SALES, profits, dividends and margins are up while net debt has fallen. As this week’s full-year results from the Kerry Group demonstrate, it’s not all doom and gloom out there. When the going gets tough, the tough get going.

After a diet of virtually uninterrupted pessimism, Stan McCarthy’s company lifted our spirits when it published an excellent set of full-year results last week. These showed that 2008 sales at Kerry had increased by 6.3 per cent in local currency terms to €4.8bn, while trading profits (profits before interest and goodwill write-offs), were up 8 per cent to €409m.

Although the weakness of sterling and the dollar — which together account for about half of Kerry’s business — meant the sales and trading profits figures were flat when converted into euro, this was still an excellent performance in what were extraordinarily difficult circumstances.

When times are bad, food companies are generally good defensive stocks.

People can cut back on luxuries when money is tight but they still have to eat. However, this time around food producers are being relentlessly squeezed by the supermarket multiples. Just ask Patrick Coveney at Greencore.

Not at Kerry. It managed the seemingly impossible feat of widening its trading margins from an already impressive 8.4 per cent to 8.5 per cent.

Just for good measure, Kerry cut its net debt by €115m to €1.164bn and boosted its final dividend by 12.2 per cent to 15.6 per share to bring the full-year dividend to 22.5 cent per share — 12.5 per cent higher than the 2007 payout to shareholders.

So how has Kerry managed to be so successful at bucking the trend? Kerry consists of two divisions — consumer foods and ingredients. The consumer foods division had sales of €1.77bn, just over a third of Kerry’s total sales, and trading profits of €120m, representing a margin of 6.7 per cent.

However, by far the largest part of Kerry’s business comes from its ingredients and flavours division. This had 2008 sales of €3.38bn, almost two-thirds of Kerry’s total sales, and trading profits of €320m, almost four-fifths of the total. Not alone does the ingredients division contribute the vast bulk of Kerry’s sales and profits, it also generates much higher trading margins, about 9.4 per cent, than consumer foods.

The ingredients division has benefited enormously from the wave of buyouts in the US and European food industries. With many of the larger food producers now being run for cash they have increasingly tended to farm out their research and development to specialist suppliers such as Kerry.

Kerry ingredients and flavours end up in a wide range of food products, ranging from soups and sauces to ice cream and baked goods. By supplying food companies with ingredients and flavours not readily available elsewhere Kerry enjoys far higher margins than it would from supplying commoditised food items to the multiples.

Despite this, Kerry had a market value of just €2.67bn at Friday’s €15.19 share price. Even when the debt is added that works out at an enterprise value of just over €3.8bn, a mere 9.3 times trading profits. If Kerry can deliver this sort of performance in the bad times then it must be considered bomb-proof.