Kerry has announced business growth of 3.7% in its Interim Management Statement for the first quarter of 2018, which ended on March 31.
This statement was made in conjunction with the group’s Annual General Meeting (AGM), which is being held today.
Markets & Group Performance
The rate of consumer-driven change and its impact within the industry and along the supply chain continues at pace, Kerry reports.
Kerry’s longstanding integrated solutions capability is helping customers as they continue to innovate to meet these fragmented consumer preferences.
Group-wide business volumes grew by 3.7% and pricing increased by 0.9% in the quarter. Reported revenues increased by 0.1% reflecting business volume growth and positive pricing, an adverse transaction currency impact of 0.1%, contribution from acquisitions of 4.0%, and an adverse translation currency impact of 8.4%.
Kerry CEO Edmond Scanlon commented on the group’s review, stating: “We are pleased with the start we have made to 2018, which is in line with our expectations as communicated in February.
“The group continued to deliver healthy volume growth and underlying margin expansion. The acquisitions completed over the past year are performing well and integration is progressing to plan.
“Our industry leading business model and ‘from-food for-food’ heritage are ever more relevant in today’s marketplace and continue to underpin a strong innovation pipeline.
In summary, we are encouraged by the start to the year and reaffirm our full year 2018 guidance of adjusted earnings per share growth of 6% to 10% in constant currency.
Financial review
At the end of March, net debt remained unchanged from year end at €1.3 billion. The group’s consolidated balance sheet remains strong, “which will facilitate the continued organic and acquisitive growth of group businesses”, Kerry has said.
Business reviews – Taste & Nutrition
Taste & Nutrition saw volume growth of 4.3% driven by meat, beverage and snacks End Use Markets (EUMs). Pricing rose by 0.9%; easing raw material inflation was managed through customer partnership pricing model.
Trading profit margin rose by 20bps – underlying growth encompassing operating leverage, enhanced product mix, efficiencies and investments.
The division achieved good growth across global, regional and local customer groupings.
Foodservice delivered good performance in the quarter, growing at 6.1%. Consumer demands for good-food-fast and new world tastes continues to drive development of innovative nutritional product solutions, providing opportunities for customers to extend their menu offerings.
Kerry’s Taste technologies recorded a strong performance in the period, 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 in meeting consumer demands for reduced sugar, natural ingredients, and authentic taste, Kerry claims.
Kerry also provided a quick regional breakdown of its global business.
Americas region
The Americas region recorded a 2.9% volume growth. It saw good performance in North America, driven by meat, snacks and beverage EUMs. Brazil performed well, while Mexico delivered a “solid performance”.
In North America, Kerry’s Meat EUM enjoyed a strong quarter – as consumer demand for clean label and a wider range of alternative protein-based products continued to grow.
Within Pharma, good growth was recorded, with excipients in North America delivering strong growth. Kerry’s Ganeden probiotics & Wellmune branded immunity enhancing ingredients continued to broaden market reach into wider applications.
Europe region
Kerry’s Europe Region saw 3.1% volume growth. Good performance was recorded in beverage, dairy and meat EUMs, while foodservice delivered strong growth through both chains and independent operators, according to the group.
Kerry’s Island Oasis beverage brand showed strong growth, particularly in Southern Europe. The Dairy EUM performed well, as consumer demand for luxury indulgence led to new premium launches in the ice cream sector.
The Meat EUM continued to provide good growth opportunities, as Kerry’s clean label and coating technologies performed well, aided in part by the recent acquisition of Hasenosa in Spain. Kerry’s smoke & meat-free technologies were successfully deployed in a number of new launches in the UK and Northern Europe.
Agreement was also reached in the period to acquire a majority shareholding in Netherlands based Ojah – a “market leading plant-based protein manufacturer” in Europe, producing textured meat alternatives.
APMEA region
Finally, the Asia, Pacific, Middle East and Africa (APMEA) region did best of the lot – recording 9.7% volume growth.
Kerry’s newly defined APMEA region, which now includes the Middle East and Africa, delivered strong growth and business development in the quarter.
This was led by the Bakery EUM, with strong growth across both savoury and sweet applications. The recent acquisitions of Tianning Flavours, Taste Master & Hangman have further strengthened Kerry’s authentic local taste capabilities.
These contributed to a strong performance in the Meals EUM with the successful launch of both main menu items, as well as limited-time-offers with a number of foodservice partners in Greater China.
The snacks EUM delivered good opportunities for growth due to the continued development of new snacking occasions across the region.
Two further acquisitions were made in the quarter were SIAS Food Co. – a China-based supplier of culinary and fruit ingredients and systems to the foodservice and food manufacturing industries, and Season to Season – a South African supplier of taste ingredients and systems to the African snack and food sectors.
Business reviews – Consumer Foods
This division of the Kerry Group recorded volume growth of 1.6%, led by good growth in ‘food to go’ solutions and snacking
Pricing rose by 1%, with easing raw material inflation across the quarter
‘Everyday Fresh’ enjoyed a good quarter, as Richmond benefited from the 2017 relaunch in the UK and the Fire & Smoke range also continued to perform well.
Rollover also continued to grow strongly with a number of new listings. Overall divisional volumes in the quarter were impacted by extreme cold weather spells in March. The Brexit mitigation programme made further progress in the quarter and is on track to deliver on its objectives.
Board Changes
Michael Dowling retires from the board following today’s AGM and will be succeeded as chairman by Philip Toomey.
Toomey joined the board in February 2012 and was appointed as senior independent director to the board. He was appointed chairman of the Audit Committee in February 2013.
Toomey will step down from the Audit Committee and as senior independent director on taking up the position as chairman. He will be succeeded as senior independent director by Joan Garahy, who joined the board in January 2012 and is currently chair of the Remuneration Committee, as well as a member of the Audit Committee.
The board has also agreed to appoint Christopher Rogers as a non-executive director of the company with effect from May 8. Rogers is senior independent director of Travis Perkins plc and was an executive director of Whitbread Group plc from 2005 to 2016. Rogers will replace Toomey as chairman of the Audit Committee on appointment to the board.
He previously served as global managing director of Costa Coffee from 2012 to 2016, having previously held group finance director roles in a number of companies including Whitbread plc and Woolworth Group plc.