TIDMKYGA
RNS Number : 2090E
Kerry Group PLC
04 November 2020
4 November 2020
KERRY GROUP - INTERIM MANAGEMENT STATEMENT
Strong recovery in business performance in third quarter, as
improved volumes approached prior year levels
Kerry Group, the global taste & nutrition and consumer foods
group, reports business performance for the nine months ended 30
September 2020.
Q3 YTD HIGHLIGHTS
* Group volume reduction of 4.7% (Q3: -2.1%)
* Pricing +0.3%
* Group trading margin reduction of 130bps (Q3: -70bps)
* Earnings guidance resumed for full year
Edmond Scanlon, Chief Executive Officer
"This year has seen unprecedented variability and complexity
across our industry. The agility and ingenuity of Kerry's teams in
adapting to these changing conditions has contributed to Kerry's
strong recovery in the third quarter, which was in line with
previous guidance.
In the foodservice channel, we have seen a strong recovery since
April, as restaurants reopened and adapted their operations and
menus to cater for increased consumer demand for takeaway, online
and delivery. Performance in the retail channel remained strong,
primarily through growth in authentic cooking, plant -- based
offerings and health and wellness products.
We continued to make good progress on a number of strategic
fronts. During the third quarter we reached agreement to acquire
Bio-K Plus International probiotics in Canada and Jining Nature
Group, a leading savoury taste business in China. We also recently
launched our 2030 sustainability strategy - Beyond the Horizon.
This details Kerry's sustainability targets and will be central to
Kerry's growth strategy, as we continue to innovate with our
customers and expand our reach of sustainable nutrition solutions
globally.
As we continue to manage through these unprecedented times, we
expect to continue our recovery in the final quarter and return to
volume growth, while today we also resume providing full year
earnings guidance."
Markets & Performance
This year has seen consumers' purchasing and consumption
behaviours significantly disrupted, leading to a much more dynamic
marketplace. At-home consumption has been elevated, while the
foodservice channel has seen significant shifts, with demand for
online and delivery increasing. A number of key consumer trends
have accelerated in the period, with increased demand for health
and immunity enhancement, natural authentic cooking, sustainability
and plant protein, while many consumers reverted to centre -- of --
store offerings. Customers continue to adapt to this dynamic
operating environment. Product portfolios and menu offerings
continue to be evaluated, with new product development strategies
being focussed on these rapidly changing consumer demands. These
dynamics will lead to significant challenges and opportunities
across the industry.
The Group's year to date performance has been impacted by
COVID-19, most notably in the foodservice channel. Kerry's business
has proved resilient throughout, and our response has been centred
on supporting our people, customers and local communities. Group
reported revenue decreased by 4.5%, reflecting a volume reduction
of 4.7%, increased pricing of 0.3%, an adverse translation currency
impact of 1.1% and contribution from acquisitions of 1.0%. Group
trading margin declined by 130bps primarily due to the significant
operating deleverage im pact resulting from the sharp decline in
foodservice orders when lockdown measures were introduced globally,
with additional COVID -- related costs being partially offset by
cost mitigation actions.
Business Reviews
Taste & Nutrition
> Continued recovery in foodservice, with ongoing strength in retail
> Overall YTD volume reduction of 4.4%, reflecting continued recovery (Q3: -1.9% | Q2: -11.8%)
> Foodservice channel volumes declined 23% year to date (Q3: -15% | Q2: -49%)
> Retail channel continued to perform well, with strong
growth in Beverage, Meals, Snacks and Pharma
> Trading margin impact decreased with volume recovery,
resulting in YTD reduction of 140bps (Q3: -80bps)
After a strong start to the year, the global spread of COVID --
19 impacted performance in the foodservice channel particularly in
the second quarter, with business volumes recovering well since
then. The retail channel continued to perform well, with Kerry's
nutrition and wellness technology portfolio delivering very good
growth through customised solutions incorporating Kerry's broad
protein portfolio, fermented ingredients, probiotics and immunity
enhancing technologies. Developing market volumes declined by 2.9%
year to date, with continued recovery in the third quarter led by
good growth in China.
In addition to the acquisition of Tecnispice, S.A. earlier in
the year, the Group also reached agreement to acquire two
businesses in the third quarter. Bio-K Plus International Inc. is a
leading biotechnology company with a number of probiotics in
beverage and supplement applications in Canada and the US. Jining
Nature Group - based in Shandong, China is a leader in savoury
taste for local meat, snacks and meals markets.
Americas Region
> Business volumes continued to recover (Q3 YTD: -3.5% | Q3: -2.8%)
> Foodservice performance continued to improve in the third quarter
> Retail channel delivered strong growth - led by Beverage, Meals and Dairy
The foodservice channel in North America continued its recovery
in the third quarter, led by quick service restaurant chains, while
dine-in restaurants and independent operators were more challenged.
The retail channel in North America achieved excellent growth in
Beverage, particularly in nutritional and plant -- based beverages
with a number of innovations incorporating Kerry's immunity
enhancing technologies, broad protein portfolio and natural
extracts. Meals delivered very strong growth through authentic
culinary solutions, with increased demand for natural stocks and
broths. Overall Meat category performance was impacted by customer
product availability on retail shelves, while performance in Dairy
was supported by increased demand for clean label nutrition
solutions across the category.
In LATAM, the foodservice channel improved through the third
quarter. Overall performance in Brazil started to show good signs
of recovery led by beverage and ice -- cream, while market
conditions in Mexico remained more challenged. The global Pharma
EUM delivered very strong growth, led by excipients and immunity
enhancing technologies.
Europe Region
> Business volumes saw significant improvement in the third quarter (Q3 YTD: -6.6% | Q3: -2.1%)
> Foodservice had a strong broad-based recovery across the region in Q3
> Retail channel delivered good growth in Beverage, Snacks and Meat
This region saw the most notable improvement in performance in
the third quarter driven by foodservice, having initially been more
impacted from COVID-related restrictions. The retail channel
performed well, with Beverage achieving good growth through
solutions for nutritional beverages and a number of launches in the
low/non -- alcoholic category. Snacks had very good growth in
savoury applications with a number of large customers, while
Confectionery was impacted by product repositioning in the
category. Meat performed well in the period, driven by strong
growth and business development in plant -- based alternatives, as
ranges continued to expand within the category. Russia and Eastern
Europe continued to deliver strong growth through the third
quarter.
APMEA Region
> Business volumes returned to growth in the third quarter (Q3 YTD: -3.9% | Q3: 0.2%)
> Foodservice recovery continued in Q3
> Retail channel continued to progress with excellent growth
in Q3 - particularly in Snacks and Dairy
The region returned to overall growth in the third quarter, with
strong performances in China and the Middle East. The foodservice
channel continued to recover in the third quarter, with variability
across the region aligned to local conditions. The retail channel
performed well, led by Snacks, Dairy and Meat, while Beverage and
Meals were more challenged, as consumers opted for more traditional
food and beverage offerings in many geographies across the region.
Performance in the third quarter was particularly strong in Snacks
and Dairy due to increased demand from regional leaders for Kerry's
clean label solutions.
The Group continued to make good progress in expanding its
capacity and deploying technology capabilities in China and the
Middle East, while also moving into the new Technology &
Innovation Centre in Shanghai.
Consumer Foods
> Good recovery in Q3, with strong performances within the portfolio
> Overall year to date volume reduction of 6.1% reflecting
the effect of the ready meals contract exit
> Pricing of +1.5% reflective of increases in input costs and market pricing
> Trading margin +10bps as efficiencies offset COVID -- 19 impacts and pricing
The division had overall underlying volume growth of 1.4% in the
third quarter, and 0.1% year to date before the impact of the prior
year ready meals contract exit. The Richmond sausage range
continued to achieve strong growth, as did the recently launched
meat-free ranges under both the Richmond and Naked Glory brands.
The Denny brand performed well, while overall meat sales were
impacted by reduced retailer deli counter operations. Spreadable
butter and the Dairygold range performed well due to increased
at-home consumption. The chilled meals category was impacted by
reduced consumer traffic, particularly in the second quarter, while
frozen meals had a good overall performance. The 'Food to Go'
category experienced variability in sales performance across the
period. After a strong start to the year, Fridge Raiders was
challenged in the second quarter, before achieving good growth in
the third quarter. The Strings & Things range, led by
Cheestrings delivered good overall growth, while Oakhouse Foods
home delivery meals had exceptionally strong growth across the
period.
Financial Review
At the end of September, net debt was EUR1.8 billion. The
Group's consolidated balance sheet remains strong which will
facilitate the continued organic and acquisitive growth of the
Group.
Sustainability
In October, the Group launched its new sustainability strategy -
Beyond the Horizon. This details Kerry's key sustainability 2030
commitments and targets, while reflecting how innovation and
co-creation will continue to be central to Kerry's growth strategy.
Kerry's aim is to increase its reach to over two billion people
with sustainable nutrition solutions by 2030, which will be
achieved by deploying and enhancing Kerry's solutions across the
nutrition spectrum. Beyond the Horizon reflects Kerry's vision to
become our customers' most valued partner, creating a world of
sustainable nutrition.
Future Prospects
Within Taste & Nutrition, the foodservice channel continues
to recover well, and we are focusing on particular growth areas in
the channel, while partnering with customers on new menu
developments. The retail channel continues to deliver good growth
due to Kerry's co -- creation model and leading solutions offering.
We have a good innovation pipeline with strong customer
engagement.
Our Consumer Foods business continues to see variability across
categories and strong performances within the portfolio.
We will continue to invest for growth and pursue M&A
opportunities aligned to strategic growth priorities. Kerry's
unique business model, broad taste and nutrition portfolio and
industry -- leading integrated solutions capabilities are more
critical than ever, as we support our customers through this
dynamic environment.
While there remains a high level of uncertainty, based on
current market conditions, we expect business volumes to return to
growth in the final quarter and are guiding a full year earnings
per share decrease of 8-11% in constant currency.
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.
CONTACT INFORMATION
=============================================
Media
Catherine Keogh , VP Corporate Affairs
& Communications
+353 45 930188 | corpaffairs@kerry.com
Investor Relations
Marguerite Larkin , Chief Financial
Officer
+353 66 7182292 | investorrelations@kerry.ie
William Lynch , Head of Investor Relations
+353 66 7182292 | investorrelations@kerry.ie
Website
www.kerrygroup.com
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END
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