GEOFF PERCIVAL: Kerry Group narrows earnings expectation

Kerry Group shares rose nearly 3% despite management cutting the upper limit of its full-year earnings expectations, writes Geoff Pervical.

In the Tralee-based food giant’s latest trading update, new chief executive Edmond Scanlon said continuing adverse currency translation headwinds should see Kerry achieve adjusted earnings per share growth of 4%-6%, on a reported basis, this year to somewhere in the region of 336c-343c per share.

That growth estimate scale has narrowed and compares to one of 3%-7% communicated by management at the time of its interim results presentation in August.

At the time of the group’s annual shareholders’ meeting in May, Kerry was forecasting 5%-9% adjusted earnings per share growth.

However, the narrowed guidance didn’t stop Kerry’s share price growing by 2.8% yesterday on the back of what was a broadly positive trading update.

Kerry reported annualised growth of 4.2% in business volumes for the first nine months of the year — driven by 4.6% growth in the core taste and nutrition division. The lesser consumer foods arm saw year-on-year volume growth of 2.5%.

“The headwinds to growth remain currency and higher raw material costs but these are expected to be temporary in nature,” said Merrion analyst Darren McKinley; while Davy reiterated its ‘outperform’ rating on the stock, saying “in a dynamic food and beverage sector, Kerry remains highly relevant”.

On the acquisitions front, Kerry has also followed up its recent purchase of US food technology company Ganeden with two further American buys — the Kettle business of Tyson Foods and the Mississippi-based seasonings and coatings specialist Dottley Spice; both for undisclosed sums and likely to be completed by the end of the year.

A Kerry spokesperson added that the group’s acquisition pipeline remains “full” and that other deals could be carried out by year’s end or early 2018.

Earlier this year, Kerry said it had estimated spend capacity of €1bn for the next year and a half and a strong pipeline of targets in Asia.

Kerry also saw strong volume growth across all geographies in the nine months; the Americas rising 3.4% and Asia-Pacific 10.9% ahead of the same period last year, the latter boosted by convenience and foodservice offerings.

Meanwhile, Kerry also announced the appointment of Philip Toomey as chairman designate. Kerry’s senior independent director since early 2012 — and a former global chief operating officer for Accenture — Mr Toomey will formally succeed current Kerry chair Michael Dowling next May.


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