Kerry Group Plc · EURONEXT:KRZ
Kerry — H1 2015 Earnings Presentation
47 slides from Kerry's earnings presentation, 2015
Slide 1: Kerry
ERRY
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 2015 Interim Management Report
H1 2015 Interim Management Report Stan McCarthy Brian Mehigan CEO CFO Outlook & Review of Financial Future Business Review Prospects
Slide 4: H1 2015: Results Highlights
H1 2015: Results Highlights Adjusted Group Trading Interim Volume ROACE* EPS* Margin Dividend +8.1% +2.7% +40bps +14.1% +11.1% › Adjusted EPS* increased 8.1% to 124.5 cent › Group revenue at €3.0 billion reflecting 2.7% volume growth › Group trading margin up 40bps › Ingredients & Flavours +40bps ›
Slide 5: H1 2015 Overview
H1 2015 Overview › Changing marketplace, ‘New Consumer’ trends › Changing retail and foodservice dynamics › Increased volatility, impact of currency movements › Developed markets: broadly stable but repositioning for evolving market conditions › Developing markets: geopolitical issues persist but zo
Slide 6: Revenue & Margin Overview
Revenue & Margin Overview GROUP €3,028m Volume: +2.7% Margin: +40bps INGREDIENTS & FLAVOURS CONSUMER FOODS €2,318m €749m Volume: +3.0% Volume: +1.9% Margin: +40bps Margin: +20bps 6
Slide 7: Business Review – Ingredients & Flavours
Business Review – Ingredients & Flavours H1 2015 GROWTH Revenue €2,318m +3.0%* Trading profit €281m +12.3% Trading margin 12.1% +40bps › Volume +3.0% and pricing (2.8%) › Trading profit +12.3% › Margin growth of 40bps › Taste & Nutrition platforms sustain business development › Solid performance in
Slide 8: Ingredients & Flavours Revenue Analysis
Ingredients & Flavours Revenue Analysis REVENUE BY TECHNOLOGY* H1 2015 YEAR ON YEAR VOLUME GROWTH Americas +3.3% Taste & Nutrition EMEA +0.7% Asia-Pacific +7.2% Savoury & Dairy 41% Total +3.0% Beverage 20% Cereal & Sweet 17% Functional Ingredients | Pharma 14% Regional Technologies 8% * As at 31 Dec
Slide 9: Business Review – Consumer Foods
Business Review – Consumer Foods H1 2015 GROWTH Revenue €749m +1.9%* Trading profit €60m (3.9%) Trading margin 8.0% +20bps › Volume +1.9% and pricing (2.6%) › Margin growth of 20bps › Portfolio repositioning to-date delivering against changing consumer environment › MBO of ‘Direct-to-Store’ complete
Slide 10: Financial Highlights
Brian Mehigan CFO Financial REVENUE TRADING PROFIT ADJUSTED EPS Highlights €3,028m €300m 124.5 cent
Slide 11: Solid Financial Performance in a Changing Market
Solid Financial Performance in a Changing Market › Changing consumer and economic environment › Input cost deflation › Financial market volatility › 1 Kerry investment › Portfolio repositioning 11
Slide 12: H1 2015 Financial Highlights
H1 2015 Financial Highlights Revenue €3,028m +2.7% volume growth Trading profit €300m +9.0% Trading margin 9.9% +40bps Adjusted EPS* 124.5 cent +8.1% Basic EPS 135.2 cent +22.0% Strong cash Free cash flow €192m generation Note:* before brand related intangible asset amortisation and non-trading item
Slide 13: Revenue Analysis
Revenue Analysis H1 2014 H1 2015 €2,893m €3,028m GROWTH YOY 4.7% VOLUME DISPOSAL/ CURRENCY 2.7% ACQUISITION 8.4% (3.8%) PRICE (2.7%) 13
Slide 14: Revenue – Volume Growth Ahead of Markets
Revenue – Volume Growth Ahead of Markets Volume +2.7% Price (2.7%) +3.0% 3,000 €3,028m (2.8%) 2,500 €2,318m 2,000 +1.9% 1,500 (2.6%) 1,000 500 €749m 0 Group Ingredients & Flavours Consumer Foods 14
Slide 15: Continued Trading Margin Expansion
Continued Trading Margin Expansion Margin Progression +40 Trading Margin % bps +40 bps 350 9.9% 12.1% 300 €300m 250 €281m 200 +20 bps 150 100 8.0% 50 €60m 0 Group Ingredients & Flavours Consumer Foods 15
Slide 16: Trading Margin Progression H1 2015 – Group
Trading Margin Progression H1 2015 – Group 400 350 300 250 200 150 H1 2014 Operating leverage / Net price Currency Kerryconnect / Disposals / H1 2015 efficiencies pension acquisitions Margin 9.5% +0.4% +0.2% +0.0% (0.3%) +0.1% +9.9% 16
Slide 17: Free Cash Flow (€m)
Free Cash Flow (€m) H1 2015 H1 2014 Trading profit 300 275 Depreciation (net) 61 52 Movement in average working capital 9 (73) Pension contributions paid less pension expense (24) (21) Finance costs (22) (21) Taxation (13) (12) Free cash flow before expenditure 311 200 Capital expenditure (net) (119
Slide 18: Financial Ratios
Financial Ratios BANKING RATIOS H1 2015 H1 2014 Net debt: EBITDA* 1.6x 1.5x EBITDA: net interest* 19.4x 13.3x RETURN RATIOS ROAE** 18.1% 18.2% ROACE** 14.1% 14.3% CFROI 10.9% 10.7% Note: * calculated in accordance with lender covenants 18 ** before brand related intangible asset amortisation and non
Slide 19: Maturity Profile of Net Debt (€m)
Maturity Profile of Net Debt (€m) H1 2015 H1 2014 Weighted average maturity years 6.1 5.8 654 660 560 479 460 360 260 151 160 85 52 60 34 0 (40) 2015 2015 2016 2017 2020 2022 2023 2025 (140) (178) (240) New 5 year €1.1bn revolving credit facility now in place – extending debt maturity profile 19
Slide 20: Acquisition and Disposal Update
Acquisition and Disposal Update ACQUISITIONS COMPLETED Taste Nutrition Developing Markets Consumer Foods Insight Beverages KFI Savory Others Rollover Ltd ACQUISITIONS SIGNED Taste Nutrition Developing Markets Consumer Foods PST Baltimore Spice DISPOSALS COMPLETED Ingredients & Flavours Consumer Food
Slide 21: Other Financial Matters
Other Financial Matters FINANCE €36.3m – an increase of €4.4m due primarily to exchange rate and COSTS pension finance Net pension deficit €361m – cost up significantly and actions being PENSION taken to address Deployment on track in EMEA and Asia-Pacific. Incremental costs KERRYCONNECT year-on-yea
Slide 22: Kerry Investor Day 2015
Kerry Investor Day 2015 Kerry Investor Day 2015 Kerry Global Technology and Innovation Centre, Naas 15 October 2015
Slide 23: Outlook and Future Prospects
Stan McCarthy CEO Outlook and Future Prospects
Slide 24: The Changing Marketplace – ‘New Consumer’
The Changing Marketplace – ‘New Consumer’ The ‘New Consumer’ consumption and shopping trends present challenges for traditional food retailers and CPG companies › Demographics › Attitude › Pace of life › Awareness 24
Slide 25: The Changing Marketplace – New Shopper Behaviour
The Changing Marketplace – New Shopper Behaviour › Shopping for immediate satisfaction – 25% › Same weekly shopping list of all meals consumed by millennials › Lowest price, multi buys include items purchased the same day › Use of mobile technology › Shopping for solutions › Seeking total value, fre
Slide 26: The Changing Marketplace – Foodservice/Retail Trends
The Changing Marketplace – Foodservice/Retail Trends Better For You Fresh & Clean Customisation healthier options authentic ingredients, making every experience ‘clean label’ personal, fun and interactive Snacking Premiumisation Indulgence the new meal the growth of handcrafted dessert inspired ever
Slide 27: Development Driven by Foodservice Trends
The Changing Marketplace – Development Driven by Foodservice Trends The foodservice channel continues to grow and steal consumer share from retail. Growth broadening from the QSR sector to fast casual, c-stores and supermarket foodservice segments › Global chain / QSR sector diversifying › Local / r
Slide 28: Kerry Market Positioning
Kerry Market Positioning › Market leading Taste & Nutrition › Speed of innovation platforms › Accelerating growth in › Authentic Taste portfolio Developing Markets › Depth of Nutrition & General › Expanding global Foodservice Wellness capability portfolio and growth platforms › Global Technology App
Slide 29: Key Nutrition Market Segments Linked to Life-stages
Key Nutrition Market Segments Linked to Life-stages Infant & Children & Early Healthy Demographic Seniors Toddlers Adolescents Adulthood Ageing Rapid growth & Learning & Lifestyle factors, Maintenance/ Specific health issues development development. maternal health prevention arise/manage health Hea
Slide 30: Kerry Nutrition & Wellness – Food and Beverage Focus
Kerry Nutrition & Wellness – Food and Beverage Focus ‘BETTER-FOR- ‘GOOD-FOR- ‘TAILORED- Category ‘FREE FROM’ YOU’ YOU’ FOR-YOU’ Avoidance Balance & Targeted Nutrition Moderation Positive Nutrition ‘Free-from’ or ‘zero’ Products with ‘diet’, Functional products, For individuals within the variants of
Slide 31: Kerry Global Foodservice Strategy
Kerry Global Foodservice Strategy Kerry Focus: Foodservice channel including C-stores in developed and developing markets. Global, Regional & Local cuisines and customised solutions › Continue to drive growth in Dual Strategy Foodservice Channel through Chain Menu innovation and Global Foodservice G
Slide 32: Consumer Foods: Market Dynamics, Kerry Foods Positioning
Consumer Foods: Market Dynamics Kerry Foods Positioning UK & Ireland Kerry Foods Today › Recovery is firmly on the horizon › Repositioned portfolio › Unemployment falling › Brand leadership › Average earnings growth vs cost › Diversified channel and customer base of living › Outperforming etail grow
Slide 33: 2015 Outlook: Summary
2015 Outlook: Summary › Focused and well positioned for changing marketplace › Taste, Nutrition & Wellness platforms aligned to retail and foodservice dynamics › Repositioned Kerry foods portfolio aligned to snacking, meal solutions and channel diversification › Underpinned by Kerry Technology & Inn
Slide 34: Questions and Answers
Questions and Answers
Slide 35: Additional Information
Additional Information
Slide 36: Business Review – Ingredients & Flavours Americas
Business Review – Ingredients & Flavours Americas H1 2015 GROWTH Revenue €1,080m +3.3%* › Volumes +3.3%, pricing (2.0%) › Solid Kerry performance – outperforming industry growth rates › Taste technologies delivering innovation in retail and foodservice channels › Progress through ‘clean label’ techn
Slide 37: Business Review – Ingredients & Flavours EMEA
Business Review – Ingredients & Flavours EMEA H1 2015 GROWTH Revenue €789m +0.7%* › Volumes +0.7%, pricing (3.8%) › Stabilised overall market but consumer spend constrained › Geopolitical issues persist in developing zones › Encouraging innovation pipeline assisted by Global Centre in Ireland › Impr
Slide 38: Business Review – Ingredients & Flavours Asia-Pacific
Business Review – Ingredients & Flavours Asia-Pacific H1 2015 GROWTH Revenue €414m +7.2%* › Volumes +7.2%, pricing (2.4%) › Good Kerry market development despite reported lower level of economic activity › Solid requirement for innovation – particularly through nutritional and wellness applications
Slide 39: Revenue Growth Components H1 2015
Revenue Growth Components H1 2015 TRADING LIKE-FOR- REPORTING DISPS/ VOLUMES PRICE TOTAL CURRENCY LIKE CURRENCY ACQS Ingredients 3.0% (2.8%) 0.0% 0.2% 8.8% (0.4%) 8.6% & Flavours Consumer 1.9% (2.6%) 0.2% (0.5%) 6.7% (12.6%) (6.4%) Foods Group 2.7% (2.7%) 0.1% 0.1% 8.4% (3.8%) 4.7% 39
Slide 40: Trading Margin by Business
Trading Margin by Business H1 2015 H1 2014 TRADING TRADING FY 2014 REVENUE PROFIT REVENUE PROFIT MARGIN €M €M % €M €M % % Ingredients & Flavours 2,318 281 12.1% 2,133 251 11.7% 13.7% Consumer Foods 749 60 8.0% 801 62 7.8% 8.3% Eliminations/unallocated (39) (41) – (41) (38) – – Group 3,028 300 9.9% 2
Slide 41: EPS Reconciliation
EPS Reconciliation H1 2014 H1 2015 GROWTH € CENT € CENT % 110.8 Basic EPS 135.2 22.0% 4.3 Brand related intangible asset amortisation 4.8 0.1 Non-trading items (net of related tax) (15.5) 115.2 Adjusted EPS* 124.5 +8.1% Note:* before brand related intangible asset amortisation and non-trading items
Slide 42: Net Debt (€m) as at 30 June 2015
Net Debt (€m) as at 30 June 2015 @ FLOATING @ FIXED DEBT RATES RATES Euro 598 293 305 Sterling – – – US Dollar 844 531 313 Other 13 13 – Gross debt 1,455 837 618 Cash (178) (178) – Net Debt 1,277 659 618 Gross Debt 100% 58% 42% Net Debt 100% 52% 48% Weighted average period for which rate is fixed: 6
Slide 43: Currency Basket – Tailwind to Soften in H2
Currency Basket – Tailwind to Soften in H2 H1 2015 June m/e 2015 2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 43
Slide 44: Free Cash Flow of €1.6bn Over 5 Years
Free Cash Flow of €1.6bn Over 5 Years 2014 2013 2012* 2011 2010 €M €M €M €M €M Trading profit 636 611 559 501 470 Depreciation (net) and impairment 104 109 114 101 148 Movement in working capital (59) (9) (41) (4) (21) Pension contributions paid less pension expense (48) (36) (30) (34) (41) Capital
Slide 45: Group Long Term Targets (5 Years 2013-2017)
Group Long Term Targets (5 Years 2013-2017) Adjusted EPS* Growth +10% p.a. by VOLUME GROWTH MARGIN EXPANSION Ingredients & Flavours 4% to 6% p.a. Ingredients & Flavours 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
Slide 46: Shareholder Analysis
Shareholder Analysis Continental Europe | Ireland 2% Rest of World 15% Kerry Co-operative 14% North America 20% UK 18% Retail 31% Shares in issue at 30 June 2015: 175,875,719 46
Slide 47: Kerry
ERRY