Kerry Group could top €1bn in acquisitions this year as sales rise

Acquisitions will remain a strong focus of Kerry Group’s growth strategy this year, with the food and ingredients group saying it could match last year’s record spend of around €900m if the right opportunities arise.

Speaking yesterday at the publication of the group’s 2015 annual results, group chief executive Stan McCarthy said capital expenditure will amount to 3%-4% of revenue — much the same as last year — with significant organic investment due to go towards improving existing manufacturing facilities.

He also said that Kerry will remain visible on the M&A front and has an active acquisition pipeline “going on right now”.

Kerry spent more than €900m on acquisitions last year — the bulk of that going on a near €700m splurge on three US ingredients specialists in October.

Mr McCarthy said that, based on what is on the radar at this moment, the group is unlikely to exceed last year’s record spend, but added that “were something very significant to come along we would be ready to take advantage of that and could execute [a deal]”.

“We expect that capex will be a little higher in 2016; we also expect that annual free cash flow will be available to spend on M&A opportunities,” said Davy Stockbrokers’ Jack Gorman.

Kerry said it expects to see earnings growth of up to 10% this year, following what it called “a record year of business development” in 2015.

The Tralee-headquartered group yesterday reported revenues of €6.1bn for last year, 6% ahead of the previous year.

Trading profit grew by 10% to €700m and pre-tax profits were ahead by 8.5% at €602.8m.

Adjusted earnings per share beat expectations with 8.2% growth to 301.9c.

“The group achieved a strong financial performance, delivering continued business margin expansion and 8.2% growth in adjusted earnings per share,” said Mr McCarthy.

“Our industry-leading technologies are well positioned to meet today’s consumer and customer requirements.

"We expect to achieve 6% to 10% growth in adjusted earnings per share in 2016 taking into account a 3% currency headwind at today’s exchange rates .”

Kerry’s core taste and nutrition division enjoyed 4% revenue growth, to €4.7bn; with trading profit ahead by nearly 12% at €663m.

The previously underperforming consumer foods division (Kerry Foods) generated revenues of just under €1.5bn, up 3% on the previous year while trading profit crept up 0.2% to €126m.

Management attributed growth to a successful repositioning of the Kerry Foods portfolio and a rise in consumer confidence levels in Ireland and Britain.