THE STATE'S largest food company, Kerry Group, expects to reach its annual profit target, despite higher food costs and pressure due to weaker currencies.
Stan McCarthy, who took over as chief executive of Kerry at the end of last year, reaffirmed the company's earnings per share (EPS) target of 151-155 cent for the year - up from 143.8 cent last year - at the company's half-year results.
Kerry said adjusted EPS rose 6.8 per cent to 62.8 cent during the first six months of the year. It planned to pay a half-year dividend of 6.9 cent, up 13.1 per cent on last year.
Kerry made a pretax profit of €132.8 million in the first six months, broadly similar to last year. Turnover rose 7.3 per cent to €2.36 billion on a like-for-like basis, excluding currency changes, acquisitions and disposals.
The company's trading or gross profit was €175 million in the first half, an underlying increase of 8.1 per cent on last year, despite "significant" pressures on food costs and the weaker dollar and sterling.
Kerry's share price rose 1.4 per cent to €19.27, valuing the company at €3.37 billion. The shares are down 11 per cent this year.
Revenue in the company's ingredients and flavours business - the larger of Kerry's two divisions, accounting for 70 per cent of revenue - rose 7.8 per cent on a like-for-like basis to €1.6 billion, while gross profit in the division rose 8.9 per cent to €134 million.
The consumer foods business, which is based in Ireland and the UK, had revenue of €877 million, a like-for-like increase of 6 per cent, while gross profit in the division rose 5.6 per cent to €56 million.
Kerry said it maintained overall profit margin at 7.4 per cent.
Revenue grew particularly strongly in the company's Asia-Pacific business, rising 20.3 per cent, ahead of America (7 per cent) and Europe (5 per cent).
Kerry passed on the higher food costs to customers, raising prices by 4 per cent due to the higher cost of raw materials, such as cereals and dairy products.
"We were able to cover the cost increases," said Mr McCarthy. It had taken longer to pass on increases of 300 per cent on chilled meats and there had been a weaker demand for dairy products, particularly yoghurt. The company would continue buying more businesses as part of its plan to double annual revenues to €10 billion over the next five to six years. "We are not taking the foot off the pedal with regard to acquisitions."
Kerry said a decision was expected shortly from the Competition Authority on the €165 million takeover of Breeo Foods, the dairy and meat consumer foods company spun out of Dairygold.
Mr McCarthy said Kerry would have at least $250 million in free cash every year for acquisitions over the next five years.
"We would obviously like to do more than that but we would like a lot of activities and initiatives that we have undertaken to be complete before we step up a gear."
Kerry is focusing on offering its ingredients and flavours technologies to customers around the globe. It is spending $50 million on a facility near Chicago, including research and development laboratories. The project is due to be completed next year.
Mr McCarthy said large increases in dairy prices last year coupled with the global downturn was "unfortunate". "I don't want to describe it as a perfect storm but it is coming close to it."
