Kerry Group outpaces its global peers

Shares in Kerry Group outpaced all its global peers in the past two months — allowing it to overtake Ryanair as the largest company with a main listing on the Irish Stock Exchange.

Kerry stock rose 7.4% over two days to a record €39 on Aug 10 after raising earnings guidance, giving it a market value of €6.85bn.

The company overtook Ryanair on Jun 26 after the airline said in May that recession and austerity in Europe will make it difficult to match last year’s record results.

Kerry, which has become one of the world’s largest suppliers of ingredients and flavours to customers such as Nestle and Pepsico, forecast last week that earnings will grow by 8% to 12% this year, compared with 7% to 10% in May.

Slower earnings growth in Europe was offset in part by expansion in Asia and the Americas, where Kerry has increased its presence through acquisitions.

“We are going through a transformation in terms of truly globalising the business,” CEO Stan McCarthy said last week. “As we move through that transformation, you have a business model that is primed for larger acquisitions.”

The stock gained 14% in the last 60 days, more than its 14 largest global food manufacturing competitors including Danone and flavours maker McCormick & Co, according to data compiled by Bloomberg.

Ireland-based Glanbia — one of the largest producers of cheddar cheese in the US — and Dublin-based Greencore Group, the world’s biggest sandwich maker, have risen 33% and 54% respectively this year as they acquired US firms.

“People are looking for that stability at the moment, and for companies that aren’t sliding downwards,” said James Targett, an analyst at Berenberg Bank, who has a buy recommendation on Kerry with a target price of €40. “It has all been about revenue synergies and cross- selling, and expansion into new markets,” he said.

The Tralee-based group has grown from operating one dairy plant in Ireland in 1972 to runnign 150 manufacturing facilities in 25 countries. Last year, the company said it acquired Cargill’s global flavours business for $230m, (€186.7m) in addition to smaller acquisitions in Argentina, India, South Africa, Australia, and Germany.

Any large acquisition would have to be in the company’s ingredients and flavours business, according to Mr McCarthy.

The ingredients and flavours division reported a 17% rise in first-half profit to €213m. Revenue from business outside of Europe, the Middle East and Africa stood at 40% of total sales last year. Increased investor confidence in Kerry’s long- term growth ambitions has helped the stock this year, said Alex Sloane, an analyst at Société Générale.

Kerry said last week it may spend up to €300m on acquisitions this year.

— Bloomberg


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