August 17, 2011 / 6:39 AM / 6 years ago

UPDATE 2-Kerry confirms full-year earnings target

* Meets forecasts with like-for-like 8.4 percent H1 revenue growth

* Reiterates full year EPS guidance of 8-12 pct growth

* Says commodity price inflation to ease to 7 pct in H2 from 11 pct (Adds share price, analyst quote, details)

By Conor Humphries

DUBLIN, Aug 16 (Reuters) - Irish food group Kerry Group (KYGa.I) met market forecasts with a 10 percent increase in first-half earnings and said it was on target for full-year earnings growth of 8-12 percent as commodity price inflation eases and revenue rises.

Kerry, Ireland’s third biggest listed company by value, said on Wednesday while margins narrowed 30 basis points due to high material costs and an ongoing IT project, its underlying trading margin increased 80 basis points.

Like-for-like first-half revenue rose 8.4 percent to 2.65 billion euros ($3.8 billion), meeting a 2.64 billion forecast in a Thomson Reuters I/B/E/S poll. Adjusted earnings per share hit consensus forecast at 86.8 euro cents.

“It is a very, very robust performance considering the international economic backdrop, all areas performing strongly,” said Cathal Kenny, an analyst with Davy stockbrokers. “The margins are tighter, but they are investing in the business.”

Growth in commodity prices was set to ease to 7 percent in the second half from 11 percent in the first half, Kerry said.

Kerry shares were up 3.6 percent at 0915 GMT, outperforming a broader market up 0.6 percent. Kerry’s share price is up 13 percent over the past 12 months, while the broader market has fallen 9 percent.

DAMPENER ON CONFIDENCE

Full-year revenue will be close to a consensus forecast from a Thomson Reuters poll of 5.3 billion euros or “a tick higher”, chief financial officer Brian Mehigan said.

While consumer sentiment remained weak across all markets, Kerry was hopeful of an improvement next year.

“There is a lot of noise in developed markets, putting a bit of a dampener on confidence. It looks like that will continue in second half but maybe ease next year,” Mehigan said.

Margins for unbranded consumer foods were tighter as retailers struggled to pass on cost rises to consumers, he said.

The company earned about two-thirds of its revenues last year from its ingredients and flavours business. The remainder came from its consumer foods business, which include Wall’s sausages, Homepride flour and Cheesestrings snacks.

Kerry’s focus on exports has allowed it to escape the broader collapse of the Irish equity market, which has lost more than three-quarters of its value since peaking in 2007, when Kerry shares fetched 23 euros.

Currency losses will be a significant drag on earnings over the whole year, cutting a couple of percent from earnings per share, Mehigan said.

Kerry’s talks to buy the U.S. agribusiness firm Cargill’s flavours unit remain on track, Mehigan said, adding a “busy pipeline of acquisitions” will cost the company more than the estimated free cash flow of 250 million euros for the year. ($1 = 0.695 euro) (Reporting by Conor Humphries; Editing by Dan Lalor)

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