Strong Kerry performance

By Eric Donald

The Kerry group has turned in a strong operating performance in 2002, lifting profits before exceptional costs by 15%, from €228.98 million to €264.01m. The higher margin ingredient and flavour businesses in the Americas accounted for 39% of the operating profit, writes Eric Donald.

However, pre tax profits were lower at €159.2 million due to a once off exceptional charge of €56.6 million. This additional cost was incurred in reorganising the former Golden Vale business.

Group turnover increased by 25% to €3.75 billion, driven in particular by a full year contribution from the former Golden Vale business, but also by the other 13 acquisitions made in 2001. The GV acquisition lifted total sales in Ireland by 56% to €1.37 billion (see adjoining table), but the operating margin in the Irish businesses slipped to 4.6%. Kerry boss Hugh Friel expects to get more benefits out of streamlining the two milk processing plants at Listowel and Charleville during the peak milk supply period this year. He expects dairy markets to be a bit firmer in the current year compared to last year.

In 2002, when currency impact and acquisition growth are stripped out the like for like growth was very good at 6%. Overall, the group remain on track to grow its turnover to €5 billion.

The group's net debt was reduced by €55 million, down to €763.8 million. Cash flow was strong with the group generating €232 million in free cash last year.

The group balance sheet shows net assets of €836 million, up from €794 million at the end of 2001.

€273.4 milllion acquisition spend

During 2002, fourteen acquisitions were completed, with eleven of those in the ingredient and flavours area. This involved a total spend of €273.4 million. Kerry has been busy on the acquisition trail already in 2003, purchasing SunPure in Florida for US$68 million. This company manufactures citrus flavours and ingredients. Kerry's plan is to build their flavour business under the Mastertaste brand to capture some of the global market estimated to be worth a total of US$6 billion. Hugh Friel expects further acquisition opportunities to arise in the ingredient and flavours areas, particulalry in the US, over the next year.

Two other flavours businesses, St Louis Flavors, which is based in Missouri and a company called Metarom, in Quebec in Canada, were purchased last year. St Louis Flavors makes sweet flavours for the bakery, beverage and confectionary sectors in the US. Metarom is the largest private flavour business in Canada supplying the dairy, drinks and confectionary business.

In the ingredients sector, Rector Foods in Ontario in Canada and IFI in Texas were added to the group's business portfolio. While at Turtle lake, in Wisconsin, the group acquired a facility to manufacture organic soy and soy isolates.

Kerry has established its first manufacturing facility in Thailand. Just before the year end, a seasonings and marinade facility near Bangkok was bought, to service the meat and seafood industries in the region.

Businesses in the Asia Pacific region, while small in the overall group, continue to grow, with 2002 sales increasing by 7% to €143 million and operating profit up by 10% to €12.7 million.

In the UK, EBI Foods Ltd. was purchased. It provides food coatings and blended ingredients for food manufacturing companies.