Food company Kerry Group is struggling to pass on higher energy costs to consumers leading to a fall in profitability, the company siad today.
Kerry which issued a profit warning in May described trading in the first six months of 2006 as "extremely challenging." The food and ingredients group has shut eight factories in the past year and plans another ten factory closures as part of a cost cutting drive.
Energy costs rose by €40 million limiting trading profit to €162 million, a modest increase of 1.5 per cent. The group's trading margin fell by 0.4 per cent to 7.2 per cent as the company had to absorb the higher costs in a competitive market.
Despite the group's current difficulties, chief executive Hugh Friel expressed confidence that the renewed focus on costs will deliver long term benefits.
"The recent competitive pressures in the food industry will inevitably increase the pace of industry consolidation," Kerry said in a statement and added that it is currently exploring a busy pipeline of bolt-on acquisition opportunities.