Acquisitions set to drive Kerry five-year strategy

By Geoff Percival

Kerry Group is expected to rely heavily on further acquisitions in a bid to meet its own ambitious growth targets over the next five years.

Towards the end of last year, new chief executive Edmond Scanlon set a growth target of 10%-plus adjusted earnings per share each year for five years.

Kerry twice changed its 2017 earnings growth targets last year, settling on a range of 4%-6% in November, which would equate to between 336c and 343c per share.

The Tralee-based food, ingredients, and nutrition group is expected to meet those targets when it publishes its 2017 figures this month.

2018 marks the first year of Kerry’s new five-year growth strategy, with analysts eyeing management of its core taste and ingredients division as being key to delivering on its goals.

“Across the ingredients sector, we believe that Kerry Group has the greatest potential for earnings growth over the medium-term,” said Davy analysts Liz Coen and Katy Hutchinson.

“The group has the dual organic growth levers of volume and margin advancement. It also has ample balance sheet capacity to expand through merger and acquisition.

“The group continues to be highly cash generative with the potential to generate over €800m in free cash flow — before dividends and acquisitions — over the next two years.

In 2017, Kerry stepped up its expansion through merger and acquisition, announcing seven bolt-on acquisitions, for a total consideration of €420m, in developed and developing markets. We expect further M&A activity in 2018.”

Kerry recently said it had a full pipeline of acquisition opportunities, particularly in Asia, and that it could spend up to €1bn over the next 18 months.