Shares in the Cavan-based building materials group Kingspan fell as much as 25 per cent yesterday after it said profit growth will slow in 2008 due to "more challenging" construction markets in the UK, the Republic and western Europe.

The group fell below €10 for the first time since November 2005, but closed the day down 21 per cent at €10.52, its biggest drop in 17 years.

Kingspan said in a trading statement that earnings may climb by about 5 per cent next year, down substantially from an increase of about 22 per cent in 2007. Analysts had expected the group to issue a cautious trading statement but it turned out to be more downbeat than expected.

Slowing growth, particularly in Britain, the company's largest market, and across Europe, will temper demand for building materials as companies scale back on investment plans.

The group was not optimistic on its guidance for the year ahead. "Present market conditions leave it difficult to guide for the coming year," it said.

In September, it had suggested revenue growth of about 11-12 per cent in 2008 but reduced this yesterday to "mid single-digit growth" because of "the international momentum on climate change" combined with the group's move towards "low-energy construction solutions".

Kingspan said its order book and upcoming projects indicate that activity will "vary from that of the current year owing, in the main, to an uncharacteristically strong start to 2007, a pattern not envisaged to be repeated in the year ahead".

John Mattimoe, analyst at Merrion Capital, expressed surprise at the scale of the reaction to the statement.

"The group has tempered its guidance but it is still expecting 5 per cent growth in earnings. They are taking quite a cautious view for the overall construction environment."

Davy said in a research note that it appeared "overall market conditions, particularly in the UK, have softened in recent weeks with the credit crunch affecting likely work flows during 2008". The broker said the earnings downgrade ended a strong cycle of profit growth for Kingspan that began in 2004.

Kingspan said trading for the first 11 months of 2007 had shown strong growth over the same period last year, with the group anticipating operating profits to grow by 22 per cent over €194 million in 2006.

The group said its insulated panels business, accounting for 40 per cent of sales, continued to perform well in the second half of the year.