Careful cost management has been key to group's success
WINNING the Sam Maguire and a strong set of results from Kerry Group are taken for granted in Kerry.
While the county might have gone off course on the football this year, it was business as usual for Kerry Group and its shareholders yesterday.
The company has reported steady growth in revenue, profits and, perhaps most importantly for investors, its dividend.
A pre-tax profit of €449.1m on revenue of €5.3bn was slightly ahead of market expectations, as was the final dividend of 22.4c, which brought the full-year dividend up to a very tidy 32.2c.
That profit was also the biggest so far of this earning season and it is unlikely that those figures will be topped by any indigenous Irish company.
However, there is one cloud on the horizon: higher input costs hit the consumer-foods business at a time when retailers have to aggressively discount products just to get wary consumers in their door.
Raw-material costs increased 8pc across the group but consumer foods took a disproportionate hit, with trading margins sliding 30bps to 7.8pc. In contrast, ingredients and flavours managed to grow margins by 10bps to nearly 12pc.
At this point, however, consumer foods generates barely a third of Kerry's profits and chief executive Stan McCarthy believes that his firm is well placed to deal with this issue.
"Oil at over $100 a barrel will boost commodity prices but we expect costs to be only 1-2pc higher this year," he said.
The management of margins stood out for some analysts, with Davy Stockbrokers' John O'Reilly describing the "good management of raw-material costs" as a "noteworthy highlight" while NCB's Darren Greenfield said it was "very encouraging".
Under Mr McCarthy, Kerry has made a number of smaller, bolt-on acquisitions.
Even with that strategy, the firm still spent €480m on deals last year and is unlikely to match that number in 2012.
The company currently expects to spend between €250m and €300m in 2012 but that could always change if the right chance came along.
"Acquisitions don't always happen when they you want them but you have to take them when they're the right thing to do," was how Mr McCarthy put it yesterday.
Kerry certainly has the firepower to do a lot of buying in 2012. Despite doing most of its deals in the last quarter of last year, retained earnings rose by more than €300m to €1.52bn, while the net debt to EBITDA ratio only rose from 1.8 to 2.0.
Kerry, which is always one of the first companies to report in the results season, has set a high standard. It has undoubtedly made it difficult for others to measure up.