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News : International Last Updated: Aug 18, 2011 - 7:59 AM


Markets News Wednesday: Kerry Group reports 8% rise in H1 2011 profit before tax
By Finfacts Team
Aug 17, 2011 - 8:21 AM

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Kerry Group, the international food ingredients group, today reported pre-tax profits of €175.2m for the half year to the end of June, up 8% from the same period last year.

Underlying sales climbed by 8.4% to €2.6bn and adjusted earnings per share rose by 9.7% to 86.8 cent.

The interim dividend has been increased by 11.4% to 9.8 cent.

Commenting on the results Kerry Group chief executive Stan McCarthy said: "Kerry delivered a solid earnings performance and strong volume growth in the first half of 2011, despite significant raw material and input cost inflation. The Group remains confident of achieving its growth targets for the full year and delivering eight to twelve per cent growth in adjusted earnings per share as guided at the beginning of the year."

Results and Interim Management Statement

Liam Igoe, analyst at Goodbody, commented: "While Kerry’s Ifs growth slowed into Q2, it remained robust and, combined with a lower than forecast finance charge, means that Kerry’s eps (earnings per share) was ahead of our forecasts (86.8c versus 86.1c forecast). H1 lfl growth of 8.4%, of which 3.6% is volume related, compares with 10.5% in Q1 (of which 4.1% was volume related). This implies lower lfls in Q2 of approximately 6.6% (of which 3.1% is volume related).

 In terms of the key volume metric, the biggest growth was within ingredients (+9.6%), though lfl volumes were lower in Q2. Margins were weaker yoy, as the company had previously indicated, due to a combination of lagged cost inflation issues, the costs associated with its ongoing 'Kerryconnect' programme and the arithmetical effect of increasing prices on the sales line. In spite of the margin pressures arising from increased cost inflation and weaker currencies, Kerry has maintained its 8-12% eps growth guidance for FY11. At first glance, we are likely to slightly increase our current projections (+9%), due to lower than anticipated interest charges in H1.

The market-related fall in Kerry’s share price in recent weeks leaves its current 2012 PER at less than 10x, very much at the lower end of its historic range. Re-affirmation of growth projections today should serve to reignite interest in this defensive growth stock."

Dell Computer on Tuesday reported net profit of about $890m, or 48 cents a share, in its latest quarter - - a 63% jump from a year earlier. Excluding once-off items, Dell earned 54 cents a share.

The second-biggest PC maker posted revenues that missed analysts' estimates, as it was hit by slowing spending on desktop PCs and consumer technology.

Second-quarter sales rose less than 1% to $15.7bn, Dell said.

The company cut its full-year revenue growth estimate to a range of 1% to 5%, from 5-9% previously, citing uncertainty about public sector and company spending on technology.

US job creation:

Economic View: Little progress at the Franco-German summit; Dermot O'Leary, chief economist at Goodbody, comments  -- "We were right to have low expectations for yesterday’s meeting of the leaders of the euro-zone’s two largest economies. Statements following the Merkel/Sarkozy meeting were big on rhetoric around support for the euro but details were sparse and simply provide a bridge to full agreement of the July 21 proposals at national parliaments. That, of course, is if the markets give them that time. Among the proposals are a twice-yearly meeting of euro leaders, chaired by Herman van Rompuy. With these summits already taking place, this announcement is hardly ground-breaking. The joint statement between France and Germany also called for closer economic ties between countries within the bloc, but it stopped short of proposing the introduction of Eurobonds. This, for the French and Germans, is putting the cart before the horse. The strategy now seems to be to dangle the notion of Eurobonds out in front of troubled euro nations as a carrot for continued compliance with fiscal discipline dictated by the two.

To this end, France and Germany agreed to take the lead on closer fiscal coordination by: (1) enshrining a debt brake in their respective national constitutions and push for similar throughout the euro-zone, and; (2) harmonising their corporation tax rates and bases. Ireland would have suspected that the corporation tax issue had fallen away following the agreement made at the July 21 summit, but it has now reared its head again less than a month later. On the former issue, Ireland and, indeed, Greece and Portugal, are all unlikely to have major problems with enshrining a debt brake into their national constitutions, given that these countries have little control over fiscal policy at this stage in any case.

Yesterday’s statements will do little to calm market’s nerves on the region, as the major issues remain the same. Firstly, solvency concerns will remain, and will be exacerbated by the signs of economic slowdown in the region. Second, the EFSF still does not have the firepower that it needs and judging by Sarkozy’s comments yesterday, increasing its size is not on the table. Thirdly, while German and French proposals carry significant influence, the challenge of navigating through 17 national parliaments still remains."

Franco-German proposals outline the future shape of European integration: Irish corporate tax rates could suffer; Barry Dixon of Davy, comments  - -"The old adage of 'what does not kill you makes you stronger' could be applied to the latest developments on resolving the eurozone debt crisis. In the face of a clear threat to the future of the single currency, the French and German leaders have pledged their support for the euro. While the proposal does not include the issuance of eurobonds, President Sarkozy's comment that this would be more appropriate 'at the end of the integration process rather than the beginning' is interesting. It suggests that the eurozone area is at the start of the process of economic integration with fiscal integration the next logical step. As part of this process, the proposal includes a recommendation for the harmonisation of the corporate tax rate as well as a balanced-budget commitment enshrined in the constitutions of all member states.

For Ireland, the most significant implication of the proposals is the potential loss of the 12.5% corporate tax rate. While this on the face of it could be bad news for FDI and job creation, in a more federal structure, the Irish government would have to become more innovative in terms of providing incentives/support to companies wishing to set up operations in Ireland.

The willingness of the core eurozone economies to support the periphery may be lessened by slowing growth within these economies. Latest eurozone GDP figures indicate that growth slowed sharply in Q2 with 0.2% growth reported for the period across the region. The slowdown in core Europe is of most concern with French GDP unchanged and German growth of 0.1%, well below the numbers reported for Q1. On a positive front, any thoughts by the ECB for a further interest rate rise must now be well and truly banished."

US Markets

On Tuesday in New York, the Dow fell 77 points, or 0.67, to 11,406.

After three consecutive days of gains, the Dow is up 7.1%, its biggest such move since March 2009, when markets were pulling out of their financial-crisis nadir.

The Nasdaq Composite slid 1.24% and the S&P 500 slipped 0.97%.

Asia Markets

The MSCI Asia Pacific Index gained 0.2% Wednesday.

Japan's Nikkei 225 dipped 0.55%; China's Shanghai Composite index fell 0.26%; Australia's S&P/ASX 200 rose  1.33% and the Bombay Stock Exchange's Sensex index climbed 0.03% in Mumbai.

Asia benchmarks

Finfacts Reports

Merkel and Sarkozy propose a 'true economic government' for the Eurozone
Irish Leaving Certificate 2011: High failure rates in maths and science again
Fund managers expect global economy will slow sharply in coming 12 months
World Bank's Food Price Watch shows global food prices remain sharply higher than year ago
Spain raises €5.7bn at better rates; Fitch affirms US triple-A rating; Fed says industrial production rose in July
Total spending on debit/ credit cards in Ireland last year was €22.8bn compared with ATM withdrawals of €22.3bn
New Irish residential mortgages fell 54.6% in the second quarter to 3,551
GDP rose by 0.2% in both the Eurozone and the EU27 during the second quarter of 2011

In Europe, the Dow Jones Stoxx 600 is off 0.79% in early trading Wednesday.

The ISEQ has risen 0.28% in Dublin.

Kerry Group is up 2.73%.


European Benchmarks

Irish Share Prices

Irish Stock Market Capitalisation by Company

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.4381 and at £0.8747.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009. The index averaged 59% lower in 2009 than a year earlier.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Friday July16th, the BDI rose 20 points or 1.12% to 1,700 to break the 35-session losing streak.

On Tuesday this week, the BDI added 38 or 2.91% to 1,344.

Crude oil for August 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $86.97 up 32 cents from Tuesday's close. In London, Brent for August delivery is trading on the International Commodities Exchange at $109.45. The North Sea benchmark accounts for two-thirds of the global market.

The margin between the US benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange and Brent is over $22.

The US Energy department recently said that growing volumes of Canadian crude oil imported into the United States contributed to record-high storage levels at Cushing, Oklahoma of over 41m barrels at the end of March 2011 (86% of working capacity at Cushing), and a price discount for WTI compared with similar-quality world crudes such as Brent. A discount for WTI is expected to persist until transportation bottlenecks impacting the movement of mid-continent crude oil to the Gulf coast are relieved. Consequently, the projected US refiner average acquisition cost of crude oil, which was about $2.70 per barrel below WTI in 2010, is $1.60 per barrel above WTI in 2011 and $1.10 per barrel above WTI in 2012.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,788.10 per oz, up $1.00 from from Tuesday's close in New York.

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