Kerry’s figures top market expectation

KERRY Group’s 2002 financial figures beat market expectations boosted by strong sales across all its divisions and markets.

However the good news was marred by the announcement of Denis Brosnan to sever links with the group before the end of the year.

He was replaced as chief executive by Hugh Friel in January 2002 and it was expected he would play a critical role in the future strategic development of the group.

Kerry’s announcement of a pensions black hole of €90m against a surplus of €4m in 2001 under the new accounting rules also took some of the gloss off the figures.

Managing director, Hugh Friel said there would be “no knee jerk reaction” to the pensions issue adding that the shortfall would be made up over a number of years if the markets fail to recover sufficiently in the meantime.

By international standards 2002 was a good one for the group, better than analysts had anticipated.

That good result was based on sales up by 25% to €3.8 billion for the year with like for like sales up 6%.

On the 6% sales boost Mr Friel said “4-5% growth performance was always regarded as a good outcome in the past.”

Analysts agreed.

Earnings before depreciation amortisation, EBITDA, rose 18% to €390m while operating profit before goodwill and exceptionals rose 17% to €305m over the period.

Adjusted earnings per share rose 15.8% to 101.8cent against market expectations of 99.5c for the year.

The earnings performance was applauded by analysts who described it as one of the strongest in the European food sector last year.

Unfortunately Kerry’s shares did not reflect the solid performance and they rose by just 0.5cent following the publication of the figures to reach €11.45 by mid afternoon.

The share price suffered in the run up to the publication of the figures and current share prices are close to a five year low.

Commenting from London, ABN Amro said given the results “it is hard to reconcile why the share price has been so weak - the group is now trading at a 10 year PE relative low.”

But the Brosnan factor and prospects of a weak dollar are factors that will over hang the share price in the first half and they are unlikely to recover all the ground lost in recent weeks.

Mr Friel said the strong performance was achieved across all businesses and territories.

He is also positive about 2003 and said the group was capable of delivering low double digit growth in the years ahead even without any major acquisitions.”

“Based on our core strengths and global service capabilities, we view the prospects of the group with confidence.

Acquisitions will form part of future strategy.

But they will have to be good strategic fits.

“Not all Haarman & Reimer fitted; only about 37% of it was a perfect fit”, he said.

And that consideration was as big an influence on the decision not to proceed as the price of €1.66bn, he said.

He made it clear Kerry was still up for the big takeover, but it would have to make sense especially at the strategic level, he said.

Irrespective of takeover possibilities in the current year Mr Friel said “we will still deliver very good results and we expect double digit growth this year again”, he said.