Slide 1: Interim Management Report 2016
Interim Management Report 2016 4 August 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: H1 2016 Interim Management Report
H1 2016 Interim Management Report 1 Review of Business 2 Financial Review 3 Outlook & Future Prospects Stan McCarthy Brian Mehigan CEO Kerry Group CFO Kerry Group
Slide 4: H1 2016 Highlights
H1 2016 Highlights +7.5% +3.2% +70bps 13.1% €379m +12.0% Adjusted EPS* Volume Group Trading ROACE* Free Cash Interim Margin Flow Dividend Solid H1 • Adjusted EPS* increased 7.5% to 133.8 cent • Group revenue at €3 billion reflecting 3.2% volume growth Volume • Group trading margin up 70bps Margin •
Slide 5: H1 2016 – Market Overview
H1 2016 – Market Overview • Macro-economic environment remained challenging Developed Markets • Currency volatility • Consumer trends driving a rapidly changing marketplace • Slower economic growth Developing Markets • Intensifying geopolitical and currency instability • Increased regulation advanci
Slide 6: Revenue and Margin Overview
Revenue and Margin Overview Group €3,037m Volume +3.2% Margin +70bps Taste & Nutrition Consumer Foods €2,379m €697m Volume +3.5% Volume +2.3% Margin +70bps Margin +30bps 6
Slide 7: Business Review – Taste & Nutrition
Business Review – Taste & Nutrition H1 2016 GROWTH Revenue €2,379m +3.5%* Volume Growth by Region Trading profit €304m +7.9% Trading margin 12.8% +70bps 9.5% • Volume growth – continuing to outperform markets • Localised taste preferences and enhanced nutrition drives product innovation • Foodservic
Slide 8: Business Review – Consumer Foods
Business Review – Consumer Foods H1 2016 GROWTH Revenue €697m +2.3%* Trading profit €58m (3.7%) Trading margin 8.3% +30bps • Broader retailer focus on EDLP • Kerry Foods: volume growth led by strong performance in snacking and meal solutions • Continued growth through e-tail • Trading profit – impro
Slide 9: Financial Highlights
Financial Highlights €3,037m Revenue €322m Trading Profit 133.8c Adjusted EPS Brian Mehigan 9 CFO Kerry Group
Slide 10: Consistent Financial Performance in a Volatile and Changing Environment
Consistent Financial Performance in a Volatile and Changing Environment Currency Volatility • Changing consumer challenging status quo GBP BRL ZAR • Customers investing in innovation Raw Material Prices • Currency volatility • Deflationary input cost environment • Partnership model delivering Global
Slide 11: H1 2016 Financial Highlights
H1 2016 Financial Highlights Revenue €3,037m +3.2% volume growth Trading profit €322m +7.4% Trading margin 10.6% +70bps Adjusted EPS* 133.8c +7.5% Basic EPS 126.4c (6.5%) Free cash flow €379m 161% conversion** Note: * before brand related intangible asset amortisation and non-trading items (net of r
Slide 12: Revenue Analysis
Revenue Analysis H1 2015 H1 2016 €3,028m €3,037m 0.3% Volume 3.2% Translation Transaction Acquisition/ Currency Currency Price Disposal (3.7%) (0.2%) (2.2%) 3.2% 12
Slide 13: Revenue – Volume Growth Ahead of Markets
Revenue – Volume Growth Ahead of Markets +3.2% €3,037m +3.5% €2,379m +2.3% €697m Group Taste & Nutrition Consumer Foods Volume Growth 13
Slide 14: Trading Margin – Expansion Ahead of Plan
Trading Margin – Expansion Ahead of Plan +70 bps +70 bps €322m €304m +30 bps €58m Group Taste & Nutrition Consumer Foods Margin Progression 14
Slide 15: Trading Margin Progression H1 2016
Trading Margin Progression H1 2016 €322m €300m H1 2015 Mix / Net price Kerryconnect Translation FX / Acquisitions / H1 2016 operating leverage / transaction FX disposals efficiencies Margin 9.9% +0.4% +0.2% +0.1% (0.2%) +0.2% 10.6% 15
Slide 16: Free Cash Flow
Free Cash Flow H1 2016 H1 2015 €m €m Trading profit 322 300 Depreciation (net) 67 61 Movement in average working capital 120 9 Pension contributions paid less pension expense (20) (24) Cash inflow from operations 489 346 Finance costs paid (net) (24) (22) Income taxes paid (23) (13) Capital expendit
Slide 17: Average Working Capital & Capital Expenditure (net)
Average Working Capital & Capital Expenditure (net) (€m) Working Capital Average Working Capital Days €120m Reduction FY 2012 FY 2013 FY 2014 H1 2015 H2 2015 H1 2016 Capital Expenditure (net) 4.5%* €m 3.8%* 3.8%** 257 3.0%* 229 229 3.1%* 2.7%* H2 177 162 156 H1 FY 2011 FY 2012 FY 2013 FY 2014 FY 201
Slide 18: Financial Ratios
Financial Ratios Banking Ratios H1 2016 H1 2015 FY 2015 Net debt: EBITDA* 1.7x 1.6x 1.9x EBITDA: net interest* 15.7x 19.4x 17.3x Return Ratios ROACE** 13.1% 14.1% 13.6% ROAE** 16.8% 18.1% 17.5% CFROI 14.5% 10.9% 11.3% Note: * calculated in accordance with lender covenants 18 ** before brand related
Slide 19: Maturity Profile of Net Debt
Maturity Profile of Net Debt 796 645 180 143 86 2016 2017 2020 2022 2023 2025 (330) H1 2016 H1 2015 Weighted average maturity years 7.0 6.1 19
Slide 20: Kerryconnect Update
Kerryconnect Update Progress to Date Scope Expansion Agenda to Completion T&N EMEA 2015 acquisitions Cloud migration T&N Asia-Pacific New cloud platform T&N Latin America Foods (phase 1) Foods (phase 2) T&N North America Corporate Foods (phase 2) One global platform – enabling Kerry’s complexity to
Slide 21: Other Financial Matters
Other Financial Matters €39m – an increase of €3m, due to acquisition financing, offset by strong Finance Costs cash generation Net deficit increased by €61m to €314m, primarily due to a decrease in Pension discount rates Raw Materials Deflationary cycle continuing into H2 Brexit Negative impact fro
Slide 22: Outlook & Future Prospects
Outlook & Future Prospects Stan McCarthy 22 CEO Kerry Group
Slide 23: Unprecedented Change in the Food & Beverage Industry
Unprecedented Change in the Food & Beverage Industry 23
Slide 24: Kerry Group: Uniquely Positioned to Meet Customer and Consumer Needs
Kerry Group: Uniquely Positioned to Meet Customer and Consumer Needs No. 1 Taste & Nutrition Kerry Foods: Repositioned Company for Growth Industry leading R&D investment Manufacturing and innovation Integrated Taste, Functional excellence Ingredients & Systems capability Localised Taste & Trusted cu
Slide 25: Kerry's Unique Taste & Nutrition Growth Model
Kerry’s Unique Taste & Nutrition Growth Model Taste Nutrition Pure & Simple Authentic & Familiar Clean Label; Trusted; No Cooking Style; Free From Better For You Artificial Ingredients; Authentic; Food Intolerance; Reduced Salt, Free From Taste of Time; Ethnic Low/No/Reduced Lactose; Salt and Fat, G
Slide 26: Kerry Taste Research Programme
Kerry Taste Research Programme Savoury Taste Technology Natural/ Sugar & Salt Citrus Dairy Taste Smoke & Grill Focus Extracts Perception Yeast Consumer Pure & Simple Pleasure & Indulgence Fresh & Invigorating Authentic & Familiar Analysis Sensory Excellence, Molecular Analytical, Regulatory Process
Slide 27: Kerry Nutrition Research Programme
Kerry Nutrition Research Programme Infant & Children & Early Healthy Lifestage Seniors Toddlers Adolescents Adulthood Ageing Digestive Health Weight Management Allergies & Immunity Muscle Health General Wellness Partners 27
Slide 28: Kerry Case Study: 'Clean Label' Customer Positioning
Kerry Case Study: ‘Clean Label’ Customer Positioning Replace Reduce Remove Re-position Customer expectation Customers seeking to replace Customers seeking to Customers seeking to Customers asking for ingredient(s) with clean label leverage clean label eliminate specific creative ways to alternativ
Slide 29: Kerry's Approach to Clean Label Product Innovation – Scalable Solutions
Kerry’s Approach to Clean Label Product Innovation – Scalable Solutions Delivering • Innovative, consumer preferred products aligned with Clean Consumer Label market Insights & opportunities Clean Label Evolution • Sustainable technical, functional & regulatory solutions • Scalable food & beverage a
Slide 30: Kerry Foods: Continued Innovation for Today's Marketplace
Kerry Foods: Continued Innovation for Today’s Marketplace Authenticity / Flavour New Health ‘Free From’ Snacking Convenience 30
Slide 31: H1 2016 Outlook: Summary
H1 2016 Outlook: Summary • Kerry model resilient and well placed to respond to ongoing volatile and changing macroeconomic and consumer landscape • Unique taste & nutrition, functional ingredients & systems capabilities • Localised innovation and speed to market • Kerry Foods outperforming snacking,
Slide 32: Interim Management Report 2016
Interim Management Report 2016 4 August 2016
Slide 33: Additional Information
Additional Information
Slide 34: Business Review: Taste & Nutrition – Americas
Business Review: Taste & Nutrition – Americas H1 2016 GROWTH Revenue €1,244m +3.5%* • Business volumes +3.5%, pricing (2.0%) • Taste technologies performed well – boosted by 2015 acquisitions (in particular Red Arrow Products) • Continued growth in meat sector in North America • Growth in snacking c
Slide 35: Business Review: Taste & Nutrition – EMEA
Business Review: Taste & Nutrition – EMEA H1 2016 GROWTH Revenue €734m +0.3%* • Business volumes +0.3%, pricing (2.7%) • Overall region challenging • Significant ‘product churn’ in a deflationary environment • Intensifying geopolitical and currency instability • Foodservice channel continued to prov
Slide 36: Business Review: Taste & Nutrition – Asia-Pacific
Business Review: Taste & Nutrition – Asia-Pacific H1 2016 GROWTH Revenue €367m +9.5%* • Business volumes +9.5%, pricing (1.8%) • Excellent performance in APAC developing markets • Taste technologies achieve strong market development • ‘Dairy Complete’ in Indonesia, the Philippines, Vietnam and China
Slide 37: Revenue Growth Components H1 2016
Revenue Growth Components H1 2016 Transaction Translation Acquisitions/ Volumes Price Currency Currency Disposals Total Taste & Nutrition 3.5% (2.2%) (0.2%) (3.8%) 5.3% 2.6% Consumer Foods 2.3% (2.1%) (0.3%) (3.1%) (3.8%) (7.0%) Group 3.2% (2.2%) (0.2%) (3.7%) 3.2% 0.3% 37
Slide 38: Trading Margin by Business
Trading Margin by Business H1 2016 H1 2015 Revenue Trading Profit Revenue Trading Profit €m €m % €m €m % Taste & Nutrition 2,379 304 12.8% 2,318 282 12.1% Consumer Foods 697 58 8.3% 749 60 8.0% Eliminations/unallocated (39) (40) – (39) (42) – Group 3,037 322 10.6% 3,028 300 9.9% 38
Slide 39: Currency Basket - Headwind Increasing in H2
Currency Basket - Headwind Increasing in H2 H1: (4%) H2 (est): (6%) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 2015 39
Slide 40: EPS Reconciliation
EPS Reconciliation H1 2016 H1 2015 Growth € cent € cent % Adjusted EPS* 133.8 124.5 7.5% Brand related intangible asset amortisation (5.8) (4.8) Non-trading items (net of related tax) (1.6) 15.5 Basic EPS 126.4 135.2 (6.5%) 40 Note: * before brand related intangible asset amortisation and non-tradin
Slide 41: Free Cash Flow of €1.8bn Over 5 Years
Free Cash Flow of €1.8bn Over 5 Years FY 2015 FY 2014 FY 2013 FY 2012* FY 2011 €m €m €m €m €m Trading profit 700 636 611 559 501 Depreciation (net) and impairment 126 104 109 114 101 Movement in average working capital (2) (59) (9) (41) (4) Pension contributions paid less pension expense (57) (48) (
Slide 42: Capital Expenditure – 5 Year History
Capital Expenditure – 5 Year History 5 Year Capital Expenditure 2015 2014 2013 2012 2011 Total €m €m €m €m €m €m 4.5%* Capital expenditure (net) 229 257 177 156 162 981 257 3.8%* Depreciation (net) and impairment (126) (104) (109) (114) (101) (554) 229 3.1%* 3.0%* 2.7%* 162 177 Excess capital/deprec
Slide 43: Net Debt (€m) as at 30 June 2016
Net Debt (€m) as at 30 June 2016 Net @ Floating @ Fixed Debt Rates Rates Euro 1,119 244 875 Sterling – – – US Dollar 721 414 307 Other 10 10 – Gross debt 1,850 668 1,182 Cash (330) (330) – Net debt 1,520 338 1,182 Gross debt 100% 36% 64% Net debt 100% 22% 78% Weighted average period for which rate i
Slide 44: 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 45: Shareholder Analysis
Shareholder Analysis Institutions 57% Kerry Co-operative 14% Institutional Analysis UK 15% North America 20% Continental Europe | Rest of World 19% Retail 29% Ireland 3% 45 Shares in issue at 30 June 2016: 175,981,485
Slide 46: Interim Management Report 2016
Interim Management Report 2016 4 August 2016