Food group Kerry has reported a dip in pre-tax profits for the six months to the end of June 2006, as energy costs slowed growth during the period. Kerry said that pre-tax profits for the half year fell to €125m from €130.9 million the same time last year.
The company saw sales revenue growth of 7% to €2.265 billion, in what it called an 'extremely challenging' six months. Adjusted earnings per share increased by 2% to 54.9 cent. The interim dividend of 5.5 cent per share reflects an increase of 10% over the 2005 interim dividend.
Kerry had warned in May that its 2006 earnings would fall short of the market's expectations at the time due to rising energy and raw materials costs, and a weakening dollar.
The company said that while group businesses had budgeted for significant cost inflation during the half year, the impact and scale of energy and energy related costs increases adversely impacted the performance of individual Kerry business units. It points out that crude oil pries, having grown on average by 42% in 2005, increased by another 32% in the first six months of 2006.
Kerry said that total group sales revenue throughout European markets in the first half of 2006 grew by 5.2% to €1.5 billion. In American markets, the group's ingredients and flavours businesses increased sales revenue by 10.9% to €635m. Sales revenue in Asia Pacific markets was up by 9.1% to €174m.
Despite the prevailing market difficulties, Kerry said its food ingredients businesses recorded like for like revenue growth of 5%. Total sales revenue rose by 6.5% to €1.548 billion, with trading profits up 4% to €123m.
The company said that against a backdrop of major cost pressures and a weak performance in poultry markets, its consumer food businesses in the UK and Irish markets performed 'robustly' in the first half of 2006. Divisional revenue grew by 6.6% to €875m.
Kerry Foods' brands all grew market share in the first half of 2006 in Ireland. These include Denny, Ballyfree, Dawn, Kerry Spring, Kerryfresh and Freshways. Double digit growth was reported in the Freshways sandwich range. Cheese and spreads had a good performance across both the UK and Irish markets, with continued progress by the Charleville and Low Low brands here.
'As previously signalled, the first six months of 2006 have proved extremely challenging,' commented Kerry's CEO Hugh Friel in today's results statement. 'The delay in recovering the significant energy related cost increases slowed growth during the period.
'However, we have full confidence in our growth strategies and our longer term growth performance will benefit from critical attention to on-going cost recovery programmes, supply chain efficiencies, increased investment in product innovation and asset optimism - including elimination of non-core activities,' he added.
'Earnings for the full year are expected to be in line with current market expectations,' he concluded.
Kerry shares closed down ten cent to €17.45 in Dublin this evening.
