Kerry to spend €400m on several acquisitions in expansion drive

by independent.ie - 18/08/2011

"Food group posts €144m profits on €2.65bn turnover surpassing expectations, boosting interim dividend"

Kerry Group will spend close to €400m in acquisitions this year as it continues to expand its business, the company said yesterday.

Chief executive Stan McCarthy said he expected the company to spend more than the €300m he flagged last year as the right opportunities have come up for the business.

The group has already made a number of acquisitions this year, including the UK frozen foods company Headland Foods while the purchase of US firm Cargill's global flavours business is proceeding "as planned", Mr McCarthy added.

The Kerry boss was speaking after the food giant reported higher half-year profits and increased its interim dividend.

Price

The company share price jumped more than 3pc after Kerry said profits after tax during the six months to June 30 increased 9pc year on year to €144.4m on the back of revenue which jumped 8.4pc to €2.65bn.

Importantly for shareholders, the interim dividend was increased by 11.4pc to 9.8c. Earnings per share rose 9.7pc to 86.8c.

The Irish market remains depressed, said the group, and the consumer foods business continue to struggle. Trading profit from the business was up slightly but margins were badly hit as the company struggled to pass on costs. Trading margin fell 30 basis points.

"We've had sustained decline in gross domestic product in Ireland for a number of years now and commentary on the Irish market has only changed slightly," said Mr McCarthy.

"We are confident that the Irish economy will correct itself over time but there is some way to go yet," he added.

Higher input costs are also a concern although much of the extra cash spent on raw materials was made back by the company.

"Coming into this year we recognised we would have challenges due to input inflation and they realised themselves at the rate of 11pc for the first half, which we have substantially recovered, however," he claimed.

The ingredients and flavours (I&F) business continued to strengthen, with revenue from the business rising nearly 10pc to €1.97bn.

I&F volumes grew by an average of 4.1pc worldwide, but in emerging markets it accelerated past 10pc.

The results were broadly in line with analysts' expectations. Kerry retained its growth target of between 8pc and 12pc.

"These results show us that not much has changed since the June where clarity about the five-year plan and an investment programme was detailed. As such, we continue to argue current levels are good entry points for patient investors," said Bloxhams' Joe Gill.

Goodbody's Liam Igoe agreed, and added he may increase his projections for the company on the back of the results.

"In spite of the margin pressures arising from increased cost inflation and weaker currencies, Kerry has maintained its 8-12pc earnings per share growth guidance for full-year 2011.

"At first glance, we are likely to slightly increase our current projections of +9pc, due to lower than anticipated interest charges in the first half," he said.

Kerry closed up 3.03pc at €27.35.

It is up nearly 10pc this year having fallen back sharply recently in the turmoil on stock markets caused by the US debt-ceiling rumpus and the fallout in Europe over the continuing debt crisis.

- Peter Flanagan

More Details: http://www.independent.ie/business/irish/kerry-to-spend-euro400m-on-several-acquisitions-in-expansion-drive-2851023.html