Kerry Group boss Edmond Scanlon says it is taking a “pragmatic” approach to forecasting sales volumes for the remainder of its 2024 financial year as European consumers continue to tighten their belts after years of soaring inflation.
Shares in the Dublin-listed food group jumped more than 5 per cent in early trading on Wednesday after it raised its full-year guidance for earnings despite a slump in revenues as softer pricing hit its Irish dairy and its taste and nutrition businesses.
The group said it purchased €279 million of its own shares in the first half and would start another share buyback programme when the current scheme concludes.
Group revenues declined 5.9 per cent in the first half of its fiscal year compared with the same period last year, the Naas, Co Kildare-headquartered group said in preliminary half-year results released on Wednesday.
Kerry faced price deflation of 4 per cent across the group over the period, it said, reporting revenues of €3.9 billion for the period, down 5.9 per cent from last year. Disposals of group properties, plant and equipment in North America and Europe over the period coupled with the legacy impact of the sale of its sweet ingredients business last year also impacted revenues, it said.
In its dairy Ireland division, revenues were down 1.9 per cent to €592 million in the first six months of the year, as prices slumped 6.9 per cent amid continuing volatility in global milk markets.
In its more significant taste and nutrition business, Kerry reported a 3.1 per cent increase in revenues to €3.4 billion despite a 3.1 per cent slide in prices. Earnings before tax, interest, deductibles and appreciation (Ebitda) within the division improved by 5.5 per cent to €551 million over the period compared to the first half of 2023.
The group upgraded its full-year earnings per share guidance to between 7 per cent and 10 per cent from a previous range of 5.5 per cent to 8.8 per cent, on the back of strong growth in North America and its Asia-Pacific, Middle East and Africa (Apmea) regions.
Europe – where group revenues dropped 1 per cent to €708 million in the first half – remains challenging, however, Mr Scanlon told The Irish Times on Wednesday.
“What we’re seeing now specifically in Europe is that the cumulative the effect of inflation since 2019 is really impacting consumer demand,” he said. “For many consumers, the price of their basket [of goods] has jumped by between 30 per cent to 40 per cent since 2019 and demand is reflecting the cumulative scale of those price increases.”
Against this backdrop, he said Kerry introduced price promotions towards the end of its second quarter, the impact of which will become evident later in the year.
On an investor call on Wednesday, Mr Scanlon was pressed to forecast sales growth for the remainder of the year. He said it would likely be in the “3 per cent to 3 per cent plus zone” compared to previous forecasts of between 2 per cent and 3 per cent.
However, he told The Irish Times that Kerry was not factoring in an improvement in underlying market conditions in its forecasts for the rest of the year.
“I’d describe our approach as pragmatic and kind of sensible, given what we’re seeing today and what we’ve seen over the last couple of years.”
Marguerite Larkin, Kerry Group chief financial officer, told investors the group intends to unveil another share buyback programme when the current scheme concludes, “given the good cash generation and current market conditions”.
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