Interim management reports from Kerry and Glanbia have failed to impress investors, despite both companies reporting strong trading performance in the first nine months of the year.

Kerry Group’s report showed the company managed to grow volumes in the US, while also managing to increase prices. For Glanbia, the improvement in its bottom line was almost completely driven by increasing prices.

For investors, companies that are able to raise prices without hurting volumes are usually viewed very positively. Strong pricing power means companies will be better able to withstand any economic downturn as they pass costs on to their consumers, thereby maintaining profits, which means dividends can be kept higher.

Yet.

Glanbia shares have dropped below €11 a share, hitting the lowest level since July, in the wake of the management report. For Kerry, the share price continues to languish near multi-year lows, trading under €90.

Away from the headline figures, investors probably do have some concerns about both companies. Kerry reported that its earnings margin dropped by 40 basis points in the first nine months of the year – this means that it is making less profit on what it sells, despite hiking prices.

Investors may be worried that further inflation-driven cost increases might further reduce margins as price increase do not keep up with input costs.

Volumes

In Glanbia’s case, the cost increases in the period came as volumes barely rose. This could suggest that the company is close to the limit of its pricing power.

Further, some investors think that Glanbia needs a fairly major restructuring to fully unlock the value in the company.

Activist investor Gianluca Ferrari of Clearway Capital has long advocated that Glanbia Performance Nutrition, home of Optimum Nutrition, was underperforming and should be moved into a separate company. Overall, for both companies, there seems to be plenty of potential upside, but right now investors seem happy to stay in wait-and-see mode.

Major announcements could unlock potential, but with inflation concerns dominating many decisions, the time for big calls may not be right.