Kerry Group's shares hit an all-time high of €23.50
Rise comes as food group reveals 'better than expected' full-year results
Published 24/02/2010 | 05:00
SHARES in the Kerry Group hit an all-time high yesterday after the owner of brands, such as Denny and Dairygold, unveiled full-year results which beat expectations and predicted an 11pc rise in 2010 earnings.
The stock touched €23.50 at midday, a 3.3pc rise on its opening price, as the market digested Kerry's earnings news and commentary of an 11pc increase in the group's full-year dividend. "Two thousand and nine was the stress test for Kerry's strategy and I think the strategy came through with flying colours," Kerry chief executive Stan McCarthy told journalists, as he presented the results of his second year at the helm.
The year's earnings performance was driven by an 80 basis point improvement in Kerry's trading profit margin as raw material costs fell and the group benefited from efficiencies and a withdrawal from lower return businesses.
Kerry also managed to grow sales volumes by 2.2pc over the year despite the hostile economic environment, although top-line revenue was down 5.6pc as the impact of weak sterling and lower retail pricing took its toll.
The results were described as "well ahead of expectations" by NCB analyst Paul Meade, though Merrion and Davy's said the figures were only "slightly ahead" of forecasts.
The higher profits left Kerry with earnings per share (EPS) of 166.5c for 2009, against forecasts of 160 to 165c. Mr McCarthy said the plc was "confident" of achieving EPS between 182 and 185c this year, which would allow for another jump in Kerry's dividend payout next year. The forecast assumes Kerry's key currencies -- sterling and the US dollar -- remain at "today's rates", Mr McCarthy confirmed. Sterling fell by 11.3pc last year while the dollar strengthened by 4.8pc. Both currencies have stabilised in recent months.
Mr McCarthy hinted to the prospect of further acquisitions in 2010, pointing to the €300m plus free cash-flow the company expected to produce, while stressing that Kerry won't "spend money just because we have it". "We think acquisitions (particularly large ones) remain a critical part of group planning," Bloxham's analyst Joe Gill told clients.
Mr McCarthy also pointed to potential for further "efficiencies" in 2010, though he stressed that the "biggest adjustment" had already been made in the Irish business, which went through significant restructuring last year.
Ireland, which accounts for about 15pc of Kerry's business, "is still righting itself", Mr McCarthy said -- adding that the home market would "obviously" continue to be "challenging" in 2010.
Kerry's Irish Consumer Foods business was "down seven or 8pc" last year, compared with a fall of 6.1pc in like-for-like revenue across the division which accounts for about 35pc of Kerry's €4.5bn business.
Meanwhile, like-for-like sales at the Ingredients and Flavours business fell by about 4.5pc to €3.26bn.
Ingredients and Flavours also led the pack in terms of margin improvement, boosting its trading margin by 90 basis points to 10.4pc compared with a 40 basis points improvement in Consumer Foods, which now boasts a trading margin of 7.1pc.