Kerry Group PLC Kerry Group Q3 Interim Management Statement (3275E)
November 03 2015 - 2:04AM
UK Regulatory
TIDMKYGA
RNS Number : 3275E
Kerry Group PLC
03 November 2015
News release
03 November 2015
Kerry Group: Interim Management Statement
03 November 2015 - Kerry, the global taste & nutrition and
consumer foods group, issues the following Interim Management
Statement for the nine months to 30 September 2015 and reaffirms
outlook for full year.
Key Highlights
9 months to 30 September 2015
* 3.2% increase in business volumes
Ø Taste & Nutrition +3.4%
Ø Consumer Foods +2.6%
* Group trading margin up 40 basis points
Ø Taste & Nutrition +40 bps
Ø Consumer Foods +20 bps
* Earnings guidance for full year in a range of 6% to
9% reaffirmed
==================================================================================
Business PERFORMANCE
Good progress continues to be achieved in consolidating the
Group's leading global infrastructure and advancing business
development through broadening channel and end-use-market
application of Kerry's Taste & Nutrition Systems. The changing
marketplace coupled with health, nutrition and wellness trends
continue to drive a strong pipeline of innovation. To assist future
business growth and development, a significant number of strategic
acquisitions were also completed.
Despite improving global economic conditions, consumer demand in
developed markets remains weak. Developing markets continue to be
impacted by geopolitical issues and significant currency
fluctuations. Kerry maintained a solid business performance against
this challenging market environment in the three month period to 30
September 2015. Taste & Nutrition delivered good growth in
American markets, an improved performance in the EMEA region and
solid market development in Asia-Pacific markets - notwithstanding
the slowdown in some regional developing markets. Kerry Foods
performed well in the changing and competitive consumer foods'
market environment in Ireland and the UK.
In the nine months to 30 September 2015, business volumes on a
Groupwide basis increased by 3.2%. Pricing declined by 2.8% against
a background of approximately 6% lower raw material costs. Reported
revenues increased by 4.3%, reflecting the business volume growth,
lower pricing, 7.7% positive currency translation impact and (3.8%)
net business acquisitions / disposals impact.
The Group's trading margin performance continued to improve in
the period. Relative to the first nine months of 2014, the Group
trading profit margin increased by 40 basis points reflecting a 40
basis points improvement in Taste & Nutrition and a 20 basis
points improvement in Consumer Foods' trading margin.
BUSINESS REVIEWS
Taste & nutrition
Despite the changing marketplace and volatility in many
geographies, the Group's Taste & Nutrition platforms and
developing market strategies continued to deliver solid growth.
Taste & Nutrition achieved 3.4% volume growth in the nine
months to end of September. Pricing declined by 2.9%. Divisional
trading profit margin increased by 40 basis points as a result of
operating leverage, improved mix and efficiency programmes.
Americas Region continued to achieve good growth despite
sectoral issues in some North American categories and the impact of
significant currency devaluation on consumer spending in Latin
America. Business volumes grew by 3.5%.
Solid growth was maintained in the North American meat industry
and foodservice channel through Kerry Taste technologies and
systems. KFI Savory, the U.S. based savoury flavour business of
Kraft Food Ingredients acquired in June 2015, performed in line
with expectations. Wynnstarr Flavors assisted performance in the
North American culinary sector and Junior Alimentos assisted growth
in the Brazilian foodservice sector despite the challenging
macro-economic conditions. Central American markets presented good
growth opportunities. Baltimore Spice, a Costa Rican based spices,
seasonings and condiments producer with production facilities
located in Costa Rica, Guatemala and Panama acquired in August,
significantly strengthened Kerry's market positioning in the
culinary and snack sectors in Central America and the
Caribbean.
Kerry maintained market development in the bakery sector through
its clean label technologies. Snacking trends provided development
opportunities in the cereals sector - compensating for volume
decline in traditional RTE cereal lines. Savoury snack innovation
provided good growth opportunities throughout American markets - in
particular in Mexico and Central America. Beverage flavours and
systems delivered continued growth through aseptic and nutritional
applications. Kerry's branded offerings recorded further progress
in the foodservice sector - in particular through increased channel
market extension of the Big Train, DaVinci Gourmet and Oregon Chai
brands. Insight Beverages (a leading U.S. based supplier of custom
beverage solutions) acquired in May performed in line with
expectations.
Pharma ingredients maintained solid growth throughout global
markets through excipient applications. Nutritional systems
performed well in medical nutrition lines.
EMEA Region developed markets proved more stable in Q3 but
geopolitical instability continues to impact industry development
in regional developing markets. Kerry achieved an improved regional
performance with business volumes increased by 0.8% compared to the
first nine months of 2014. Snacking and wellness trends provided
continued innovation opportunities across Kerry's taste &
nutrition technology platforms. Establishment of the Group's Global
Technology & Innovation Centre in Ireland was completed during
the period. Emulsifiers and texturants recorded good volume growth.
Dairy and culinary technologies were impacted by overall market
competitiveness issues. Sweet systems achieved good progress in the
ice cream sector. Beverage systems & flavours maintained
satisfactory growth throughout the region, in particular through
branded foodservice offerings including 'DaVinci Gourmet' and 'Big
Train'.
Business development continues in Russia but performance in the
quarter was impacted by the continuing political and currency
related issues. While MENAT market conditions proved more stable,
performance in the zone's cereal and sweet sectors was weaker. Good
growth was maintained in the foodservice channel in the Middle
East. PST Pastacilik Gida - a Turkey based branded foodservice
provider of sweet ingredient solutions to the fine bakery,
confectionery, ice cream and foodservice sectors in Turkey and the
Middle East acquired in July, performed to expectation. Market
conditions in Sub-Saharan Africa remain highly competitive
impacting growth.
The investment programme to upgrade and expand production of
nutritional lines at the Group's facilities in Ireland assisted
ongoing development of all life-stage end-use-market applications
particularly in Asian markets. Establishment of the Kerry IOI
Loders Croklaan joint venture company to develop and market the
nutrition lipid Betapol(R) business was completed in September.
International primary dairy market price returns continued to be
impacted by increased output in exporting countries.
Kerry maintained solid growth through its Taste & Nutrition
technology platforms in Asia Pacific markets despite the slowdown
in regional economic growth compared to the first nine months of
2014. Business volumes increased by 7.9%. 'Dairy Complete' systems
achieved strong growth in Indonesia, Vietnam, China and the
Philippines. Culinary systems continued to grow throughout South
East Asia in particular in Thailand and the Philippines. Increased
market competitiveness in Australia and New Zealand continued to
impact dairy and culinary applications. Japan and Korea presented
encouraging market development opportunities. Nutritional systems
maintained strong regional development. Beverage systems recorded
good growth particularly in the foodservice sector throughout
Asia-Pacific markets. Progressive extension of Kerry's branded
beverage offerings into new channels and regional markets also
achieved excellent results. In South West Asia market development
is progressing well, in particular in India. In Australia, the sale
of the Pinnacle lifestyle bakery business was completed in May.
Consumer foods
While the Irish and UK consumer foods' markets remain highly
competitive with increased retailer focus on EDLP, the repositioned
Kerry Foods portfolio performed well against this background.
Business improvement was broad-based through the division's
snacking and meal solution categories - with strong growth through
etail. In the nine months to end of September 2015, business
volumes increased by 2.6%. Pricing was 2.4% lower. Divisional
trading profit margin improved by 20 basis points reflecting the
improved product mix and business efficiency programmes.
In the UK, Mattessons maintained good growth in the meat
snacking sector. Richmond branded offerings were impacted by the
changing promotional environment. Cheestrings performed ahead of
market growth rates, boosted by a successful back-to-school
campaign in the period. International growth of Cheestrings
continues with new listings in Germany, Austria and Poland. Growth
in meal solutions continued. Kerry Foods achieved solid growth in
chilled ready meals and the frozen meals category also returned to
growth where the Sharwood's and Bisto branded offerings performed
well. Rollover Ltd, acquired in January 2015, also recorded good
growth, extending Kerry Foods' 'hot-to-go' offering and channel
distribution in the UK market. The Kerry Foods' Direct-to-Store
business in the UK was disposed of at the end of February 2015.
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