Price and volume growth led to success

ANALYSIS:FOLLOWING CRH'S announcement of interim results on Tuesday, Kerry Group yesterday became the latest Iseq heavyweight to post first-half numbers.

Like the construction giant, Kerry’s figures did not disappoint.

Any company that can deal with an 11 per cent rise in raw material costs without a very significant impact on margin is on track to deliver sustained growth.

Its figures were particularly impressive in light of recent disappointing results from some of its international peers, notably Givaudan.

One of the factors behind Kerry’s success is its ability to achieve both price and volume growth. Overall, volumes, or the amount of product sold, increased by 3.6 per cent, while the company achieved price increases of 5 per cent.

That Kerry succeeded in passing on a 5 per cent price increase to its customers in the current economic environment (though this proved more of a challenge in the British and Irish consumer market) is an achievement.

Chief executive Stan McCarthy said yesterday it was able to work collaboratively with its customers on price action because it similarly reacted to lower input costs by reducing price when needed.

The steady increase in volume sales also shows that the company is continuing to gain traction across its wide geographical spread. Yesterday the company identified China as one of the key areas offering major growth potential in terms of volume.

The Asia-Pacific region accounts for 11 per cent of total revenue. It also hopes to expand in countries where it already has sales teams in place such as Africa, the Middle East and India.

The company is currently developing its strategic “1 Kerry” growth plan, which involves a greater consolidation of its resources to reflect an increasingly globalised business. One example proffered by Mr McCarthy yesterday illustrates the benefits the company’s global spread can bring to the group – Kerry is tapping into the growth of restaurant chains in emerging markets by leveraging off the relationships it already has with these providers in the West.

Another focus for future expansion is the pharma industry. Though a relatively new platform for the group, Kerry now has global sales and technical teams covering the sector.

In the meantime the fact that the Kerry Co-op voted on Tuesday to reduce its 22.8 per cent stake in the company to potentially as low as 10 per cent is a sign of the times. While it is mainly a means for co-op members to release share value, it is also indicative of how far this increasingly international player has come from its co-op roots.