Food and drink sector performing best

LISTED Irish Agrifood and Beverages (IAB) companies are performing substantially better than other marketsectors during the downturn.

New research shows eight IAB companies have added 32% to their collective stock market value since February 2009.

Four have delivered very strong performances – with C&C, up 129%; Fyffes, up 95%; Total Produce, up 75%; and Origin Enterprises, up 59%, doing well over the period.

The financial strength of the IAB group is underlined by their relatively low debt to EBITDA of 1.8.

“All of the companies under review are displaying cash flow attributes that give them the ability to control debt, finance development and fund dividend pay outs”, said report author Joe Gill of Bloxham Stockbrokers.

Fyffes has the strongest balance sheet with net cash of €37 million, according to the report.

Profits from the eight firms are 35% exposed to Sterling and 15% to the US dollar. And the report said changes in currencies and the economic outlook in these areas will be “key” to the companies’ performance in the second half of the year. Sterling fell sharply against the euro in the second half of 2008.

Since January sterling has rallied 13%, making the companies’ exports more competitive.

“This gives us some optimism for the second half, ahead of the pending reporting season,” Mr Gill said.

Included in the list of companies are such household names as Kerry Group and Gambia. The other firms are Aryzta, Total Produce, drinks group C&C, Fyffes, Origin and Greencore.

The IAB group continues to offer an important stream of income for investors and all of the constituent companies are paying dividends in 2009. Two companies, C&C and Greencore, rebased their dividends downwards during the first half of the year, reflecting restructuring and balance sheet management initiatives.

Back in February, Mr Gill highlighted Kerry and Total Produce as Bloxham’s preferred bets for 2009.

At this point in the year he said C&C, Greencore and Total Produce have the capacity to deliver value through a combination of capital appreciation and higher dividends.

“Strong finances, conservative [earnings] guidance and cautious development have been the hallmarks of these ISEQ companies during the first seven months of the year”.

He said all of the firms will pay dividends during this year.

He said because of their strong financial positions, they also have the ability to grow through acquisitions of firms hit by the credit crunch.