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SMART’s Letter to U.S. Shareholders with Key Questions for Kingspan Management

SMART sent the following letter via email on Feb. 16, 2022, to U.S. shareholders with key questions for Kingspan management about safety concerns, potential costs, headline risk and lack of an independent board. 

Dear Shareholder,

The International Association of Sheet Metal, Air, Rail and Transportation workers (SMART) includes the skilled workforce that manufactures and installs building envelope products, ventilation and HVAC systems throughout the United States and Canada, as well as the specialists who perform fire and life safety testing on buildings. We are writing to you because your firm is a shareholder of Kingspan Group plc ($KGSPY).

We would like to brief you on the matters related to Kingspan arising from the U.K. Government Grenfell Tower Fire Inquiry summarized below. Kingspan’s public statements to investors regarding the Grenfell Tower fire sidestep the many issues about the firm that came out during the Inquiry, which shed light on 14 years of shortcomings in fire safety testing. Kingspan has been featured in many news headlines in the United Kingdom over the past 16 months because of revelations that emerged about the company’s approach to product fire safety testing, certification, and marketing. See our website, and read our 38-page report, “Kingspan and the Grenfell Tower Inquiry: A Report for Architects, Specifiers, Project Managers & Fire Protection Engineers,” to better understand these revelations. Kingspan began marketing the same product used in Grenfell (Kooltherm K15) in the United States in 2018.

In addition to the Inquiry, Michael Gove, Member of Parliament and Secretary of State for Housing, Communities and Local Government (Conservative Party), recently told building products manufacturers (including Kingspan) that they will need to shoulder a significant portion of these costs — estimated now at £9 billion — or else risk a trading ban in the United Kingdom. Also, it was recently reported in the press that “prohibition notices” were served on Kingspan in December 2021 by the U.K.’s National Regulator for Construction Products, the Office for Product Safety and Standards, for “non-compliant” K15 insulation.

On Friday, February 18, 2022, Kingspan will announce its 2021 full-year earnings on a call for investors and analysts. Below we have prepared key questions about several areas of concern for investors to ask Kingspan management.

  1. Product Safety Concerns
    Eighty (80) percent of Kingspan’s total revenues are from insulation products. The U.K. Government Grenfell Tower Fire Inquiry is limited in scope to only one Kingspan product: Kooltherm K15, which made up 5% of the insulation in the tower. But the revelations from Kingspan testimony and internal documents involve many people a) still employed in key positions related to fire testing and marketing, and b) in charge of testing, certifying and marketing other products. K15 is a product that has been imported into the United States and used here since 2018. In fact, Kingspan had over $1 billion in revenues in the Americas in 2020.

    Questions for Kingspan:
     How much K15 has been sold or distributed in the United States? Is any of the K15 sold in the United States the same as that subject to the prohibition notices issued in the United Kingdom? If so, what steps have you taken? Both in the United Kingdom and in the United States, how and to what extent have you done an accounting of not just K15 but your other products regarding their fire testing, certification and marketing?

    In the wake of Kingspan’s testimony in the Grenfell Inquiry in late 2020 and early 2021, the company made assurances to investors that K15 was retested and is safe. However, in December 2021 the U.K. regulator in charge of construction materials issued a “letter of prohibition” to the company for all K15 manufactured since August 1, 2021, due to issues with fire testing certificates. Kingspan has stated “where questions have been raised about Kingspan’s historical BS 8414 testing, the tests have all been repeated and provided evidence to support previous fire safety claims.” Similarly, in the 2020 Q4 earnings call (Feb 19, 2021), CEO Gene Murtagh referred to “a retest of the oft-mentioned 2005 certificates.” And in its closing statement to Module 2 of the Grenfell Tower Inquiry, Kingspan states “anyone who relied on the 2005 BS 8414 test in respect of ‘new technology’ K15 can now similarly rely on the replacement test which has been conducted.” As recently as Dec 8, 2021, when the company issued a statement ending its partnership with Mercedes, it reiterated this claim about the retests. However, the company told the BRE in 2020 that the retests were not exact duplicates of the original tests and differed from them in several ways.[1]

      If the “re-tests” were not exact duplicates of the original (now withdrawn) tests of K15, how is Kingspan able to justify this statement to shareholders and owners/ occupants of buildings with previous versions of K15 installed?

  2. Potential Cost of the Cladding Crisis to the Firm
    The costs to insulation manufacturers for the cladding crisis and remediation may be in the many billions. Since its launch in 2005, Kingspan K15 has become a market leading product in the United Kingdom that now must be removed from hundreds of high-rise buildings, a complex and expensive process. Michael Gove, Member of Parliament and Secretary of State for Housing, Communities and Local Government (Conservative Party), recently told building products manufacturers that they will need to shoulder a significant portion of these costs (estimated at £9 billion) or else risk a trading ban. Other estimates for remediation costs have been as high as £50 billion. On January 22, 2022, Gove wrote in a letter to them that if they fail to come up with a plan to pay by March 2022:

    I am prepared to do whatever it takes to deliver our objective including using our regulatory framework to limit any culpable company from operating and selling products in this country in the future; and I will pursue those individuals and firms liable for building defects who are unwilling to do the right thing now.

    Questions for Kingspan: What is your best estimate of the total cost (regardless of who will ultimately bear the cost) of removing Kingspan products in the United Kingdom? How many buildings are potentially involved? Is Kingspan prepared to take responsibility for a share of the damage, and what is the expected cost to Kingspan?

  3. Continued headline risk
    In December 2021, Kingspan announced a partnership with the Mercedes-Benz Formula One Team. A week later, Mercedes announced that it was ending that partnership immediately. Amid the backlash from the survivors and bereaved of the Grenfell Tower fire, MP Michael Gove had also called on Mercedes to reconsider the commercial partnership, which he said, “threatens to undermine all the good work the company and sport have done.” This made headlines in the United States, “Mercedes ends partnership with firm whose insulation was used in Grenfell Tower” CNN, December 9, 2021. In addition, the Santa Ana, Calif., problems have been in the press.

    Question for Kingspan: What are the other potential liabilities to Kingspan before and after the conclusion of the Grenfell Tower Inquiry, and how have you quantified them?

  4. Lack of independent board
    While it seemed the board would become more independent following the 2021 annual meeting—with only four  out of nine directors on the proxy statement being executive insiders and an independent chair being elected for the first time— in April it was announced that another non-independent board member, the CEO’s brother Paul Murtagh, was added to the board. A significant number of Kingspan shareholders have voted against board members for several years prior to the Grenfell Inquiry, increasing in 2019-2021. Proxy advisory ISS has raised concerns about board independence and diversity. Even before the scandal related to the Grenfell Tower Fire Inquiry in the last year, votes against the executive performance share plans were 32 percent in 2016, and 26 percent in 2017.

    Question for Kingspan: Considering the revelations from the Grenfell Inquiry, we believe that board independence should be a top priority. Are you planning to increase independence? How and when?

After reading the report on the Grenfell Inquiry, and reviewing recent developments in the United Kingdom, it is clear there are many reasons investors and public officials need to ask more questions of Kingspan. While the Grenfell Inquiry evidence is voluminous, our report raises issues and illustrates internal communications by firm management that cannot be ignored.

We would appreciate the chance to brief your team on our report and discuss the company’s response to it.


Meredith Schafer

International Association of Sheet Metal, Air, Rail & Transportation Workers
1750 New York Avenue, N.W.
Washington, DC 20006

[1] The differences between the retest and original tests are described on p. 35 of our report, which you can download here:

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