Kerry announces 3.5% growth for first 9 months

Kerry Group has announced a 3.5% growth in business volumes for the first nine months of 2018.

Issuing its interim management statement up to September 30, the firm revealed that its Taste & Nutrition division saw growth for 4.1%, while its Consumer Foods department recorded a business volume boost of 1.2%.

Pricing fell marginally by 0.2%, though group trading margin has been maintained, leading to the reaffirmation of the earnings guidance for 2018 in total.

At the end of September, net debt was €1.4 billion, similar to the year end 2017 level.

The group’s consolidated balance sheet “remains strong which will facilitate the continued organic and acquisitive growth of group businesses”, according to Kerry in its report.

The group reaffirms its full year 2018 guidance of adjusted earnings per share growth of 7% to 10% on a constant currency basis.

CEO of Kerry Edmond Scanlon said: “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. 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.”

Groupwide business volumes grew by 3.5% and pricing decreased by 0.2%, reflecting lower raw material prices on average across the period.

Reported revenues increased by 2.2%, encompassing: the business volume growth and pricing; an adverse transaction currency impact of 0.1%; contribution from acquisitions of 3.9%; and an adverse translation currency impact of 4.9%.

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.

Taste & Nutrition

The Taste & Nutrition division achieved “good” growth across global, regional and local customer groupings. Growth in developed markets was solid, whilst developing markets delivered strong broad-based growth of 9.7%.

Foodservice delivered good performance in the period, the company says, growing at 5.8%.

Kerry’s Taste technologies continued to record strong performance, with TasteSense sugar-reduction technology and natural extracts being highlighted as key drivers of growth.

In North America, Kerry Group acquired Flavor Source, based in Arkansas.

Consumer Foods

Whilst the UK consumer landscape had been resilient in the first half of 2018, demand softened in a number of categories in the third quarter.

‘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 reported.

Strategic Acquisitions

On October 25, at Kerry’s Investor Day in Singapore, it was announced that agreement was reached to acquire Fleischmann’s Vinegar Company Inc and AATCO Food Industries LLC.

These acquisitions “further expand the Group’s foundational technology portfolio, as well as strengthen its foodservice and developing markets positioning, in line with its strategic growth priorities”, according to the company.

Total consideration for the acquisitions is expected to be €365 million. These acquisitions have annualised revenues of approximately €150 million.

Fleischmann’s is a USDA-certified all-natural producer of specialty ingredients; headquartered in California, it has manufacturing facilities in Washington, New York, Maryland, Illinois, Missouri, Alabama and California.

Meanwhile, AATCO Food Industries LLC is a provider of culinary sauces to the foodservice channel.

Headquartered in Muscat, Oman, with manufacturing facilities in Saudi Arabia and India, AATCO Food Industries provides a platform for business development in the Middle East and Africa, according to Kerry.

The group has said it will finance these acquisitions from existing lines of credit and it is anticipated that the transactions will be completed prior to year-end, subject to routine regulatory and closing conditions.

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