On the money: Kerry to slow acquisition rate in 2012
21 February 2012 | News | Source: Kerry Ingredients & Flavours
Highly acquisitive Irish food and ingredients firm Kerry Group has indicated that it will ease off the throttle and reduce its level of takeover deals during 2012.
The company, which announced its latest acquisition today with the purchase of South African flavours firm FlavourCraft, plans to spend less on M&A and ramp up internal investment this year, with an eye to improving productivity and streamlining operations.
Kerry said it is aiming to increase its spend on the seven-year Kerryconnect programme over the next 12 months as it begins to revamp supply chain, manufacturing and customer care processes.
In 2011, Kerry spent EUR65m (US$86m) on Kerryconnect and the company said that throughout the seven-year plan it anticipates spending an average of EUR50m per year. However, during 2012, Kerry plans to invest in the region of EUR80m as it looks to extend its new supply chain, manufacturing and customer care "design" from the pilot deployments in the Netherlands and Denmark to the rest of its business.
The group also indicated it will be focusing on integrating its 2011 acquisitions – particularly in its flavours business – and streamlining its global manufacturing footprint.
Commenting on the company's objectives for 2012, CEO Stan McCarthy said that Kerry would look to "optimise its scale" and "grow its capabilities".
"We want to leverage the global alignment that we have put in place and grow it further, leveraging our position with customers and technologies and continuing to focus on emerging markets and product capability to support the growth objectives of the organisation," he told analysts and investors during a conference call on Kerry's 2011 financial results.
Looking to 2012, McCarthy said that the group's level of investment in M&A would be down on 2011.
"We spent something like EUR380m or so in 2011. We were quite pleased with that because sometimes these acquisitions take a while to execute and that's pretty much what we had expected to spend.... We have perhaps not that level in the pipeline right now. But we have a fair degree of acquisition activity. Will it be at that level? I don't think so for 2012. We would flag our cash flows are perhaps in the EUR250m area for 2012, so you can assume that we could spend in that region. However, we may not get to that," he said.
McCarthy revealed that Kerry has identified "farm and functional" as one area that it hopes to expand in through M&A and suggested that the company would also look to continue to grow its global footprint by investing in acquisitions in emerging markets.