Kerry Group has reported a 26 per cent fall in pre-tax profits for 2006, a year in which the company was forced to issue a profit warning as a result of higher energy costs, a weak dollar and volatility in raw material prices.
Sales at the Tralee-based food group increased by 4.9 per cent to €4.65 billion, but pre-tax profits were down from €298 million to €221 million.
However, an improved trading performance in the second half of the year went some way toward making up for the difficult first half and overall the results were marginally better than the market had expected.
Chief executive Hugh Friel said Kerry had made "a good start" to 2007 and was confident that its performance this year would be in line with market expectations.
He said the company had achieved good organic growth in "a challenging year" and would continue its rationalisation programme in 2007.
"We are very confident that the issues that were there last year are totally out of the way," Mr Friel said.
The sharp increase in energy costs left the company €20 million adrift, he added, as it only had time to recover €60 million of total energy-related costs of €80 million.
Trading profits at its larger food ingredients business, which grew 3.3 per cent to €293 million, were dragged down by a 4.5 per cent decrease in trading profits in its consumer foods business, with the result that trading profits overall increased only marginally on 2005, rising from €380 million to €384 million.
While trading margins in its ingredients business remained at 9.4 per cent, margins in consumer foods slipped from 7.1 per cent to 6.5 per cent.
The problems in Kerry's consumer foods business were caused by the delay in recovering energy cost increases and market-related difficulties in the poultry and frozen ready meals sectors.
Kerry disposed of its main poultry operations at the end of the year.
The company said it had seen a recovery in sales of chilled ready meals, but that profitability in the frozen market was unlikely to get back to the levels it had enjoyed in the past.
Growth in Kerry's US ingredients business was ahead of its European ingredients activities, with sales growing by 5.2 per cent compared to below-expectations growth of 2.3 per cent in Europe.
Adjusted earnings per share (eps) were up 1.7 per cent to 133.9 cent, while the final dividend per share rose 13.6 per cent to 12.5 cent.
The company maintained strong free cash flow of €241 million, while expenditure on research and development increased 11.4 per cent to €139 million.
Kerry's shares fell 34 cent yesterday to €20.12, a decline of 1.66 per cent, on a poor day for stock markets in which the Iseq index of Irish shares fell 3.5 per cent.
