Kerry’s solid performance undermined by domestic woes

Irish food manufacturer Kerry Group reported that its domestic meat business has been “adversely impacted” by the trend of consumers trading out of brands into private-label and discounters.

The company’s interim management statement maintained that although it had achieved “good organic growth” in the last three months and a solid performance across all regions, revenues and volume growth were primarily focused on the ingredients and flavours business, with meat markets remaining “challenging”.

The nine months to 30 September statement showed that, overall, reported sales revenue had increased by 10.9% to €4.4bn, a like-for-like growth of 2%, with continuing business volumes up 2.1%. However, profit margins in consumer food remained unchanged while ingredients and flavours margins increased by 10 basis points, and revenues increased by 14.8% or 3.5% like-for-like.

Meat technologies in the Asia-Pacific region grew strongly, strengthened by the acquisition of Angsana Food Industries in Malaysia and China. The company also acquired meat and texturant system manufacturer Griffith do Brasil, which it said extended the group’s capacity to serve added-value growth to the Brazilian meat industry.

However, consumer food progress in Ireland, the UK and Europe was more variable and like-for-like revenues fell by 0.9%. Although brand performance in the UK performed well, with Richmond sausages and Mattessons meat snacks maintaining momentum, and the chilled ready meals category recording good growth, the Irish meat category was impacted by “intense price-driven competition from private-label and discounter offerings” with promotions in the multiples affecting sales through the independent retailers.
It said: “Trading in the Irish consumer foods market remains challenging. Denny faced intense competition from heavily discounted private-label offerings.”

The company said: “The group is confident of achieving its growth targets for the full year and delivering 9-11% growth in adjusted earnings per share.”