New kid on Kerry block makes waves

Under Stan McCarthy, Kerry Group seems unworried by currency weakness and market turmoil, writes LAURA SLATTERY

There is a new man in charge of Kerry: Stan McCarthy. He's not totally new - he's a career Kerry executive - and after two months he's already got a taste for the job as head of Ireland's largest food company.

The 50-year-old yesterday proffered his "road map" for Kerry - a Powerpoint flow chart explaining why its array of bioscience technologies will help it "seamlessly" service its end-use markets (make food and drink) and "avoid any fumbling that might take place".

Kerry has been accused of fumbling in the past, but McCarthy's grand plan for a doubling of revenues to €10 billion over the next five to six years will, as one analyst put it, "re-excite" the group's rate of earnings growth.

McCarthy, exhibiting a Sven-Göran Eriksson-like sense of calm, isn't fazed by the soaring cost of raw materials. Kerry has practised "discipline" in relation to cost recovery.

A weak sterling and a weak dollar will have some impact, "but I think we have enough momentum to mitigate that".

Financial market turmoil is of even less concern. The credit squeeze won't hurt Kerry's ability to raise finance for acquisitions because of its robust balance sheet, he says. It may even have knocked some private equity bidding rivals out of the race.

Kerry's consumer food brands - Denny, Low Low, Charleville, etc - have "stood the test of time" and will emerge from any periods of inflation unscathed, McCarthy assures. Retailers can't afford not to stock them and have granted Kerry the price increases it sought as a result of higher milk and animal feed prices.

McCarthy does his best to make it sound simple. The consumer foods division has divested itself of poorly performing businesses or ones that don't fit in, he says. Out of favour with health-conscious consumers, the frozen meals market is "challenging", even "difficult", he admits, but on the bright side, one competitor in the category has fallen by the wayside.

There was no mention yesterday of Breeo Ireland, Dairygold's consumer foods division, which Kerry is rumoured to be buying. Whatever happens, it is clear that it is the ingredients division, which accounts for two-thirds of Kerry's business, where McCarthy's real appetite lies.

Not only does it have a higher trading margin than consumer foods - 9.4 per cent versus 6.6 per cent - but it also lies in the fastest growing territories for Kerry - the US and the Asia-Pacific region.

Devising bio-ingredients, emulsifiers, "savoury systems" and cell nutrition proteins is a long way from Denny's "home is where you make it" ad slogan in terms of customer recognition, but its potential to spur Kerry's growth is clear.

McCarthy is an ingredients man. Having moved to the US when Kerry set up a small office in Chicago in 1984, one significant elevation up the ranks came when Kerry bought ingredients firm Beatreme in 1988.

By the time he was appointed as successor to the retiring Hugh Friel, he was head of Kerry Ingredients Americas.

In 22 years as a public company, Kerry has always turned an annual profit. Who would want to break that run? But on the evidence presented so far, it seems Stan McCarthy is right not to be worried.

KERRY GROUP 2007: results

Turnover: €4.78 billion (up 3.1 per cent)

Pretax profit: €298 million (up 35 per cent)

Operating profit: €377 million (up 26.5 per cent)

Earnings per share: 143.8 cent (up 7.4 per cent)

Final dividend per share: 13.9 cent (up 11.2 per cent)

SUMMARY

Kerry withstood 2007's inflationary input cost environment to achieve strong growth that was in line or slightly better than analysts' expectations.

Sales grew faster in its ingredients and flavours division than in its traditional UK and Ireland consumer foods operation, while its nascent Asia-Pacific businesses surged.