Kerry Group PLC · EURONEXT:KRZ
Kerry — H1 2011 Earnings Presentation
41 slides from Kerry's earnings presentation, Aug 17, 2011
Slide 1: Interim Management Report
Interim Management Report 17 August 201 | KERRY
Slide 2: Disclaimer: Forward Looking Statements
Disclaimer: Forward Looking Statements This presentation contains forward looking statements which reflect management expectations based on currently available data. However actual results will be influenced by macro economic conditions, food industry supply and demand issues, foreign exchange fluct
Slide 3: 2011 Interim Management Report
2011 Interim Management Report » Review of Business Stan McCarthy CEO » Financial Review Brian Mehigan CFO » Outlook and Future Prospects Stan McCarthy CEO » Q&A
Slide 4: H1 2011 Results Highlights
H1 2011 Results Highlights GROUP LFL REVENUE GROUP ADJUSTED* INTERIM REVENUE OF GROWTH TRADING MARGIN EPS DIVIDEND €2.6bn +8.4% 8.1% +9.7% +11.4% » Adjusted* EPS increased by 9.7% to 86.8 cent » Group revenue increased by 9.4% to €2.6 billion (+8.4% LFL) » Volume growth +3.6%, price +5.0%, trading c
Slide 5: Global Industry Overview
Global Industry Overview » Challenging operating environment » Significant raw material and input cost inflation » Consumer spending remains cautious and value focused » Promotional activity driving less favourable product mix » Robust performance by leading processors/foodservice chains » Cost reco
Slide 6: H1 2011 Like-for-like Revenue Growth Analysis
H1 2011 Like-for-like Revenue Growth Analysis Group: €2,650m +8.4% LFL Volume +3.6% Price +5.0% Ingredients & Consumer Flavours: €1,973m Foods: €944m +9.6% LFL +5.3% LFL Volume +4.1% Volume +2.0% Price +5.7% Price +3.5% Note: like-for-like represents revenue growth before subsidiary translation and
Slide 7: Business Review – Ingredients & Flavours
Business Review – Ingredients & Flavours H1 2011 Like-for-like Revenue €1,973m 9.6% Trading profit €181m 9.7% Trading margin 9.2% 0bps » Sustained growth in all regions (volumes +4.1%) » Successful cost recovery and efficiency programmes » Integrated technology approach delivering for customers » Su
Slide 8: Business Review – Consumer Foods
Business Review – Consumer Foods H1 2011 Like-for-like Revenue €944m 5.3% Trading profit €64m 6.0% Trading margin 6.8% -30bps » Volumes up 2% – (UK up 3%, ROI down 1%) » Good performance against background of constrained consumer spend » Promotional activity deeper and wider » Lag in cost recovery i
Slide 9: Financial Review
Financial Review
Slide 10: H1 2011 Financial Highlights
H1 2011 Financial Highlights Revenue > €2,650m 8.4% like-for-like 9.4% reported Trading profit > €214m 6.1% like-for-like 4.8% reported Trading margin > 8.1% -30bps Adjusted* profit after tax > €152m 9.9% Adjusted* EPS > 86.8 cent +9.7% Free cash flow > €48m H1 2010: €117m Note: * before acquisition
Slide 11: Group Revenue Growth Components
Group Revenue Growth Components 8.4% 9.4% 3.6% 5.0% (0.2%) (1.5%) 2.5% Acquisitions/disposals Price/mix Volume Total Trading currency Reporting currency Note: year on year % change
Slide 12: Ingredients & Flavours Revenue Growth Components
Ingredients & Flavours Revenue Growth Components 9.6% 10.4% 4.1% 5.7% (0.2%) (1.8%) 2.6% Acquisitions/disposals Price/mix Volume Total Trading currency Reporting currency Note: year on year % change
Slide 13: Consumer Foods Revenue Growth Components
Consumer Foods Revenue Growth Components 5.3% 6.6% 2.0% 3.5% (0.2%) (0.5%) 1.8% Acquisitions/disposals Price/mix Volume Total Trading currency Reporting currency Note: year on year % change
Slide 14: Trading Profit Growth
Trading Profit Growth H1 2011 H1 2010 LFL LFL €m €m Growth Growth % Ingredients & Flavours 181 164 16 9.7% Consumer Foods 64 63 4 6.0% Eliminations/unallocated (24) (23) (1) - Group before Kerryconnect 221 204 19 9.6% Kerryconnect (7) - (7) - Group 214 204 12 6.1%
Slide 15: Trading Margin by Business
Trading Margin by Business H1 2011 H1 2010 Revenue Trading Profit Revenue Trading Profit €m €m % €m €m % Ingredients & Flavours 1,973 181 9.2% 1,788 164 9.2% Consumer Foods 944 64 6.8% 885 63 7.1% Eliminations/unallocated (267) (31) - (252) (23) - Group 2,650 214 8.1% 2,421 204 8.4%
Slide 16: Trading Margin Progression
Trading Margin Progression €214m €204m Margin 8.4% +0.8% (0.2%) (0.6%) (0.1%) +0.0% (0.2%) 8.1%
Slide 17: Raw Material Cost % Change on Prior Year Spend
Raw Material Cost % Change on Prior Year Spend
Slide 18: Operating Model/Kerryconnect – H1 Impact
Operating Model/Kerryconnect – H1 Impact » Significant benefits from 1 Kerry reorganisation in previous years delivering for the businesses » Investing in Kerryconnect (systems and processes) and shaping our new operating model » Total spend in H1 €16m (incremental) » Capital spend €9m » P&L impact
Slide 19: Interim Free Cash Flow (€m)
Interim Free Cash Flow (€m) H1 2011 H1 2010 Trading profit 214 204 Depreciation (net) 55 51 Increase in working capital (85) (26) Pension contributions paid less pension expense (16) (14) Finance costs (25) (24) Taxation (35) (33) Free cash flow before capital expenditure 108 158 Capital expenditure
Slide 20: Financial Ratios
Financial Ratios H1 2011 H1 2010 EBITDA : net interest* 11.6x 8.2x Net debt : EBITDA* 1.7x 2.2x ROAE** 16.6% 17.0% ROACE** 12.5% 12.2% CFROI 9.1% 15.2% Note: * calculated in accordance with lenders facility agreements ** before acquisition related intangible asset amortisation and non-trading items
Slide 21: Maturity Profile of Net Debt (€m)
Maturity Profile of Net Debt (€m) 30 June 2011 31 Dec 2010 30 June 2010 Within 1 year (49) 31 (94) Between 1 and 2 years 160 261 116 Between 2 and 5 years 573 408 761 Over 5 years 404 412 416 1,088 1,112 1,199 Weighted average maturity (years) 5.4 4.8 5.2 Facilities increased and maturity profile of
Slide 22: Other Financial Matters
Other Financial Matters » Finance costs Down €5.5m – lower interest rates and lower average borrowings » Taxation Tax on normal trading activity 17.5% (FY 2010: 17.5%, H1 2010: 18.2%) » Pension Net deficit decreased by €15m to €130m due mainly to increased discount rates » Currency US dollar adverse
Slide 23: Outlook & Future Prospects
KERRY Outlook & Future Prospects
Slide 24: Kerry Group Growth Model – 1 Kerry Positioning
Kerry Group Growth Model – 1 Kerry Positioning » 1 Kerry embraces Group’s ‘Dual Strategy for Growth’ - building on our global leadership in ingredients & flavours and our chilled foods’ leadership position in the UK and Irish markets » Successful implementation of ‘go-to-market’ strategies in line w
Slide 25: 1 Kerry – Realising the Potential
1 Kerry – ‘Realising the Potential’ 1 Kerry Benefits » Multinationals globalising brands » Ability to grow globally (CPG, efficient global management » Collaborative brand innovation model) » Consumer-ready solutions » Deeper market knowledge » Synergistic benefits through R&D and » Optimisation of
Slide 26: Our Strategic Growth Plan
Our Strategic Growth Plan » 1 Kerry » Compass for the future » Realisation of Kerry business potential » Business transformation programme well underway » Providing unrivalled customer solutions to an expanding global consumer marketplace » Investment for growth in developed and developing markets »
Slide 27: 2011 Outlook: Summary
2011 Outlook: Summary » On track to deliver full year growth targets » Well focused on business inflationary challenges » Ingredients & Flavours » good innovation pipeline » continued deployment of technologies in developing markets » Consumer Foods » brand portfolio optimisation » ensuring relevanc
Slide 28: Additional Information
Additionaleinformation
Slide 29: Business Review – Ingredients & Flavours: Americas
Business Review – Ingredients & Flavours Americas H1 2011 Like-for-like Revenue €762m 9.8% » Volumes up 3.9% » Good cost recovery (5.9% increase in pricing/mix) » Meat – coatings volumes favourable, added value product development despite challenges in meat industry » Strong growth in culinary & sna
Slide 30: Business Review – Ingredients & Flavours: EMEA
Business Review – Ingredients & Flavours EMEA H1 2011 Like-for-like Revenue €653m 9.3% » Volumes up 2.9% » Good cost recovery (6.4% increase in pricing/mix) » Savoury & Dairy » growth through dairy flavours in dairy and ice-cream applications » Beatreme™ range of dairy systems and cultured ingredien
Slide 31: Business Review – Ingredients & Flavours: Asia-Pacific
Business Review – Ingredients & Flavours Asia-Pacific H1 2011 Like-for-like Revenue €293m 12.8% » Volumes up 10% » Good cost recovery (4% increase in pricing/mix) » Strong growth through QSR’s » Meat technology – good growth in Australia and New Zealand » Expansion of coatings – acquisition of EBI C
Slide 32: EPS Reconciliation
EPS Reconciliation H1 2010 H1 2011 Growth € cent € cent % 79.1 Adjusted* EPS 86.8 9.7% (3.4) Acquisition related intangible asset amortisation (3.3) (0.1) Non-trading items (net of tax) (1.3) 75.6 Basic EPS 82.2 8.7% Note: * before acquisition related intangible asset amortisation and non-trading it
Slide 33: Adjusted EPS – Revised Calculation Basis
Adjusted EPS – Revised Calculation Basis FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 H1 2010 Adjusted earnings €m 246.1 249.0 257.5 268.9 291.4 340.9 140.6 (as reported) Computer software €m (1.5) (2.0) (2.6) (3.6) (4.5) (4.2) (1.9) amortisation Adjusted earnings €m 244.6 247.0 254.9 265.3 286.9
Slide 34: Five Year Free Cash Flow (€m) – Full Year
Five Year Free Cash Flow (€m) – Full Year 2010 2009 2008 2007 2006 EBITDA 618 519 503 500 487 Movement in working capital (21) 133* 18 (9) (35) Pension contributions paid less pension expense (41) (42) (34) (29) (11) Finance costs (58) (78) (73) (79) (77) Taxation (54) (57) (42) (37) (35) Free cash
Slide 35: Net Debt Profile (€m) as at 30 June 2011
Net Debt Profile (€m) as at 30 June 2011 Net @ Floating @ Fixed debt rates rates Euro 498 435 63 US Dollar 486 72 414 Sterling 88 88 - Other 16 16 - 1,088 611 477 100% 56% 44% Weighted average period for which rate is fixed: 3.7 years
Slide 36: Euro - Sterling Trend
Euro - Sterling Trend H1 H2 0.88 0.86 0.86 0.82 H1 2011 H1 2010 Avg fx rate 0.87 0.86 % change -1.2%
Slide 37: Euro – US Dollar Trend
Euro – US Dollar Trend H1 H2 1.45 1.40 1.34 1.34 1.23 H1 2011 H1 2010 Avg fx rate 1.41 1.32 % change -6.8%
Slide 38: Performance v Current Targets
Performance v Current Targets Performance v Targets to Date KPI Target 3 Year Avg 2011 2012 2008 to 2010 +2% to +4% LFL Revenue ✔ +3.7% On track volume growth 10% trading margin Margin ✔ +37bps pa Behind** (30bps pa) Adjusted* EPS CAGR 10%+ On track Growth ✔ 10.6% ROAE* 15%+ ✔ 16.5% On track CFROI 1
Slide 39: Long Term Targets
Long Term Targets » Adjusted* EPS Growth 10%+ p.a. Driven 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 & Flavours 50 bps p.a. Consumer Foods 20
Slide 40: Shareholder Analysis
Shareholder Analysis Institutions 50% Kerry Co-op 23% Institutional Analysis UK 17% North America 15% Retail 27% Continental Europe / Rest of World 12% Ireland 6% Shares in issue at 30 June 2011 was 175,522,816
Slide 41: Interim Management Report
Interim Management Report 17 August 201 | KERRY