Kerry results boosted by Taste & Nutrition: Authenticity, health, convenience and clean label trends drive NPD

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07 Nov 2018 --- Kerry, the global taste and nutrition and consumer foods group, says that consumer demands for authenticity, clean label, premiumization, healthfulness, convenience, and new taste experiences continue to drive product launches and innovation across the marketplace, as it publishes financial details for the nine months ended 30 September 2018. Q3 key highlights include a 3.5 percent growth in business volumes with Taste & Nutrition up 4.1 percent and Consumer Foods up by 1.2 percent. Earnings guidance for the full-year has also been reaffirmed.

The Group says that the high level of product churn is leading to significant change along the supply chain, as traditional models are being challenged to deliver speedy innovation. Kerry says its longstanding business model and integrated solutions capability are best positioned to enable customers to navigate this changing landscape and meet these fragmented consumer preferences.

Groupwide business volumes grew by 3.5 percent and pricing decreased by 0.2 percent, reflecting lower raw material prices on average across the period. Reported revenues increased by 2.2 percent, encompassing the aforementioned business volume growth and pricing, an adverse transaction currency impact of 0.1 percent, contribution from acquisitions of 3.9 percent, and an adverse translation currency impact of 4.9 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.

These results closely follow Kerry reaching an agreement to acquire Fleischmann’s Vinegar Company Inc and AATCO Food Industries LLC, in conjunction with its Investor Day in Singapore. According to Kerry, these acquisitions further expand the Group’s foundational technology portfolio, as well as strengthening its foodservice and developing markets positioning, in line with its strategic growth priorities. 

“We are pleased with our performance to date in 2018, with volume growth well ahead of our markets and underlying margin expansion in line with expectations. In the third quarter, we have delivered good volume growth against very strong comparatives,” says Kerry CEO, Edmond Scanlon.

“We have also made good progress across our strategic growth priorities, including the recent acquisition announcements of Fleischmann’s Vinegar Company Inc. and AATCO Food Industries LLC. In summary, we are encouraged by the progress we have made in 2018 and reaffirm our full year 2018 guidance of adjusted earnings per share growth of 7% to 10% in constant currency.”

Taste & Nutrition
For Taste & Nutrition, volume growth of 4.1 percent was driven by Meat, Beverage & Snacks End Use Markets (EUMs). Pricing (0.2 percent) lower raw material costs reflected in customer partnership agreements and 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 while developing markets delivered strong broad-based growth of 9.7 percent. 

Foodservice delivered good performance in the period, growing at 5.8 percent against a backdrop of very strong comparatives, particularly in the latter half of 2017. 

Consumer demands for new world tastes and better-for-you offerings continue to drive the development of innovative nutritional product solutions, providing opportunities for customers to extend their menu offerings.

Kerry’s Taste technologies continued to record strong performance, 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 meet consumer demands for reduced sugar, natural ingredients, and authentic taste. 

Customers are increasingly turning to Kerry, as the significance of a partner with a “from-food for-food” heritage is ever more relevant in today’s marketplace.

Consumer Foods
Kerry reported volume growth of 1.2 percent for Consumer Foods, a continued market outperformance driven by good growth in “Food to Go.” Pricing was flat, reflecting neutral raw material prices on average across the period and a trading profit margin (60bps), underlying margin improvement more than offset by transaction currency.

While the UK consumer landscape had been resilient in the first half of 2018, demand softened in a number of categories in the third quarter, according to Kerry. “Everyday Fresh” enjoyed solid growth across the period with the Richmond range performing well, benefiting from the successful launch of Richmond chicken sausages. 

In the spreads category, the division’s softer butter technology delivered good growth, as traditional spreads continued to lag overall category performance. 

“Convenience Meal Solutions” remained challenged in the period, with retailers reducing promotional activity, and sales negatively impacted by the exceptionally warm weather in the second and third quarters.

“Food to Go” performed well with strong growth in Cheestrings and Fridge Raiders ranges. During the third quarter, the relaunch of the Fridge Raiders brand was completed, with positive early signs that the new broader range of snacking products is appealing to a wider consumer demographic. 

Rollover and Out-of-Home meal solutions continued to deliver good growth with a number of new listings. Kerry also says that the Brexit mitigation program is progressing in line with expectations.

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