Kerry Group Plc · EURONEXT:KRZ
Kerry — FY2015 Earnings Presentation
50 slides from Kerry's earnings presentation, February 2016
Slide 1: Preliminary Statement of Results 2015
~~ y > Preliminary Statement of Results 2015 February 2016
Slide 2: Disclaimer: Forward Looking Statements
Disclaimer: Forward Looking Statements This presentation/announcement may contain forward looking statements with projections regarding, among other things, the Company’s strategy, revenues, earnings, trading profit, trading margin, finance costs, tax rate, capital expenditure, dividends, cash flow,
Slide 3: 2015 Preliminary Statement of Results
2015 Preliminary Statement of Results 1 Review of Business 2 Financial Review 3 Outlook & Future Prospects Stan McCarthy Brian Mehigan CEO Kerry Group CFO Kerry Group
Slide 4: 2015 Full Year Highlights
2015 Full Year Highlights +8.2% +3.8% +40bps 13.6% €453m +11.1% Adjusted EPS* Volume Group Trading ROACE* Free Cash Total Dividend Margin Flow Group Model & Outperforming Market Strong Financial Strategy Delivers Growth Rates Performance Record year of business Adjusted EPS* up 8.2% 3.8% Volume Grow
Slide 5: 2015 Overview
2015 Overview Developed Markets Developing Markets • Macro-economic environment stabilised • Slower economic growth • Consumer spending power remains constrained • Geopolitical issues and significant currency movement • ‘New connected consumer’ trends impact • Localisation of taste drives innovation
Slide 6: Revenue and Margin Overview
Revenue and Margin Overview Group €6,105m Volume +3.8% Margin +40bps Taste & Nutrition Consumer Foods €4,716m €1,476m Volume +4.0% Volume +3.0% Margin +40bps Margin +20bps 6
Slide 7: Business Review – Taste & Nutrition
Business Review – Taste & Nutrition 2015 GROWTH Revenue €4,716m +4.0%* Volume Growth by Region Trading profit €663m +11.9% Trading margin 14.1% +40bps 10.1% • Continued margin improvement driven by operating leverage, efficiency programmes and product mix • Increased innovation and customer engageme
Slide 8: Our Taste & Nutrition Business Today
Our Taste & Nutrition Business Today Year On Year Volume Growth Revenue By End Use Market +3.4% 24% Beverage Savoury & Dairy Systems & Flavours 18% Meats 9% Dairy +8.6% 9% Bakery Beverage Systems & Flavours 6% Cereal & Bars 6% Soups, Sauces & Dressings Technology (1.4%) End Use Market 5% Ice-cream &
Slide 9: Business Review – Consumer Foods
Business Review – Consumer Foods 2015 GROWTH Revenue €1,476m +3.0%* Trading profit €126m +0.2% Trading margin 8.5% +20bps • Consumer confidence improves in Ireland & UK • Deflationary environment – encouraging volume growth • Margin improvement in 2015 driven by efficiency programmes and repositione
Slide 10: Performance v 5 Year Group Targets (2013-2017)
Performance v 5 Year Group Targets (2013-2017) GROWTH Target (p.a.) 3 Year Performance Adjusted EPS growth* 10%+ +8.8% – Volume growth** 3% - 5% +3.1% ✔ Margin expansion +30bps +60bps ✔ RETURN ROACE* 12%+ 14.1% ✔ ROAE* 15%+ 18.0% ✔ CFROI 12%+ 11.0% – Achieving Group Targets Note: * before brand rela
Slide 11: Financial Highlights
Financial Highlights €6,105m Revenue €700m Trading Profit 301.9 Adjusted EPS Brian Mehigan 11 CFO Kerry Group
Slide 12: Consistent Delivery in a Volatile and Changing Environment
Consistent Delivery in a Volatile and Changing Environment Currency Volatility USD • Further investment in scientific capability GBP €- 100 • Repositioning of product portfolios ZAR BRL • Investment in flexible technology footprint Raw Material Prices • Robust partnerships / commercial model • Effic
Slide 13: 2015 Financial Highlights
2015 Financial Highlights Revenue €6,105m +3.8% volume growth Trading profit €700m +10.0% Trading margin 11.5% +40bps Adjusted EPS* 301.9c +8.2% Basic EPS 298.7c +9.4% Free cash flow €453m 85% conversion** Note: * before brand related intangible asset amortisation and non-trading items (net of relat
Slide 14: Revenue Analysis
Revenue Analysis 2014 2015 €5,757m €6,105m 6.1% Volume 3.8% Transaction Acquisition/ FX Translation Currency Price/Mix Disposal 6.9% 0.1% (2.2%) (2.5%) 14
Slide 15: Revenue – Volume Growth Ahead of Markets
Revenue – Volume Growth Ahead of Markets Group Volume €m Growth by Quarter 7,000 +3.8% 5.7% 6,000 €6,105 +4.0% 4.1% 5,000 2.9% €4,716 4,000 2.5% 3,000 +3.0% 2,000 Q1 Q2 Q3 Q4 1,000 €1,476 2014 2015 0 Group Taste & Nutrition Consumer Foods Volume Growth 15
Slide 16: Trading Margin – Expansion Ahead of Plan
Trading Margin – Expansion Ahead of Plan % Group 12.0 +40 11.5 bps +40 11.0 bps 10.5 10.0 9.5 11.5% 9.0 €m 14.1% 2011 2012* 2013 2014 2015 700 €700 Taste & Nutrition 600 €663 % 14.5 14.0 500 13.5 13.0 +20 12.5 400 bps 12.0 11.5 300 2011 2012* 2013 2014 2015 8.5% 200 % Consumer Foods 100 9.0 €126 8.5
Slide 17: Trading Margin Progression 2015
Trading Margin Progression 2015 €700m €636m 2014 Operating leverage / Net price Kerryconnect / other Translation currency Disposals / acquisitions 2015 efficiencies Margin 11.1% +0.4% +0.2% (0.2%) (0.1%) +0.1% 11.5% 17
Slide 18: Strong Earnings Growth While Maintaining Return on Capital Employed
Strong Earnings Growth While Maintaining Return on Capital Employed ROACE % EPS* CENT 350 13.6% 14% 325 300 301.9 12% 275 10.8% 278.9 250 257.9 10% 234.0 225 213.4 200 8% 192.1 175 163.9 150 6% 151.8 142.4 125 132.8 100 4% 75 2% 50 25 0% 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 EPS* ROACE
Slide 19: Free Cash Flow
Free Cash Flow 2015 2014 €m €m Trading profit 700 636 Depreciation (net) 126 104 Movement in average working capital (2) (59) Pension contributions paid less pension expense (57) (48) Cash inflow from operations 767 633 Finance costs (47) (42) Taxation (38) (31) Capital expenditure (net) (229) (257)
Slide 20: Financial Ratios
Financial Ratios Banking Ratios 2015 2014 Net debt: EBITDA* 1.9x 1.6x EBITDA: net interest* 17.3x 17.2x Return Ratios ROACE** 13.6% 14.4% ROAE** 17.5% 18.6% CFROI 11.3% 9.1% Note: * calculated in accordance with lender covenants 20 ** before brand related intangible asset amortisation and non-tradin
Slide 21: Strong Balance Sheet
Strong Balance Sheet Maturity Profile of Net Debt • Closing net debt of €1.7bn (2014: €1.2bn) 798 667 • Due to acquisition financing and fx movements 154 • New 10 year €750m debut Eurobond issued 38 144 85 2015 2016 2017 2020 2022 2023 2025 • New 5 year €1.1bn Revolving Credit Facility agreed (236)
Slide 22: Other Financial Matters
Other Financial Matters R&D/Marketing Taste & Nutrition spend up to 4.7% and Foods brand marketing up to 4.6% Spend Net deficit decreased by €140m to €253m, primarily due to an increase in Pension the discount rates Kerryconnect EMEA and Asia-Pacific well progressed, assessing plan for Americas €69.
Slide 23: Outlook & Future Prospects
Outlook & Future Prospects Stan McCarthy 23 CEO Kerry Group
Slide 24: Kerry Business Model: Aligned to Changing Marketplace
Kerry Business Model: Aligned to Changing Marketplace Unique Taste & 1 Kerry Global Focus Kerry Foods Nutrition Positioning & Business Enablement Repositioned for Growth Evolution from Ingredients Global ‘Go-to-market’ Repositioned portfolio for today’s & Flavours portfolio – strategies – snacking –
Slide 25: Kerry Sustainable Business Model – A Proven Strategy for Growth
Kerry Sustainable Business Model – A Proven Strategy for Growth Market Leadership #1 Consumer #1 Taste & Nutrition Foods Holistic Partnerships Consumer Channel Customer Nutrition & General Developing Geography Taste Wellness Markets Sustainability 1 Kerry 25
Slide 26: Taste Technologies & Systems: Strategic Growth Pillars
Taste Technologies & Systems: Strategic Growth Pillars Pure & Simple Authentic & Familiar Fresh & Invigorating Pleasure & Indulgence For self-accountable For consumers who want For consumers seeking For consumers who crave consumers we create taste comfort, nostalgia and products with a feel good pr
Slide 27: Nutrition & General Wellness: Strategic Growth Pillars
Nutrition & General Wellness: Strategic Growth Pillars Free from Better for you Good for you Tailored for you AVOIDANCE BALANCE & MODERATION POSITIVE NUTRITION TAILORED FOR YOU Consumer ‘Free-from’ or ‘zero’ variants of Products with ‘diet’, ‘low’ or ‘less’ Functional products, ‘superfoods’ For indi
Slide 28: Taste & Nutrition: Foodservice Growth Strategies
Taste & Nutrition: Foodservice Trends Driving Growth Strategies Foodservice Traffic • Foodservice has grown at three times the pace of retail (+3.0% v +1.0% 2013-2015) • Foodservice has overtaken retail as the No.1 channel for food and beverage sales in the U.S. • Growth across all markets – in part
Slide 29: Kerry’s Unique Holistic Business Model: Delivering for Customers
Kerry’s Unique Holistic Business Model: Delivering for Customers Customer Intimacy Enabling Growth 29
Slide 30: Kerry Case Study: The Industry’s Broadest Portfolio of Beverage Solutions
Kerry Case Study: The Industry’s Broadest Portfolio of Beverage Solutions Functional & Beverage Systems Taste Nutritional Ingredients Nutritional Foodservice Dry Foodservice Beverage Beverage Beverage Automation Systems Systems Systems Natural Flavours Enzymes Foaming Systems Natural Extracts – Citr
Slide 31: Kerry Foods: Growth Platforms
Kerry Foods: Growth Platforms Consumer Channel Customer Geography We will use consumer-led We will ensure our products We will work collaboratively We’re committed to insight & innovative are readily available to all with our customers to expanding our footprint technology to develop our consumers,
Slide 32: Kerry Foods’ Offerings: Differentiation Through Technology and Brand Investment
Kerry Foods’ Offerings: Differentiation Through Technology and Brand Investment Kerry Foods’ Offerings 32
Slide 33: Significant Technology Investment for Future Growth
Significant Technology Investment for Future Growth Market Leadership Significant Activity Taste & Nutrition #1 Consumer #1 Foods Consumer Channel Nutrition & Customer Taste Developing 2015 ACQUISITIONS General Wellness Markets Geography Red Arrow Island Oasis Wellmune Insight Beverages KFI Savory B
Slide 34: Future Prospects
Future Prospects • Strong underlying business development momentum – benefiting from changing marketplace • solid innovation pipeline driven by our Taste & Nutrition and General Wellness technology platforms • Kerry Foods performing well and delivering for today’s consumer requirements • Group will
Slide 35: Preliminary Statement of Results 2015
~~ y > Preliminary Statement of Results 2015 February 2016
Slide 36: Appendix
Appendix
Slide 37: Business Review: Taste & Nutrition – Americas
Business Review: Taste & Nutrition – Americas 2015 GROWTH Revenue €2,308m +4.1%* • Volume +4.1%, pricing (1.9%) • Increased innovation in wellness, nutrition and snacking categories • Taste technologies drive innovation as customers focus on evolving consumer requirements • Good growth in foodservic
Slide 38: Business Review: Taste & Nutrition – EMEA
Business Review: Taste & Nutrition – EMEA 2015 GROWTH Revenue €1,546m +0.9%* • Volume +0.9%, pricing (2.9%) • Kerry Global Technology & Innovation Centre drives strong customer engagement • Innovation driven by demand for low sodium, calorie and fat reduction and ‘better-for-you’ offerings • Continu
Slide 39: Business Review: Taste & Nutrition – Asia-Pacific
Business Review: Taste & Nutrition – Asia-Pacific 2015 GROWTH Revenue €784m +10.1%* • Volume +10.1%, pricing (2.1%) • Strong Kerry performance – realising benefits of Group investment • Regional economic growth slower but urbanisation and consumer trends increase demand for innovation and speed of l
Slide 40: Revenue Growth Components FY 2015
Revenue Growth Components FY 2015 Trading Reporting Disposals/ Total Volumes Price Currency Currency Acquisitions Taste & Nutrition 4.0% (2.3%) 0.0% 6.9% 0.1% 8.7% Consumer Foods 3.0% (1.9%) 0.4% 6.6% (10.3%) (2.2%) Group 3.8% (2.2%) 0.1% 6.9% (2.5%) 6.1% 40
Slide 41: Trading Margin by Business
Trading Margin by Business 2015 2014 Revenue Trading Profit Revenue Trading Profit €m €m % €m €m % Taste & Nutrition 4,716 663 14.1% 4,337 593 13.7% Consumer Foods 1,476 126 8.5% 1,509 125 8.3% Eliminations/unallocated (87) (89) – (89) (82) – Group 6,105 700 11.5% 5,757 636 11.1% 41
Slide 42: EPS Reconciliation
EPS Reconciliation 2015 2014 Growth € cent € cent % Adjusted EPS* 301.9 278.9 8.2% Brand related intangible asset amortisation (10.6) (8.2) – Non-trading items (net of related tax) 7.4 2.3 – Basic EPS 298.7 273.0 – 42 Note: * before brand related intangible asset amortisation and non-trading items (
Slide 43: Free Cash Flow (€m)
Free Cash Flow (€m) 5 year free cash flow of €1.8bn 500 €453m 450 €412m 400 €344m 350 €303m 300 €279m 250 200 150 100 50 0 2011 2012 2013 2014 2015 Earnings conversion 74% 84% 91% 62% 85% 43 Note: * free cash flow as a % of adjusted earnings after tax
Slide 44: Net Debt (€m) as at Dec 2015
Net Debt (€m) as at 31 Dec 2015 Net @ Floating @ Fixed Debt Rates Rates Euro 1,057 168 889 Sterling (19) (19) – US Dollar 691 369 322 Other (79) (79) – Net debt 1,650 439 1,211 2015 27% 73% 2014 27% 73% Weighted average period for which rate is fixed: 7.6 years (2014: 4.4 years) 44
Slide 45: Exchange Rate Movements
Exchange Rate Movements Average 2015 v 2014 16% 10% 4% 3% 0% 1% 0% USD GBP MXN BRL MYR AUD CAD ZAR RUB -18% -34% Latest Exchange Rates – 2016* v Average 2015 1% USD GBP MXN BRL MYR AUD CAD ZAR RUB -6% -7% -9% -8% -16% -21% -23% -25% 45 Note: * source – ECB foreign exchange rates as of 19 February 20
Slide 46: Group Long Term Targets (5 Years 2013-2017)
Group Long Term Targets (5 Years 2013-2017) Growth Adjusted EPS* 10%+ p.a. by: VOLUME GROWTH MARGIN EXPANSION Taste & Nutrition 4% to 6% p.a. Taste & Nutrition 50bps p.a. Consumer Foods 2% to 3% p.a. Consumer Foods 20bps p.a. Group 3% to 5% p.a.** Group 30bps p.a. (** assumes market growth rate of 2
Slide 47: Revenues and Profitability
Revenues and Profitability Group Revenues (€m) Group Trading Profit (€m) 5 year CAGR 4.2% 5 year CAGR 8.3% 700 6,105 636 5,848 5,837 611 5,757 559 5,302 501 2011 2012 2013 2014 2015 2011 2012* 2013 2014 2015 Taste & Nutrition Trading Profit Consumer Foods Trading Profit 800 13.7% 14.1% 8.3% 8.5% 180
Slide 48: Cash Flow and Adjusted EPS
Cash Flow and Adjusted EPS* Adjusted Earnings*(€m) Free Cash Flow (€m) 5 year CAGR 9.5% 5 year CAGR 8.2% 453 531 412 490 453 344 411 303 375 279 2011 2012** 2013 2014 2015 2011 2012** 2013 2014 2015 Adjusted EPS* Dividends Per Share (cent) 5 year CAGR 9.5% 5 year CAGR 11.7% +11.1% +8.2% +12.5% +8.1%
Slide 49: Shareholder Analysis
Shareholder Analysis Institutions 57% Kerry Co-operative 14% Institutional Analysis UK 16% North America 20% Continental Europe | Rest of World 18% Retail 29% Ireland 3% 49 Shares in issue at 31 December 2015: 175,884,469
Slide 50: Preliminary Statement of Results 2015
~~ y > Preliminary Statement of Results 2015 February 2016