Kerry Group delivers 13% increase in pretax profit

Kerry Group reported a 13 per cent increase in pretax profit in the first half of this year, helped by last year's record spend on acquisitions.

However, the group's failure to upgrade its full-year earnings forecast as a result of the recent acquisition of Noon Foods caused the share price to fall, traders said.

Chief executive Hugh Friel said full-year profit at the food and ingredients group would be in line with the market consensus, which according to the group's website is a 7.4 per cent increase in earnings per share.

Mr Friel also said the company was experiencing pressure on its margins because of higher raw material and energy costs and currency fluctuations.

He said he expected things to remain tight in the second half, when margins are traditionally higher. Kerry shares lost almost 4 per cent of their value, falling 80 cents to €19.85.

Pretax profit at Kerry, whose products include Denny sausages and Kerry Spring water, rose to almost €131 million in the six months to the end of June, from €116 in the year-earlier period.

Total sales, including the effect of acquisitions, increased 8.3 per cent to €2.1 billion. On a like-for-like basis the group reported a 3.4 per cent increase in sales.

Kerry last year spent more than €700 million on 18 acquisitions.

Mr Friel said that while Kerry had been unsuccessful in a number of acquisitions so far this year, there were still "plenty of bolt-on opportunities" around that he would consider.

The Tralee-based company raised its interim dividend 11 per cent, to 5 cent a share.

Kerry's food ingredients business, which was boosted by last year's $440 million (€360.27 million) acquisition of Quest, delivered a 12 per cent increase in sales revenue. On a like-for-like basis, sales grew by 3.8 per cent. Trading profit at the division, increased by 10 per cent to €118 million.

Meanwhile, the group's consumer business reported a 1.5 per cent increase in sales to €820 million.

A geographic breakdown of sales showed that revenue from the group's European markets rose 7.2 per cent, to €1.38 billion. Operations in the Asia Pacific region performed strongly, growing by 26.5 per cent to €160 million.

The increased demand for convenience foods will drive the market going forward, according to Mr Friel, who pointed out that last month's £124 million (€180 million) acquisition of Noon foods, a UK producer of Indian and Asian ready meals, would help Kerry take advantage of that increase.

While the UK chilled ready-meal market, which is valued at about £1.4 billion, is currently growing at about 7 per cent a year, Kerry is forecasting a "high double digit" increase in sales for Noon.

"Noon combined with Kerry will give us a very strong foothold in one of the fastest growing areas of the ready-meal market," said Mr Friel.

Analysts were generally happy with the group's results, agreeing with Mr Friel's comments that it was a reasonable performance in a relatively tough environment.

Still, the growth was lower than is usual for Kerry and several analysts said they would probably be lowering their forecasts for the next two years.