Kerry Group has maintained its position as one of the State's fastest growing companies with a near 20 per cent increase in pretax profits to €119.2 million (£93.9 million).

And with Kerry's huge free cash flow meaning that its interest bill was covered 3.7 times by operating profits, analysts believe that the group is already back in a position where it can look at sizeable acquisitions despite spending £346 million net of disposals on acquisitions last year and a further £54 million on capital expenditure in the existing businesses.

In total, sales rose by almost 29 per cent to £1.73 billion (€2.2 billion) with sales from the existing businesses up 10 per cent or £134 million (€170 million) while acquisitions - notably the Dalgety food ingredients business - contributed £254.3 million (€322.9 million).

Operating profits were 30 per cent higher on £136.5 million (€173.4 million) while acquisitions were responsible for £17.3 million (€21.l9 million). Overall, operating margins continued their steady improvement and were 7.9 per cent last year compared to 7.8 per cent in 1997. Kerry was also a beneficiary last year of the strength of the US dollar and sterling, and better exchange rates accounted for 20 per cent of the increase at the operating level, said a Kerry spokesman.

The past year has seen a continuing shift in the balance towards Kerry's ingredients business, which - partly due to the Dalgety and other acquisitions - accounted for more than 63 per cent of the £1.7 billion sales last year compared to less than £783 million or 58 per cent of the £1.34 billion sales in 1987.

While Kerry insists that it is committed to expanding its consumer foods business and is not focused solely on the ingredients business, analysts believe that the greater availability of large acquisition opportunities in ingredients is likely to mean that the balance of the business is likely to shift increasingly towards ingredients over the next few years.

This year, Kerry has commented on its business on a geographical rather than product basis "to reflect sales performance and profitability by market of origin". In Ireland, sales rose 4.3 per cent to £455 million (€578 million) with operating profits up 6 per cent to £25.3 million (€32.1 million), mainly due to the growth in the consumer foods business and dairy ingredients from the Listowel plant.

In the rest of Europe, both consumer foods and ingredients saw underlying volume growth. Turnover from continuing businesses were up more than 15 per cent to £562 million with operating profits of £40.3 million while acquisitions - particularly Dalgety - contributed almost £200 million in sales and almost £16.5 million in operating profits.

In the Americas, there was little in the way of acquisitions and the vast bulk of the growth came from a 9.1 per cent increase in sales from the continuing businesses to £452 million with operating profits up more than 15 per cent to almost £53 million. In Asia/ Pacific, acquisitions - particularly the Burn Philps business in Australia - accounted for £44 million of the £53 million sales and more than half of the £1.7 million operating profits.

Analysts welcomed the Kerry results and upgrades of 1999 earnings to 68 to 69 cents per share are likely. Kerry is already benefiting from the strength of the dollar - which accounts for around 60 per cent of earnings - and also sterling. On the ingredients side, Kerry is also benefiting from more benign raw material prices especially flour and cheese.

The group, however, will take an exceptional charge of £25 million in the current year to cover the integration and rationalisation of the Dalgety and Burn Philips businesses.