Irish food company Kerry (KYGA) is forecasting a return to growth in the fourth quarter after signs of recovery emerged in its foodservice business. The company behind brands like Richmond sausages and Dairygold spreads, also reinstated earnings guidance after a much-improved third quarter to September helped to improve visibility.
Investors took this as an encouraging sign, bidding shares in the ingredients-to-packaged foods supplier 3% higher to €107.65.
REINSTATING GUIDANCE
Kerry has felt the impact of the pandemic in the year-to-date, notably in the foodservice channel in the second quarter, although management insist Kerry has the balance sheet strength to survive the crisis and thrive on the other side.
‘While there remains a high level of uncertainty, based on current market conditions, we expect business volumes to return to growth in the final quarter and are guiding a full year earnings per share decrease of 8% to 11% in constant currency,’ said Kerry in today’s outlook statement.
Over the nine months to September, group sales softened and trading margins weakened, largely due to the ‘significant operating deleverage impact resulting from the sharp decline in foodservice orders when lockdown measures were introduced globally, with additional COVID?related costs being partially offset by cost mitigation actions.’
Q3 RECOVERY
However, Kerry enjoyed a strong recovery in the third quarter, with improved volumes approaching prior year levels, which it expects to continue in the final quarter with a return to volume growth.
‘This year has seen unprecedented variability and complexity across our industry,’ admitted chief executive Edmond Scanlon, explaining that ‘the agility and ingenuity of Kerry’s teams in adapting to these changing conditions has contributed to Kerry’s strong recovery in the third quarter’.
Since April, the group has witnessed a strong recovery in the foodservice channel as restaurants have reopened and adapted their operations and menus to cater for increased consumer demand for takeaway, online and delivery.
And while foodservice channel volumes slumped 49% in the second quarter, the decline moderated to 15% in the third quarter. Over in the retail channel, performance has ‘remained strong, primarily through growth in authentic cooking, plant ? based offerings and health and wellness products’, assured Kerry, one of the beneficiaries of the vegan boom.
DEAL HUNGRY
Despite the headwinds stirred up by the pandemic, Kerry has shown an appetite for strategic acquisitions that will supplement long-term organic growth.
Having snapped up Tecnispice earlier in the year, it agreed to acquire two businesses in the third quarter; Bio-K Plus International, a biotechnology company with a number of probiotics in beverage and supplement applications in Canada and the US, and Jining Nature, a China-based leader in savoury taste for local meat, snacks and meals markets.
