Shares in Kerry Group plunged by 10 per cent yesterday after the company warned it might not meet profit forecasts for the year.
Hugh Friel, chief executive of the food and ingredients group, told shareholders that while the group was performing ahead of last year, it was facing into a number of "strong headwinds".
"Energy cost inflation, the weakening dollar and the volatility of raw material prices may impact on the attainment of group earnings targets for the full year," he said.
Shareholders at Kerry's annual general meeting in Tralee were told that 2006 would be "a very challenging year" and that the group must be "realistic".
Mr Friel said that trading profit would increase this year, but that it would be 2007 before the €400 million mark would be crossed. The group generated trading profits of €380 million last year, with analysts having expected €400 million to be passed in 2006.
Mr Friel's comments put immediate pressure on Kerry's shares, which fell as low as €17.50 before recovering somewhat to close at €18, down €1.47 or 7.55 per cent on Thursday's finish. Such severe movements are unusual for the stock, which usually trades in a more sedate fashion.
Mr Friel said that last year alone, Kerry, which manufactures in 20 countries, had seen energy costs rise by some €24 million. Basic materials such as vanilla had fluctuated wildly in price, he said.
Shareholders also heard, however, that Kerry was making "good operational progress" in updating its structures and eliminating non-core activities.
Last year, these change included "mothballing" one plant in the UK until the market picked up, the closing of others and the sale of one line.
"We have a strong platform for growth into the future notwithstanding the fact there are strong headwinds out there," said Mr Friel, adding that the firm was continuing to look for bolt-on acquisitions in ingredients and food, having most recently bought two north American food ingredients businesses.
"I am very confident about long-term prospects for the group," Mr Friel told shareholders.
He said the group would be confronted constantly in the future with cutting costs, a factor that was regrettable when it affected people. "But I don't see any alternative. We are not competing locally any more, but in a global market," he said in response to a disgruntled haulier from Co Clare.
Shareholders approved a final dividend of 11 cent per share, bringing the total dividend to 16 cent per share.
