Kerry Reports Double-Digit Growth, Boosted by Ingredients

Kerry has reported that group sales on a reported basis increased by 10.3% to €5.8 billion in 2012, reflecting like-for-like (LFL) growth of 1.7% when account is taken of acquisitions net of disposals and currency translation. Continuing business volumes increased by 2.8% and pricing/mix increased by 0.1%.

26 Feb 2013 --- Volume growth and trading performance in ingredients & flavours’ markets improved sequentially as the year progressed. Allowing for 0.7% volume loss due to business restructuring programmes to optimise the division’s manufacturing footprint, continuing business volumes increased by 4%.

Continuing business volumes in Kerry Foods increased by 0.6% allowing for 2.2% rationalisation volume loss as a result of restructuring of production across a number of consumer foods’ sites. Group trading profit increased by 10.8% to €555m reflecting 5% LFL growth. Excluding development costs relating to the Group’s global IT (‘Kerryconnect’) project, the Group trading profit reflects 7.2% LFL growth. Good progress was achieved in advancing the Group’s 1 Kerry Business Transformation Programme to optimise and align manufacturing to our global technology strategies. This followed a review of the Group’s manufacturing footprint - taking account of recent acquisitions, streamlining of existing manufacturing facilities and the disposal of non-core activities.

Ingredients and flavours achieved 10 basis points margin improvement to 12%. Consumer foods margin was back 20 basis points to 7.6%. Allowing for the increased level of expenditure relating to the Kerryconnect programme and the Group’s 1 Kerry Business Transformation Programme, the Group trading profit margin increased by 10 basis points to 9.5% reflecting an underlying trading margin improvement of 60 basis points. Adjusted profit before tax, brand related intangible asset amortisation and non-trading items increased by 10.6% to €497m. The income statement charge arising from integration of acquisitions, restructuring/reorganisation costs and loss on disposal of non-current assets/businesses amounted to €136m (net of tax) resulting in a net cash outflow of €43m after tax.

Adjusted profit after tax before brand related intangible asset amortisation and non-trading items increased 11.4% to €417m. Adjusted earnings per share increased 11.3% to 237.6 cent (2011 : 213.4 cent). The Board recommends a final dividend of 25 cent per share, an increase of 11.6% on the 2011 final dividend. Together with the interim dividend of 10.8 cent per share, this brings the total dividend for the year to 35.8 cent, an increase of 11.2% on 2011. Investment in research and development increased to €186m (2011 : €167m). Net capital expenditure amounted to €156m (2011 : €162m). The Group achieved a free cash flow of €380m (2011 : €279m).

Commenting on the results Kerry Group Chief Executive Stan McCarthy said; “We are pleased to report a strong Groupwide performance in 2012 and 11.3% growth in adjusted earnings per share. Our 1 Kerry Business Transformation Programme is well underway which through exploiting the technologies and expertise of the organisation will drive our future growth. We continue to invest in our technologies, innovation and nutritional expertise, and also in expanding our footprint throughout developing markets. In 2013 we expect to achieve 7% to 11% growth in adjusted earnings per share.”

Kerry Ingredients & Flavours develops, manufactures and delivers innovative taste solutions and nutritional and functional ingredients for food, beverage and pharmaceutical markets. The Group’s Ingredients & Flavours businesses achieved a strong performance across all key technology platforms, end-use-markets and geographies – benefiting from our 1 Kerry strategic focus and the breadth and depth of Group technologies. Sales revenue grew by 14% on a reported basis to €4.2 billion reflecting 3.4% LFL growth. Continuing business volumes increased by 4% outperforming market growth rates. Rationalisation volume loss was 0.7% and pricing/mix increased by 0.1%. Trading profit grew by 15.1% to €506m with the division’s trading margin improved by 10 basis points to 12%.

Ingredients & Flavours, with a well diversified and strong market position across all end-use-markets, accounted for 71% of Group revenue and 79% of Group trading profit in 2012. Good growth was achieved through key accounts across developed and developing markets. Despite challenging market conditions in some consumer food and beverage categories, in particular in relatively mature developed market sectors, demand for new product development remained strong – driven by consumer health and wellness trends towards ‘clean label’, high fibre, ‘heart healthy’, reduced calorie, enhanced nutritional and dietary products – in addition to ongoing demand for convenient delivery systems, hand-held or snackable products, cost effective solutions and affordable indulgence. Kerry continued to invest in its technology, research, development & applications expertise and facilities to capitalise on the Group’s technology layering potential and industry leading processing capabilities. All technology clusters maintained solid growth in 2012. Revenue grew by 9.3% in Savoury & Dairy systems, 18.5% in Cereal & Sweet systems, 40.7% in Beverage systems and 11.5% in Pharma, Nutritional & Functional ingredients.