Kerry raises earnings forecast for 2010

SHARES IN Kerry Group rose more than 5 per cent in Dublin yesterday as the food company raised its 2010 earnings forecast following a strong trading performance in first half of this year.

“Based on our strong performance to date in 2010, we now expect to achieve mid-teen growth in adjusted earnings per share in the full year,” the Tralee-based food group said yesterday.

The company had guided an earnings growth range of 182 to 185 cent per share. This is now set to top 190 cent a share.

Kerry’s adjusted earnings per share rose by 19.3 per cent to 80.2 cent in the first six months.

Kerry reported a 6.7 per cent rise in group revenues to €2.4 billion, but on a like-for-like basis the increase was just 2.7 per cent.

Its ingredients and flavours division recorded the strongest performance, with sales rising by 3.9 per cent to just under €1.8 billion.

Sales in its consumer foods division, which comprises a broad range of chilled foods, were flat at €885 million. While volumes rose by 4 per cent in consumer foods, prices remained depressed by the downturn in Ireland and the UK.

Kerry chief executive Stan McCarthy said the consumer foods market had stabilised but shoppers “are still cautious and pragmatic about what they will pay”.

Kerry’s consumer brands include Denny, Dairygold, Shaws and Galtee.

Kerry’s trading profit in the first half rose by 13 per cent to €204 million. Just more than 40 per cent of this rise was attributable to acquisitions and positive foreign currency movements.

Its trading profit margin increased by 40 basis points to 8.4 per cent.

The ingredients and flavour division saw its margin rise by 50 basis points to 9.2 per cent, while consumer foods was up 40 points to 7.1 per cent.

Kerry’s pre-tax profit rose to €162.3 million in the first six months compared with €115.4 million in the same period of 2009.

Since the close of the half-year, Kerry has offered €33 million to acquire Cork-based Newmarket Co-operative Creameries Ltd.

The co-op is a big supplier of cheese to Kerry from its plant in north Cork. The deal is subject to competition approval.

Kerry has also acquired SpringThyme Oils Ltd, a seasonings company based in England.

Mr McCarthy said further acquisitions were possible. “I would expect the back half of the year to be significantly busier than the first half. We are very busy on that front.”

Kerry’s net debt stood at just under €1.2 billion at the end of June, compared with €1.4 billion a year earlier.

The majority of its borrowings are subject to the following covenants: a ratio of net debt to Ebitda (earnings before interest, tax, depreciation and amortisation) of a maximum 3.5 times; and Ebitda to net interest charge of a minimum of 4.75 times. Its current net debt to Ebitda ratio is 2.2 times, while its Ebitda to net interest figure is 8.2 times. This means the group is operating comfortably within its covenants.