Kerry lowers outlook despite H1 growth

Kerry lowers outlook despite H1 growth

Kerry Group lowered its full-year earnings forecast, despite reporting higher sales and earnings for the first half, as currency exchange headwinds hit its outlook.

Kerry cautioned on the increasing impact that currency exchange is having on its performance this morning, particularly given the depreciation of the sterling and ongoing global volatility.

As a result, the company lowered its full year earnings forecasts. Kerry said it now expects adjusted earnings per share to rise by between 3% and 7%, offering a guidance range of 333.1-346 cents per share, compared to 323.4 cents a share delivered in fiscal 2016.

The revision reflects “account increased currency translation headwinds of 4% and a 2% improvement in underlying performance at constant currency rates”, CEO Stan McCarthy explained.

In February, Kerry had been guiding to EPS growth of 5-9%.

First-half growth ahead of markets

Kerry nevertheless reported growth that “outpaced” its markets during the first six months of the year.

The company said sales volumes rose 4.8% on a group-wide basis. Sales value, including the impact of currency exchange, increased  to €3.18bn in the half, up from €3.04bn in the comparable period of last year.

Top line growth was supported by higher volumes at Kerry’s taste and nutrition unit, where volumes increased 4.2% and the company hiked prices by 1.7% in the period. Consumer foods booked a slower rate of volume growth, at 2.3%, while Kerry was able to push through price increases of 1.9%.

Davy Research analyst Liz Coen noted that Kerry had accelerated growth at its taste and nutrition division quarter-on-quarter. Volume growth at the unit accelerated to an estimated 4.3% in the second quarter, from 4.1% in first quarter. “Taste and nutrition’s capacity to deliver organic growth ahead of the market continues to impress. Its best-in-class delivery model and technology toolkit ensures that it remains highly relevant to its customers,” Coen wrote.

Trading profit grows ahead of sales

Kerry also revealed trading operating profit growth ahead of its sales volumes. Trading operating profit increased by 5.2% to €338.4m versus €321.6m in the comparable period of last year.

Kerry’s trading margin was maintained at 10.6%, reflecting 20 basis points improvement in taste and nutrition and “positive underlying margin improvement” in Kerry Foods, which offset by adverse Sterling exchange rates resulting in a 70 basis points margin reduction at the consumer foods business.

Net earnings increased to €225.1m versus €222.4m.

McCarthy commented: “We achieved a strong overall business performance in the first half of 2017, outperforming market growth rates and delivering a 7.5% increase in adjusted earnings per share.”

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