Patience the key to more Kerry Group glory

KERRY GROUP is one of the thoroughbreds in the corporate field but its loyal fans are beginning to wonder if its glory days are over.

Kerry Group shares, which have made millionaires out of hundreds of Kerry farmers, treaded water for the last two years and stayed stubbornly below €16.

What’s wrong with the champion food company that started on the banks of the Feale and from its Listowel base went on to conquer the world? In a word: nothing. The company is sound but has grown so big, so fast that what would once have been heralded as massive takeover coups are now small potatoes.

Kerry Group sold €3,693 million worth of goods all over the world in 2003, big money in anyone’s language, generating pre-tax profits of €161m, a jump of 55%. The increase was bigger than normal because costs associated with its aggressive ongoing acquisitions policy kept them down in 2002. Kerry Group has acquired 27 separate companies in the last three years in multi-million euro deals. The company spent €208m buying new companies in 2003, a further €92.8 million on capital investment and increased its spend on research and development by 12.6% to €88.4m.

That’s the bones of €390m spent in 2003 alone on developing the company on its three main growth fronts: developing existing manufacturing capabilities, buying new companies and creating new products.

This kind of spend is not indicative of a company treading water but of one on a very determined march to growth with its sights set on bigger things.

This is the kind of investment that has to be interpreted as the actions of a company confident it can spend millions on buying new firms, confident it has the management wherewithal to knit them into the existing framework to drive profits.

Kerry Group accomplishes these task with consummate ease. The men and women who work in Kerry will tell you it’s a hard grind, but their competitors will tell you they achieve the near impossible.

Kerry has always had the ability to take the market by storm by completing the audacious acquisition that becomes a quantum leap for the company.

Big steps were taken in the past by those that forged Kerry Group not least by the late, sagacious Eddie Hayes, who took on the youthful Denis Brosnan to develop and run a casein factory in Listowel in 1972.

Brosnan with the current chief executive Hugh Friel by his side took on the world and made the company what it is today. What many seem to forget is that Friel was there all the time. The duo, along with deputy chief executive Denis Cregan picked the people who fill nearly all the key posts in the company all over the world.

Kerry Group is a lean hungry machine that churns out cash at a frightening rate, creating a free cash flow of €204 million in 2003.

The company has the resources to buy big, in the billions and this is what it has to do to survive. Not an acquisition for the sake of one but one for the right reasons, one that will propel Kerry on to greater heights.

Patience has to be the key. The stakes are massive, thousands of families and shareholders depend on the company and this brings its own pressures.

The problem has been the big takeover target has not become available.

Kerry Group trains its people to think big; to think of the All-Ireland finals of business. This is what their mission is.