Kerry results boosted by Taste & Nutrition, remains cautious on Brexit outlook

19 Feb 2019 --- Kerry Group, the global taste & nutrition and consumer foods group, has reported volume growth in 2018 well ahead of the market, where the rate of change continues to accelerate. Group revenue on a reported basis increased by 3.1 percent to €6.6 billion reflecting strong volume growth and contribution from acquisitions, partially offset by adverse currency movements. Business volumes grew by 3.5 percent and pricing decreased by 0.5 percent against a backdrop of lower raw material costs in the year.

Taste & Nutrition delivered 4.1 percent volume growth and pricing decreased by 0.5 percent. Consumer Foods’ business volumes increased by 1.1 percent and pricing decreased by 0.4 percent. “The Group will continue to invest in business development and pursue M&A opportunities aligned to strategic growth priorities. In 2019, the Group expects to deliver adjusted earnings per share growth of 6 percent to 10 percent on a constant currency basis,” a statement reads.

“We are pleased with our performance in 2018, with volume growth well ahead of our markets, underlying margin expansion in line with expectations and adjusted earnings per share growth of 8.6 percent in constant currency,” says Edmond Scanlon, Kerry’s CEO. “This performance continues to highlight the uniqueness of Kerry’s business model in supporting customers, as consumers continue to look for innovation and drive further marketplace fragmentation. We have also made good progress across our strategic growth priorities, including further developing our industry leading portfolio of taste and nutrition foundational technologies, completing a number of strategic acquisitions and investments aligned to growth priorities as planned. In 2019 we expect to deliver adjusted earnings per share growth of 6 percent to 10 percent on a constant currency basis.”

When announcing preliminary results for the year ended December 31, 2018, the Group reported how the food and beverage industry and end‐to‐end supply chain are experiencing unprecedented disruption, as consumers become increasingly demanding and traditional business models are challenged. “The application of Kerry’s leading taste and nutrition technology portfolio through our leading business model continues to drive significant value for our customers as they seek to meet rapidly changing consumer demands and increase speed to market,” the statement reads.

Major global consumer trends such as authenticity, healthfulness, convenience, clean label, sustainability and premiumization, aligned with local consumer preferences continue to generate increased innovation opportunities. Taste & Nutrition achieved sustained volume growth in North America, solid growth in Latin America, a good performance in Europe and continued strong growth in APMEA. While UK and Irish consumer foods markets encountered challenges impacting consumer sentiment, with market growth rates reducing across the year, Kerry’s Consumer Foods division delivered a solid underlying performance.

During 2018, Kerry completed 10 acquisitions at a total consideration of €502.2 million and an investment in a joint venture of €15.6 million. These investments were aligned to the Group’s strategic priorities for growth, bringing additional taste and nutritional technologies, expanding its presence in developing markets and adding to its foodservice offering. The Group also announced it had reached agreement for two further strategic acquisitions for an expected total consideration of €325.0 million, subject to regulatory approval and customary closing conditions. The acquisition of Southeastern Mills’ North American coatings and seasonings business (SEM) was completed after the year end.

The Group also expects to complete the acquisition of Ariake USA Inc. – a leading producer of natural clean label savory taste solutions by the end of Q2 2019. Ariake USA is a leading savory taste manufacturer specializing in stock bases. Based in Harrisonburg, VA, Ariake USA is a leader in natural seasonings derived from livestock with ingredients from chicken, pork and beef, offering a clean-label product solution.

In terms of future prospects, Kerry is confident on its innovation pipeline and has a mitigation plan in place should a “no deal scenario” emerge on Brexit, with the Irish headquartered group highly susceptible.

“Kerry’s Taste & Nutrition has a strong innovation pipeline with good growth prospects, particularly in developing markets where the business footprint expansion and successful roll out of the consumer led in‐country approach continues. Within Consumer Foods we will continue to build on the strategy of realigning the core and investing in adjacencies, while navigating the current uncertain environment,” the statement continues.

During 2018 the Group incurred a non‐trading charge of €55.1 million (2017: income of €10.2 million) net of tax. The charge in the year related to costs associated with the integration of recent acquisitions and the completion of the Brexit Currency Mitigation Program, where good progress was made in reducing the Group’s sterling transaction exposure. The prior year non‐trading income arose primarily due to the one‐off deferred tax credit arising from the US tax reform changes.

On Brexit, the statement reads: “While there continues to be uncertainty with respect to the outcome of the UK’s exit from the European Union, Kerry currently anticipates that a managed transition will be the most likely outcome of the negotiations. The Group has mitigation plans in place to limit the potential short term implications of a ‘no‐deal’ scenario. Kerry remains cautious on the UK consumer landscape, but is confident it will continue to outperform the market.”

Click to EnlargeFrom January 1, 2019, Kerry began allocating further resources behind foodservice to leverage the deep knowledge and experience that the company already has in this space in multiple markets. Kerry’s Taste & Nutrition division achieved good growth across an increasingly diverse customer base. Developing markets delivered strong volume growth of 9.5 percent, with APMEA the main driver. Foodservice delivered a good performance of 5.8 percent volume growth, particularly considering the strong comparatives in 2017. Trading profit grew by 5.0 percent to €805 million, reflecting a 20 basis points improvement in trading margin to 15.1 percent.

Kerry’s taste technologies recorded a strong performance across all regions, with TasteSense technology and natural extracts being key drivers of growth, as consumer demands for reduced sugar and authentic taste were met through innovations across all categories. Kerry’s leading clean label technologies continued to perform well, with its broad protein portfolio, nutritional bioactives, enzyme technologies, food protection and natural preservation solutions all delivering good growth in the year. An increasing number of innovations brought to market combined technologies from both Kerry’s authentic taste and nutrition portfolios, as Kerry’s Technology & Innovation Centres supported customers from ideation all the way through to launch.

In a recent interview with The World of Food Ingredients, Martin Stiegler, President Food & Beverage & Global Accounts, Kerry Europe & Russia, spoke about six Top Consumer Trends 2019 that the company has identified.

These are:
1. Freedom Food
2. Fulfilling Lives
3. Living Nutrition
4. Dining Redefined
5. Spark the Senses
6. Green Label

You can read the full interview on how Kerry is “tapping into green demand” here. 

Another innovative platform for growth at Kerry is foodservice. From January 1, 2019, Kerry began allocating further resources behind foodservice to leverage the deep knowledge and experience that the company already has in this space in multiple markets. You can read an interview with Karl Buiks, VP of Foodservice, Marketing & Strategic Planning, Kerry Europe & Russia here.

By Robin Wyers

To contact our editorial team please email us at editorial@cnsmedia.com