City snapshot: Kerry Group annual sales grow 4.5% despite weak pound

Irish good giant Kerry Group (KYGA) has reported a 4.5% jump in full-year revenues to €6.4bn driven by strong volume growth, despite a negative impact from currency movements.

Kerry said that in the year to 31 December 2017 it “achieved a strong volume driven business performance above market growth rates”.

Business volumes grew by 4.3% year-on-year, with net pricing up 2% against a background of approximately 4% raw material price inflation. New business acquisitions also contributed 0.8%.

However, currency headwinds accelerated during the year contributing an adverse 2.4% translation impact and an adverse 0.2% transaction currency impact relative to revenue.

The group saw broad-based growth, with its Taste & Nutrition segment delivering 4.7% volume growth and pricing increased by 2% as revenue increased by 5.7% to €5.2bn. Kerry Foods’ business volumes increased by 2.4% and pricing increased by 2% to drive overall growth of 2.4% to €1.3bn as the weak pound hit the division.

Taste & Nutrition accounted for 79% of Group revenue and 88% of Group trading profit.

In the group’s UK and Irish consumer foods markets, while Kerry Foods maintained a strong category and business development focus, benefiting in particular from the increased snacking and ‘food-to-go’ consumption trends, the underlying satisfactory divisional business performance was impacted by adverse sterling exchange rate movements.

Kerry said there was some lag in price recovery in response to the impact of sterling depreciation on products exported from Ireland to the UK, which decreased the divisional trading profit margin by 70 basis points to 8.1%.

However, snacking occasions continued to drive strong category growth in the meat and cheese categories. In the grocery meats sector, the rebrand of ‘Richmond’ had a positive impact in the UK sausage category. Kerry Foods’ grocery dairy business also maintained growth in a challenging category environment.

The group trading margin was maintained at 12.2%, reflecting 20 basis points improvement in Taste & Nutrition, positive underlying margin improvement in Kerry Foods. However, this was completely offset by the adverse sterling exchange rates resulting in a 70 basis points margin reduction, and an increased spend on the Kerryconnect programme.

Overall trading profit was up 4.2% to €781.3m, with adjusted earnings before tax up from €655.8m to €691.4m.

Kerry CEO Edmond Scanlon said: “Kerry Group delivered strong top line growth and sustained business development in 2017. Adjusted earnings per share increased by 5.5% reflecting 9.4% growth over the prior year on a constant currency basis.

“In 2018 we expect to deliver adjusted earnings per share growth of 6% to 10% on a constant currency basis”.

Kerry shares were down 4% to €82.65 in early trading.

Morning update

C&C Group (CCR) is ending its US distribution agreement with Pabst Brewing Company, first singed in December 2015.

The cider maker announced this morning that from 1 April 2018 its wholly owned US subsidiary Vermont Hard Cider Company, will resume full responsibility for the sales and marketing of the Group’s portfolio of cider brands in the US including Woodchuck, Wyders and Magners.

The statement said that “both parties recognise that current market dynamics require a different approach that concentrates on VTHCC’s core markets”.

Selected sales and marketing personnel will return from Pabst, supplemented by a small number of external hires.

However, C&C’s partnership with Pabst in the UK will continue.

In 2017, C&C’s US business constituted 4% of Group volumes and less than 1% of operating profits. The Group does not anticipate any material transitional costs or change to its financial performance.

C&C Group shares were up 1.2% to €2.88 on the news.

On the markets this morning, the FTSE 100 has eased back another 0.2% to 7,236pts so far today.

Early movers include Nichols (NICL), up 2.3% to 1,565p, Ocado (OCDO), up 2.4% to 499.9p and Stock Spirits (STCK), up 1.2% to 289.5p.

Fallers so far include Bakkavor (BAKK), down 2.6% to 191p, Total Produce (TOT), down 1.9% to 210p and Reckitt Benckiser (RB), down another 1,7% to 5,972p on top of yesterday’s falls.

Yesterday in the City

The FTSE 100 kicked off the week falling back 0.6% to 7,247.6pts after a quiet day as the US markets remained closed.

The biggest FTSE 100 mover was Reckitt Benckiser, which plunged 7.5% to 6,075p after the Dettol to Durex maker reported flat like-for-like sales for 2017.

Another stock in the red was McColl’s, which dropped 3.2% after announcing like-for-like full-year revenue growth of just 0.1% despite headline sales jumping 19.1% to £1.1bn following the integration of the 298 shops acquired from Co-op.

Other fallers yesterday included Just Eat (JE), down 2.7% to 866.4p, PureCircle (PURE), down 3.7% to 426.5p, SSP Group (SSPG), down 2% to 616p, Unilever (ULVR), down 1.8% to 3,732p, PZ Cussons (PZC), down 1.5% to 284p and WH Smith (SMWH), down 1% to 2,044p.

The day’s few risers included Dairy Crest (DCG), up 1.2% to 578.5p, Tesco (TSCO), up 0.7% to 206p, Hilton Food Group (HFG), up 1.2% to 830p and Majestic WINE (WINE), up 0.8% to 442.5p.