Kerry's revenues grow 5.6% after price increases

Food group Kerry has reported a healthy set of results for the first half of the year, with price increases and a cost-efficiency programme helping it offset the soaring cost of raw materials.

Kerry secured like for like revenue growth of 5.6 per cent in the first six months of the year, with trading profit growing 6.2 per cent to €172 million. Earnings per share grew 7.1 per cent to 58.8 cent, while trading margins increased by 20 basis points to 7.4 per cent.

However, chief executive Hugh Friel warned the knock-on effects of a dramatic shift in land use for biofuels rather than food production, drought in parts of the world and soaring demand for dairy products in Asia meant cost pressures had to be constantly managed. More frequent pricing reviews with its customers needed to be put in place.

But he added that there would be a lag between the increases in raw material costs and the time it took to recover some costs through higher prices for its food products because of the buying power of the supermarkets.

Kerry is exposed to global price increases in dairy, cereals, meats, fruit and sugar through its consumer food and food ingredients businesses and Mr Friel said that he expected raw material prices to stay high for some time. A weak dollar also affects the company at an operating level.

The company's ventures in Asia are profitable and "encouraging," he added.

Mr Friel, who retires at the end of the year after a 35-year career at the group, including five years as chief executive, said Kerry's balance sheet has the capacity to make acquisitions.It was seen to have lost out in the race last year for Bird's Eye, which was purchased by a private-equity group.

Mr Friel said it was possible that problems on world markets would reduce the amount of debt that private-equity groups can use in acquisitions, giving Kerry an advantage in future bids. He said the company would not buy businesses that were overpriced.

Kerry's share price increased by €1 on the Irish Stock Exchange yesterday, rising 5.59 per cent to €18.90. Davy and NCB upgraded their earnings per share forecasts for Kerry following the results.

PROFILE: chief executive-designate is a career Kerry man

Stan McCarthy will take over as chief executive of the Kerry Group in January, following the retirement of Hugh Friel (63).

Mr McCarthy (49), who has been appointed chief executive-designate of the food group, is a career Kerry executive. He has been an executive director of the company since 1999 and is currently president and chief executive of its important Kerry Ingredients Americas division.

With a background in accounting, Mr McCarthy joined Kerry's graduate recruitment programme in 1976 and worked in finance until he moved to the US when Kerry set up a small office in Chicago in 1984. He "wore many different hats" as the fledgling business grew, including that of financial controller.

Following Kerry's acquisition of ingredients firm Beatreme in 1988, he was appointed vice-president of materials management and purchasing. In 1991, he became vice-president of sales and marketing, and he was named president of Kerry North America in 1996.