Kerry Group boss Edmund Scanlon must be wondering what he needs to do to get a share price bounce.
Kerry Group announced the sale of its meats and ready meals business last Thursday night and the Kerry boss would have been expecting a share price bounce that didn’t materialise.
Following that Kerry announced a purchase of a preservative business in the US that ties in with the overall strategy and ethos of the Kerry Group vision and plan.
So two strategic moves are better than one and shareholders would have been expecting another share price bounce, but that hasn’t happened either.
The share price has lifted from €106 per share to €112 per share (midday 23 June), which is not near what Kerry would have been expecting.
This is what makes a global business the size of Kerry tick
The sale of the meats business was no real surprise and it’s not because it was a bad business, but it’s just because the margin that type of business was returning is between 6% and 8%.
Given the stage of development and strategy of Kerry Group, it wants to play the game with businesses making margins of 10% to 15%.
This is what makes a global business the size of Kerry tick. It allows it to move into new and upcoming categories and allow share price to rise as shareholders see that management can deliver on what they say they are going to do.
Talk is cheap, action and delivery are measurable and required.
Meats business sale
Late last week Kerry announced it was selling its Meats business.
The meats business is a leading manufacturer of branded and private-label meats, meat snacks, food-to-go in the UK and Ireland.
The meats business had revenues of €828m, EBIDTA of €86m and profits before tax of €63m
There are some brands that many farmers can relate to such as Denny and Galtee.
Denny started in Waterford while the Galtee brand moved from Dairgyold in 2008.
US company Pilgrims Pride, which incidentally bought Moy Park for over €1bn in 2017, has now swept in and bought the meats business from Kerry for €819m.
The meats business had revenues of €828m, EBIDTA of €86m and profits before tax of €63m.
So depending on when the deal closes and 2021 profits, you are looking at a price tag multiple of 8.5 to 9.5 times earnings.
Niacet purchase
Meanwhile, Kerry Group this week announced a deal to buy preservatives maker Hare Topco, trading as Niacet, for €853m as it moves to buy again in the taste, nutrition and ingredients business.
Niacet is a market leader in technologies for preservation and operates in the bakery and pharma sectors.
Its preservation systems are also used in the meat and plant-based food sectors.
For the year ended December 2021, Niacet is expected to have annualised revenue of about €184m and EBITDA of about €55m.
Kerry said Niacet will be integrated into its global food protection and preservation platform
So for a multiple of about 15.5 times earnings, Kerry has a new business that works in the higher-margin space in which it wants to operate.
Following the deal, Kerry said Niacet will be integrated into its global food protection and preservation platform.
So that’s how the Kerry global machine works. It buys the company and products in the space it wants to get into. It rolls the products and new platforms into the global Kerry machine and in a short space of time the turnover goes up and profits go up.
The higher price tag is quickly paid back if the business performs as expected.
Two good strategic moves by Kerry and those watching will still be looking for the share price bounce.
So what does this mean for the sale of the milk business to the farmers or anyone else?
In my opinion, I think it just buys time for Kerry Group CEO Edmund Scanlon to sort out the issues that have been dragging on the dairy sale. Scanlon has been forthright in his views on the milk business and that it will be sold, to the farmers or elsewhere.
Not being able to do a deal with the Kerry farmers will have been a negative for Scanlon’s copybook.
I think it’s fairly clear it is just timing and that the long-term objective of Kerry Group is to sell the dairy business
Selling the meats business buys time for the CEO while staying true to his word on prioritising resources in higher-margin businesses.
While Kerry Group says there will be no disposal of the dairy business right now – I think it’s fairly clear it is just timing and that the long-term objective of Kerry Group is to sell the dairy business. This is the same reasoning on selling the meats business – free up money for acquisitions in the fast-growing taste and nutrition sector.
Some farmers have been asking me is there anything the farmers can glean on the value of the dairy business given the previously published balance sheets and profits of consumer division as published by Kerry Group.
To answer that question is not that simple, even if we have the sale price and earnings of the meats business, but it is a question we will come back to next week.
Read more
Kerry Group sells meat and meals business for €819m
Opinion and analysis: Kerry agrees to sell meats but hold milk, for now
Kerry plc buys preservatives business Niacet for €853m
Kerry Group boss Edmund Scanlon must be wondering what he needs to do to get a share price bounce.
Kerry Group announced the sale of its meats and ready meals business last Thursday night and the Kerry boss would have been expecting a share price bounce that didn’t materialise.
Following that Kerry announced a purchase of a preservative business in the US that ties in with the overall strategy and ethos of the Kerry Group vision and plan.
So two strategic moves are better than one and shareholders would have been expecting another share price bounce, but that hasn’t happened either.
The share price has lifted from €106 per share to €112 per share (midday 23 June), which is not near what Kerry would have been expecting.
This is what makes a global business the size of Kerry tick
The sale of the meats business was no real surprise and it’s not because it was a bad business, but it’s just because the margin that type of business was returning is between 6% and 8%.
Given the stage of development and strategy of Kerry Group, it wants to play the game with businesses making margins of 10% to 15%.
This is what makes a global business the size of Kerry tick. It allows it to move into new and upcoming categories and allow share price to rise as shareholders see that management can deliver on what they say they are going to do.
Talk is cheap, action and delivery are measurable and required.
Meats business sale
Late last week Kerry announced it was selling its Meats business.
The meats business is a leading manufacturer of branded and private-label meats, meat snacks, food-to-go in the UK and Ireland.
The meats business had revenues of €828m, EBIDTA of €86m and profits before tax of €63m
There are some brands that many farmers can relate to such as Denny and Galtee.
Denny started in Waterford while the Galtee brand moved from Dairgyold in 2008.
US company Pilgrims Pride, which incidentally bought Moy Park for over €1bn in 2017, has now swept in and bought the meats business from Kerry for €819m.
The meats business had revenues of €828m, EBIDTA of €86m and profits before tax of €63m.
So depending on when the deal closes and 2021 profits, you are looking at a price tag multiple of 8.5 to 9.5 times earnings.
Niacet purchase
Meanwhile, Kerry Group this week announced a deal to buy preservatives maker Hare Topco, trading as Niacet, for €853m as it moves to buy again in the taste, nutrition and ingredients business.
Niacet is a market leader in technologies for preservation and operates in the bakery and pharma sectors.
Its preservation systems are also used in the meat and plant-based food sectors.
For the year ended December 2021, Niacet is expected to have annualised revenue of about €184m and EBITDA of about €55m.
Kerry said Niacet will be integrated into its global food protection and preservation platform
So for a multiple of about 15.5 times earnings, Kerry has a new business that works in the higher-margin space in which it wants to operate.
Following the deal, Kerry said Niacet will be integrated into its global food protection and preservation platform.
So that’s how the Kerry global machine works. It buys the company and products in the space it wants to get into. It rolls the products and new platforms into the global Kerry machine and in a short space of time the turnover goes up and profits go up.
The higher price tag is quickly paid back if the business performs as expected.
Two good strategic moves by Kerry and those watching will still be looking for the share price bounce.
So what does this mean for the sale of the milk business to the farmers or anyone else?
In my opinion, I think it just buys time for Kerry Group CEO Edmund Scanlon to sort out the issues that have been dragging on the dairy sale. Scanlon has been forthright in his views on the milk business and that it will be sold, to the farmers or elsewhere.
Not being able to do a deal with the Kerry farmers will have been a negative for Scanlon’s copybook.
I think it’s fairly clear it is just timing and that the long-term objective of Kerry Group is to sell the dairy business
Selling the meats business buys time for the CEO while staying true to his word on prioritising resources in higher-margin businesses.
While Kerry Group says there will be no disposal of the dairy business right now – I think it’s fairly clear it is just timing and that the long-term objective of Kerry Group is to sell the dairy business. This is the same reasoning on selling the meats business – free up money for acquisitions in the fast-growing taste and nutrition sector.
Some farmers have been asking me is there anything the farmers can glean on the value of the dairy business given the previously published balance sheets and profits of consumer division as published by Kerry Group.
To answer that question is not that simple, even if we have the sale price and earnings of the meats business, but it is a question we will come back to next week.
Read more
Kerry Group sells meat and meals business for €819m
Opinion and analysis: Kerry agrees to sell meats but hold milk, for now
Kerry plc buys preservatives business Niacet for €853m
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