Bright outlook puts Irish food firms in expansionist mood
As a result, Irish companies, even those as successful as Kerry Group, can become potentially attractive takeover targets, even more so after Kerry Co-op’s ownership of shares in the group has fallen to only 10%.
Meanwhile, Kerry Group itself is in an aggressive expansionist mood, with up to €400 million available for buying companies before the end of this year. Within days of chief executive Stan McCarthy outlining the group’s worldwide growth, at the ASA conference, Kerry announced agreement to acquire SuCrest GmbH, a European ingredients and flavours business with annual revenue of €50m.
Kerry’s principal business is international food ingredients, which account for 70% of the total. Its dairy business in Ireland and its branded food business in Ireland and Britain account for the balance. As with other Irish multinational companies such as Glanbia and CRH, Kerry reported impressive financial results in recent times. The profits earned in other more rapidly growing economies provide a form of protection for the Irish business (and provide the resources for new plant, if required, though Mr McCarthy says that Kerry at present have the capacity to handle 20% more milk).
Another Irish international success is Jameson whiskey, where sales volume increased in the past year by 17%, and sales value by 20%. Sales had increased by over 10% per annum in each of the past 10 years, and it is now the No 29 brand in world sales of spirits, while it was just within the top 1,000 in 2004. The capacity of the distillery in Midleton is about to be doubled, said chief executive Alex Ricard at the ASA Conference.
Also at the conference, Agriculture Minister Simon Coveney indicated that studies being carried out on the feasibility of resuming sugar production, if EU sugar quotas are ended in 2016, are “persuasive” about the possibilities.
While all speakers endorsed the approach in the Food Harvest report in setting ambitious targets for the sector, and rejoiced in the renewed recognition of the importance of the sector for the economy, there were several warnings about the dangers of excessive hype.
The minister acknowledged the “chasm” between good and bad farming, particularly on beef herds.
Joe Gill of Bloxham Stockbrokers repeated his views in his article in this paper last week about the lack of scale in our supposedly efficient and competitive dairy sector, and the need to rationalise the processing sector into a single operator, incorporating the Irish Dairy Board, which could potentially compete with Fonterra and other dairy giants. He was also sceptical about too great a reliance on “added value” foods. His research failed to find examples where excursions into these areas had added to shareholder value.
