TIDMKYGA
RNS Number : 0835O
Kerry Group PLC
02 November 2016
2 November 2016
Kerry Group
Interim Management Statement
2 November 2016 - Kerry, the global taste & nutrition and
consumer foods group, issues the following Interim Management
Statement for the nine months ended 30 September 2016.
KEY HIGHLIGHTS
-- 3.2% growth in business volumes
- Taste & Nutrition +3.4%
- Consumer Foods +2.2%
-- Group trading margin up 70 basis points
- Taste & Nutrition +70bps
- Consumer Foods +30bps
-- 2015 acquisitions performing well
-- Strong cash flow generation
-- Earnings guidance for full year reaffirmed
Business Performance
The Group maintained the business momentum reported at the
half-year stage in the third quarter delivering sustained volume
growth and business margin enhancement. Overall, global market
conditions remained weak - impacted by currency volatility, the
changing marketplace and continuing geopolitical issues in some
developing regions. Consumer trends reflect widening preference for
health & wellness offerings, clean-label solutions, organic
lines and convenient products available through more fragmented
retail and foodservice channels. In turn, this has led to
significant product 'churn' as food and beverage providers seek
growth through innovative, differentiated product developments.
Taste & Nutrition Technologies and Systems continued to
record good growth in North America, an improved performance in
Latin America and excellent growth in Asia. EMEA market conditions
remained subdued due to the deflationary environment, rapidly
changing marketplace and instability in developing markets in the
region. However snacking and wellness trends drove a strong
innovation pipeline in the dairy and meat retail / convenience
sectors - in particular throughout global foodservice channels
which provided strong growth opportunities for Kerry's Taste &
Nutrition Technologies and Systems. Businesses acquired in 2015
continued to perform well providing a strong platform for
international market development.
Despite the uncertainty and sterling devaluation resulting from
the UK electorate voting to leave the European Union, Kerry Foods
continued to perform well in the UK and Irish markets. The consumer
foods division also maintained good growth in its selected mainland
European markets and in the fast growing e-tail channel.
In the nine months to 30 September 2016, business volumes on a
Group-wide basis increased by 3.2%. Pricing declined by 2.2%
against a background of 4.5% lower raw material costs. Reported
revenues increased by 0.4% reflecting the business volume growth,
lower pricing, adverse currency translation impact of 4.5%, adverse
currency transaction impact of 0.3%, and the effect of acquisitions
net of disposals of 4.2%.
The Group trading profit margin increased by 70 basis points.
This reflects a 70 basis points improvement in trading margin in
Taste & Nutrition, a 30 basis points improvement in Kerry
Foods' margin and reduced spend on the Kerryconnect Programme.
Business Reviews
Taste & Nutrition
The Group's global Taste & Nutrition businesses achieved
3.4% volume growth in the nine months to the end of September. Net
pricing was 2.2% lower. Divisional trading profit margin increased
by 70 basis points due to innovation, improved product mix and
operational leverage.
Americas Region
Americas Region delivered 3.6% volume growth responding to
health & wellness trends in North American markets and
achieving solid growth in Latin America. Strong market development
was achieved in the bakery and meat sectors through clean label
applications driven by Kerry fermentation technologies. Red Arrow
Products, acquired in December 2015, also assisted growth in the
meat and savoury product sectors through its market leading smoke
and grill Taste technologies. Development in Latin American markets
was strengthened by the Costa Rican based Baltimore Spice business
acquired in July 2015. Clean label trends also assisted growth
through dairy and culinary applications in the school meals sector
throughout the Americas region. Good growth was maintained through
snack applications in Mexico and Central American markets.
Development in the overall cereal and sweet sectors remained
subdued but launches of snacking and health offerings provided a
good innovation pipeline. Strong momentum was again recorded in the
beverage sector through Kerry's Beverage Taste & Systems. The
2015 acquisitions of Island Oasis and Insight Beverages boosted
Kerry's market positioning, broadening penetration into the c-store
and hotel and catering channels. Kerry's branded beverage products
also continued to broaden market reach, in particular throughout
Latin American markets. In the pharmaceutical sector, further
progress was achieved through cell nutrition applications.
Wellmune(R) acquired in September 2015, delivered strong growth in
broader nutritional applications.
EMEA Region
EMEA markets remained challenging, impacted by price deflation
in many markets and continued geopolitical instability in some
regional developing markets. Business volumes increased by 0.3%
relative to the first nine months of 2015. Kerry's Taste &
Nutrition technologies were well positioned to respond to the
significant product churn in the marketplace and to demand for
clean label and health offerings. Solid market growth continued in
the foodservice sector in particular through beverage applications
and chain accounts. Vendin S.L. based in Madrid was acquired in
June, broadening Kerry's distribution of beverage solutions to the
vending and foodservice sectors in Europe. Development in the meat
sector remained constrained but solid progress was achieved in the
Russian meat and snacks market segments.
Market conditions in Sub-Saharan Africa remained highly
competitive adversely impacting development in the sweet sector.
Enzymes performed well, delivering good growth in the beverage
sector. Hydrolysed proteins achieved good growth in clinical
nutrition. Nutritional technologies maintained solid momentum
through life-stage nutritional applications. Growth in the dairy
sector was impacted by international dairy market conditions. Q3
saw a reduction in primary dairy production in some major exporting
countries which contributed to improved trading across most dairy
markets by the end of the period.
Asia-Pacific Region
Growth was generated across all geographic markets in Asia which
contributed an excellent Kerry business performance in the period.
Market conditions in Australia and New Zealand also stabilised.
Business volumes across the Asia-Pacific region grew by 9.6%.
Regional trends favouring dairy, health & wellness lines and
snacking applications provided strong growth for Kerry's portfolio
of Taste & Nutrition Technologies and Systems. Development
through foodservice applications in particular was strong
throughout the region. Dairy Taste maintained good growth in
Indonesia, Vietnam, the Philippines and China. Snacking
applications provided a strong growth platform in Malaysia,
Thailand, and the Philippines. South Korea based Jungjin Foods
acquired in March 2016 performed well. Proteins grew in the
nutritional and confectionery sectors in China and India. In the
infant nutrition sector, Kerry's Europe-based nutritional
technologies continued to achieve good market development in China,
benefiting from recent regulatory changes. Kerry's beverage
technologies and brands continued to successfully extend market
positioning in the foodservice and c-store channels.
Consumer Foods
Kerry Foods maintained a solid business performance despite the
prevailing competitive market situation and uncertainty caused by
the Brexit vote in the UK. Consumer demand for dairy and meat snack
offerings and prepared meals continued to provide good growth
opportunities for the division. In the nine months to end of
September business volumes grew by 2.2%. Pricing was 2% lower.
Divisional trading profit margin increased by 30 basis points,
benefiting from improved product mix and business efficiencies.
Chilled ready meals maintained solid growth and the launch of
novel premium lines assisted development in the frozen category.
'Mattessons' achieved sustained growth in the meat snacking sector.
The UK sausage category remained highly competitive but
repositioning of the 'Wall's' brand assisted brand growth.
'Cheestrings' continued to perform well, boosted by encouraging
brand growth in mainland Europe and the launch of 'Cheestrings
Scoffies' - a new '3-in-1' cheese snack solution for after school
snacking occasions. The 'Yollies' childrens yoghurt snack range
continued to grow benefiting from new listings in the UK market.
The UK private label spreads category remained highly
competitive.
In Ireland 'Dairygold' maintained a solid brand performance,
assisted by new product launches. 'Charleville' performed well in
the cheese sector. 'Fire and Smoke' branded meat products achieved
good growth with the successful launch of a 'food-to-go' snacking
pots range and new retail listings in the UK market.
Financial Review
Benefiting from the Group's strong cash flow generation, net
debt at the end of the period stood at EUR1.4 billion compared to
EUR1.7 billion at year-end 2015. The Group's consolidated balance
sheet remains strong which will facilitate the continued organic
and acquisitive growth of Group businesses.
Future Prospects
We remain confident of delivering an underlying trading
performance in the full year as previously guided; taking into
account the currency headwinds of 5% at current exchange rates,
growth in adjusted earnings per share in 2016 is expected to be
towards the middle to lower end of the 6% to 10% range of 320 to
332 cent per share.
Contact Information
Media
Frank Hayes Director of +353 66 corpaffairs@kerry.ie
Corporate Affairs 7182304
Investor
Relations
Brian Mehigan Chief Financial +353 66 investorrelations@kerry.ie
Officer 7182292
Ronan Deasy Group Financial +353 66 investorrelations@kerry.ie
Controller 7182292
William Head of Investor +353 66 investorrelations@kerry.ie
Lynch Relations 7182292
Website
www.kerrygroup.com
Disclaimer Forward Looking Statements
This Announcement contains forward looking statements which
reflect management expectations based on currently available data.
However actual results may differ materially from those expressed
or implied by these forward looking statements.
These forward looking statements speak only as of the date they
were made and the Company undertakes no obligation to publicly
update any forward looking statement, whether as a result of new
information, future events or otherwise.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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