Kerry Group Reports Strong First Half

Progress in ingredients & flavours markets was driven by successful product development initiatives, assisted by the business performance of the Group’s leading global customers – reversing destocking trends of 2009.

Aug 31 2010 --- The Kerry Group has reported that sales revenue increased by 2.7% on a like-for-like basis (LFL) to €2.4 billion. Allowing for changes to product mix, lower pricing and trading currency movement, continuing business volumes were 5.8% ahead on a Group-wide basis. Ingredients & flavours continuing business volumes increased by 6.5% and consumer foods delivered a 4% increase in continuing business volumes.

Trading profit increased by 12.9% to €204m, reflecting a 7.4% (LFL) increase and a 40 basis points improvement in the Group trading profit margin to 8.4%. Ingredients & flavours achieved a 50 basis points improvement in trading margin to 9.2% and margins in consumer foods advanced by 40 basis points to 7.1%. Profit before tax increased to €162m from the 2009 first half level of €115m. Adjusted profit after tax before intangible asset amortisation and non-trading items increased by 19.5% to €141m. Adjusted earnings per share increased by 19.3% to 80.2 cent. Basic earnings per share increased by 41.3% from 53.5 cent to 75.6 cent. The interim dividend of 8.8 cent per share represents an increase of 14.3% over the 2009 interim dividend.

Kerry said that results for the period were very encouraging with a solid overall business performance relative to the same period of 2009, allowing for the relatively weaker market conditions early in 2009. Business volumes grew steadily and positive margin momentum was maintained through ongoing business efficiency projects and the benefits of restructuring actions/business alignment undertaken in connection with the Group’s ‘go-to-market’ programmes over the past two years.

Progress in ingredients & flavours markets was driven by successful product development initiatives, assisted by the business performance of the Group’s leading global customers reversing destocking trends of 2009. The Group continues to benefit from successful layering of our ingredients & flavours technologies bringing industry leading integrated innovative solutions speedily and cost effectively to customers throughout global food and beverage end-use-markets. Good market development was achieved in all regions and in particular the Group’s strong business development in the Asia-Pacific region is most encouraging. In the Group’s consumer foods markets, successful brand strategies and investment continued to drive business development. Kerry’s leading UK brands again performed very well. The Irish consumer foods sector remains challenging due to the prevailing market conditions. However Kerry Foods has stabilised its positioning in the Irish market through brand investment programmes targeted towards value-focused consumer requirements – without compromising on quality.

Commenting on the results Kerry Group Chief Executive Stan McCarthy said; “Kerry delivered strong profitable growth in the first half of 2010, growing continuing business volumes by 5.8% on a Groupwide basis. Adjusted earnings per share in the period increased by 19.3% to 80.2 cent. Based on our strong performance to date in 2010 we now expect to achieve mid-teen growth in adjusted earnings per share for the full year”.

Total ingredients & flavours sales revenue grew by 3.9% (LFL) to €1,788m. Continuing business volumes increased by 6.5% (allowing for business restructuring volume loss of 0.6% and 1.9% lower pricing/mix). Business performance was strong throughout all regions and end-use-markets and is testament to the strength of Kerry’s commercial/customer alliances – facilitated by our ‘go-to-market’ strategy and the level of innovation achieved through optimising synergies across the Group’s technology platforms. Divisional trading profit grew by 9.3% (LFL) to €164m reflecting a 50 basis points improvement in trading profit margin to 9.2%.

By region the ingredients & flavours performce was as follows:

Successful product development projects for major accounts continued to drive business performance in the Americas region. Revenue increased by 3% (LFL) to €701m while continuing business volumes grew by 6.2% after restructuring volume loss of 0.6%, 2.4% lower pricing/mix and 0.2% adverse trading currency impact. Food and beverage consumer trends arising from the economic downturn in 2008/2009 were broadly unchanged, with home consumption remaining strong relative to out-of-home consumption. Leading brands continued to recover through new product development and an increased level of value/promotional activity, but store brand applications maintained market share in many categories. Fast casual restaurants and leading QSR chains (with expanded menu offerings) again grew at the expense of full-serve restaurants.

Business alignment towards Kerry Ingredients & Flavours ‘go-to-market’ end-use-market strategic development and systems approach to technology development contributed significantly to a strong business performance in EMEA markets in the first half of 2010. Revenue increased by 2.3% (LFL) to €589m reflecting 4.4% continuing business volume growth after restructuring volume loss of 1.2% and 0.9% lower pricing/mix. A new Kerry Ingredients & Flavours, EMEA Region Headquarters was established in Dublin (Ireland). To drive technology development and service customer requirements throughout EMEA markets, 3 Centres of Excellence focused on specific end-use-market applications are being established in Bristol (UK), Amsterdam (the Netherlands) and in Brussels (Belgium).

The Group again achieved excellent results in the Asia-Pacific region with revenue increased by 11.8% (LFL) to €248m. Continuing business volumes increased by 15.7% allowing for 3.9% lower pricing/mix. All regional technology platforms performed well and growth through foodservice food and beverage applications was very strong.