Kerry Group suffers fall in 2006 figures

FOLLOWING a profit warning in May last year Kerry Group has announced a sharp dip in earnings for 2006.

Figures from the ingredients, flavourings and consumer food group, show a fall of 25% in pre tax profits from €297.9m to 221.2m.

Profits at the operating and after tax level were also well down, as the group suffered a 73m write off from the sale or closure of five subsidiaries during the second half of the year.

Overall the group reported good performances across its global ingredients businesses and its core consumer divisions.

Results were in line with market expectations and the adjusted Earnings Per Share rose a modest 1.7% to 133.9 cent which was slightly ahead of the consensus forecast.

Markets are now expecting a rise of 5% in the EPS in 2007, based on last year’s figure of 133.9 cents, to around 140 cents.

Shares in the group fell during the day and were down 41 cents to 20.05 by early afternoon in Dublin, a full 2% loss in the market value of the company.

However the group says it has recovered the higher costs inflicted in the first half of 2006 by the sharp rise in energy and related costs. The issue has been firmly dealt with through cost cutting and increased prices.

Hugh Friel, chief executive, pointed out that despite the low EPS, it still represented “21 years of earnings growth by the group”, despite the upset of last year.

“The group has made a good start to 2007 and we are confident of an outcome for the full year in line with market expectations”, he said.

In a breakdown of the figures, ingredients still remain the dominant factor within Kerry’s operations, accounting for €3.1bn of total sales, up by 3.7% year on year and a trading profit of €293m that rose 3.3%.

Trading margins for the year fell from 8.6%, dragged down by lower margins in the consumer food sector due to the difficulties in poultry and frozen ready meals that saw the margin decline from 7.1% to 6.5% year on year.

During his press conference Mr Friel said the group generated free cash flow of €1 billion in the past four years, upped R&D spending to €139m from €125m and invested €100m in capital projects.

Overall the outlook is positive while problems remain with the frozen food sector. Its decline has affected all players in the market and “profits are much lower than they were three or four years ago”, said Mr Friel.