TIDMKYGA
RNS Number : 2497E
Kerry Group PLC
27 October 2022
Date: 27 October 2022
LEI: 635400TLVVBNXLFHWC59
KERRY GROUP
Q3 INTERIM MANAGEMENT STATEMENT 2022
Continued strong business growth in a dynamic marketplace
Q3 YTD OVERVIEW
* Group volume growth of 6.6% (Q3: +6.2%)
* Group pricing of +10.6% (Q3: +15.3%)
* Taste & Nutrition: Volume +8.5% | Pricing +7.5%
* Dairy Ireland(1): Volume +1.8% | Pricing +36.6%
* Group EBITDA margin -40bps
* Full year EPS guidance updated
(1) Pro-forma growth excluding the Consumer Foods Meats and Meals
business disposal
Edmond Scanlon, Chief Executive Officer
"We achieved excellent growth across the period through a combination
of strong business volumes and pricing, as we continue to manage through
this unprecedented inflationary pricing environment in collaboration
with our customers. Our volume growth was broad based across our regions,
channels and markets, led by excellent performances in Snacks, Beverage,
Meat and Bakery in particular. We also made good strategic progress
with further footprint expansion and strategic acquisitions.
While we recognise the current level of uncertainty in the marketplace,
we feel very well positioned as we continue to support our customers
in addressing the various market challenges and opportunities. Given
we have now reported the third quarter, we are updating our full year
earnings guidance to 6% to 8% growth on a constant currency basis."
Markets and Performance
The overall demand environment continued to be strong through
the period. Consumer preferences for new taste experiences, clean
label and healthier options remains strong, while the importance of
value options continues to rise across categories.
The resilience of supply chains remains a key focus across the
industry due to geopolitical volatility and inflationary pressures.
Given the evolving consumer landscape, customers are continuing to
evaluate the relevance and uniqueness of their offering and the
need to adapt and expand their product ranges. Against this market
backdrop, the level of innovation remains strong as customers
target opportunities linked with the changing consumer landscape,
while also looking to reconfigure aspects of their operations given
the evolving industry environment.
Group reported revenue increased by 16.1% in the period. This
comprised of business volume growth of 6.6%, increased pricing of
10.6%, a transaction currency tailwind of 0.2%, a translation
currency tailwind of 6.6%, with the contribution from business
acquisitions of 4.8% partially offset by the impact of the business
disposal of the Consumer Foods Meats and Meals business of 12.7%.
Group EBITDA margin decreased by 40bps primarily driven by the
significant impact of passing through input cost inflation,
partially offset by accretion from portfolio developments,
operating leverage, portfolio mix and efficiency initiatives.
Business Reviews
Taste & Nutrition
Continued strong business volume growth across regions, channels
and end use markets
> Overall volume growth of 8.5% with strong Q3 growth of 8.2%
> Snacks, Meat, Bakery and Beverage markets all achieved very strong growth
> Pricing of 7.5% reflected the pass through of increases in input costs
> EBITDA margin reduction of 80bps driven by the impact of passing through input cost inflation
Taste & Nutrition delivered strong volume growth through the
period across all regions, despite the effect of increased
pricing.
The foodservice channel continued its momentum with strong
double-digit volume growth. This growth was underpinned by
increased LTO and seasonal offerings, combined with solutions to
reduce operational complexity. The retail channel also continued to
deliver strong growth with customers looking for increased
innovation and renovation to offer new taste experiences within
categories, as well as reducing food waste and providing more value
options to consumers.
The growth achieved across Kerry's food and beverage EUMs was
supported by the overall performance of its key growth platforms.
Authentic taste continued to deliver very strong growth, with
Tastesense (TM) salt and sugar reduction technologies deployed
across a number of Savoury and Dairy applications. Plant-based
performed well in spite of a slowdown within the category. Demand
continued to be strong for Kerry's range of food waste solutions,
while proactive health performed in line with expectations given
the elevated demand in the prior year.
Business volumes in emerging markets increased by 12.3%, as
strong growth in LATAM, the Middle East, and Southeast Asia was
partially offset by challenging conditions in China.
Americas Region
> Overall volume growth of 9.3% with excellent Q3 growth of 9.6%
> Growth led by Beverage, Meat and Bakery markets
> LATAM delivered very strong growth led by Brazil and Mexico
North America delivered an excellent performance through the
period. The strong growth in the retail channel was driven by
innovation activity across Beverage, Meat and Bakery markets in
particular. Within Beverage, growth was driven by increased
launches in the tea & coffee, refreshing and nutritional
beverage categories. Growth in Meat was delivered through increased
demand for taste systems and Kerry's range of food protection and
preservation solutions, while Bakery saw growth driven by
functional solutions and texture systems.
Growth in foodservice remained strong with quick service
restaurants in particular, due to increased seasonal menu
offerings, further menu development and innovations enhancing back
of house efficiency.
Within LATAM, Brazil and Mexico delivered very strong growth.
Volume growth in Brazil was driven by performance in Meals and
Meat, while volumes in Mexico were led by growth in Beverage and
Snacks with strong wins in authentic taste.
Within the global Pharma EUM, good volume growth was achieved in
cell nutrition offset by weaker volumes in excipients due to supply
chain constraints.
Europe Region
> Overall volume growth of 6.2% with Q3 growth of 4.4%
> Volume growth led by Snacks, Dairy and Meals markets
> Growth led by Central and Southern Europe
In the period, performance in Snacks, Dairy and Meals led broad
based growth across food and beverage markets. Snacks achieved very
strong growth with Kerry's Tastesense (TM) salt reduction
technology portfolio, driven by increased customer focus on
enhancing their products' nutritional profiles. Growth in Dairy was
strong, supported by new launches in ice cream and dairy
alternative innovations in the foodservice channel. Meals achieved
good growth through taste systems and functional solutions while
growth in Beverage was driven by sales of products incorporating
Kerry's botanicals, natural extracts and sugar reduction
technologies.
The strong overall volume growth in the region was led by the
foodservice channel supported by new menu innovations, and an
increased level of seasonal products.
From a geographical perspective growth was strongest in Central
and Southern Europe, while performance in Eastern Europe was
impacted by the ongoing war in the region. As previously announced,
the divestment of the Group's Russian subsidiary was also completed
during the period.
APMEA Region
> Overall volume growth of 9.0% with continued strong Q3 growth of 8.6%
> Volume growth led by Snacks, Meat and Bakery markets
> Growth driven by the Middle East and Southeast Asia, partially offset by China
Growth in the region was primarily driven by very strong
performances in the Middle East and Southeast Asia, led by
excellent growth in foodservice as well as Snacks and Bakery within
the retail channel. In China, performance was constrained by
localised restrictions which continued to be a feature throughout
the period.
Overall growth was strong across Food EUMs. The excellent growth
in Snacks was driven by authentic taste in savoury applications
with regional leaders across APMEA. Growth in Meat was led by local
authentic savoury and smoke innovations, while growth in Bakery was
supported by texture solutions and increased demand for
preservation systems.
The Group also continued to make good strategic progress by
enhancing its presence within the region with the expansion of
footprint in the Middle East and Southeast Asia.
Dairy Ireland
Solid growth while managing significant price inflation
> Overall volume growth (1) of 1.8% with Q3 performance of 1.0%
> Pricing (1) of 36.6% reflected significant increases in dairy prices and other input costs
> EBITDA margin (1) reduction of 190bps driven by the impact
of passing through input cost inflation
Dairy Ireland delivered solid overall volume growth through the
period while managing the heightened inflationary cost environment,
which resulted in significant price increases across the
business.
Within Dairy Consumer Products, the significant price increases
led to lower overall category volumes. Within the spreads category,
good performance was achieved across our customer-branded ranges.
Volumes in cheese snacking were impacted by reduced promotional
activity in the period.
Dairy Ingredients delivered volume growth while prices remained
significantly higher as a result of constrained global supply
dynamics.
(1) Pro-forma performance excluding the Consumer Foods Meats and
Meals business disposal
Financial Review
At the end of September, the Group's net debt was EUR2.4
billion. The Group's consolidated balance sheet remains strong
which will facilitate the continued organic and acquisitive growth
of Group businesses.
Future Prospects
While overall market conditions remain uncertain, Kerry is well
positioned to support its customers through this dynamic
marketplace. The Group remains confident in its ability to continue
to manage through the current inflationary cycle with its
well-established pricing model and cost initiatives. Kerry will
continue to strategically evolve its portfolio and invest capital
aligned to its strategic priorities and key growth platforms.
With the completion of the third quarter, the Group is updating
its full year guidance and now expects to achieve adjusted earnings
per share growth* in 2022 of 6% to 8% on a constant currency
basis.
* Earnings guidance is stated after including estimated net
dilution from portfolio changes of c. 2.5% in 2022, comprising the
previously announced portfolio changes of c. 1.5% and the impact of
the divestiture of the Russia and Belarus businesses of c. 1%.
Foreign currency is expected to be favourable 9% on earnings in
2022 based on prevailing exchange rates.
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
=============================================
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
Media
Catherine Keogh , Chief Corporate
Affairs & Brand Officer
+353 45 930188 | corpaffairs@kerry.com
Website
www.kerry.com
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END
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October 27, 2022 02:00 ET (06:00 GMT)
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