Date: 2 May 2024
LEI: 635400TLVVBNXLFHWC59
Q1 INTERIM
MANAGEMENT STATEMENT 2024
Good Start To The
Year
FIRST QUARTER HIGHLIGHTS
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> Taste & Nutrition delivered good volume growth of 3.1%
with Group volumes +1.9%
> Group pricing of -5.3% | Taste & Nutrition
-3.9%
> Group EBITDA margin +140bps | Taste & Nutrition
+140bps
> Dairy Ireland delivered a solid performance with EBITDA margin
+70bps
> New
€300m share buyback programme - reflected in updated full year
guidance
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Edmond Scanlon, Chief
Executive Officer
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"We are
pleased to report a good start to the year given market dynamics.
Taste & Nutrition achieved good volume growth driven by a
strong performance within our foodservice channel and we delivered
strong margin expansion in the period reflecting the continued
development and evolution of our business.
Consumer
market dynamics remain similar to those outlined at our full year
results. As part of our capital allocation framework as previously
indicated, we are announcing a new share buyback programme, and the
expected net earnings per share accretion has been reflected in our
updated guidance range."
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Markets and Performance
Consumer demand remained relatively subdued
during the period given the recent inflation across many
geographies. Customer innovation and renovation primarily focused
on new taste profiles, enhancing product nutritional
characteristics and providing relative value options for consumers
at different price points.
Group revenue comprised volume growth of 1.9%,
pricing deflation of 5.3%, the effect from disposals net of
acquisitions of 5.1% and unfavourable translation currency of 1.4%,
resulting in overall reduced revenues of 9.9% in the period. Group
EBITDA margin increased by 140bps driven by cost efficiencies,
portfolio developments and the effect of pricing.
As previously announced and as
expected, the carve-out acquisition of part of the global lactase
enzyme business of Novonesis (formerly Chr. Hansen Holding A/S
("Chr. Hansen") and Novozymes A/S ("Novozymes")) was completed at
the end of April. This acquisition¹ is strongly aligned to Kerry's
recent strategic enhancement of its biotechnology capabilities,
while extending Kerry's enzyme manufacturing capabilities and
footprint to three continents with its focus on food, beverage and
pharma applications.
¹ Acquisition comprises certain trade and
assets of Chr. Hansen's global lactase enzyme business
and 100% of the share capital of Nuocheng Trillion Food
(Tianjin) Co., Ltd, a Chinese subsidiary of Novozymes.
Business Reviews
Taste & Nutrition
Growth driven by strong foodservice
performance
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Volume growth of 3.1%
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Growth led by Snacks, Meals, Meat and Beverage
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Pricing of -3.9% reflected the deflationary
environment
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EBITDA margin expansion of 140bps driven by cost
efficiencies, portfolio developments and effect of
pricing
Taste & Nutrition delivered good overall
volume growth in the period given relatively muted consumer demand
in a number of markets. Foodservice continued its momentum with
volume growth of 8.6%, supported by menu enhancement activity,
seasonal products and back-of-house solutions. The retail channel
returned to overall growth recognising varying market conditions
across regions.
Growth in the period was led by Snacks, Meals,
Meat and Beverage markets, with recent innovations in healthier,
more nutritious products performing well. This was supported by
strong growth in savoury taste and Tastesense® salt and
sugar reduction technologies in particular, as well as good growth
across many of Kerry's Proactive Health technologies.
Business volumes in emerging markets increased
by 5.2% in the period, led by strong growth in the Middle
East.
Within the global Pharma EUM, volumes were
similar to the prior year, with growth in excipients offset by
lower volumes in cell nutrition.
Americas Region
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Returned to volume growth of 3.6% in Q1
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Snacks, Meals and Beverage delivered strong growth
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Foodservice delivered strong growth with retail performing
well
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LATAM growth led by Mexico
Performance in North America reflected a return
to volume growth given significant customer inventory management in
the prior year. Growth in the period reflected a strong performance
in the foodservice channel, as well as some timing benefits in the
first quarter.
Within North America, Snacks achieved very
strong growth with new savoury taste business wins and a number of
launches incorporating Kerry's Tastesense® technologies.
Meals delivered good growth through culinary taste solutions with a
number of leading foodservice chains. Growth in Beverage was driven
by strong performances in botanicals, coffee extracts and
Tastesense® sugar reduction technologies.
Within LATAM, good growth was achieved in Mexico
across Beverage and Snacks, with performance improving in Brazil in
the period.
Europe Region
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Volumes -1.4% against strong comparatives
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Meals and Beverage achieved good growth
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Foodservice performed well with softer dynamics in the retail
channel
Performance in the period reflected strong
comparatives and softer market conditions across the region given
recent inflation. Foodservice delivered another quarter of good
growth with quick service restaurants and coffee chains, while
softer retail channel volumes reflected constrained consumer
demand. Good growth was achieved in Meals with solutions
incorporating Kerry's food protection, preservation and authentic
taste technologies. Beverage performed well in functional and
refreshing beverages supported by a number of new innovations
incorporating Kerry's proactive health portfolio, while performance
in Dairy reflected strong prior year comparatives.
APMEA Region
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Volume growth of 4.8% led by Snacks and Meat
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Growth driven by strong performance in the Middle
East
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Foodservice achieved strong volume growth
Performance in the region was primarily driven
by strong growth in the Middle East, with volumes in China similar
to the prior year and Southeast Asia improving in the period.
Foodservice delivered very strong volume growth with leading
regional coffee chains and quick service restaurants. Growth in the
retail channel was supported by strong demand for Kerry's range of
local authentic taste profiles.
Snacks delivered excellent growth with a number
of launches incorporating Kerry's savoury taste portfolio across
leading global and regional brands. Strong growth was achieved in
Meat through functional and taste systems, while Dairy performed
well with dairy taste solutions.
Dairy Ireland
Solid start to the year in-line with
expectations
>
Volumes -3.0% with good growth in Dairy Consumer Products,
more than offset by the impact of market supply conditions in Dairy
Ingredients
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Pricing -13.7% given reduction in dairy input costs year on
year
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EBITDA margin expansion of 70bps reflective of the effect of
pricing
Within Dairy Ireland, Dairy Ingredients volumes
were impacted by softer overall supply across the first quarter
given local market conditions. Dairy Consumer Products performed
well in the period, with growth led by snacking, Kerry's branded
cheese range and private-label spreads.
Note: Revenue in Dairy Ireland reflects changes
in contractual arrangements implemented in the current year, in
accordance with IFRS 15.
Financial Review and Share Buyback
Programme
At the end of March, Group net debt was €1.7
billion reflecting cash generation, capital investment and the
share buyback programme. The Group's consolidated balance sheet
remains strong, which will facilitate the continued strategic
development and growth of the business. Aligned to Kerry's Capital
Allocation Framework, the Group announces it will commence a share
buyback programme of up to €300 million of Kerry Group plc ordinary
shares, subject to approval at today's AGM. The programme will
commence in May 2024 and will complete by year end at the latest. A
formal announcement will be made prior to its launch. As previously
announced, the Group has proposed a final dividend of 80.8 cent per
share for approval at the Annual General Meeting.
Board Changes
Dr Hugh Brady and Dr
Karin Dorrepaal, each having served as Directors for over nine
years, will retire from the Board of Directors effective from the
conclusion of the Annual General Meeting to be held later today. Mr
Christopher Rogers will succeed Dr Hugh Brady as Senior Independent
Director and Ms Emer Gilvarry will succeed Dr Karin Dorrepaal as
designated employee engagement director.
Outlook
Kerry has a good innovation pipeline and remains
well positioned for volume growth and good margin expansion, while
recognising consumer demand remains relatively subdued.
The Group will continue to develop its business
and portfolio aligned to its strategic priorities.
Reflecting the new share buyback programme, the
Group is updating its adjusted earnings per share guidance range to
5.5% to 8.5% growth² in constant currency (previously 5% to
8%).
² Expected net earnings per share
accretion in FY 2024 from the new share buyback programme of 0.5%
based on average number of shares in issue of ~173.0m. | Foreign
currency translation expected to have a relatively neutral impact
in the full year.
Disclaimer
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 Company 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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CONTACT INFORMATION
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Investor Relations
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Marguerite Larkin, Chief
Financial Officer
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+353 66 7182292 |
investorrelations@kerry.ie
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William Lynch, Head of Investor
Relations
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+353 66 7182292 |
investorrelations@kerry.ie
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Media
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Catherine Keogh, Chief
Corporate Affairs Officer
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+353 45 930585 |
corpaffairs@kerry.com
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Website
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www.kerry.com
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