Kerry reports “solid” start of the year, boosted by Taste & Nutrition volume growth

02 May 2019 --- Kerry has reported a “solid” start to 2019 with overall business performance in line with expectations in the first quarter. The company reported a 10.3 percent increase in revenues in the first three months of the year. Business volume growth was +3.3 percent, with Taste & Nutrition growth of +3.8 percent, compared to +0.8 percent for Consumer Foods. The group has also reaffirmed its full-year 2019 guidance of adjusted earnings per share growth of 6 percent to 10 percent on a constant currency basis.

“The group continued to deliver volume growth ahead of the market while expanding trading margin,” says Edmond Scanlon, CEO. “We are pleased with our innovation pipeline and the continued enhancement of our product mix. Our business model and unique taste and nutrition positioning continue to deliver significant value for our customers in meeting rapidly evolving consumer needs. The recently announced acquisitions have also performed very well and we are pleased with the progress made on their integration.”

“The growth behind Kerry’s functional health and wellness ingredients is largely driven by consumer demand, as consumers increasingly take steps to support their health through their diet proactively,” Catherine Keogh, VP Corporate Affairs & Communications at Kerry tells FoodIngredientsFirst. “We know that innovation and product success starts with formulating products with science-backed ingredients and we see growth opportunities in working with innovative customers in this expanding health and wellness space.” 

“As outlined in our five-year strategic plan, Kerry will focus on proactive investments to strengthen and enhance our foundational technologies and routes to market, and expand our geographical presence across developed and developing markets,” she explains. 

Kerry has invested significantly in preparing a number of contingency plans, to ensure the company is well prepared to manage all Brexit eventualities, with a focus on protecting the business and maintaining continuity of supply to their customer base, Keogh notes. “We have improved capacity and capability within our trading functions, invested in new systems and expertise to manage the processing of new customs procedures and tariff charges and other requirements relating to international trade. Despite the extension of the proposed exit date, our contingency plans remain ready to be deployed, as needed.”

The statement further noted that at the end of March net debt was €1.9 billion, reflecting the acquisitions completed in the period. The group’s consolidated balance sheet remains strong which will facilitate the continued organic and acquisitive growth of group businesses, says Kerry. 

Group reported revenue increased by 10.3 percent, reflecting business volume growth of 3.3 percent, a pricing decrease of 0.2 percent due to lower raw material prices on average across the period, acquisition contribution of 4.7 percent, and a favorable translation currency impact of 2.5 percent. Group trading profit increased by 10bps, reflecting a 10bps improvement in Taste & Nutrition, an adverse 10bps in Consumer Foods and increased net investment on the KerryExcel program.

Consumer demand for “food for life and wellbeing,” “new taste experiences” and “made for me” continue to be noteworthy drivers of innovation. Kerry’s business model continues to drive significant value for customers as they seek to meet these rapidly evolving consumer demands and increase speed to markets.

Within Taste & Nutrition, volume growth of 3.8 percent was driven by Meat, Snacks and Dairy End Use Markets (EUMs). Pricing of -0.1 percent was reflective of customer partnership agreements with relatively neutral raw material costs. Trading profit margin +10bps – good underlying growth was driven mainly by enhanced product mix, operating leverage and efficiencies, offset by investments and Brexit risk-mitigation costs Kerry’s nutrition and wellbeing technology portfolio had a strong performance in the period, as demand for great-tasting products with improved nutritional attributes continues to accelerate globally. 

The company’s taste and nutrition positioning, food science expertise and deep understanding of the intersection of taste and nutrition attributes mean more customers are seeing Kerry as their key innovation partner. “This has led to good sales growth in customized solutions incorporating in particular Kerry’s fermented ingredients, broad protein portfolio, probiotics, botanicals and natural extracts,” says the company.

Developing market growth continued to be strong at 9.0 percent, with developing APMEA being the main driver. Foodservice performed well in the quarter, growing at 5.1 percent with the North American market a little softer at the beginning of the year. The group completed the acquisitions of Southeastern Mills (SEM) and Ariake USA Inc. in the period.

Furthermore, the company’s Consumer Goods division had a solid performance in the context of a subdued marketplace. “Everyday Fresh” performed in line with expectations, with growth in Meat offset by challenges within the Dairy sub-category. The Richmond brand had solid growth particularly with chicken sausages, along with the Denny brand in Ireland. The traditional spreads category continued to be challenged, however, Kerry had solid growth in spreadable butter. 

Within “Convenience Meal Solutions” the chilled meals sub-category continued to be impacted by reduced promotional activity, while the frozen meals sub-category had good performance across the range. “Food to Go” also performed well, as strong growth in Cheestrings was complemented by several new listings at the end of the quarter. Fridge Raiders also extended their snacking range to reach a broader consumer market. 

For the Americas Region, 2.6 percent volume growth was reported with a solid performance in North America, driven by Meat, Snacks and Dairy EUMs. In North America, Kerry’s Meat EUM enjoyed another strong quarter, as our industry-leading portfolio continued to support customers as they innovate to meet consumer demands for new regional flavors, cleaner labels, natural shelf-life preservation and plant-based alternatives. This performance was complemented by the acquisition of Southeastern Mills (SEM), which performed well in the period. The Snacks EUM delivered good growth through healthier snacking and new world taste experiences. The Dairy EUM benefited from the ongoing evolution of the ice cream category towards premiumization, along with lower-calorie offerings. The Foodservice channel had a soft start to the year, which impacted performance in the Beverage and Meals EUMs.

In LATAM, Brazil performed well particularly in the Dairy and Beverage EUMs, while Mexico’s performance was led by good growth in the Snacks EUM. The global Pharma EUM had a solid performance, while impacted by the timing of customer orders in the quarter. The recently acquired Fleischmann’s business (FVC) performed well and the group also completed the acquisition of Ariake USA Inc. during the last quarter.

In the Europe Region, 2.4 percent volume growth was reported with a strong performance in Beverages, with good growth in Meat and Snacks EUMs. The region delivered a good performance in the quarter, led by strong growth in the Beverage EUM, as Kerry continued to support customers as they improve their product ranges. This growth was broad-based, as Foodservice customers enhanced their beverage offerings across their menus, a number of launches incorporated Kerry’s botanicals and natural extracts capabilities, and non-alcoholic launches also featured Kerry’s brewing and taste technologies. The Meat EUM performed very well, with multi-texture coating systems delivering new sensorial taste experiences, along with further growth through “better-for-you” launches. Good business development was also achieved in plant-based meat alternatives, as Kerry’s offering was enhanced by the recent JV with Ojah. The Snacks EUM performed well, with strong demand for innovations incorporating Kerry’s Ganeden probiotic technology. Northern Europe and Russia had particularly strong growth, led by local and regional customers.

The APMEA Region reported a particularly strong 9.3 percent volume growth, with a strong performance in Meat, Beverage and Snacks EUMs. The APMEA region delivered another strong performance, with broad-based growth across the region led by China. The Meat EUM delivered growth with a range of new innovations to meet key consumer preferences for local authentic taste, value and food safety. The Beverage EUM performed very well, particularly in the Foodservice channel as customers continue to broaden their menu offerings to target new and evolving consumption occasions.