Food firm Kerry Group has posted promising half yearly figures despite UK brands flat-lining in spreads and frozen food as a result of heavy promotions and the horsemeat effect.
While the firm’s Richmond sausages, Wall’s pastries and Matteson’s meat products performed well, Kerry conceded the “overall UK customer brands performance was flat compared to the same period in 2012”.
In addition to the continued impact of the horsemeat scandal, which hit frozen ready meals after such products tested positive for horse DNA, Kerry blamed heavy promotions for UK struggles.
“Cheese slices performed well but dairy spreads lost market share to heavily promoted branded offerings,” Kerry claimed in its interim management report on six month results to June 30.
'Loss in consumer confidence'
“Overall volumes in chilled ready meals were unchanged but … sales in the frozen category reflected the significant loss in consumer confidence in frozen meat products.”
The sluggish performance was set against the backdrop of the decision to refocus its consumer foods division on its core products, “which impacted in particular the direct-to-store service to the independent and convenience retail sectors in the UK and Ireland in the period”.
Consumer foods performed better in Ireland, with the Galtee pork products range, Dairygold spreads and LowLow cheese all posting strong sales.
Elsewhere, in its ingredients and flavourings division, business volumes increased by 3.9% relative to the half year in 2012 and pricing increased by 2%. Trading profit grew by 11.6% to €239M (£205.9M).
“Ingredients and flavours achieved good underlying value growth through innovative product developments in all end-use-markets and channels driven by Kerry’s complete technology positioning,” stated the company.
Clean label demand
Culinary systems and flavours benefited from increased demand for low sodium and clean label solutions in the EMEA region. Cereal and sweet systems and flavours maintained good growth, with the premium sector proving particularly buoyant.
Beverage systems and flavours also achieved good growth in developing markets in Europe, Middle East and Africa, with flavours and brewing ingredients in the Middle East and Africa performing especially well.
In the Americas, beverage systems and flavours recorded an “excellent performance”, particularly in terms of its foodservice brands. Kerry’s savoury, dairy and culinary systems held its ground in the region but its cereal systems were “negatively impacted by poor retail sales in a highly competitive marketplace”.
In Asia, sales revenue on a reported basis increased by 15.4% to €394M (£339.4M), largely driven by strong demand from the foodservice sector.
Commenting on the results, Kerry Group chief executive Stan McCarthy said: “The Group achieved a strong financial performance in the first half of 2013 and continued to invest in enhancing the quality of our businesses. We remain confident of achieving our growth targets for the full year …”
Kerry Group recorded profits before interest, tax, depreciation and amortisation of €323.8M (£278.8M), a rise of 5.64 %, while revenues were up 1.1% to €2.95bn (£2.54bn).