Kerry Group dismisses talk of selling its consumer foods branch

Kerry Group has dismissed speculation it might sell its consumer food arm by saying it remains “very, very committed” to it and still sees further growth opportunities arising from the division.

The Tralee-based food and nutrition group yesterday said it expects to see “good revenue growth” and between a 5% and 9% rise in adjusted group earnings per share this year.

That guidance came on the back of a strong set of full-year figures for 2016, which showed a 7.1% rise in trading profit to €750m and group revenue of €6.1bn, which reflected 3.6% business volume growth, exceeding market expectations.

Growth was driven by the key taste and nutritions arm, which saw revenue growth of 3.5% to just under €5bn and over 8% growth in trading profit to €716m.

However, while the smaller consumer foods division grew volumes by over 2%, reported revenues fell by nearly 10% to just over €1.3bn and trading profit was down by nearly 7% at €117m.

That prompted Darren McKinley of Merrion Stockbrokers to say in a research note that “the [consumer foods] sector continues to be challenging and we would not be surprised to see Kerry look to dispose of this division sometime in the future.”

However, presenting Kerry’s results yesterday, outgoing chief executive Stan McCarthy — who will retire later this year and be replaced by Kerry’s Asia-Pacific boss Edmond Scanlon — said “we have no intention, whatsoever, to sell that business”.

He added that the division’s performance last year was dented by disposals and currency volatility, but said it remains “a very good cash generative business” which may offer Kerry good export opportunities on the back of Brexit.

Kerry has invested significantly in the division, which houses such brands as Denny, Dairygold, Cheestrings, Charleville, Fire and Smoke, and Low-Low.

Sales volumes were boosted by better utilisation of the food-to-go and convenience channels and management said that, despite the Brexit- related uncertainty, the consumer foods arm “performed well” and met with changing consumer demands.

Kerry is also eyeing a return to the acquisition arena this year, having been quiet last year absorbing the €1bn worth of purchases it made in 2015.

It has already agreed two purchases — worth a combined €18m — since the turn of the year, in Australia and China, and yesterday hinted at making a couple of more buys in the Asia-Pacific region in the coming months.

Kerry wants to boost the percentage of taste and nutritions revenue it generates from emerging markets (mainly Asia-Pacific countries) from 16% to around 30% in the short-to-medium term.

With net debt back down to 1.5 times earnings (from nearly two times at the end of 2015) and €570m in free cashflow generated last year, Mr McCarthy said the company has “quite a bit of headroom” in terms of acquisition spending space.

“We’ll be much more acquisitive than last year,” he said.

He added that the group could spend “anything between a couple of hundred million and one billion euro” in combined outlay in 2017.

Kerry, whose shares were up nearly 4% in Dublin trading yesterday, also said it is currently on track to meet, or is already ahead of, five-year targets for the 2013 to 2017 period.


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