Kerry continues to expand ingredients, food divisions

By staff reporters

- Last updated on GMT

Reporting good sales and profits growth in the first six months of
2005, ingredients and food products maker Kerry said today it is
still on the prowl for what it describes as further"bolt-on"
acquisitions.

The Ireland-based company is becoming increasingly split into an ingredients and flavours supplier and into a maker of food products. Earlier this month the company bought an Asian ready mealsbusiness in the UK for £124m (€175m). Kerry said the purchase of Noon Group is part of a major expansion of its chilled ready meals business in the UK. The company believes on-going consolidation in the ingredients and foods sectorwill continue to provide it with further opportunities to make other complementary acquisitions. In the consumer foods segment Kerry 'already owns the Mattesons, Denny, Dawn and Ballyfree brands. Despite the downward pressure on prices caused by supermarkets' battle for market position across Europe, Kerry's management expect further business improvement in the second half of the year. Kerry today said sales rose in the first half by 8.3 per cent to €2.1bn compared to the first half of last year. Reflecting an industry-wide pattern, Kerry cited "significant input costs"linked to an increase in energy and raw material costs as exacerbating an already competitive working environment. Food ingredients make up 69 per cent of sales while consumer foods make up the rest. The company's food division increased sales revenue by 1.5 per cent to €820m in the first half of the year. This represents a 3.1 per cent growth on a like-for-like basis and with currency exchange rates removed from the calculations. The company reported growth in its branded, convenience and food-to-gocategories. In Ireland its cheese brand continued to out-perform market growth rates. Denny consolidated its brand leadership in the premium cooked meats and sausage categories. The company said itsconvenience food range of sandwiches, salads, desserts, juices and mineral waters also turned in good performances. Its chilled foodservice business was also a growth area. In the UK its Cheestrings brand continued to increase market share and is making inroads in France with its Ficello brand. The launch of its snack product, Brunchettas, in the UK also caught the increased demand for food-on-the go, a trend in the market, Kerry stated in an announcement. The market in frozen ready meals remains competitive, although the company's Rye Valley Foods brand still managed to eke out a "satisfactory" performance, Kerry stated. Profit growth for Kerry's food division was hurt by one-off start up costs for a new production facility in Hartlepool. Higher distribution costs in the UK's convenience store sector also cut intoprofits. Overall total group sales in Europe, including the food ingredients segment, increased by 7.2 per cent to €1.38bn. The European ingredients business posted a 12.1 per cent growth in sales revenue to €1.4bn for the first half. Dairy proteins and speciality ingredients from the Listowel and Charleville operations continued to yield good results. Growth in markets for protein hydrolysate applications in infant foods and innutrient therapy also boosted the bottom line. Elsewhere, the US ingredients operations, still recovering from the decline in the low-carb phenomenon in 2004, saw revenues increase by 6.5 per cent to €573, reflecting growth of 2.6 per cent onthe year before. Kerry highlights that demand in the US for soy-based systems and functional lines "improved to encouraging levels". In March Kerry acquired ingredients firm Hangzhou Lanli Food Industry. The deal improves the Irish company's offering of sectoral ingredients for nutritional, dairy, flavoured noodle, brewing,flavoured beverage, snack and baking segments in this "fast growing consumer marketplace." External links to companies or organisations mentioned in this story: Kerry Group

Related topics: Market Trends

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