Kerry Group issues half year results with focus on nutrition and wellbeing tech drivers

09 Aug 2019 --- Irish dairy cooperative Kerry Group has issued its financial results for the half year ended 30 June 2019. The company’s nutrition and wellbeing technology portfolio exhibited a strong performance in the period, as demand for products with nutritional attributes was noted to have accelerated across the globe. Growth was observed in customized solutions incorporating in particular Kerry’s fermented ingredients, broad protein portfolio, probiotics, fiber systems, botanicals and natural extracts. During the period, the Group completed three acquisitions at a total cost of €327.2 million (US$366.5 million) including Ariake U.S.A. and Southeastern Mills’ North American coatings and seasonings business (SEM).

Heightened consumer pricing and uncertainty impacted market volume growth rates in some developed markets, notes Edmond Scanlon, CEO of Kerry. However, developing market growth was reported at 9.1 percent, with Asia Pacific Middle East and Africa (APMEA) developing markets being the main driver. In June, the group officially inaugurated a state-of-the-art, €20 million (US$22.4 million) production facility in India, marking its fourth significant investment in the country.

The Group reported that revenue increased by 10.7 percent to €3.6 billion (US$4 billion), reflecting volume growth of 3.3 percent, neutral pricing, contribution from acquisitions of 4.7 percent, and a favorable translation currency impact of 2.7 percent. Foodservice exhibited a growth of 5.3 percent despite some softness in the company’s North American market at the beginning of the year.

Kerry’s trading margin increased by 20bps, reflecting growth driven by operating leverage, portfolio enhancement, efficiencies, impact of foreign currency and acquisitions, partially offset by Brexit risk management costs, investments for growth and increased net investment on the KerryExcel program.

On 30 June 2019, the company’s net debt was listed at €1.9 billion (US$2.1 billion). This increase of €294.7 million (US$330.2 million) relative to the December 2018 net debt of €1.7 million (US$1.8 million) reflects cash flow generated offset by investment in acquisitions and the dividends paid in the period. In June, the Group agreed a new five year €1.1 billion (US$1.2 billion) revolving credit facility which extends the maturity profile of the Group’s available credit facilities.

Americas region
Reported revenue in the region increased by 19.1 percent to €1.6 billion (US$1.79) primarily reflecting volume growth, foreign currency translation and significant contribution from acquisitions of 9.9 percent. North America volume growth was significant, while market volume growth rates softened as heightened consumer pricing impacted overall consumption in the period. Latin America reportedly exhibited good growth, particularly in Mexico, with solid performances in Brazil and Central America.

Kerry’s Meat EUM performance in the Americas region was complemented by the acquisition of Southeastern Mills (SEM) in the period, attending to consumer demands for new regional flavors, cleaner labels, natural shelf-life preservation and plant-based alternatives.

The group’s Snacks EUM delivered growth, particularly in Latin America. The Dairy EUM benefitted from the ongoing evolution of the ice cream and desserts category towards premiumization, lower-calorie and plant-based offerings. While the Beverage EUM was impacted by a softer start to the year in Foodservice, it benefitted from a number of product offerings utilizing Ganeden probiotics and Wellmune immunity-enhancing technologies. The Meals EUM was impacted by softness, particularly in the ambient and chilled categories.

The company’s global Pharma EUM exhibited growth in excipients in North America. The recently acquired Fleischmann’s (FVC) business was noted to have performed well. Kerry also completed the acquisition of Ariake U.S.A. in the period. These acquisitions were noted to further enhance Kerry's clean label technology portfolio, which the Group plans to leverage in meeting increased demands across a broader range of applications.

Europe
Reported revenue in the region increased by 2.5 percent to €718 million (US$805 million), primarily reflecting volume growth. Beverage EUM achieved “strong broad-based growth,” particularly in Foodservice, as customers enhanced their beverage offerings across their menus, with a number of “better for you” and seasonal product launches incorporating Kerry’s botanicals, natural extracts and sugar reduction technologies.

Kerry’s Meat EUM in Europe was boosted by the group’s multi-texture coating systems, which deliver “new sensorial taste experiences,” in addition to a number of successful cleaner label launches. Business development was also achieved in plant-based meat alternatives, as Kerry’s offering was enhanced by the recent JV with Ojah.

Dairy EUM was impacted by softer demand in the ice cream category during the period. International dairy markets were relatively stable in the period, reflecting less volatility in global supply and demand dynamics.

Confectionary EUM achieved good growth through a number of local novel taste LTOs across the region, while Snacks EUM saw a number of new launches with new “authentic world flavors.”

APMEA Region
Reported revenue in the region increased by 13.3 percent to €608m (US$681.2 million), primarily reflecting 9.6 percent volume growth and the contribution from business acquisitions.

The group continued to selectively deploy the Kerry business model on a country-by-country basis in the period.

Kerry’s Meat EUM in the region saw launches of innovations across both Foodservice and Retail customers to meet key consumer preferences for local authentic taste, value, food safety and home delivery.

Growth in the group’s Beverage EUM in the region was underpinned by a number of successful launches into nutritional beverages and a range of foodservice applications. The branded DaVinci range enjoyed expansion into independent distributors.

Snacks EUM in APMEA delivered strong growth, with innovation centred around the localization of Western taste profiles incorporating both sweet and savory technologies.

Kerry focused on expanding its capacity and processing capabilities in the region. The group’s strategic expansion in China was reported to have progressed well, as upgrades were made at the recently acquired SIAS facility to service the company’s Greater Beijing region, while further expansions were made at its Nantong facility. The Group also opened a new facility in Tumkur, India, which will serve the company’s expanding South West Asia market,and investments were made in expanding capacities in the Middle East region, further to the group’s acquisition of Oman-based AATCO at the end of 2018.

By Benjamin Ferrer

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