H1 profits at Irish dairy group Kerry rose by 9%. Kerry Group continues to show good growth with a strong US performance boosting its results. The company will also benefit strongly from its E398 million takeover of Irish rival Golden Vale. However, it will need to ensure it continues to grow organically, rather than becoming reliant on acquisitions.

Kerry, the Irish food group, saw H1 pretax profits rise 9% from E71.4 million to E78 million, with an encouraging set of US results driving much of the growth. These results have been in spite of tighter margins in the US, where consolidation in the food and drink sector has tended to reduce product development in the key ingredients sector. Sales rose 5.9% from E1.26 billion to E1.34 billion, while operating profits were up 6.5% from E101.3 million to E107.8 million.

The Irish food group has built on its strong domestic position and established a strong international business, with 76% of revenue now derived from outside the Irish Republic. The US is becoming increasingly important for Kerry, accounting for 30% of turnover and 40% of profits. Although the rest of Europe continues to account for the largest share of revenue, Kerry sees its best opportunities for growth in the US. It is thought to regard building its presence in the US ingredients market as crucial to long-term expansion.

Kerry is also set to see significant domestic growth, assuming the E398 million takeover of Golden Vale, its fellow Irish dairy group, gets official approval. This could increase sales for the year by up to E900 million. Kerry stands to benefit from high levels of synergies with Golden Vale, as well as adding new group competencies through Golden Vale’s strength in the ready meals market.

Acquisition has remained core to Kerry’s expansion strategy, with a significant purchase taking place approximately every three years. While this has served the group well so far, it is crucial that Kerry maintains its focus on organic growth, if it is to meet its stated aim of becoming the world’s largest food ingredients group within five years.

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