Kerry Group to spend €500m on acquisitions this year

Kerry Group is set to spend over €500m on acquisitions this year, with chief executive Stan McCarthy saying the group is very busy in the takeover market.

At the presentation of Kerry’s interim results yesterday, Mr McCarthy said that the group has had around €250m worth of business since the start of 2015, with four purchases completed and five agreed but awaiting completion. He said management is eyeing up more deals worldwide to bolster Kerry’s taste and nutrition offering and the total year’s spend should top €500m.

“Our significant business structure and capability investment, in recent years, positions Kerry well for future growth through organic development of the group’s taste and nutrition platforms and developing market strategies — together with complimentary acquisition investments,” Mr McCarthy said.

He said there remains “solid opportunities” for growth in developing markets, which are becoming more stable despite geopolitical issues persisting.

The Tralee-based food and ingredients business has also raised its full-year earnings guidance, on the back of a strong first-half showing.

Kerry generated group revenues of €3bn in the first six months of the year; almost 5% up on the corresponding period last year. A strong near 3% rise in business volumes was driven by good performances in the Americas and Europe, Middle-East and Africa region, which contributes to half of Kerry’s annual revenues. Trading profit was up 9% to €300m and adjusted earnings per share grew by 8.1% to 124.5c.

On the back of the strong first-half showing, Kerry now expects adjusted earnings per share to grow by 6% to 9% — up from a previous 5%-8% range — to between 296c and 304c per share.

“We delivered a strong financial performance in the first half of 2015; reporting continued business margin expansion and an 8.1% increase in adjusted earnings per share.

“Based on group year- to-date performance, current exchange rates and business momentum, we are increasing our market guidance for the full-year,” Mr McCarthy said.

Kerry’s first half was again driven by its dominant division — ingredients and flavours — which saw year-on-year revenue growth of 3% to just over €2.3bn and a trading profit improvement of 12.3%, to €281m.

The consumer foods division, which counts for 24% of group revenue, saw some improvement, thanks to economic improvements in Ireland and Britain, but the group said retail fragmentation and “channel diversification” has kept it highly competitive.

“However, the restructured Kerry Foods’ portfolio is performing well — benefiting from snacking and convenience trends,” management said

It said growth in chilled meals and a recovery in the frozen foods category have been key drivers. The consumer foods division saw a 1.9% annualised increase in revenue, to €749m, but trading profit was down nearly 4% at €60m.

Yesterday’s half-year results also saw Kerry increase its interim dividend, for shareholders, by 11.1% to 15c per share. Mr McCarthy also said an upturn in dairy markets can be expected, but not before a continued decline in dairy prices for the remainder of this year.

Kerry’s share price rose around 0.5% to €72.