Kerry Reports Strong Ingredients & Flavours Performance as Revenues Rise in First Half

Raw material costs during the period increased by 11% relative to the prior year level. Ingredients & Flavours volumes grew by 4.1% and Consumer Foods achieved 2% business volume growth.

Aug 17 2011 --- The Kerry Group has reported that group sales revenue increased to €2.6 billion for the half year ended 30 June 2011, reflecting like-for-like (LFL) growth of 8.4%. Business volumes grew by 3.6% with product pricing/mix increasing by 5%. Raw material costs during the period increased by 11% relative to the prior year level. Ingredients & Flavours volumes grew by 4.1% and Consumer Foods achieved 2% business volume growth.

Kerry delivered strong volume growth and a solid earnings performance in the first half of 2011 despite significant raw material and input cost inflation. Against a strong first half comparative in 2010, the overall half-year performance was satisfactory across all regions notwithstanding the continuing economic challenges and restrained consumer spending in some key markets. The company reported that group cost recovery and business efficiency programmes proved highly effective and where raw material inflationary trends have continued pricing actions will continue to be taken in collaboration with customers. Ingredients & Flavours grew volumes ahead of the market in all regions due to successful layering of Group technologies and focused end-use-market innovation. Encouraging growth was maintained in developing markets. While the Irish and UK consumer foods markets remain highly competitive with heavy promotional activity which delayed input cost recovery, Kerry’s leading brands maintained good growth in the UK market and stabilised market shares in Ireland.

Trading profit increased by 6.1% (LFL) to €214m. Notwithstanding the significant increase in raw material and input costs, Ingredients & Flavours maintained a trading margin of 9.2%. A lag in cost recovery due to the competitiveness of the UK and Irish consumer foods sectors meant that the Consumer Foods divisional trading margin at 6.8% was 30 basis points lower than the same period of 2010 despite gains made through business efficiency programmes. While the underlying Group business trading margin increased significantly, the reported trading margin reduced by 30 basis points due to the impact of cost recovery and central costs relating to the ongoing 1 Kerry business transformation and global IT project (“Kerryconnect”).

Profit before tax increased to €175m from the 2010 first half level of €162m. Profit after tax increased by 9% to €144m. Adjusted earnings per share increased by 9.7% to 86.8 cent. Basic earnings per share increased by 8.7% to 82.2 cent. The interim dividend of 9.8 cent per share represents an increase of 11.4% over the 2010 interim dividend.

Ingredients & Flavours revenue increased on a reported basis by 10.4% to €1,973m, reflecting 9.6% (LFL) growth. The Group’s integrated technology approach and end-use-market focus continued to deliver a strong innovation pipeline – contributing 4.1% business volume growth in the period. Trading profit grew by 9.7% (LFL) to €181m maintaining the division’s 9.2% trading margin despite the impact of significant raw material and input cost increases. Food and beverage consumption trends continue to increase demand for reduced calorie, reduced salt, all-natural solutions and clean product labelling – providing increased opportunities for Kerry “to capitalise on its global leadership in development and delivery of consumer preferred taste solutions.”

The Group remains confident of achieving its growth targets for the full year and delivering eight to
twelve per cent growth in adjusted earnings per share as guided at the beginning of the year. The Kerry Group confirmed last month that the Group is in exclusive discussion with Cargill which may, or may not result in the Group’s acquisition of Cargill’s global flavours business.