Kerry Group PLC · EURONEXT:KRZ
Kerry — FY2012 Earnings Presentation
56 slides from Kerry's earnings presentation, Feb 26, 2013
Slide 1: Preliminary Statement of Results 2012
KERRY GROUP PRELIMINARY STATEMENT OF RESULTS 2012 26 FEBRUARY 2013
Slide 2: Disclaimer: Forward Looking Statements
Disclaimer: Forward Looking Statements This presentation/announcement may contain forward looking statements with projections concerning, among other things, the Company’s strategy, revenues, earnings, trading profit, trading margin, finance costs, tax rate, capital expenditure, dividends, cashflow,
Slide 3: 2012 Full Year Results
2012 Full Year Results » Review of Business Stan McCarthy CEO » Financial Review Brian Mehigan CFO » Outlook and Future Prospects Stan McCarthy CEO » Q&A
Slide 4: 2012 Full Year Highlights
2012 Full Year Highlights GROUP CONTINUING GROUP ADJUSTED* TOTAL REVENUE VOLUMES TRADING MARGIN EPS DIVIDEND +10.3% +2.8% 9.5% +11.3% +11.2% » Strong Group-wide performance in developed and developing markets » Group revenue increased 10.3% to €5.8 billion » Continuing volume growth +2.8% » Trading
Slide 5: 2012 in Perspective
2012 in Perspective » Economic landscape remains challenging » Industry performance impacted by weak consumer confidence in some countries, but overall growth favourable in American markets » Strong performance throughout developing markets in particular Asia-Pacific region » Demand for innovation a
Slide 6: Business Review – Ingredients & Flavours
Business Review – Ingredients & Flavours 2012 Growth Revenue €4,225m +14.0% Trading Profit €506m +15.1% Trading Margin 12.0% +10bps » Growth improved sequentially throughout 2012 » Continuing volumes +4.0% » Solid performance across key technologies, end-use-markets and all geographies » Continuing
Slide 7: Kerry Ingredients & Flavours Revenue Analysis
Kerry Ingredients & Flavours Revenue Analysis Revenue by Technology Year on Year Growth Savoury & Dairy +9.3% Cereal & Sweet +18.5% Beverage +40.7% Pharma/Functional Ingredients +11.5% Ingredients & Regional Technologies (3.5%) Taste Solutions Total +14.0% Savoury & Dairy 44% Cereal & Sweet 20% Beve
Slide 8: Business Review – Consumer Foods
Business Review – Consumer Foods 2012 Growth Revenue €1,712m 2.3% Trading Profit €130m 0.1% Trading Margin 7.6% -20bps » Satisfactory performance in a challenging market environment – particularly in Ireland » Continuing volumes +0.6% » A lag in cost recovery due to level of promotional activity but
Slide 9: Consumer Foods Revenue Analysis
Consumer Foods Revenue Analysis Revenue by Technology Year on Year Growth Meat and Savoury Provisions (0.1%) Meal Solutions +3.5% Dairy Products +4.5% Total +2.3% Meat and Savoury Provisions 42% Meal Solutions 32% Dairy Products 26%
Slide 10: Revenue, Trading Profit, Adjusted EPS
€5,848m REVENUE €555m TRADING PROFIT 237.6 cent ADJUSTEDEPS ©
Slide 11: 2012 Financial Highlights
2012 Financial Highlights Revenue > €5,848m +10.3% reported +1.7% LFL / +2.8% Cont vols Trading profit > €555m +10.8% reported +5.0% LFL Trading margin > 9.5% +10bps Adjusted* EPS > 237.6 cent +11.3% Basic EPS > 152.0 cent -26.0% Free cash flow > €380m 2011: €279m Note: LFL represents growth before
Slide 12: 2012 Revenue: Like-for-like % Growth
2012 Revenue: Like-for-like % Growth Reported Acquisitions/ Reporting Like-for-like growth disposals currency growth Ingredients & Flavours 14.0% 5.6% 5.0% 3.4% Consumer Foods 2.3% (0.6%) 4.4% (1.5%) Group 10.3% 3.7% 4.9% 1.7%
Slide 13: Like-for-like Revenue Growth Analysis
Like-for-like Revenue Growth Analysis INGREDIENTS CONSUMER GROUP & FLAVOURS FOODS €5,848m €4,225m €1,712m LFL +1.7% LFL +3.4% (1.5%) LFL CONT VOL +2.8% CONT VOL +4.0% CONT VOL +0.6% (1.2%) DISCONT VOL (0.7%) DISCONT VOL (2.2%) DISCONT VOL PRICE +0.1% PRICE +0.1% PRICE +0.1% Note: like-for-like repre
Slide 14: Revenue Growth Continuing Volumes
Revenue Growth Continuing Volumes 2012 2011 » KIF Americas* 3.5% 3.3% » KIF EMEA* 1.8% 2.7% » KIF Asia-Pacific* 9.3% 10.0% Ingredients & Flavours 4.0% 4.0% Consumer Foods 0.6% 1.1% Group 2.8% 3.3% Note: * third party revenue by location of customers
Slide 15: 2012 Quarterly Volumes
2012 Quarterly Volumes Group Continuing Volume Growth 5.0% 4.7% 4.5% 4.0% 3.5% 3.0% 2.8% 2.5% 2.0% 1.7% 1.8% 1.5% 1.0% 0.5% 0.0% Q1 Q2 Q3 Q4 I&F Continuing Volume Growth Foods Continuing Volume Growth 8.0% 0.8% 7.0% 0.7% 7.0% 0.7% 0.6% 6.0% 0.6% 5.0% 0.5% 4.0% 0.4% 0.4% 4.0% 0.4% 3.0% 2.5% 0.3% 2.2%
Slide 16: Trading Profit Growth
Trading Profit Growth 2012 2011 Reported LFL €m €m Growth €m Growth % Ingredients & Flavours 506 439 66 9.3% Consumer Foods 130 130 - (2.8%) Eliminations/unallocated (45) (43) (2) - Group before Kerryconnect 591 526 64 7.2% Kerryconnect (centre) (36) (26) (10) - Group 555 501 54 5.0% Note: Like-for-
Slide 17: Trading Margin by Business
Trading Margin by Business 2012 2011 Revenue Trading Profit Revenue Trading Profit €m €m % €m €m % Ingredients & Flavours 4,225 506 12.0% 3,706 439 11.9% Consumer Foods 1,712 130 7.6% 1,674 130 7.8% Eliminations/unallocated (89) (81) – (78) (69) – Group 5,848 555 9.5% 5,302 501 9.4%
Slide 18: 2012 Trading Margin Progression
2012 Trading Margin Progression 575 €555m 525 €501m 475 425 375 FY 2011 Operating leverage/ Kerryconnect Net price/mix Currency Acquisitions/ FY 2012 efficiencies (divisions & centre) disposals Margin 9.4% +0.6% (0.2%) (0.1%) 0.0% (0.2%) 9.5%
Slide 19: Raw Material Costs
Raw Material Costs Food Price Index 170 160 150 140 130 120 110 100 90 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Source: Food and Agriculture Organisation of the United Natio
Slide 20: The Kerryconnect Programme Plan (€350m)
The Kerryconnect Programme Plan (€350m) PHASE 1 - COMPLETED PHASE 2 - UNDERWAY 2010 2011 2012 2013 2014 2015 2016 2010-2012 PHASE 1 2013-2016 PHASE 2 Design and deployment of Finance, Design and deployment of Procurement, Master Data Manufacturing, Supply Chain and Management, Human Resources and Cu
Slide 21: Acquisition & Restructuring Programme FY 2012
Acquisition & Restructuring Programme FY 2012 Cost (net of tax) €m Acquisition integration (Cargill’s flavours business etc) 59 Footprint & supply chain restructuring 41 Cash outflow (net of tax) €m Net cash outflow 50 13 sites closed/streamlined The Group also recorded a loss on disposal of busines
Slide 22: Free Cash Flow (€m)
Free Cash Flow (€m) 2012 2011 Trading profit 555 501 Depreciation (net) 114 101 Increase in working capital (6) (4) Pension contributions paid less pension expense (25) (34) Finance costs (49) (47) Taxation (53) (76) Free cash flow before capital expenditure 536 441 Capital expenditure (net) (156) (
Slide 23: Financial Ratios
Financial Ratios 2012 2011 Net Debt : EBITDA* 1.8x 2.0x EBITDA: net interest* 13.8x 13.5x 5 Year Average 2012 2011 ROAE** 16.5% 17.0% 16.5% ROACE** 12.3% as 12.6% 12.1% CFROI 11.6% 11.5% 9.4% Note: * calculated in accordance with lenders’ facility agreements | ** before brand related intangible asse
Slide 24: Maturity Profile of Net Debt (€m)
Maturity Profile of Net Debt (€m) 31 Dec 2012 31 Dec 2011 Within 1 year (2) (199) Between 1 and 2 years 3 179 Between 2 and 5 years 936 894 Over 5 years 274 414 1,211 1,288 Weighted average maturity (years) 3.8 4.9 Undrawn committed & undrawn standby facilities at 31 Dec €741m
Slide 25: Other Financial Matters
Other Financial Matters €49.2m – up €3.2m as strong cash flows and lower interest FINANCE COSTS rates are offset by impact of acquisitions TAXATION Tax on normal trading activity 16.5% (2011: 17.1%) Net deficit increased by €33m to €245m due mainly to PENSION reduced discount rates. P&L charge up €7
Slide 26: Outlook & Future Prospects
Slide 27: Our Strategy for Growth
Our Strategy for Growth KERRY BUSINESS Kerry Business Model delivering for Group MODEL 1 Kerry Business Transformation – Platform for Growth 1 KERRY Investing for the Future Kerry’s Leading Taste Positioning INGREDIENTS & Delivering Across Nutritional Management Space FLAVOURS Global Technology & In
Slide 28: 1 Kerry Business Transformation
1 Kerry Business Transformation
Slide 29: Kerry’s Leading Taste Positioning
Kerry’s Leading Taste Positioning FOOD & NO.1 GLOBALLY TOP 5 PLAYER IN BREADTH OF BEVERAGE FOR TASTE & GLOBAL APPLICATIONS & FOCUSED INGREDIENT FLAVOURS SENSORY SOLUTIONS EXPERTISE
Slide 30: Embracing Evolving Nutritional Management Space
Embracing Evolving Nutritional Management Space » General Wellness Meeting daily recommended nutrition guidelines (Calories, Fat, Sodium, Sugar, Protein, Fibre etc) » Life Stages & Gender Meeting specific nutrition requirements based upon age and/or gender (Calcium, DHA, Probiotics, Iron etc.) » Con
Slide 31: Global Technology Application and Culinary Leadership
Global Technology Application and Culinary Leadership R&D EXPENDITURE » Best-in-class global development and applications model 220 4.7% 4.9% 4.6% 4.5% 4.4% 200 » Layer and leverage development and 180 0.0% 160 process capability 140 -20.0% 120 -40.0% » Raw material category technology 100 80 167.1
Slide 32: Kerry Global Technology & Innovation Centre EMEA Region
Kerry Global Technology & Innovation Centre EMEA Region Vision: » To develop and establish an industry-leading Kerry Global Technology & Innovation Centre of Excellence serving global and regional customers in the EMEA region Objectives: » Deliver industry-leading technology and innovation for key g
Slide 33: Kerry Global Technology & Innovation Centre Functional Building Blocks
Kerry Global Technology & Innovation Centre Functional Building Blocks Management Centre » I&F Global & Regional Management Customer Centre » Customer Suites and Applications Suites Innovation Centre » Innovation Laboratories, Culinary Theatres, Consumer Sensory Facilities Technical/Commercialisatio
Slide 34: Kerry Ingredients & Flavours Developing Markets Strategy
Kerry Ingredients & Flavours Developing Markets Strategy DEVELOPING MARKETS – DISTRIBUTION OF INGREDIENTS STRATEGIES & FLAVOURS 2012 REVENUES » In line with brand globalisation, GDP growth, population and urbanisation trends in developing markets » Transfer proven Kerry End Use Market and Technology
Slide 35: Kerry Foods: Diversified Product Portfolio and Strong Market Positioning
Kerry Foods: Diversified Product Portfolio and Strong Market Positioning CONSUMER FOODS – ADDED VALUE CHILLED CATEGORIES Segment Markets Key Products Market Position MEAT & SAVOURY PROVISIONS » #1&2 breakfast product brands in Ireland €6.8bn » #1&2 cooked meat brands in Ireland » #1&2 sausage brands
Slide 36: Kerry Foods: GB & Ireland Marketplace
50 60 70 80 90 100 110 120 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Source: Nielsen Global Consumer Confidence Study Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Global* Average Aug-09 Oct-09 Dec-09 GB Feb-10 Apr-10 Jun-10 Aug-10 Kerry Foods: GB & Ireland Marketplace
Slide 37: Kerry Foods: Strategic Brand Investment, Innovation
Kerry Foods: Strategic Brand Investment, Innovation - supported by ‘Lean Efficiency’ CORPORATE PRIORITIES LOCAL BRANDS OTHERS
Slide 38: ‘Securing Sustainable Growth’
‘Securing Sustainable Growth’ Embedding Sustainability in our Business Kerry’s Sustainability plan represents a journey of continuous improvement – an ongoing process and strategy to secure sustainable growth It offers Kerry Group a framework through which to ensure the long-term development of the
Slide 39: Performance Framework (5 Years: 2008–2012)
Performance Framework (5 Years : 2008 – 2012) Performance v Targets KPI Target 5 Year Avg 2008 to 2012 2% to 4% LFL Revenue ✔ +3.4% volume growth Margin 10% trading margin 9.5%** CAGR Adjusted* EPS Growth 10%+ ✔10.8% ROAE* 15%+ ✔16.5% CFROI 12%+ 11.6%** Note: ** target achieved excluding impact of K
Slide 40: Strong Earnings Growth While Increasing ROACE
Strong Earnings Growth While Increasing Return on Capital Employed 14.0% 250.0 13.0% 225.0 12.0% 200.0 11.0% 175.0 10.0% ROACE % EPS* CENT 9.0% 150.0 8.0% 125.0 7.0% 100.0 6.0% 75.0 5.0% 4.0% 50.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 EPS* ROACE* Note: * before brand related intangible a
Slide 41: Long Term Targets (5 Years 2013–2017)
Long Term Targets (5 Years 2013 – 2017) GROWTH » Adjusted EPS* Growth +10% p.a. Achieved by: » Revenue Growth (LFL Volume) Kerry Ingredients & Flavours 4% to 6% p.a. (including emerging markets 10% p.a.) Consumer Foods 2% to 3% p.a. Group 3% to 5% p.a.** » Margin expansion Kerry Ingredients & Flavou
Slide 42: Summary: Future Prospects
Summary: Future Prospects » Encouraging start to 2013 » Strong growth opportunities for Kerry Taste & Nutritional Solutions » 1 Kerry programmes enabling realisation of Kerry business potential » Global alignment objectives and efficiencies delivering excellent results » Continued investment to supp
Slide 43: Additional Information
Slide 44: Business Review – Ingredients & Flavours Americas
Business Review – Ingredients & Flavours Americas 2012 Growth Revenue €1,807m 16% » Continuing volumes +3.5% » Good growth in key Kerry technologies despite some industry sectoral issues » Solid performance in Dairy & Culinary systems » acquisition of Millennium Foods (IN) » acquisition of Griffith
Slide 45: Business Review – Ingredients & Flavours EMEA
Business Review – Ingredients & Flavours EMEA 2012 Growth Revenue €1,614m 9.5% » Continuing volumes +1.8% » Implementation of 1 Kerry strategies drives innovation » Meat technologies record good growth in EMEA developing markets » Assisted by FlavourCraft acquisition in South Africa » Successful pro
Slide 46: Business Review – Ingredients & Flavours Asia-Pacific
Business Review – Ingredients & Flavours Asia-Pacific 2012 Growth Revenue €726m 19.9% » Continuing volumes +9.3% » Continued strong growth in all technologies » Double digit growth through nutritional solutions in China » Significant launches in QSR sector through meat technologies » meat and culina
Slide 47: Kerry Sustainability Programme 2012-2015 Aspirations
1 Kerry Sustainability Programme 2012-2015 ENVIRONMENT MARKETPLACE WORKPLACE COMMUNITY CLIMATE EFFICIENCY WASTE QUALITY SOURCING NUTRITION PEOPLE ETHICS SOCIAL ECONOMIC Continue to improve our environmental Through our leading innovation and Continue to conduct our business in a Be a responsible nei
Slide 48: EPS Reconciliation
EPS Reconciliation 2011 2012 Growth € cent € cent % 213.4 Adjusted* EPS 237.6 11.3% (7.9) Brand related intangible asset amortisation (8.4) - Non-trading items (net of tax) (77.2) 205.5 Basic EPS 152.0 (26.0%) Note: * before brand related intangible asset amortisation and non-trading items (net of t
Slide 49: Net Debt Profile (€m) as at 31 Dec 2012
Net Debt Profile (€m) as at 31 Dec 2012 Net @ Floating @ Fixed debt rates rates Euro 644 415 229 US Dollar 496 41 455 Sterling 108 108 - Other (37) (37) - 1,211 527 684 100% 44% 56% Weighted average period for which rate is fixed: 2.2 years
Slide 50: In excess of €1.5bn Free Cash Flow over 5 years
In excess of €1.5bn Free Cash Flow over 5 years 2012 2011 2010 2009 2008 €m €m €m €m €m Trading profit 555 501 470 422 409 Depreciation (net) & impairment 114 101 148 97 94 Movement in working capital (6) (4) (21) 133* 18 Pension contributions paid less pension expense (25) (34) (41) (42) (34) Capit
Slide 51: IAS 19 Employee Benefits – Impact of New Standard
IAS 19 Employee Benefits – Impact of New Standard » With effect from 1 January 2013, the Group will transition to the revised ‘IAS 19 Employee Benefits’ accounting standard » Interest cost on pensions, net of return on assets, will be recognised in Finance Costs (previously within staff costs in Tra
Slide 52: Shareholder Analysis
Shareholder Analysis Institutions 53% Kerry Co-op 17% Retail 30% Institutional Analysis UK 19% North America 16% Continental / Rest of Europe 13% Ireland 5% Shares in issue 31 December 2012: 175,626,663
Slide 53: Revenues and Profitability
Revenues and Profitability Group Revenues (€bn) Group Trading Profit (€bn) 10 Year CAGR 4.5% 10 Year CAGR 6.1% 7 600 555 5.8 501 470 6 5 3.7 4.1 4.4 4.6 4.8 4.8 4.5 5.0 5.3 as 500 400 309 356 380 384 401 409 422 4 300 3 200 2 1 100 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2003 2004 2005
Slide 54: Cash Flow and Adjusted EPS
Cash Flow and Adjusted EPS* EBITDA (€m) Free Cash Flow (€m) 800 400 380 367 700 669 350 618 601 305 600 300 279 519 500 503 as 250 227 400 200 300 150 200 100 100 50 0 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Adjusted EPS* and Dividends (cent) +11.2% +11.3% +11.8% +11.1% +15.2% +17.2% +11
Slide 55: Glossary / Definitions For Long Term Targets (2013–2017)
Glossary / Definitions For Long Term Targets (2013 – 2017) » Adjusted Earnings: Profit after taxation before brand related intangible asset amortisation and non-trading items (net of tax) » Adjusted EPS: Adjusted earnings/basic weighted average number of shares in issue » LFL Volume Growth: Growth i
Slide 56: Kerry Group Preliminary Statement of Results 2012
KERRY GROUP PRELIMINARY STATEMENT OF RESULTS 2012 26 FEBRUARY 2013