Kerry Group shares rise 3% as first-half results better than expected

KERRY GROUP’S share price rose by more than 3 per cent yesterday after the foods and ingredients company posted first-half results ahead of expectations and reaffirmed its earnings guidance for this year.

Total revenue in the first half of 2011 reached €2.6 billion, an 8.4 per cent increase on the same period last year. Kerry achieved price increases of 5 per cent as it sought to recover rising input costs, while there was a 3.6 per cent growth in volumes sold.

Revenue at the company’s ingredients and flavours division – which accounts for just over two-thirds of sales – rose 9.6 per cent on a like-for-like basis to €1.97 billion. The company’s consumer foods division saw revenue rise by 5.3 per cent to €944 million, with an increase in sales in volume terms of 2 per cent.

Pre-tax profits increased to €175 million in the first six months of the year compared to €162 million in the same period in 2010, an 8 per cent increase. Earnings per share increased by 9.7 per cent to 86.8 cent.

Kerry Group chief executive Stan McCarthy said the results displayed a “very strong margin performance” in light of the fact that raw material costs increased by 11 per cent during the period on a like-for-like basis.

While the reported trading margin dropped 30 basis points, the underlying trading margin – exclusive of a number of variable factors – was 80 basis points.

Strong competition in the British and Irish consumer foods market and a focus on promotional activity meant Kerry’s consumer foods division saw a 30 basis-points drop in trading margin due to a lag in cost recovery. Volumes in the British consumer foods market – where Kerry brands such as Cheestrings and Richmond sausages continue to gain market share – grew by 3 per cent.

Sales in the Irish market continued to be under pressure as the economy contracted, with volumes down 1 per cent.

Kerry Group said it was pleased with the performance of its consumer foods division in light of constrained consumer demands, with its chilled ready meals in particular outperforming market growth rates. Some analysts expressed surprise at the strong performance of the consumer foods division, in light of high raw material costs and the competitive consumer environment.

While yesterday’s results showed strong earnings growth for the first half, a breakdown of the figures suggested a slightly slower rate of growth in the second quarter. Mr McCarthy said this was in part due to uncertainties surrounding the global economy in May and June as well as a delay in gaining traction in Asia in the second quarter, due to the Japanese earthquake.

Kerry said yesterday it was “very confident” of delivering earnings per share growth of 8 to 12 per cent for the full year.