OFTEN dismissed as dull during the boom times, investor interest in Ireland's food companies is growing as the sector's four main players demonstrate their resilience in the face of the global downturn.

Shareholders in Kerry, Aryzta, Glanbia and Greencore can all expect to receive dividends this year and, in some cases, will see their company's earnings rise.

Some analysts even believe that several of the companies will embark on the acquisition trail later this year, which could significantly enhance their global market positions.

Ironically, the secret of their current strength is precisely what repelled investors during the boom: conservative financial management.

According to Joe Gill, an analyst with Bloxham Stockbrokers, this approach now means that the companies have stronger balance sheets than their rivals, leaving them "well-positioned to acquire quality food manufacturing and distribution assets that are financially impaired amid the credit crisis".

With Kerry and Glanbia due to reveal their half-year results this week, the Sunday Tribune profiles the country's four major listed food companies and reveals why their shareholders are likely to reap dividends amid the downturn.

Kerry group

Ireland's largest listed food company, Kerry is widely expected to start eyeing up acquisition targets during the final months of this year as it seeks to profit from the weakness of other key players in the sector.

The current weak economic conditions could easily provide a unique window of opportunity for its chief executive Stan McCarthy, who vowed to step up Kerry's acquisition activity when he was appointed in 2007.

McCarthy has often spoken of how the credit crunch could assist Kerry's expansion plans by driving rival bidders, such as private equity houses, out of the market. He now has an ideal opportunity to put his money where his mouth is.

Kerry's executives can afford to focus on the future given the robust nature of their business, which is mirrored by its exceptionally stable share price. Despite all the stock market's travails, Kerry shares have lost less than 18% of their value since January 2008.

This outstanding share performance is likely to continue for the foreseeable future with analysts expecting McCarthy to unveil a 5% rise in half-year earnings on Tuesday, despite a dip in sales.

According to NCB analyst Paul Meade, Kerry has offset its weaker sales by boosting its margins by up to 50 basis points through efficiency and rationalisation initiatives.

"Overall, we expect a very resilient performance and upbeat outlook from management despite the challenging trading environment," he said.

Aryzta

Established a year ago following the merger of IAWS with its Swiss rival Hiestand, Aryzta is the most inconspicuous of the Irish food companies by a considerable margin.

"If we can deliver for shareholders with less noise and less attention, that's a measure of success in this business," explained its chief executive Owen Killian in a recent interview with the Financial Times.

This approach appears to be working for the bakery company, which has seen its sales rise by 7% in the first nine months of its current financial year to €2.43bn.

"They have very strong momentum in the US at the moment and this should feed through to their full-year results next month," said Gill.

This momentum, however, is being partly offset by some particularly tough trading conditions in Ireland, which still accounts for 50% of the company's sales.

The major issue facing the company is the fact that its 200,000 customers include many small convenience stores, which are particularly vulnerable to the current economic downturn.

Greencore

Greencore's share price may be in the doldrums but that has more to do with Liam Carroll's troubles than the company's performance under chief executive Patrick Coveney.

The developer owns 29.5% of the company and the uncertainty surrounding his stake has depressed the company's share price to such an extent that the firm has lost over 70% of its value since January 2008 – more than any other Irish food company.

"Once the situation is resolved, the share price should be able to drive forward," said Gill, who has tipped Greencore as a good buy for short-term investors.

The company's recent performance has show particular resilience in the face of the downturn, aided by changes in British eating habits, which have seen consumers abandon restaurants in favour of chilled meals.

This trend saw Greencore's British chilled meals sales to rise by 4.4% in the four months to July compared with the same period in 2008.

The company's US operations are also faring well, vindicating the company's decision to expand organically following its purchase of Home Made Brand Foods for around €35m last year. Its US sales rose by 43% in the four months to July 24 compared with the same period in 2008.

The company also holds the potentially lucrative WeightWatchers prepared meal licence for the US.

Glanbia

Compared to other major Irish food companies, Glanbia is having a rough year due to the scale of its exposure to the falling global dairy prices, which prompted the company to issue a profit warning in April.

Analysts believe that the company's half-year earnings, which will be issued on Wednesday, will 25% lower than last year's figure due to losses from its Irish dairy operations. At some points, Glanbia had been forced to buy milk at artificially high prices from farmers because its market price had fallen below the cost of producing it.

Although milk prices are expected to rebound later this year, the damage has already been done with Glanbia admitting that its Irish dairy division is certain to lose money this year.

Luckily for the company's managing director, John Moloney, most Glanbia shareholders are now more interested in the performance of its overseas interests, which are expected to be far more resilient.

There are particularly high hopes for Optimum Nutrition, the sports supplement firm it bought for €210m last year.

Optimum provides Glanbia with a foothold in the US sports nutrition market, which is worth €13.5bn annually.

"It's all about Optimum. It's a potentially transformational acquisition," said Gill. "I would draw a parallel with the purchase of Cuisine de France by IAWS [now Arzyta], which was the most crucial deal in its entire history as a PLC."