Group to continue restructuring of foods division after sales uplift

Kerry Foods is to continue with the restructuring programme that delivered a sales uplift at the end of 2013 and into 2014 — despite “highly competitive” consumer markets in the UK and Ireland.

Kerry’s foods division now accounts for around €1.6bn of its annual revenue compared to the €4.3bn generated by the ingredients and flavours business last year.

Kerry Foods expects to make further acquisitions in key markets. Some food businesses will be sold.

More retail deals, similar to Kerry Foods’ recent €3.6m contract to deliver its Healthy Living range of dairy and pork-based products to 3,100 UK stores, are also possible.

“Our restructuring of the direct-to-store business in the UK is ongoing,” said Kerry Group’s director of corporate affairs Frank Hayes. “We had developed a UK business built around a network of depots delivering to independent stores. A lot of those convenience stores are now members of own-brand symbol groups, so we had to change to reflect the changing marketplace.

“We also feel that a number of our consumer foods businesses will perform better as independent businesses outside Kerry. We will exit those businesses, in the way that Kerry exited liquid milk. Those non-core businesses are held for sale.”

Mr Hayes said this reconfigured Kerry Foods model will help it establish a high quality “scaleable” portfolio that is capable of meeting Kerry Group’s growth strategy.

Analysts at financial advisors Exane BNP Paribas expect Kerry to unveil more deals likes its recent contract to supply dairy ingredients to Chinese infant nutrition company Beingmate. Exane cites this deal as a model for how larger food and ingredients companies will build their share value through strategic local partnerships. “There are some very, very good businesses in that space, but I don’t think you can just bundle them all together, as you can see with Tate & Lyle,” said Exane analyst Jeff Stent. “If you take a stock like Kerry, we’ve been buyers of that stock for as long as we’ve been analysts at Exane.”

Kerry’s ingredients and flavours business has also enjoyed strong growth in markets such as Asia, Africa, Russia and the Middle East. It also anticipates growth in these markets in foods and beverages.

Kerry will develop further global technology and innovation centres in key new markets, similar to the centre in Naas, Co Kildare. Growth will also come via targeted acquisitions.