Preliminary
Statement
of Results
18 February 2020
Disclaimer: Forward Looking Statements
This presentation/announcement may contain forward looking statements with projections regarding, among other things, the Group's strategy, revenues, earnings, trading profit, trading margin, finance costs, tax rate, capital expenditure, dividends, cash flow, net debt or other financial measures, the impact of foreign exchange fluctuations, the impact of raw material fluctuations and other competitive pressures. These and other forward looking statements reflect management expectations based on currently available data.
However, actual results will be influenced by, among other things, macro-economic conditions, food industry supply and demand issues, foreign exchange fluctuations, raw material and commodity fluctuations, the successful acquisition and integration of new businesses, the successful execution of business transformation programmes and other, as of today, unknown factors. Therefore actual results may differ materially from these projections.
These forward looking statements speak only as of the date they were made and the Group undertakes no obligation to publicly update any forward looking statement, whether as a result of new information, future events or otherwise.
Preliminary Statement of Results 2019
1 Review of
Business
2 FinancialReview
3 | Outlook & Future |
Prospects |
Edmond Scanlon, Chief Executive Officer | Marguerite Larkin, Chief Financial Officer |
Key Highlights - Continued Delivery and Strategic Development
Growth | Integrated Solutions | Developing Markets |
Driven by Taste & Nutrition | Kerry's leading integrated | Continued strong growth, |
volume growth and | solutions capability driving | technology deployment |
strategic acquisitions | performance and innovation | and strategic expansion |
Revenue | |
+10% | €7.2bn |
€6.6bn | |
2018 | 2019 |
Vol | ||
Trading Profit | Developing Markets | +10% |
€1.6bn
+12% | €903m |
€806m | |
2018 | 2019 |
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
© Kerry | 4 |
Business Review - Taste & Nutrition
2019 | Growth | |
Revenue | €6,018m | +4.0%1 |
Trading margin | 15.3% | +20bps |
Continued volume growth ahead of our markets:
- Nutrition and wellbeing a key driver of growth
- Winning across a diverse customer base
- Developing markets +10.0%
- Foodservice +5.5%
Pricing +0.1% - reflecting broadly neutral raw material costs
Margin progression primarily driven by enhanced product mix and operating leverage
© Kerry | 5 | | ¹ Volume growth |
Taste & Nutrition - End Use Market Overview
Food EUMs overall delivered good growth - led by Meat and Snacks
- Meat - excellent performance driven by clean label, natural preservation and plant-based innovations
- Snacks - very strong growth through healthier snacking
- Dairy - good performance within ice cream through healthy indulgence innovations
- Bakery & Confectionery - a number of successful LTOs in Europe
- Meals - significant churn across the category
- Cereal & Sweet - overall remained challenged
Beverage EUMs performed well - particularly in Europe & APMEA, led by health & wellness innovations across category
Pharma EUMs achieved good growth driven by excipients
+3%
+9%+1%
0%
+9% Taste & Nutrition
End Use Market
Analysis1-3%
+6% | |
+5% | |
Food EUMs | Meat |
Beverage EUMs | Snacks |
Pharma EUMs | Dairy |
Bakery & Confectionery | |
Meals | |
Cereal, Sweet & Other |
© Kerry | 6 | | ¹ Volume growth by End Use Market |
Taste & Nutrition - Business Growth by Region
Volume Growth | Americas |
by Region | €3.2bn |
10.3% |
EuropeAPMEA
€1.5bn€1.3bn
• North America - good growth | |||
versus softer market volumes, | |||
with Meat and Snacks EUMs | |||
2.7% | 2.0% | performing strongly | |
• LATAM - good growth in | |||
Americas | Europe | APMEA | Mexico and Brazil, with |
Kerry | Market | Central America solid | |
• Strategic acquisitions further
Developed Developing enhancing our technology
72%28%capabilities
- Performed well, led by good growth in Beverage, Meat and Snacks EUMs
- Eastern Europe & Russia delivered strong growth and business development
- Foodservice - strong growth with Beverage menu innovations
- Strong growth across all Food and Beverage EUMs
- Southwest Asia and MENAT delivered excellent growth
- Strategic investments in capacity expansion and additional processing capability in China, India and the Middle East
© Kerry 2020| 7 | | 7 | | Note: Kerry third party reported revenue | Kerry market estimates based on published data and company disclosures |
Business Review - Consumer Foods
2019 | Growth | |
Revenue | €1,307m | -2.2% / +0.9%1 |
Trading margin | 7.6% | +10bps |
- Solid underlying performance against a backdrop of softer markets
- Overall volume performance impacted by ready meals contract exit
- Pricing of -0.5% reflective of lower input costs and market pricing
- Trading margin improvement - Realignment programme completed and delivered to plan
- Successful launch of meat-free ranges
Everyday Fresh
- Richmond - good growth in chilled, while frozen challenged
- Spreadable butter - solid overall performance
Convenience Meal Solutions
- New business offset by contract exit and reduced promotional activity
- Frozen - solid performance across the range
Food to Go
- Dairy snacking - Cheestrings grew strongly, supported by new listings
- Meat snacking - Fridge Raiders snacking range continued to reach into broader consumer markets
© Kerry | 8 | | Note: ¹ volume growth excluding contract exit |
Acquisitions Completed - Aligned to Strategic Priorities
Strategic | Acquisitions Completed |
Priorities | |
Taste
Nutrition
Developing
Markets
Foodservice
Total Consideration of €562m
Strategic Value
Creation
Improved Taste
Enhanced Nutrition
New Functionality
New Applications
New Geographies
New Channels
New Solutions
© Kerry | 9 | | Note: Completed 11 acquisitions in 2019 (inclusive of four other acquisitions completed in the year not highlighted above) |
FY 2019 Financial Review
€7.2bn | €903m | 393.7c | ||
Revenue | Trading | Adjusted | ||
Profit | EPS | |||
Marguerite Larkin, Chief Financial Officer
FY 2019 Financial Highlights
Revenue | €7.2bn | +2.8% volume growth |
+9.6% reported growth | ||
Trading profit | €903m | +9.5% constant currency |
+12.1% reported growth | ||
Trading margin | 12.5% | +30bps margin expansion |
Adjusted EPS | 393.7c | +8.3% constant currency |
+11.4% reported growth | ||
Basic EPS | 320.4c | +4.7% reported growth |
ROACE | 11.8% | FY 2018: 12.0% |
Free cash flow | €515m | 74% cash conversion1 |
© Kerry | 11 | | 1 expressed as a percentage of adjusted earnings after tax |
Group Revenue Growth Analysis
2018 | 2019 |
€6,608m€7,241m
9.6%
Volume | ||||
Translation | 2.8% | Acquisitions | ||
currency | / disposals | |||
2.1% | 4.7% |
© Kerry | 12 | | Note: Group net pricing was flat in the year |
Group Revenue Breakdown
Group Revenue 2019
+2.8%
Taste & Nutrition Volume Growth
€7bn
+4.0%
€6bn
4.4%
3.8% 3.8% 4.0%
-2.2%1
€1bn
Group | Consumer | Taste & |
Foods | Nutrition |
Kerry Reported Revenue
Q1 | Q2 | Q3 | Q4 |
Kerry Volume Growth | Market Volume Growth |
© Kerry | 13 | | ¹ Excluding the impact of the ready meals contract exit, Consumer Foods volumes would have increased by +0.9% | Kerry market volumes estimates based on published data and company disclosures |
Group Trading Margin Breakdown
Kerryexcel
€903m
€806m
FY 2018 | Portfolio Mix / | Net Price | Kerryexcel | Kerryexcel | Currency | Acquisitions | Other¹ | FY 2019 |
Operating Leverage | Efficiencies | Investments |
Trading | 12.2% | 0.4% | 0.0% | 0.3% | (0.4%) | 0.0% | 0.1% | (0.1%) | 12.5% |
Margin | |||||||||
© Kerry | 14 | | ¹ Other comprises Brexit risk management costs incurred (-11bps) and impact from IFRS 16 'Leases' (+5bps) |
Free Cash Flow
2019 | 2018 | |
€m | €m | |
Trading profit | 903 | 806 |
Depreciation (net) | 191 | 134 |
Movement in average working capital | (89) | (57) |
Pension contributions paid less pension expense | (27) | (40) |
Cash inflow from operations | 978 | 843 |
Finance costs (net) | (81) | (65) |
Taxation | (67) | (46) |
Capital expenditure (net) | (315) | (285) |
Free cash flow | 515 | 447 |
Cash conversion1 | 74% | 72% |
© Kerry | 15 | | ¹ Expressed as a percentage of adjusted earnings after tax |
Strong Credit Metrics with Long Maturity Profile
Extended Maturity Profile of Net Debt
Undrawn
€1.1bn
RCF
2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2029 | ||||||||||||||
Net Debt of €1.9bn | |||||||||||||||||||||
On demand | Up to 1 year | < 2 years | 2 to 5 years | > 5 years | |||||||||||||||||
(€550m) | €140m | €1m | €733m | €1,539m | |||||||||||||||||
Strong Credit Metrics | 2019 | 2018 | |||||||||||||||||||
Net debt: EBITDA* | 1.8x | 1.7x | |||||||||||||||||||
EBITDA: Net interest * | 13.2x | 14.7x |
© Kerry | 16 | | * Calculated on a pro-forma basis |
Other Matters
Finance costs (net) | Increase of €15m primarily due to acquisitions and the transition to IFRS 16 |
Pension | Net deficit of €9m - decrease of €35m due to strong return on assets offset by movements in |
discount rates | |
Non-trading items | Net charge of €92m - due to M&A integration & transaction-related costs and Foods realignment |
Kerryconnect | North America deployment commenced and progressing well |
Dividends | Final dividend of 55.1 cent proposed - an increase of 12.0% |
Raw materials | Overall flat in 2019 |
Currency | 2019 EPS translation impact: +3.1% |
2020 EPS translation outlook: c. +2-3% | |
© Kerry | 17 |
Outlook & Future Prospects
Edmond Scanlon, Chief Executive Officer
Accelerating Consumer Change is Reshaping Our Industry
Traditional Models Being Redefined
Consumer Revolution | Driving Customer Transformation | Reshaping Industry | |
Food for Life & Wellbeing | Managing Accelerating Fragmentation | Organisational Agility Critical |
New Taste Experiences | Elevated Nutrition that Tastes Great | Integrated Innovation Processes |
Trust is Core | Being Trusted | Supply Chains Being Redefined |
'Made-for-me' | Digital Transformation | Manufacturing Needs Evolving |
Sustainability Driving Change Across the End-to-End Supply Chain
© Kerry | 19 |
Our Sustainability Strategy - Innovation Enabling Sustainable Nutrition
Innovation Vision | 2030 Commitments | Impact We | |||
Will Deliver | |||||
Sustainable Solutions | Sustainable Agriculture | Better for People | |||
Co-creating solutions with | 100% of key raw materials | Enabling more sustainable | |||
customers that address the | are sustainably sourced | nutrition for millions of | |||
industry's biggest challenges | + Climate Action | = | consumers | ||
Investing for the Future | Better for Communities | ||||
Leading investment in | Net Zero Emissions by | Partnering for a food system | |||
RD&A to shape a | 2050 with absolute | that works for everyone | |||
sustainable food future | reduction of 1/3 by 2030 | ||||
Sustainable by Design | Circularity | Better for the Planet | |||
Our innovation programme | 100% waste recovered and | Protecting the planet and | |||
will be deliberately focused | 50% reduction in food waste | vital ecosystems on which | |||
on delivering sustainable | we depend | ||||
nutrition |
© Kerry | 20 |
The Nutrition & Wellness Partner … right across the beverage market
Categories being redefined and reinvented
Examples
Oat Frappe for Foodservice
Functional Oats | Ebi-Frappe |
TasteSenseTM | ProDiem |
Fermented Probiotic Kombucha Tea
Natural Flavour | Tea Vinegar |
GanedenBC30 | TasteSenseTM |
Zero Alcohol Whiskey
Natural Flavour | Wine Spirit Extract |
Whiskey Absolute | Red Arrow Smoke Sugar |
Natural Extracts |
Sensory | Customer & |
Consumer Insights | |
Authentic
Recipes &
Formulas
Analytical
Testing
Regulatory
& Quality
Processing Application
Technology Expertise
Nutrition & Wellness now spans across all beverage categories
© Kerry | 21 |
Outlook 2020
- Continued Delivery and Strategic Development
- Taste & Nutrition: Strong innovation pipeline and good growth prospects, as we continue to further deploy our customer-centric business model
- Consumer Foods: Continue to selectively focus on growth opportunities
- Invest for growth aligned to changing market landscape opportunities
- Pursue M&A opportunities aligned to our strategic growth priorities
In 2020, we expect to deliver adjusted EPS growth
of 5% to 9% on a constant currency basis
© Kerry | 22 | | Note: Full year guidance reflects estimated impact of coronavirus in Q1 2020 |
Additional Information
Revenue Growth Components FY 2019
Transaction | Translation | Acquisitions/ | ||||
Volume | Price | Currency | Currency | Disposals | Total | |
Taste & Nutrition | 4.0% | 0.1% | 0.0% | 2.6% | 5.8% | 12.5% |
Consumer Foods | (2.2%) | (0.5%) | 0.0% | 0.3% | 0.0% | (2.4%) |
Group | 2.8% | 0.0% | 0.0% | 2.1% | 4.7% | 9.6% |
© Kerry | 24 |
Trading Margin by Business
2019 | 2018 | |||||
2019 | Trading | 2018 | Trading | |||
Revenue | Profit | Revenue | Profit | |||
€m | €m | % | €m | €m | % | |
Taste & Nutrition | 6,017.6 | 918.5 | 15.3% | 5,350.6 | 805.3 | 15.1% |
Consumer Foods | 1,306.6 | 98.9 | 7.6% | 1,339.0 | 100.1 | 7.5% |
Eliminations/unallocated | (82.9) | (114.7) | (82.0) | (99.8) | ||
Group | 7,241.3 | 902.7 | 12.5% | 6,607.6 | 805.6 | 12.2% |
© Kerry | 25 |
EPS Reconciliation
2019 | 2018 | |
€ cent | € cent | |
Basic EPS | 320.4 | 305.9 |
Brand related intangible asset amortisation | 21.4 | 16.3 |
Non-trading items (net of related tax) | 51.9 | 31.2 |
Adjusted EPS | 393.7 | 353.4 |
Retranslating PY adjusted EPS at current year average fx rates | 10.1 | |
Adjusted EPS in constant currency | 393.7 | 363.5 |
© Kerry | 26 |
Net Debt as at 31 December 2019
@ Floating | @ Fixed | ||
Debt | Rates | Rates | |
€m | €m | €m | |
Euro | 1,793 | 245 | 1,548 |
Sterling | - | - | - |
US dollar | 620 | 397 | 223 |
Other | 5 | 5 | - |
Gross debt | 2,418 | 647 | 1,771 |
Cash | (555) | (555) | - |
Net debt | 1,863 | 92 | 1,771 |
Gross debt | 2019 | 27% | 73% |
Gross debt | 2018 | 50% | 50% |
Weighted average maturity of debt: 5.9 years
© Kerry | 27 |
Exchange Rate Movements
Average Exchange Rates - 2019 v 2018
5% | 5% |
3%
2%
1%1%
AUD | BRL | CNY | GBP | MXN | MYR | RUB | USD | ZAR |
(2%) | (2%) |
(2%)
© Kerry | 28 |
Strong Growth While Maintaining Return on Average Capital Employed
500 | |||||||||
14% | |||||||||
450 | |||||||||
12% | 12% | ||||||||
400 | |||||||||
393.7 | |||||||||
10% | |||||||||
353.4 | 350 | ||||||||
341.2 | |||||||||
8% | 323.4 | 300 | |||||||
301.9 | |||||||||
6% | 278.9 | ||||||||
250 | |||||||||
257.9 | |||||||||
234.0 | |||||||||
4% | 213.4 | 200 | |||||||
192.1 | |||||||||
2% | 150 | ||||||||
0% | 100 | ||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
Adjusted EPS | ROACE |
© Kerry | 29 | | Adjusted EPS, ROACE and Cash Conversion as defined in the Annual Report |
Leader in R&D | No. 1 in Developing Markets
Largest R&D Spend Taste & Nutrition
€m
Developing Market Sales Taste & Nutrition
€m
283
261
180 175
108 105 97 97
79 76
35 23 13
Kerry Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 T&N
1,647
1,385
1,180
1,033
821
732 654
392
303 298 264 190 155
Kerry Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 T&N
© Kerry | 30 | | Kerry estimates based on most recent accounts published & available information |
Share Register
Institutional Analysis
Institutions 60% | Kerry Co-operative 13% | North America 20% | |
UK 15%
Continental Europe | Rest of World 23%
Ireland 2%
Retail 27%
© Kerry | 31 | | Shares in issue at 31 December 2019: 176,514,942 |
Preliminary
Statement
of Results
18 February 2020
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Kerry Group plc published this content on 18 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 February 2020 11:09:12 UTC