Shares in Irish food producer Kerry (KYGA) rose 3.5% to €107.10 on Thursday after the ingredients-to-packaged foods supplier tightened up its full year guidance.
Giving it that extra confidence is solid second quarter volume growth. The first half dividend was increased by almost 12%.
Chief executive officer (CEO) Edmond Scanlon said his charge continued to deliver volume growth ahead of the market, has made ‘good progress’ in integrating recent acquisitions and he is also ‘excited by the ongoing enhancement of our product mix and the development of our innovation pipeline’.
READ MORE ABOUT KERRY HERE
Kerry, the company behind Dairygold spreads and Richmond sausages, served up solid volume growth of 3.3% for the second quarter to 30 June 2019. That was up from 3.1% in the first quarter and driven by the core Taste & Nutrition business which speaks for almost 80% of group sales and saw strong growth across Kerry’s meat, beverage and snack technologies and geographic markets.
Over in Consumer Foods, representing a shade above 20% of group sales, Kerry delivered more subdued volume growth of 0.4% in the second quarter, with performances in the UK and Ireland supported by repositioned product offerings catering to the snacking, convenience and food-to-go trends.
Investors applauded a 20 basis point hike in Kerry’s first half operating margin to 10.7%, delivered despite Brexit-risk management costs and driven by the margin benefits of new business wins, operating leverage and cost savings.
Kerry narrowed its 2019 guidance for adjusted earnings per share growth to 7%-to-9% in constant currency from 6%-to-10% previously, whilst confidently upping the half time shareholder reward by 11.9% to €23.5 cent per share.
THE LIBERUM VIEW
Liberum Capital believes Kerry ‘boasts the recipe for long-term success’ given its robust volume growth, scope for margin upside and rising free cash flow generation. ‘The group’s ingredients platform provides unrivalled breadth of solutions backed by global technology and innovation centres and regional development and application centres that service a diversified customer base’, insists the brokerage.
‘As Kerry’s customers go through a major churn in their product portfolio, the strong ingredients platform allows the group to take market share, improve mix and enhance margins. Accretive bolt-on M&A is a key driver - we estimate Kerry has €1.1bn+ firepower (plus a further €1bn if Consumer Foods is sold) available to consolidate the ingredients market.’
