Kerry chief Stan McCarthy sees up to €1bn of deals as he exits

Kerry Group’s chief executive Stan McCarthy said the group could spend up to €1 billion on deals this year as he signalled his plans to retire in September after nine years in the role.

Mr McCarthy will be replaced by fellow Kerry native Edmond Scanlon (43), president and chief executive of Kerry Asia Pacific, who joined the company 20 years ago on a graduate programme.

News of the management change comes as Kerry reported its trading profit rose 7.1 per cent last year to €750 million – beating market expectations by €4 million – driven by growth in its taste, nutrition and functional ingredients business.

Group sales grew 3.6 per cent to €6.1 billion, against analysts’ expectations for a 2.9 per increase, with the largest division, comprising taste and nutrition, driving the surprise as its 4 per cent growth was almost twice that seen by the consumer foods division.

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Kerry forecast its adjusted earnings per share for the current year to rise 5-9 per cent, following a 7.1 per cent increase in 2016 to €3.234. Analysts at Davy said the midpoint of forecast is in line with consensus estimates.

Acquisitions

The group, which spent last year working on integrating €900 million in acquisitions carried out in 2015, has returned to doing deals in the first seven weeks of the year. It recently agreed to buy Shanghai-based Tianning Flavour & Fragrance, which supplies the Chinese food and beverage industry, and Australian company Taste Master for a combined €83 million.

“We’re very much in acquisitive mode,” Mr McCarthy told reporters, adding that the group could spend between a couple of hundred million euro and €1 billion on acquisitions this year, depending on the right opportunities cropping up.

Net debt stood at €1.3 billion at the end of December, equivalent to 1.5 times operating earnings, well below the ratio of 3.5 that is allowed under its banking covenants.

During 2016, Kerry said it had “responded well” to the prevailing business environment, increased volatility on currency markets and changing consumer demands.

“Health and wellness trends continued to drive ‘nutritionally minded’ consumer choice, increasing demand for taste, active nutrition, higher protein, natural, ‘free-from’, authentic, clean-label, convenience food and beverage products,” Kerry said.

The net deficit for its defined-benefit pension schemes, where retirement benefits are linked to an employee’s final salary, widened to €291.9 million from €253.3 million, primarily as a result of lower corporate bond yields. However, this was partially offset by an additional €66 million in one-off cash contributions paid into the schemes during the year.

Shares in Kerry jumped as much as 6.1 per cent in Dublin trading on Tuesday to €74, boosting the group’s market value to more than €13 billion for the first time since October.

"Overall, we retain our positive stance on the stock as we expect the group to continue outperforming peers through a combination of organic and acquisitive growth," said Jason Molins, an analyst with Goodbody Stockbrokers.