Kerry puts in strong all-round performance

A strong improvement in operating margins across all areas helped Kerry Group produce a 16 per cent increase in pre-tax profits to €173.2 million (£136.4 million). Shareholders get a final dividend of 6.13 cents, an increase of 15 per cent.

While the 2000 results were inevitably overshadowed by the announcement that the chief executive, Mr Denis Brosnan, is stepping aside to become group chairman at the end of the year, they do show the strength of Kerry's business and its ability consistently to increase its margins.

Last year was relatively quiet for Kerry in terms of acquisitions, with the $80 million (€87.6 million) acquisition of Shade Foods being the single biggest deal. Kerry also bought the US ingredients producer Armour for $35 million but balanced these acquisitions with the sale of DCA's bakery business for $100.7 million. Kerry also pulled out of the acquisition of the Brazilian ingredients company Harald Industria.

The main driver of growth came from the ingredients business in the Americas and the Asia Pacific region. In the Americas, sales jumped to €704 million from €615 million, while an increase in operating profits to €92.4 million from €76.3 million included a rise in operating margins to 13.1 per cent from 12.4 per cent.

Although sales in the Asia Pacific region fell marginally last year to €131 million because of rationalisation in Australia and capacity limitations in Malaysia, operating profits rose sharply to €12.1 million from €7 million, with margins up to 9.2 per cent from 5.2 per cent.

Turnover from the lower margin Irish operations rose to €646 million from €614 million, with operating profits rising to €37.3 million from €34.5 million. The modest sales growth partly reflects a rationalisation of Kerry's liquid milk operations following the sale of its dairy in Cork and the closure of the dairy in Moate, Co Westmeath.

In Europe, sales grew 4 per cent to €1.14 billion, with operating profits up €85.8 million to €91.9 million.

Consumer foods in Ireland and the UK is the other main arm of Kerry's operations. According to the group, it outperformed the British chilled convenience foods sector average.

Strong cash-flow and the absence of major acquisitions meant Kerry could reduce its debt to €478.3 million from €544.5 million. Interest cover improved to 4.8 times from 3.7 times.

The absence of any surprises meant there was little movement in the Kerry share price, which fell 32 cents to close at €13.40 in very thin trading. Kerry shares are very illiquid and had risen ahead of the results to a high of €14.10, before easing back in the past few days.

With analysts expecting earnings growth of at least 10 per cent and probably significantly more, steady growth in the share price is expected, although, with equity markets suffering from general uncertainty, it may take a major acquisition to push the share ahead towards last year's high of €15.