TIDMKYGA
RNS Number : 5539G
Kerry Group PLC
07 November 2018
07 November 2018
Kerry Group
Interim Management Statement
Kerry, the global taste & nutrition and consumer foods
group, issues the following Interim Management Statement for the
nine months ended 30 September 2018.
Q3 YTD KEY HIGHLIGHTS
-- 3.5% growth in business volumes
- Taste & Nutrition +4.1%
- Consumer Foods +1.2%
-- Pricing (0.2%)
-- Group trading margin maintained
- Good underlying margin expansion, offset by currency impact
- Taste & Nutrition +20bps
- Consumer Foods (60bps)
-- Earnings guidance for full year reaffirmed
Edmond Scanlon - Chief Executive Officer Statement
"We are pleased with our performance to date in 2018, with
volume growth well ahead of our markets and underlying margin
expansion in line with expectations. In the third quarter we have
delivered good volume growth against very strong comparatives. We
have also made good progress across our strategic growth
priorities, including the recent acquisition announcements of
Fleischmann's Vinegar Company Inc and AATCO Food Industries LLC. In
summary, we are encouraged by the progress we have made in 2018 and
reaffirm our full year 2018 guidance of adjusted earnings per share
growth of 7% to 10% in constant currency."
Contact Information
Media
Catherine Keogh VP Corporate Affairs +353 66 7182304 corpaffairs@kerry.ie
& Communications
Investor Relations
Marguerite Chief Financial +353 66 7182292 investorrelations@kerry.ie
Larkin Officer
William Lynch Head of Investor +353 66 7182292 investorrelations@kerry.ie
Relations
Website
www.kerrygroup.com
Markets & Group Performance
Consumer demands for authenticity, clean label, premiumisation,
healthfulness, convenience and new taste experiences continue to
drive product launches and innovation across the marketplace. The
high level of product churn is leading to significant change along
the supply chain, as traditional models are being challenged to
deliver speedy innovation. Kerry's longstanding business model and
integrated solutions capability are best positioned to enable
customers navigate this changing landscape and meet these
fragmented consumer preferences.
Groupwide business volumes grew by 3.5% and pricing decreased by
0.2%, reflecting lower raw material prices on average across the
period. Reported revenues increased by 2.2%, encompassing the
aforementioned business volume growth and pricing, an adverse
transaction currency impact of 0.1%, contribution from acquisitions
of 3.9%, and an adverse translation currency impact of 4.9%.
Group trading profit margin was maintained, reflecting a 20
basis points improvement in Taste & Nutrition, with underlying
margin improvement in Consumer Foods being offset by the sterling
transaction impact, resulting in a 60 basis points margin reduction
in the division.
Business Reviews
Taste & Nutrition
-- Volume growth of 4.1% driven by Meat, Beverage & Snacks End Use Markets (EUMs)
-- Pricing (0.2%) - lower raw material costs reflected in customer partnership agreements
-- Trading profit margin +20bps - underlying growth encompassing
operating leverage, enhanced product mix, efficiencies and
investments
The division achieved good growth across global, regional &
local customer groupings. Growth in developed markets was solid,
whilst developing markets delivered strong broad-based growth of
9.7%. Foodservice delivered good performance in the period, growing
at 5.8% against a backdrop of very strong comparatives,
particularly in the latter half of 2017. Consumer demands for new
world tastes and better-for-you offerings continue to drive
development of innovative nutritional product solutions, providing
opportunities for customers to extend their menu offerings.
Kerry's Taste technologies continued to record strong
performance, with TasteSense(TM) sugar-reduction technology and
natural extracts being key drivers of growth. These technologies,
in conjunction with Kerry's broader clean label technology
portfolio, helped customers meet consumer demands for reduced
sugar, natural ingredients, and authentic taste. Customers are
increasingly turning to Kerry, as the significance of a partner
with a 'from-food for-food' heritage is ever more relevant in
today's marketplace.
Americas Region
-- 2.8% volume growth
-- Good performance in North America, driven by Meat, Snacks & Beverage EUMs
-- Mexico and Central America performed well with good growth returning in Brazil in Q3
In North America, Kerry's Meat EUM enjoyed strong growth, as
consumer demand for authentic flavours, clean label and a wider
range of alternative protein-based products continued to drive new
product innovations in both retail and foodservice channels. In the
period, the Group acquired Flavor Source - based in Arkansas,
further enhancing Kerry's authentic taste capabilities for the Meat
EUM. The Snacks EUM delivered very good growth through protein
snacking, healthier snacking, and snacks offering new innovative
global taste experiences. The Beverage EUM achieved good growth,
aided by new products delivering added functional health benefits.
In LATAM, Central America and Mexico delivered good growth with
both the Snacks and Bakery EUMs growing strongly.
Strong growth was achieved into the Pharma EUM on a global
basis, driven by excipients in North America and APMEA.
Europe Region
-- 2.5% volume growth - versus very strong comparatives
-- Good performance in Beverage, Dairy & Meat EUMs
-- Foodservice performed well with a number of highly successful seasonal product launches
The region delivered a good performance, given the very strong
comparatives particularly in the second half of 2017. The Beverage
EUM delivered strong performance across a number of beverage
categories, with Kerry's TasteSense(TM) sugar-reduction technology
and natural extracts being key drivers of growth. The Meat EUM
continued to deliver good growth through new authentic taste
profiles and Meat-Free technologies. The recent Hasenosa
acquisition in Spain and the majority shareholding in
Netherlands-based Ojah are performing well and contributing to good
business development for the meat category. The Dairy EUM performed
well, as Kerry benefited from consumer demand for premiumisation
and dairy-free ranges in the ice cream category. Foodservice played
a key role across a number of EUMs, particularly in the Beverage
and Meat EUMs with the continued nutritional enhancement of menu
ranges and successful seasonal products.
APMEA Region
-- 10.1% volume growth
-- Good performance across a range of EUMs - led by Meat, Meals & Snacks
-- Continued strategic expansion - both organic and acquisitive
The APMEA region continued to deliver excellent growth, well
ahead of the market. All developing markets in the region delivered
strong performances. Kerry's business model continued to be
successfully deployed, with the industry-leading foundational
technology portfolio selectively rolled out to meet rapidly
evolving local consumer needs across the region. The Meat EUM
delivered very strong growth through customer partnerships, with a
number of new innovations launched to meet key consumer needs for
authentic taste, value and food safety. The Meals EUM continued to
perform strongly in Greater China and South East Asia, particularly
through new authentic cooking taste profiles. The Snacks EUM
delivered strong growth with the continued development of new
snacking occasions across the region.
The Group continued to invest in its strategic growth priorities
in the region. Good progress was made through investments in
ongoing footprint expansion in Indonesia, China and Malaysia. Three
acquisitions have been made in the year to date; Hangman - a
leading producer of sweet and savoury flavours, SIAS Food Co. - a
leading China-based supplier of culinary and fruit ingredients and
systems to the foodservice and food manufacturing industries, and
Season to Season - a leading South African supplier of taste
ingredients and systems to the African snack and food sectors.
Consumer Foods
-- Volume growth of 1.2% - continued market outperformance driven by good growth in 'Food to Go'
-- Pricing flat - reflecting neutral raw material prices on average across the period
-- Trading profit margin (60bps) - underlying margin improvement
more than offset by transaction currency
Whilst the UK consumer landscape had been resilient in the first
half of 2018, demand softened in a number of categories in the
third quarter. 'Everyday Fresh' enjoyed solid growth across the
period with the Richmond range performing well, benefiting from the
successful launch of Richmond chicken sausages. In the spreads
category, the division's softer butter technology delivered good
growth, as traditional spreads continued to lag overall category
performance. 'Convenience Meal Solutions' remained challenged in
the period, with retailers reducing promotional activity, and sales
negatively impacted by the exceptional warm weather in the second
and third quarters.
'Food to Go' performed well with strong growth in Cheestrings
and Fridge Raiders ranges. During the third quarter, the relaunch
of the Fridge Raiders brand was completed, with positive early
signs that the new broader range of snacking products is appealing
to a wider consumer demographic. Rollover and Out of Home meal
solutions continued to deliver good growth with a number of new
listings. The Brexit mitigation programme is progressing in line
with expectations.
Strategic Acquisitions
On October 25(th) , at Kerry's Investor Day in Singapore, it was
announced that agreement was reached to acquire Fleischmann's
Vinegar Company Inc (Fleischmann's) and AATCO Food Industries LLC.
These acquisitions further expand the Group's foundational
technology portfolio, as well as strengthen its foodservice and
developing markets positioning, in line with its strategic growth
priorities. Total consideration for the acquisitions is expected to
be EUR365m. These acquisitions have annualised revenues of
approximately EUR150m.
Fleischmann's is a USDA certified all-natural producer of
specialty ingredients that further support Kerry's taste and clean
label strategies across a number of EUMs. It is headquartered in
California and has manufacturing facilities in Washington, New
York, Maryland, Illinois, Missouri, Alabama and California.
AATCO Food Industries LLC is a leading provider of culinary
sauces to the foodservice channel. Headquartered in Muscat, Oman
with manufacturing facilities in Sohar (Oman), Jeddah (Saudi
Arabia) and Nashik (India). AATCO Food Industries provides a
platform for business development in the Middle East and
Africa.
The Group will finance these acquisitions from existing lines of
credit and it is anticipated that the transactions will be
completed prior to year-end, subject to routine regulatory and
closing conditions.
Financial Review
At the end of September, net debt was EUR1.4 billion, similar to
the year end 2017 level. The Group's consolidated balance sheet
remains strong which will facilitate the continued organic and
acquisitive growth of Group businesses.
Future Prospects
The Group reaffirms its full year 2018 guidance of adjusted
earnings per share growth of 7% to 10% on a constant currency
basis.
Disclaimer: Forward-Looking Statements
This announcement contains forward-looking statements which
reflect management expectations based on currently available data.
However, actual results may differ materially from those expressed
or implied by these forward-looking statements.
These forward-looking statements speak only as of the date they
were made and the Group undertakes no obligation to publicly update
any forward-looking statement, whether as a result of new
information, future events or otherwise.
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END
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