ANALYSIS:KERRY MAINTAINED its position at the top of the Irish PLC class yesterday with a stellar set of results that surprised even the most optimistic of analysts.
Turnover of €5 billion, customers in 140 countries, and a healthy profit of €470 million is the stuff of which corporate dreams are made. Add in a tight balance sheet and up to €1 billion in acquisition money to play with, and it doesn’t get much better as far as most analysts and shareholders are concerned.
Kerry’s success is down to its deft expansion into international markets. Back when few Irish companies were willing to dip their toes into international waters, Kerry began to quietly build up its presence abroad, moving into the nascent ingredients and flavours business. Today, it is the largest ingredients and flavours business in the world.
The business with its headquarters in Listowel has not forgotten its roots however.
Despite its growing emphasis on the trendy ingredients and flavours industry – which sees the company produce everything from sweetened flavours to ingredients for tablets – it still maintains a market-leading presence in consumer foods, particularly in the UK. Consumer foods represents a third of its revenue and approximately a quarter of its profits.
Rather than a nod to shareholders, this is very much part of a specific strategy, one that was described by chief executive Stan McCarthy yesterday as the company’s “dual strategy” which allows Kerry to withstand cyclical changes such as increasing commodity prices. As McCarthy said at various points during the presentation of Kerry’s results yesterday, the foods and ingredients business is “not a linear industry”.
Kerry’s strong performance last year is in part a result of a well-planned internal restructuring exercise which has taken place over the last few years. Next year, the company may well look externally, focusing on larger acquisitions.
McCarthy said the company can spend €300 million without making a dent in the balance sheet, while acquisition expenditure could top €1 billion if the right opportunity came along, with McCarthy mentioning branded businesses as possible targets.
Unsurprisingly, Kerry declined to comment on whether it was in any discussions with smaller rival Greencore, itself at somewhat of a crossroads.
What is certain is that Kerry certainly would have the means to acquire an interest in all or part of other food businesses either in the UK or Ireland. Whether it will actually do so remains to be seen.
2010 RESULTS
Turnover: €5 billion (+9.7%)
Trading profit: €470 million (+11.3%)
Earnings per share: 194.5 cent (+16.8%)
Total 2010 dividend: 28.8 cent (+15.2%)
