24 October 2024
LEI: 635400TLVVBNXLFHWC59
KERRY GROUP
Q3 INTERIM MANAGEMENT STATEMENT 2024
Continued Volume Progression and Strong Margin
Expansion
HIGHLIGHTS
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Taste & Nutrition Q3 volume growth of 3.4% and Group Q3
volumes +3.2%
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Taste & Nutrition Q3 price -1.2% | Group Q3 price
-1.2%
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Taste & Nutrition YTD EBITDA margin +120bps | Group
+140bps
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Dairy Ireland YTD volume growth of 0.4% | YTD EBITDA margin
+120bps
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Full year earnings per share guidance range
reiterated
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Edmond Scanlon, Chief
Executive Officer
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"We were pleased with our performance across the
first nine months of the year, with continued volume progression
through the period, combined with strong margin
expansion.
Taste & Nutrition achieved volume growth of
3.4% in Q3, which as previously referenced was broadly in line with
market expectations. This represented continued strong volume
growth in the Americas, a good performance in APMEA, with volumes
in Europe turning positive in the third quarter. Volumes in the
retail channel steadily improved through the period, while
foodservice continued to deliver strong growth, given our unique
positioning as we outlined at our recent investor day.
We remain on track to achieve our full year
guidance, and today we reiterate our range of 7% to 10% constant
currency adjusted earnings per share growth."
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Markets and Performance
Consumer demand across many food and beverage
markets remained relatively muted following recent inflation in
many geographies. Customer innovation activity across the period
was weighted towards renovation of existing products, with an
increased focus on nutritional profile enhancement, cost
optimisation and improving sustainability characteristics of
products. A significant level of new product innovation
concentrated on addressing increased consumer demand for new taste
experiences and providing relative value options.
Group reported revenue in the first nine months
of the year comprised volume growth of 2.2%, pricing deflation of
3.2%, favourable transaction currency of 0.2%, adverse translation
currency of 0.7%, positive contribution from acquisitions of 0.8%
and the effect from disposals of 2.3%, resulting in reduced overall
revenues of 3.0% across the period. Group EBITDA margin increased
by 140bps driven by benefits from the Accelerate Operational
Excellence Programme, a positive impact from portfolio
developments, operating leverage, product mix, and the net effect
from pricing.
Business Reviews
Taste & Nutrition
Volume growth led by strong foodservice
performance
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Volume growth of 3.2% (Q3: +3.4%)
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Growth led by Snacks, Beverage and Bakery EUMs
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Pricing -2.5% (Q3: -1.2%) reflecting input cost deflation in
places
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EBITDA margin expansion of 120bps driven by cost
efficiencies, portfolio developments, operating leverage, product
mix and the net effect of pricing
Taste & Nutrition delivered good volume
growth ahead of its end markets. Foodservice continued to perform
strongly with volume growth of 6.8%, supported by new menu
innovations, seasonal products, and solutions for nutritional,
sustainability and operational enhancements. Growth in the retail
channel improved through the period, reflecting good performances
in the Americas and APMEA.
Good growth was achieved in authentic taste and
biotechnology solutions through the period. Growth in taste was led
by innovations incorporating Kerry's savoury taste, botanicals,
natural extracts, and Tastesense® salt and sugar
reduction technologies. Biotechnology solutions' growth was driven
by good performances across proactive health technologies and
through clean label food protection and preservation launches
within food applications.
Business volumes in emerging markets increased
by 6.4% in the period, led by strong growth in the Middle East and
Africa.
Within the Pharma & Other EUM, growth in
excipients and supplements was offset by softer cell nutrition
volumes.
At the recent investor day, Kerry announced a
€15 million investment in its Biotechnology Hub at BioSquare,
Leipzig, Germany. Scheduled for completion in the second quarter of
2025, this state-of-the-art facility will provide the space and
infrastructure for additional enzyme engineering and bioprocess
development. During the period, the Group also acquired the
LactoSens® lactose testing technology assets and related
business from DirectSens GmbH, while modest in scale, it enhances
Kerry's position and capability in providing the complete solution
as regards lactose-free dairy products.
Americas Region
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Volumes +3.5% (Q3: +3.7%)
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Growth led by Snacks, Bakery and
Beverage EUMs
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Retail achieved good growth with continued strong
growth in Foodservice
Volume growth in the Americas was broad-based
across the region, channels and end markets.
Within North America, Snacks achieved excellent
growth with new business wins incorporating Kerry's leading range
of savoury taste profiles and Tastesense® salt reduction
technologies. Growth in Bakery was supported by performance in
preservation and taste systems. Beverage achieved good growth with
new innovations including Kerry's coffee extracts, proactive health
and Tastesense® sugar reduction technologies.
Foodservice delivered strong volume growth
through the period, supported by innovations across both
established and emerging chains, with good growth in the retail
channel across customer and retailer brands.
Within LATAM, growth was led by Mexico,
particularly in Snacks and Beverage.
Europe Region
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Volumes -0.5% (Q3: +0.7%) - turning positive in Q3
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Beverage and Bakery EUMs achieved good growth
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Foodservice performed well, with retail volumes
improving through the period
Volumes within Europe reflected market
conditions, particularly given market consumption in the retail
channel post the recent inflation in the region.
Beverage achieved good growth with a number of
new innovations in refreshing beverages incorporating Kerry's
botanical extracts and Tastesense® sugar reduction
technologies. Performance in Dairy and Snacks reflected strong
prior year comparatives, while Bakery performed well with solutions
incorporating Kerry's food protection, preservation, and texture
systems.
Foodservice continued to deliver good growth
through seasonal and limited time offer extensions, combined with
new beverage and meat innovations across a number of
customers.
APMEA Region
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Volumes +5.4% (Q3: +5.1%)
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Snacks, Beverage, and Meat EUMs delivered good
growth
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Foodservice achieved strong growth with good growth in
retail
Volume growth in the APMEA region reflected
strong growth in the Middle East and Africa, while volumes in China
were similar to the prior year.
Snacks delivered very strong growth across
leading global and regional brands, with increased demand and
continued innovation incorporating Kerry's authentic local savoury
taste profiles. Beverage performed well through refreshing beverage
innovations, while good growth was achieved in Meat through taste
and preservation systems.
Foodservice achieved strong volume growth with
leading regional coffee chains and quick service restaurants in
particular, while growth in the retail channel was supported by
strong demand for Kerry's range of local authentic taste solutions
with regional leaders.
Dairy Ireland
Good EBITDA Performance led by Dairy Consumer
Products
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Volume growth of 0.4% with Q3
+5.7%
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Pricing -3.1% with Q3 +5.1% given year-on-year movement in
input costs
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EBITDA margin expansion of 120bps YTD
The segment achieved a good EBITDA performance
in the period. This was driven by Dairy Consumer Products' growth
and mix development as well as recovery in Dairy Ingredients. Dairy
Consumer Products performance was led by good volume growth across
Kerry's snacking and branded cheese ranges. Dairy Ingredients
volumes reflected soft overall supply conditions, which improved
through the period.
Financial Review and Share Buyback
Programme
At the end of September, Group net debt was €1.9
billion reflecting cash generation, capital investment and the
share buyback programme.
As announced at Kerry's recent investor day and
aligned to the Group's Capital Allocation Framework, the Group
intends to initiate a further share buyback programme of up to €300
million of Kerry Group plc ordinary shares post the completion of
the existing programme. A formal announcement will be made prior to
its launch.
The Group's consolidated balance sheet remains
strong, which will facilitate the continued strategic development
and growth of the business.
Future Prospects
Kerry has a good innovation pipeline and remains
well positioned for good volume growth and strong margin expansion,
while recognising overall market dynamics remain relatively
unchanged.
The Group will continue to develop its business
and portfolio aligned to its strategic priorities.
The Group reiterates its full year constant
currency adjusted earnings per share growth guidance of 7% to
10%.
Note: Foreign currency translation expected to
be a headwind of ~1% on earnings per share in the full
year.
Guidance based on average number of shares in
issue of ~173m.
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.