FDBusiness.com

Kerry Group, the global ingredients, flavours and consumer foods business, has increased pre-tax profit by 8.0% to Eur175m for the first half ended 30th June 2011 compared to the corresponding period in 2010. Group sales revenue increased to Eur2.6b, 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.

Group trading profit increased by 6.1% (LFL) to Eur214m. 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).

Ingredients & Flavours revenue increased on a reported basis by 10.4% to Eur1.97b, 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 Eur181m. 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 UK and Irish consumer foods markets remain challenging as retail competition continues to drive deeper and wider promotional activity. However Kerry Foods’ brands in the UK market continued to grow satisfactorily and the division’s Irish brand shares have stabilised. Divisional revenue grew by 5.3% (LFL) to Eur944m. Overall business volumes increased by 2%, reflecting 3% volume growth in the UK and a decline of 1% in Ireland. Trading profit grew by 6% (LFL) to Eur64m.

“Kerry delivered a solid earnings performance and strong volume growth in the first half of 2011, despite significant raw material and input cost inflation. 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,” comments Stan McCarthy, chief executive of Kerry Group.