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News : International Last Updated: Feb 21, 2012 - 9:49 AM


Markets: Kerry Group reports rise of almost 11% in 2011 profit
By Finfacts Team
Feb 21, 2012 - 9:31 AM

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From left to right: Evangelos Venizoles, Greek minister for finance, Lucas Papademos, Greek prime minister and Wolfgang Schäuble, German finance minister, at the Eurogroup meeting, Brussels, Feb 20, 2012. The wheelchair bound Schäuble had provoked an angry rebuke from the Greek president last week.

Food group Kerry today reported adjusted pre-tax profits of €449.1m for the year to the end of December, a 10.8% rise on the €405.4m reported the previous year.

Revenues climbed by 6.4% to €5.302bn from €4.960bn in a year of a continuing global  food commodity boom but also weak consumer confidence in many markets and significant raw material and input cost inflation.

Commenting on the results Kerry Group chief executive Stan McCarthy said:"Kerry delivered good profitable growth in 2011 despite weak consumer confidence in many markets and significant raw material & input cost inflation. The Group performed well across developed and developing markets while continuing to build our capabilities and positioning for the future. Trading profit reached a milestone level of €501m in 2011. We are confident of achieving our strategic growth objectives for 2012 and expect to achieve seven to ten per cent growth in adjusted earnings per share to a range of 228 to 235 cent per share (2011: 213.4 cent)".

Results detail

Liam Igoe, analyst at Goodbody comments - - "Kerry Group today reported FY11 eps up 11.1% were towards the top end of its guidance range (+8-12%) at 213.3c. Growth in earnings was driven, as expected, by robust lfl sales and, to a lesser extent, acquisition activity in the latter part of the year. Lfl volumes of 3.3% were in-line with our forecasts. Within this Ingredients volume increased by 4%, while Kerry Foods saw volume growth of 1.1%. The differing performance between the divisions was even more marked in Q4, when Ingredients lfl volumes increased by 4.5%, but Foods declined (due to declines in Ireland, with UK sales still increasing). In terms of margins, overall margins fell 10bps, which was broadly as expected. Divisionally, foods fell 30bps, while Ingredients fell 10bps. In H2, Ingredients saw a 20bps rise in margin, with Foods down 20bps.

Kerry is guiding an eps range of 228c to 235c for FY12, which compares with our current eps forecast of 226.1c. At first glance we are likely to nudge our forecasts up slightly. As we had already noted, FY12 forecasts are being impacted by some front loading of Kerryconnect costs, with spending here expected to rise from €65m in FY11 to €80m in 2012, resulting in the sub 10% guidance for growth."

Economic View; €130bn bailout agreed for Greece: Juliet Tennent, economist at Goodbody comments  -- "Confidence that a second bailout package for Greece in less than two years would be approved at last night's Eurogroup meeting was well founded. Following weeks of negotiations with the European authorities, the ECB, the IMF and private investors European finance ministers finally agreed to the €130bn aid package that will stave an imminent disorderly Greek default that would have threatened the stability of the euro itself.

Agreement on Private Sector Involvement (PSI) proved more complicated as it became apparent that the original estimates of a 50% haircut would not see the debt/GDP level reach the target level 120.5% by 2020. Instead the debt swap offer will result in an estimated 53.5% write-down. The ECB will also play a part, with profits from its bond purchase programme being distributed to the national central banks. With Greece having a history of not meeting its deficit targets, a permanent monitoring of the implementation of the austerity measures has also been agreed. In addition, an escrow account is being set up to ring-fence the bailout money. Whether the Greek politicians can keep their side of the agreement remains to be seen. History would suggest not.

With the debt/GDP levels in Ireland set to reach 124% in 2014, which is at the very edge of sustainability, the Irish government will have been watching the unfolding developments in Greece closely. As the poster child of European austerity, Ireland will doubtlessly now increase the pressure on its European partners for some movement in reducing the debt burden, particularly that assumed in support of the domestic and indeed Eurozone banking system."

Greece funding package finally agreed: Conall Mac Coille, chief economist at Davy comments - - "The meeting of EU finance ministers that began yesterday afternoon concluded close to 03.00 this morning with a new funding package for Greece finally approved. The surprise development was that private sector creditors accepted further write-downs on their holdings of Greek debt — 53.5% relative to the 50% cut previously agreed, representing 70% of the net present value.

This means that Greek debt is now expected to fall to 120% of GDP, with additional funds secured through an effective debt buy-back scheme, reflecting national central banks' past purchases of Greek debt below par as part of the ECB's Securities Markets Programme (SMP). Luxembourg prime minister, Jean-Claude Junker, also predicted that the March 1st-2nd summit will lead to agreement on a further expansion of the euro area's emergency funds to €750bn from the planned limit of €500bn.

Overnight, Asian stocks responded positively to the agreement of the new Greek rescue package. So, European markets are likely to rise when they open this morning. Indeed, the recovery in stock indices since the beginning of the year reflects increased confidence from markets in European policymakers' responses to the sovereign debt crisis. However, thus far, a similar rebound in consumer and business confidence has not been evident. And the contraction in euro area GDP by 0.3% in Q4 surely reflected households and companies postponing spending given uncertainty about economic prospects. So markets will look to today's European consumer confidence survey for any evidence of improving sentiment from households."

LinkedIn Co-Founder: Future of Social Media:

US  Markets

US markets were closed Monday for the Presidents' Day holiday.

Asia Markets

The MSCI Asia Pacific Index slipped 0.3% Tuesday.

Japan's Nikkei 225 fell 0.23%; China’s Shanghai Composite Index added 0.75%. South Korea's Kospi index advanced 0.07%. Australia's S&P/ASX 200 climbed 0.82% and the Bombay Stock Exchange Sensex 30 index in Mumbai rose 0.92%.

Asia benchmarks

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is down 0.20% in early trading Tuesday.

The ISEQ is off 0.17% in Dublin.

Dragon Oil is up 1.33% and FBD is up 3.23%.

Dragon Oil (Buy, Closing Price £5.64); FY11 First Glance: In line statement: Gerry Hennigan, analyst at Goodbody, comments on today's results announcement: "The FY11 results statement from Dragon this morning is very much in line with expectations with little in the way of incremental newsflow beyond that provided in the Trading Statement and Reserves Update outlined on January 23rd. Not surprisingly, there is no further commentary regarding the indication of an interest, albeit preliminary, in UK-listed Bowleven. As such, reference to diversification efforts are confined to Dragon’s recent entry into the Bargou Licence offshore Tunisia, the recent appointment of an Exploration Director and a decision to relinquish the legacy 10% interest in Block 35 in Yemen.

The latter, however, is immaterial to valuation accounting for just 0.3p of our total risked NAV of 817.1p. Looking ahead, guidance in terms of infrastructure capex ($1bn over the period 2012 - 2015) and development wells (13-15 in 2012, 15-20 wells annually over the period 2013-2015) is in line with our expectation. Average annual production growth (10%-15%) over the period 2012-2015 and the stated target of 100 kbopd by 2015 has also been maintained.

In terms of the results, revenue for the year amounted to $1.15bn, with PBT of $871.7m and adj. EPS of 125.6c compared to our estimate of 124.7c. Variances largely relate to a lower cost of sales, but also lower interest charges. A final year dividend of 11c has been declared resulting in a full year payout of 20c, slightly below our expectation of 22.5c. At first glance, given that we upgraded as recently as January 24th, we are likely to defer further adjustments to forecasts, while acknowledging the recent spike in oil prices, clearly points to a positive upward bias to current year estimates. Incremental newsflow, aside from the above, largely relates to commentary regarding efforts to commercialise its gas reserves (1.5 TCF). Discussions with the Turkmen government continue, with the emphasis remaining on pursuing a dual strategy towards realising value from associated field gas. While the long term objective remains to secure a gas sales agreement, the near term emphasis is on extraction of the condensate."

European Benchmarks

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Currencies

The euro is trading at $1.3280 and at £0.8375.

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.

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 Monday this week, the BDI fell 2 points or 0.28% to 715 - -  the BDI plunged a full 70% from its recent mid-October peak of 2,173 to an all-time low of 647 on February 3.

Freighter Oversupply Weighs on Shipowners and Banks - - Jan 26, 2012: The New York Times says vessels bought during the global commodity boom are only now being delivered, putting pressure on the European banks that financed the purchases.

The skyscrapers and immaculate beaches of Singapore's seaport look out on one of the world’s largest parking lots: mile after mile of empty cargo ships, as far as the eye can see.

Similar fleets bob at anchor, with empty cargo holds, off the coasts of southeast Malaysia and Hong Kong. And dozens of newly built ships float empty near the giant shipyards of South Korea and China, their owners from all over the world reluctant to accept delivery during one of the worst markets ever for the global shipping industry.

As recently as six weeks ago large freighters that can carry bulk commodities like iron ore or grain were fetching charter rates of $15,000 a day. Now, brokers and owners say, the going rate is $6,000 a day. If any customers can even be found.

Crude oil for February 2012 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $104.99 up $1.75 from Monday's close. In London, Brent for February delivery is trading on the International Commodities Exchange at $120.16. 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 $17 - - The Globe and Mail says that for the past 10 months, Canadian producers - - whose prices are tied to WTI - - have been taking steep discounts for their oil compared with international crude prices that are benchmarked against North Sea Brent, which can be shipped more readily. In the past, WTI tended to trade at a small premium to Brent, because it is easier to refine.

That spread hit a peak of $28.08 (US) on Oct. 14, but has fallen dramatically since then. After plans for more pipeline capacity at Cushing, Oklahoma, the differential narrowed.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,739.60 up $5.50 from Monday's close in New York.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 6.

Check out our new subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.

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Business executives who put a premium on time and value high quality information, should use our service.


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