Kerry Group eyes €800m deal spend this year

By Geoff Percival

Kerry Group could spend up to €800m on acquisitions this year with management describing its potential mergers and acquisitions pipeline as being “as strong as we’ve ever seen it”.

Such a spend is double its annual average.

“[Acquisition activity] is very much part of our strategy and we could double [the €400m average spend] this year, but it’s all down to timing. We very much see ourselves as the consolidators in our space and we feel very good about our pipeline,” said group chief executive Edmond Scanlon.

Kerry has already spent just over €120m on four acquisitions and one joint-venture agreement this year and Mr Scanlon said any further purchases would be focused on strengthening the group’s core taste and nutrition division, largely in developing markets.

The Tralee, Co Kerry headquartered food and ingredients group marginally upped its earnings expectations for the full-year on the back of a strong showing in the first half and progress made on its business development initiatives.

Kerry reported an 8% year-on-year rise, in constant currency terms, in group revenue for the first six months of the year to just over €3.2bn, with marginal gains seen in profits and earnings per share.

On a reported basis, however, revenue growth was 1.4%; contribution from acquisitions accounting for 3.9% of the sales growth but currency movements shaved 6.6% off the growth. Sales volumes rose 3.6%.

Trading profit was 0.5% ahead of the same period last year, on a reported basis, at €340m, while after-tax profit was up 0.7% at €226.7m. Basic earnings per share crept up by less than one cent to 128.3c.

Kerry’s trading margin — down 10 basis points to 10.5% in the first half — was impacted by adverse currency movements, but the group still increased its interim dividend by 11.7% to 21c per share.

Management and investors were relatively buoyant — Kerry’s shares rising by over 2.3% and the board slightly upping full-year adjusted earnings per share growth guidance to between 7% and 10%, compared to a previous range of 6%-10%.

“Evolving consumer trends and the changing marketplace have provided increased opportunities and demand,” Mr Scanlon said.

“Key growth drivers going forward include localisation — a shift in consumer preferences towards smaller brands and private labels — and tapping into the growing demand for plant protein,” said Merrion analyst Darren McKinley.

“Kerry believes it is well-equipped to take advantage of these opportunities through its well-established business model in local markets and its unique plant protein taste technologies,” he said.

“We think Kerry Group is fully valued up to December 2019 with no risk attributed for Brexit despite Kerry Group’s consumer food division considerably exposed,” Mr McKinley said.

Consumer food revenues rose 1.3% in the first half, to €685m and management said its Brexit mitigation programme made further progress and is on track to deliver on its objectives.

The group’s core taste and nutrition divison saw revenues increase by 4.1% to €2.58bn.

Mr Scanlon said Kerry remains committed to its consumer food business, calling it “an important leg to the stool” and “part of Kerry’s overall DNA”.


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