Tuesday 21 November 2017

Hungry investors can't get enough of food sector as shares rise average of 18pc

SO far, 2010 has not been a good one for investors with money in ISEQ Index shares. The index is down more than 10pc since January and has paid the price for being so reliant on construction and financial stocks.

One sector that has really bucked the trend, however, has been the food sector. The various food shares on the ISEQ are up by an average of 18pc on the year, with some of the true titans in Irish industry leading the way.

Kerry Group, which releases an interim management statement today, has been a favourite with investors for years, and with a return over the first 10 months of the year of about 33pc, that's likely to continue. With every passing year, the decision to branch out into the food ingredients sector looks even better.

The ingredients and flavours business accounted for three quarters of Kerry's revenue during the first half of the year, while the high margins in the business allowed for profits from the sector to increase by more than 9pc despite a revenue increase of less than 4pc.

And the ingredients sector should continue to grow. Davy Stockbrokers' analyst John O'Reilly believes the outlook is "very positive".

"Unprocessed or staple foods ceased to be the dominant source of nutrition a long time ago," he says. "The growth in packaged food consumption ... has created a big opportunity for the large international ingredients houses."

Kerry of course is not the only company to have diversified its business. Glanbia now relies on its US cheese and nutrition division for most of its profits, a strategy that has rewarded investors with a 25pc return on investment so far in 2010.

Meanwhile the Irish led Swiss firm Aryzta, which is perhaps best known on the street as the parent of Cuisine de France, has gained 19pc since January.

The company's recent move deeper into the "quick service restaurant" sector seems to be working, with the recent buyout of Maidstone Bakeries in Canada as well as acquisitions by its US subsidiary Fresh Start Bakeries having been universally welcomed by the market.

Perhaps the star of food and beverage space on the ISEQ this year, however, has been Donegal Creameries which has more than doubled in value since January.

Having opened the year at €2.25, the stock price is now touching €4.55 as the market laps up strong numbers from the company, including a June interim statement that showed a profit after tax that increased nearly six fold to €3.6m.

peter flanagan

Irish Independent

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