Kerry figures beat industry growth

Irish ingredients, flavours and end products company Kerry shrugged off currency fluctuations and sluggish industry growth rates with interim results - broadly in-line with analysts' expectations - showing a rise in operating profits and growth across all leading brands.

Against the background of a sharp fall in the dollar, the group reported a 4.1 per cent rise in operating profit (EBITA) for the first six months of 2003 to €133m with operating margin (before goodwill and exceptionals) up from 7.1 per cent to 7.4 per cent.

The results reflect a like-for-like sales growth of 5.9 per cent compared with 5.0 per cent in the first half of 2002.

"Against a background of significant currency movement in the group's major markets, Kerry outperformed industry growth rates delivering a strong operational performance and good financial results,"​ said Kerry group managing director,Hugh Friel.

Cost efficiencies gained from capital development programmes concluded in 2002 seem to have paid off for the company with performance across the group's European ingredients businesses, including coatings, up on the half-year level in 2002.

Two key factors are providing the Kerry business units with good growth opportunities. Firstly, exposure to fast growth sectors like ready meals and secondly, a heightened awareness of health and dietary issues that in turn provide a stimulus for ongoing innovation in the food ingredients, flavours and consumer foods industry.

Kerry reported that the division's performance in European food coatings markets significantly improved through benefits from supply chain improvement projects, increased production efficiencies and synergies across manufacturing facilities.

The UK-based EBI Foods business, acquired in late 2002, exceeded budgeted business targets for the period across added-value coatings markets in European, Middle Eastern and Far Eastern markets.

Raw material price increases were not fully recovered in product prices in the competitive coatings market and speciality ingredients though according to the company recovery here is 'ongoing' and should lead to an improved result by the year-end.

Divisionally the biggest variations were in the Americas and Asia Pacific. In the Americas, the result was lower than analysts had anticipated. Like for like growth has slowed to 3 per cent and was partly due to initial costs associated with setting up the international flavours division Mastertaste.

The company reported a strong set of results in Asia Pacific. Like-for-like sales rose 7.4 per cent from the first half of 2002 to €71.6m. Operating profits grew to €5.4m, reflecting a like-for-like increase of 34.8 per cent.

During the six month period to June 2003 the company spent €125m on three US acquisitions - ingredients company Guernsey Bel, seasonings manufacturer Pacific Seasonings and citrus flavours manufacturer SunPure.

By all accounts acquisitions will continue to form part of the future strategy for the Irish company, but they will have to be good strategic fits. Last year the Irish group decided against buying flavours company Haarman & Reimer - on sale for €1.66bn - concluding that it was not the perfect fit.

Shares for Kerry group showed a net change drop of 0.1 to €14.5 at 15:00 GMT on 2 September 2003.