TIDMKYGA
RNS Number : 3198R
Kerry Group PLC
26 October 2023
Date: 26 October 2023
LEI: 635400TLVVBNXLFHWC59
KERRY GROUP
Q3 INTERIM MANAGEMENT STATEMENT 2023
Continued volume growth with good margin improvement
OVERVIEW
* Taste & Nutrition Q3 volume growth of 1.6% and Group
Q3 volumes +0.1%
* Overall YTD pricing of 1.3%, with third quarter
pricing reflecting deflationary environment
* Group margin expansion of +100 bps in Q3, driven by
Taste & Nutrition +130bps
* Dairy Ireland YTD volumes -6.2% with margins also
impacted by challenging market conditions
* Full year earnings guidance expected to be at low end
of previously stated 1% to 5% constant currency range
* Share buyback programme of EUR300m to commence at the
beginning of November
Edmond Scanlon, Chief Executive Officer
"We delivered a good overall performance in the period recognising
varying conditions across our markets. North America saw good improvement
through the third quarter, Europe performed in line with expectations
while APMEA continued to deliver strong growth. Our unique positioning
in foodservice supported our continued strong growth in the channel.
We made good strategic progress through the period with further
footprint expansion and strategic acquisitions, and given the Group's
strong balance sheet and cash flow, we are also initiating a share
buyback programme.
Taste and Nutrition remains strongly positioned for volume growth
and margin expansion while recognising current market conditions,
however Dairy Ireland performance continues to be impacted by challenging
industry dynamics. Given this context, we expect our constant currency
earnings growth to be at the low end of our guidance range".
Markets and Performance
Given the prevailing industry dynamics through the period, the
overall demand environment remained quite resilient. Customer
innovation activity primarily focused on new taste profiles,
continued improvements to products' nutritional characteristics,
products targeting health need states, and providing more relative
value options for consumers.
Group reported revenue in the first nine months of the year
decreased by 4.2%, reflecting business volume growth of 0.4%,
pricing of 1.3% and a contribution from acquisitions of 1.1%, more
than offset by the effect of disposals of 5.1% and adverse
translation currency of 1.9%. Group EBITDA margin increased by
10bps as benefits from cost efficiency initiatives and portfolio
developments were partially offset by the mathematical impact of
passing through overall input cost inflation.
Business Reviews
Taste & Nutrition
Growth driven by continued strong foodservice performance
> Overall volume growth of 1.5% with Q3 growth of 1.6%
> Meat, Snacks and Dairy markets achieved good growth
> Pricing of 3.0% with third quarter pricing of -1.4% reflective of some input cost deflation
> EBITDA margin +20bps (Q3 +130bps) primarily reflected
benefits from cost efficiencies and portfolio developments,
partially offset by the mathematical impact of passing through
overall input cost inflation
Overall volumes in the division remained solid considering
customer and industry dynamics. Foodservice achieved high-single
digit volume growth driven by ongoing innovation with QSRs and
coffee chains on menu enhancement, seasonal products, and
back-of-house efficiency solutions. Volumes in the retail channel
were impacted by customer inventory management in North
America.
Within the division, the Food EUM achieved good volume growth
led by Meat, Snacks and Dairy. This was supported by strong
performances in savoury and culinary taste solutions, as well as
Tastesense(R) salt and sugar-reduction technologies.
Business volumes in emerging markets increased by 5.1% driven by
strong growth in the Middle East.
Within the global Pharma EUM, performance was led by good volume
growth in cell nutrition and excipients.
Americas Region
> Overall volumes -1.7% (Q3 -0.9%) with improvement in North America in Q3
> Retail channel saw softer market conditions while foodservice performed well
> Good growth in Snacks and Dairy markets
> LATAM achieved overall growth despite softer Q3 market conditions
Performance in the region reflected strong comparatives and
customer inventory reductions particularly across the Beverage,
Bakery and Meat markets in the retail channel. Innovation and new
launch activity remained strong in many categories despite these
dynamics. Foodservice delivered good growth through new taste
innovations across menus and back-of-house efficiency solutions,
particularly with QSRs and coffee chains.
Overall performance in North America improved through the
period, with volumes in the third quarter similar to the prior
year. Snacks delivered good growth driven by authentic taste-led
innovations across global leaders, emerging brands and private
label, while Dairy performed well through taste system innovations.
Within the Meat market, we continued to see good launch activity
with culinary taste and texture solutions against a backdrop of
challenging industry conditions.
LATAM achieved overall growth in the period despite softer
market conditions in the third quarter. This growth was driven by
Mexico with good performances in the Snacks and Meat markets.
Europe Region
> Overall volumes +3.7%, with Q3 growth of 2.0% in line with expectations
> Volume growth led by Meat, Snacks and Meals markets
> Growth driven by strong performances in UK and Ireland
The region achieved continued excellent growth in the
foodservice channel driven by seasonal products, new menu
innovations and ongoing nutritional profile improvements. The
retail channel delivered a solid performance in the region
considering the significant consumer inflationary environment.
Growth in Meat was driven by culinary taste and texture system
launches combined with continued nutritional enhancement
innovations. Snacks delivered strong growth through savoury taste
and Tastesense(R) salt reduction technologies, while Meals also
achieved strong growth through nutritional enhancements and
authentic taste solutions for stocks and broths.
APMEA Region
> Overall volume growth of 7.5% with continued strong Q3 growth of 8.2%
> Volume growth led by Meat, Meals and Dairy markets
> Growth was strong in the Middle East and South Asia Pacific
Growth in the region remained strong through the period,
particularly in the foodservice channel and within the Food EUM in
the retail channel. Excellent growth was achieved in Meat through
local authentic taste and texture solutions, while Meals and Dairy
had good growth in taste systems and Tastesense(R) salt reduction
technologies.
Within the region, strong growth was achieved in the Middle East
and South Asia Pacific, with good overall performance in China
considering market conditions through the period. In the third
quarter, the Group completed the acquisition of Greatang(1), which
broadens and deepens Kerry's capability and portfolio of local
taste solutions in the Chinese market.
(1) Acquired 100% of the share capital of Shanghai Greatang
Orchard Food Co., Ltd.
Dairy Ireland
Performance Impacted by Significant Reduction in Dairy
Prices
> Volumes -6.2% (Q3: -12.1%) as challenging industry dynamics persisted
> Pricing -6.5% (Q3: -17.6%) relating to increased
deflationary market dynamics across the period
> EBITDA Margin -110bps driven by the significant impact from changes in dairy market prices
Volumes in Dairy Ireland were lower through the period, as input
cost dynamics continued to impact overall market demand. Within
Dairy Ingredients, volumes principally reflected softer market
supply dynamics with prices continuing to reduce through the
period. Overall growth in Dairy Consumer Products was led by
Kerry's branded cheese ranges and private-label spreads.
Financial Review
At the end of September, the Group's net debt was EUR1.8
billion. The Group's consolidated balance sheet remains strong,
which will support the continued strategic development of the
business.
Share Buyback Programme
Today Kerry has announced it will commence a share buyback
programme of up to EUR300 million of Kerry Group plc ordinary
shares. The buyback is underpinned by the Group's strong balance
sheet and cash flow, and aligned to Kerry's Capital Allocation
Framework. Kerry will commence the share buyback programme at the
beginning of November 2023, and an announcement will be made
immediately prior to its formal launch.
Board Changes
The Board has agreed to appoint Dr. Genevieve Berger and
Professor Catherine Godson as non-executive directors of the
Company with effect from 1 November 2023.
Dr. Berger is a global science leader and during her executive
career held roles as the Chief Science Officer at Firmenich
International SA as well as the Chief Research & Development
Officer and Chief Science Officer at Unilever plc. Dr. Berger is
currently a non-executive director of Dassault Systèmes SE and
previously served on the boards of Air Liquide SA, Astra Zeneca plc
and Smith & Nephew plc.
Professor Godson is the Associate Dean, Research and Innovation
at University College Dublin ("UCD") School of Medicine. She has an
international reputation in scientific research gained during a
long and successful academic career in the US, Switzerland and at
UCD. Professor Godson has a broad knowledge across human health and
is a global expert on diabetes as well as cardiovascular and kidney
diseases. She currently serves on the Irish Research Council and as
a Trustee of Barts Charity, London.
Future Prospects
While market conditions remain uncertain, Kerry remains well
positioned with a good innovation pipeline.
The Group will continue to manage through the current input cost
environment in collaboration with customers. Kerry will continue to
develop the business through capital investment and acquisitions
aligned to its strategic priorities. Taste and Nutrition is
strongly positioned for volume growth and margin expansion; however
Dairy Ireland performance continues to be impacted by challenging
market conditions. Given this context, the Group expects constant
currency adjusted earnings growth to be at the low end of the
previously stated 1% to 5% guidance range.
Note: Constant currency earnings guidance includes a net
dilution of approximately 2% from portfolio developments. Foreign
exchange translation is expected to be a headwind of approximately
3% on earnings in the full year based on prevailing rates.
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 Company undertakes no obligation to publicly update any forward
looking statement, whether as a result of new information, future
events or otherwise.
CONTACT INFORMATION
=============================================
Investor Relations
Marguerite Larkin , Chief Financial
Officer
+353 66 7182000 | investorrelations@kerry.ie
William Lynch , Head of Investor
Relations
+353 66 7182000 | investorrelations@kerry.ie
Media
Catherine Keogh , Chief Corporate
Affairs & Brand Officer
+353 45 930188 | corpaffairs@kerry.com
Website
www.kerry.com
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END
STRNKPBNOBDDPKB
(END) Dow Jones Newswires
October 26, 2023 02:00 ET (06:00 GMT)
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