Kerry reports 3.7 percent business volumes growth in Q1, boosted by strong performing acquisitions

03 May 2018

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03 May 2018 --- Global taste & nutrition and consumer foods group, Kerry, has grown its business volumes by 3.7 percent in the first quarter and reaffirmed its full-year 2018 guidance of adjusted earnings per share growth of 6 to 10 percent. Reporting the first quarter results up to March 31, 2018, the Ireland-based dairy group says Taste & Nutrition is up 4.3 percent while Consumer Foods increased by 1.6 percent

The company, which is holding its annual general meeting today (May 3), reports a contribution from acquisitions at 4 percent.

“We are pleased with the start we have made to 2018, which is in line with our expectations as communicated in February,” says Edmond Scanlon, CEO.

“The group continued to deliver healthy volume growth and underlying margin expansion. The acquisitions completed over the past year are performing well and integration is progressing to plan.”

“Our industry-leading business model and ‘from-food for-food’ heritage are ever more relevant in today’s marketplace and continue to underpin a strong innovation pipeline. In summary, we are encouraged by the start of the year and reaffirm our full year 2018 guidance of adjusted earnings per share growth of 6 percent to 10 percent in constant currency.”

Markets & group performance
The rate of consumer-driven change and its impact on the industry and along the supply chain continues at pace. Key consumer trends that continued to evolve and develop included authentic world tastes, new snacking formats, sugar reduction, meat-free and clean label.

Kerry’s longstanding integrated solutions capability is helping customers as they continue to innovate to meet these fragmented consumer preferences.

Group-wide business volumes grew by 3.7 percent and pricing increased by 0.9 percent in the quarter. Reported revenues increased by 0.1 percent reflecting the business volume growth and positive pricing, an adverse transaction currency impact of 0.1 percent, contribution from acquisitions of 4.0 percent, and an adverse translation currency impact of 8.4 percent.

Group trading profit margin was maintained, reflecting a 20 basis points improvement in Taste & Nutrition, with underlying margin improvement in Consumer Foods being offset by the sterling transaction impact, resulting in a 60 basis points margin reduction in the division.

Taste & Nutrition
There was a volume growth of 4.3 percent driven by Meat, Beverage & Snacks End-Use Markets (EUMs). Pricing was up 0.9 percent – easing raw material inflation managed through customer partnership pricing model.

Trading profit margin +20bps – underlying growth encompassing operating leverage, enhanced product mix, efficiencies and investments. The division achieved good growth across global, regional and local customer groupings. Growth in developed markets was solid at 2.6 percent, while developing markets delivered strong growth of 9.5 percent, with developing APMEA being the main driver. Foodservice delivered good performance in the quarter, growing at 6.1 percent.

Consumer demands for good-food-fast and new world tastes continues to drive the development of innovative nutritional product solutions, providing opportunities for customers to extend their menu offerings, the company claims.

Kerry’s Taste technologies recorded a strong performance in the period, with TasteSense sugar-reduction technology and natural extracts being key drivers of growth.

These technologies, in conjunction with Kerry’s broader clean label technology portfolio, helped customers in meeting consumer demands for reduced sugar, natural ingredients and authentic taste.

Americas Region

Good performance in North America, driven by Meat, Snacks & Beverage EUMs.
Brazil performed well, while Mexico delivered a solid performance with a 2.9 percent volume growth.
In North America, Kerry’s Meat EUM enjoyed a strong quarter, as consumer demand for clean label and a wider range of alternative protein-based products continued to grow.

The Snacks EUM continues to deliver good growth with innovative flavors, healthier snacking and packaging formats all driving high churn in the category.

Kerry’s natural extract capabilities were also a key driver of growth in the Beverage EUM. The ready-to-eat cereal category remains challenged, but Kerry continues to outperform the sector through better-for-you, high protein and clean label offerings.

The recent acquisitions of the Kettle business from Tyson Foods and Dottley Spice further strengthened Kerry’s positioning and contributed to strong performance in the foodservice channel in the quarter.

In LATAM, Brazil performed well with foodservice chains contributing strongly, while performance in Mexico was impacted by the timing of customer orders in the quarter.

Within Pharma, good growth was recorded, with excipients in North America delivering strong growth. Kerry’s Ganeden probiotics & Wellmune branded immunity enhancing ingredients continued to broaden their market reach into wider applications.

Europe region
Kerry reported a good performance in Beverage, Dairy & Meat EUMs with a 3.1 percent volume growth in the Europe region.

Foodservice delivered strong growth through both chains and independent operators and the region delivered a good performance in the quarter, with the Beverage EUM a major contributor through integrated taste and nutrition solutions in both the retail and foodservice channels.

Kerry’s Island Oasis beverage brand showed strong growth, particularly in Southern Europe. The Dairy EUM performed well, as consumer demand for luxury indulgence led to new premium launches in the ice cream sector. The Meat EUM continued to provide good growth opportunities, as Kerry’s clean label and coating technologies performed well, aided in part by the recent acquisition of Hasenosa in Spain.

The Galicia-based company is a producer of added value coatings with a specialty in extruded and gluten-free breadcrumbs and coatings systems.

Kerry’s smoke & meat-free technologies were successfully deployed in some new launches in the UK and Northern Europe. An agreement was also reached in the period to acquire a majority shareholding in Netherlands based Ojah – a market leading plant-based protein manufacturer in Europe, producing textured meat alternatives.

Kerry Taste and Nutrition will become the majority shareholder of the company, next to Ojah management and Korys, the investment holding of the Belgian Colruyt family. Going forward, Korys and Kerry will co-control the joint venture. This new partnership will focus on strengthening relations with current customers, establishing international opportunities and developing new plant-based products.

Dr. Albert McQuaid, Chief Technology Officer, Kerry told FoodingredientsFirst: “We have already been investing and expanding into the whole area of plant protein for some time and its growing quite rapidly. If you look at the space that Ojah is in, plant protein is driven around the whole concern around sustainability, the move to flexitarianism, vegan lifestyles and the overall reduction in consumption of meat mainly by nutritional and sustainability concerns. We see that sector continuing to grow, and when we saw the Ojah product we were very impressed by the quality and the technology that they have the texture of the protein that they can make in the alternative meatspace. We had an ongoing discussion last year and we saw a potential of synergies between them we saw them as having core technology capabilities around the whole area of protein and texture but we could add that, so it’s that link by which we are building on through the joint venture.”

APMEA Region
Kerry’s newly defined APMEA region, which now includes the Middle East and Africa, delivered strong growth and business development in the quarter. This was led by the Bakery EUM, with strong growth across both savory and sweet applications.

The recent acquisitions of Tianning Flavours, Taste Master & Hangman, have further strengthened Kerry’s authentic local taste capabilities. These contributed to a strong performance in the Meals EUM with the successful launch of both main menu items, as well as limited-time-offers with some foodservice partners in Greater China.

The Snacks EUM delivered good opportunities for growth due to the continued development of new snacking occasions across the region. These new occasions are driving considerable change, as local category leaders continue to innovate in bringing developed market concepts tailored to local taste preferences, the company writes.

Consumer Foods
According to Kerry, “Everyday Fresh” enjoyed a good quarter, as Richmond benefited from the 2017 relaunch in the UK and the Fire & Smoke range also continued to perform well. The traditional spreads category continued to be challenged. However, Dairygold had a solid performance in Ireland, as did the division’s softer butter technology through private label brands within the UK.

“Convenience Meal Solutions” were impacted by reduced promotional activity in the quarter. “Food to Go” had a strong performance across both the Cheestrings and Fridge Raiders ranges, as they consolidated leadership positions in their target markets. Rollover also continued to grow strongly with some new listings. Overall divisional volumes in the quarter were impacted by extremely cold weather spells in March. The Brexit mitigation program made further progress in the quarter and is on track to deliver on its objectives.

Meanwhile, it was announced that Michael Dowling has retired from the Board following the AGM and will be succeeded as Chairman by Philip Toomey who joined the Board in February 2012 and was appointed as Senior Independent Director to the Board. He was appointed Chairman of the Audit Committee in February 2013. Toomey will step down from the Audit Committee and as Senior Independent Director on taking up the position as Chairman of the Board of Directors.

By Gaynor Selby