Energy costs hit Kerry growth

Kerry Group has blamed sluggish growth in the first half of the year on difficulties in passing higher energy costs on to customers.

Results issued yesterday show that Kerry's revenues climbed by 7 per cent to almost €2.3 billion in the six months to the end of June, while trading profits increased by 1.5 per cent to €162 million.

Pretax profits declined, falling by 4.3 per cent to €125.3 million.

The results, which mark a decline in Kerry's growth rate, were in line with a profit warning issued by the company at its agm in May.

The group's chief executive, Hugh Friel, said higher energy prices had added €40 million to costs over the first six months, with the company only able to recover €30 million of this from its customer base.

He predicted that the full 12 months would bring additional energy-related costs of €40 million.

"The issue is one of not being given adequate time to catch up," Mr Friel said, noting that the firm's focus also needed to fall on achieving efficiencies.

Kerry's trading margin in the first half fell by 40 basis points to 7.2 per cent, well below last year's full-year margin of 8.6 per cent.

The firm will seek to improve margins by 25 points by shutting 10 manufacturing plants over the near term.

Mr Friel declined to specify the location of the plants, leaving open the possibility that some could be in Ireland.

A breakdown of the sales numbers showed that like-for-like revenues, stripping out acquisitions, were ahead by 3.5 per cent. Mr Friel said this was "very satisfactory in the circumstances".

In ingredients, Kerry's biggest business, sales grew by 6.5 per cent to almost €1.6 billion, while trading profits were up by 4 per cent at €123 million.

Like-for-like sales increased by 5 per cent, with growth faster in the Asia/Pacific region than elsewhere.

Shares in Kerry fell by 10 cent to €17.45 yesterday.