Kerry could raise €1.4bn from consumer foods unit, Exane says

Kerry Group could raise at least €1.4 billion by selling its consumer foods division and help fund acquisitions in its higher-margin taste and nutrition unit, according French equities brokerage Exane BNP Paribas.

A sale of the consumer business, with brands ranging from Dairygold butter spreads to Denny rashers and sausages and which had a trading margin of 8.3 per cent in the first half of the year, would help accelerate deals in the remaining business, Exane said in a note on Tuesday.

The company’s taste and nutrition business’s €303.8 million first-half trading profit was more than five times that of consumer foods, while its margin was 50 per cent wider, at 12.8 per cent.

Kerry Group, currently valued at €10.9 billion on the Dublin bourse, has spent an average of about 4 per cent of its market capitalisation a year on mergers and acquisitions since 2010 and M&A is likely to play a bigger role in its strategy over the next five years, the French brokerage said.

Danish food ingredients group Danisco, Wisconsin-based colours and flavours company Sensient Technologies and Israeli favour and fragrance house Frutarom Industries all meet Kerry Group's M&A criteria, according to Exane.

Consumer foods

However, Kerry Group, led by chief executive Stan McCarthy, has played down the prospect of a sale of the consumer foods division, which has been the subject of perennial speculation.

“Kerry Group’s dual-strategy approach has served the organisation and its shareholders well,” said a spokesman for the company, referring to its two divisions. “Both businesses continue to grow in volumes and margins.”

He added the fact the consumer foods division is “highly cash-generative”, which has aided the group’s strategy.

Exane reiterated its “outperform” rating on Kerry Group’s stock, which has fallen by about 26 per cent from an all-time high of €84.05 reached in April.

Kerry Group said in a trading update earlier this month that growth in its earnings per share this year is expected to be towards the lower to middle of the 6-10 per cent range it had previously forecast.