Kerry boss upbeat despite near 5% share slide

By Geoff Percival

New Kerry Group boss Edmond Scanlon has shrugged off initial poor market reaction to the company’s latest growth figures, by calling the Kerry investment rationale “a long game”.

Kerry shares fell by as much as 5% yesterday and only pared back marginally, despite the food group reporting strong annual figures and announcing a 12% increase in shareholder dividend for 2017. The company’s shares are up by over 18% in the past 12 months.

“I don’t take a huge amount of notice of the day-to-day [share price movement]. This is a long game and we will do the right thing for shareholders and that’s not going to change on my watch,” Mr Scanlon said.

The Tralee-headquartered food and ingredients group yesterday reported a 4.5% rise in group revenue to €6.4bn, driven by a 4.3% growth in volume, while post-tax profits for the year rose by 10.4% to €588.1m.

Adjusted earnings per share were up 5.5% to 341.2c, the upper end of Kerry’s recently tightened target range. Mr Scanlon said further growth of between 6%-10% is being targeted for 2018. Late last year, Kerry said it is targeting 10% earnings per share growth, per annum, as part of its latest five-year development plan.

“Despite the changing market landscape and significant currency volatility, Kerry businesses are well-positioned to continue to grow and develop profitability, and to achieve the group’s new medium-term strategic financial targets,” said Mr Scanlon.

He said the group is well prepared for Brexit, with sterling mitigation plans “well-progressed” and the restructuring of less profitable businesses continuing.

The planned 31 redundancies at Kerry’s Carrickmacross facility have been blamed on the sterling exchange rate and Brexit uncertainty.

Mr Scanlon said that while Brexit may affect certain product lines at the facility, it wouldn’t hamper the future of the overall plant.

On acquisitions, Mr Scanlon said Kerry would continue to buy companies — helped by a strong balance sheet boosted by the generation of €500m in free cash flow last year and net debt of €1.3bn being only 1.4 times earnings.

“The acquisition pipeline remains strong. With the market fragmenting, there will be many opportunities for consolidation and we’re confident we can lead the way in that consolidation.”

Kerry spent €400m on eight acquisitions last year and has already spent another €80m on deals in Asia and Africa this year. Mr Scanlon said the pipeline is equally balanced between developed and non-developed markets and regions, but less money is likely to be invested in Asia this year, where Kerry’s revenues grew 13% last year.

Kerry’s 2017 growth was again driven by its core taste and nutrition division, with near 5% revenue growth — to €5.2bn — and 7.1% growth in trading profit to €767m. However, despite an 8% slide in profits in the consumer foods arm, revenue grew by 2.4% to €1.33bn and management is targeting expansion into the snacking and food-to-go markets.

However, Mr Scanlon warned rising inflation in the UK could impact on consumer demand there.

Kerry has also announced Marguerite Larkin, a senior partner with Deloitte, as its new chief financial officer. She will replace Brian Mehigan, who is switching to the role of chief strategy officer at the end of September.

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