Kerry Foods acquisitions lead to emerging markets

21-Feb-2012 - Last updated on 22-Feb-2012 at 14:55 GMT

Analysts have said Kerry is well placed to increase profits in emerging markets after last year's acquisitions

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Acquisitions totalling nearly £350M last year have boosted Irish food giant Kerry Foods profit potential in emerging markets, according to city analysts, after the firm revealed a strong performance in its latest set of financial results.

Liam Igoe, an analyst at stockbroker Goodbody, told FoodManufacture.co.uk that the deals would allow the firm to significantly expand its business outside core areas such as Europe and the US.

He said: “The acquisitions that Kerry has made are significant in the medium-to long-term, particularly in allowing the firm to get into emerging markets. This is especially prevalent in areas such as Argentina and India, where the firm will now be looking to expand.

“Some of the acquisitions that Kerry has made already have operations in these regions, which will give it a toe-hold to build on.”

Improved performance

Igoe also said that the deals were likely to lead to an improved performance in Kerry’s functional ingredients division.

Kerry confirmed its intentions to expand in new markets. It also said that the acquisitions, which were mostly completed by the firm’s ingredients and flavours business, would increase that possibility.

“The group completed a number of acquisitions during the year at a total cost of £323M (€386.4M),” the firm said in a statement.

“The acquisitions will strengthen the group’s capabilities across a range of technologies and expand Kerry’s footprint into new geographies.”

Increased trade overseas

Despite predicting increased trade overseas, Igoe told FoodManufacture.co.uk that the acquisitions were not a key factor in the firm’s strong performance for the year.

“The acquisitions were not material to the results as they happened too late in the year. The biggest factor was the like-for-like value growth of 6.4%. This is a pretty good number when compared with other manufacturers.”

Kerry confirmed that it had shrugged off weak consumer confidence and significant raw material and input cost inflation for the year, to report total sales revenues up 6.9% to £4.4bn (€5.3bn) for the period ending December 31.

The firm also saw a 3.3% increase in business volumes and reported a trading profit of £419M (€501M) for the period, an increase of 7.1% from the previous year.

Kerry Group chief executive, Stan McCarthy said: “Kerry delivered good profitable growth in 2011 despite weak consumer confidence in many markets and significant raw material and input cost inflation.

“The Group performed well across developed and developing markets while continuing to build our capabilities and positioning for the future. Trading profit reached a milestone level of €501m in 2011. We are confident of achieving our strategic growth objectives for 2012 and expect to achieve seven to 10% growth in adjusted earnings per share to a range of 228 to 235 cent per share.”

The busy year for Kerry started with the acquisition of ingredients business Headland Foods in January 2011. The deal was subsequently referred to the Competition Commission amidst strong concerns from Headlands' main customers.

The firm also acquired Cargill’s flavour business in December last year in a £147M deal. Prior to the completion of the deal, Kerry also bought German flavourings group SuCrest for an undisclosed sum.

Kerry also said that a number of bolt-on acquisitions in the ingredients and flavours business were completed during the year.