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Kerry continued to advance in 2015, and tomorrow’s results are not expected to throw up any surprises. The global giant, which is valued at almost €13bn today, had revenues of €5.8bn in 2014. While the share price hit a record €77.70 on the last day of 2015, the shares have fallen since. They remain 15% up compared with this time last year.
As the year progressed, volumes at Kerry continued to grow and margins expanded. For the first nine months last year, revenues increased 4.3% while volumes were up 3.2%.
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Margins expanded (40 basis points) due to overall deflation in food prices. For example, the FAO food price index fell 17% in 2015, with dairy prices falling 14%.
Raw material prices at Kerry reflected this fall (down 6%) but the group’s sales prices remained relatively robust and fell at a much slower rate (down 2.8%).
While the KerryConnect programme also contributed to the margin expansion, a large part of the growth was down to the group’s continued investment in R&D, including the opening of the €100m innovation centre in Naas during the year.
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Kerry Group was very active on mergers and acquisitions activity in 2015, and spent close to €1bn on acquisitions. This expanded Kerry’s global reach and brought the group into new business areas that emphasise natural ingredients and nutrition. This is a key growth area for the sector and the group.
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The three new businesses are expected to add about 4% to revenues and 6% to earnings in 2016 before factoring in any growth or synergies. These are also high-margin businesses and should contribute to Kerry’s overall 11% margins last year.
While Kerry paid about 12.5 times earnings for these businesses, it was in line with the multiples being paid in the sector.
The group disposed of a number of businesses during the year – including its Australian bakery ingredients business, Pinnacle, and its direct-to-store business in the UK.
With underperforming divisions exited, assets are well invested. As the new acquisitions bed in, Kerry is well positioned for growth in 2016.
Follow www.farmersjournal.ie tomorrow for news and analysis of the Kerry Group’s full year results for 2015.
Kerry reiterates solid outlook for 2015
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