Slide 1: Preliminary Statement of Results 2016
Preliminary Statement of Results 2016 February 2017
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 Group’s strategy, revenues, earnings, trading profit, trading margin, finance costs, tax rate, capital expenditure, dividends, cash flow, n
Slide 3: Preliminary Statement of Results 2016
2016 Preliminary Statement of Results 1 Review of Business 2 Stan McCarthy, CEO Financial Review 3 Brian Mehigan, CFO Outlook and Future Prospects Stan McCarthy, CEO 3
Slide 4: 2016 – Another Year of Successful Growth
REVIEW OF BUSINESS HIGHLIGHTS GROWTH RETURNS 2016 – • Good business growth in a Adjusted* EPS ROACE* Another competitive environment +7.1% +12.9% • Strong Q4 performance +12.3% constant currency Year of • Marketplace changes growth Ahead of target Successful accelerating innovation Volume Free Cash
Slide 5: FY 2016 Market Overview
REVIEW OF BUSINESS MARKETPLACE DYNAMICS DEVELOPED MARKETS DEVELOPING MARKETS FY 2016 • Nutrition, health & • Less than buoyant • Varied economic growth Market wellness, clean-label and convenience driving economic conditions • Geopolitical issues Overview product differentiation and • Continued curr
Slide 6: Revenue and Margin – A Year of Strong Growth
REVIEW OF BUSINESS Revenue and Margin – A Year of Strong Growth GROUP €6,131m Volume +3.6% Margin +70bps TASTE & NUTRITION CONSUMER FOODS €4,880m €1,333m Volume +4.0% Volume +2.1% Margin +60bps Margin +30bps 6
Slide 7: Business Review – Taste & Nutrition
REVIEW OF Business Review – Taste & Nutrition BUSINESS 2016 GROWTH Revenue €4,880m +4.0%* Trading profit €716m +8.1% Trading margin 14.7% +60bps QUARTERLY VOLUME GROWTH • Good volume growth through successful innovation • Foodservice channel – continued strong growth through menu 5.4% extension in a
Slide 8: Business Review – Taste & Nutrition: Growth by Region
REVIEW OF Business Review – Taste & Nutrition BUSINESS Business Growth By Region VOLUME GROWTH BY REGION AMERICAS EMEA ASIA-PACIFIC • Good growth in core end-use- • Focus on commercial • Excellent growth across all markets in North America and effectiveness and engagement regional developing markets
Slide 9: Our Taste & Nutrition Business Today
REVIEW OF Our Taste & Nutrition Business Today BUSINESS Developed Developing 54% 30% 16% 74% 26% AMERICAS EMEA ASIA-PACIFIC Year On Year Volume Growth Revenue By End-Use-Market 25% Beverage 17% Meats +3.5% 9% Dairy Savoury & Dairy Systems & Flavours 8% Bakery +8.4% 7% Soups, Sauces Beverage Systems
Slide 10: Business Review – Consumer Foods
REVIEW OF Business Review – Consumer Foods BUSINESS 2016 GROWTH Revenue €1,333m +2.1%* Trading profit €117m (6.7%) Trading margin 8.8% +30bps • Kerry Foods – good performance despite Brexit DAIRY QUARTERLY VOLUME GROWTH uncertainty • Growth in cheese snacking • Spreads – traditional category decline
Slide 11: Financial Highlights
FINANCIAL Financial Highlights REVIEW €6,131m €750m 323.4 Revenue Trading Profit Adjusted EPS Brian Mehigan, CFO 11
Slide 12: Strong Underlying Financial Performance
FINANCIAL REVIEW Strong Underlying Financial Performance • Delivering growth ahead of our markets • Developing business portfolio • Managing raw material volatility • Integrating acquisitions successfully • Investing cash for long term growth VOLUME GROWTH MARGIN GROWTH RAW MATERIAL PRICES R&D INVES
Slide 13: Currency Dynamics
FINANCIAL REVIEW TRANSLATION EFFECT – TRANSACTION EFFECT – YOY RATES EURO – STERLING EXPOSURE 1% USD 3-4% of Group Revenue (4%) CAD Currency (18%) MXN net euro – sterling exposure Dynamics (12%) (3%) BRL STG (16%) (9%) ZAR RUB €6.1bn GROUP (1%) AUD REVENUE (7%) MYR (5%) CNY 5% EPS headwind 1% EPS he
Slide 14: 2016 Financial Highlights
FINANCIAL REVIEW 2016 Financial Highlights REVENUE €6,131m +3.6% volume growth TRADING PROFIT €750m +7.1% TRADING MARGIN 12.2% +70bps ADJUSTED EPS* 323.4c +7.1% (+12.3% constant currency) BASIC EPS 302.9c +1.4% FREE CASH FLOW €570m 100% conversion** Note: * before brand related intangible asset amor
Slide 15: Revenue Analysis
FINANCIAL REVIEW Revenue Analysis 2015 2016 €6,105m €6,131m 0.4% Volume Volume 3.6% 3.6% Translation Transaction Acquisition/ Price currency currency disposal (4.1%) (0.3%) (2.1%) 3.3% 15
Slide 16: Revenue – Volume Growth Ahead of Markets
FINANCIAL REVIEW Revenue – Volume Growth Ahead of Markets €m GROUP VOLUME 7,000 +3.6% +1.5% GROWTH BY QUARTER 6,000 €6,131 +4.0% +1.7% 5.0% 5,000 €4,880 4,000 3.5% 3.1% 3,000 2.9% +2.1% 2,000 +1.0% 1,000 €1,333 0 Group Taste & Nutrition Consumer Foods Q1 Q2 Q3 Q4 2015 2016 Kerry volume growth Market
Slide 17: Trading Margin – Expansion Ahead of Plan
FINANCIAL REVIEW Trading Margin – Expansion Ahead of Plan +70 bps +60 GROUP 12.2% bps +260bps €m 12.2% 9.6% 800 14.7% 2012* 2013 2014 2015 2016 700 €750 €716 14.7% 600 TASTE & NUTRITION 500 +30 12.0% +270bps 400 bps 2012* 2013 2014 2015 2016 300 200 8.8% CONSUMER FOODS 8.8% 100 €117 7.7% 0 +110bps G
Slide 18: Trading Margin Progression FY 2016
FINANCIAL REVIEW Trading Margin Progression FY 2016 €750m €700m FY 2015 Portfolio mix Net price R&D investment Kerryconnect Currency Acquisitions/disposals FY 2016 operating leverage/ efficiencies Margin 11.5% +0.5% +0.3% (0.3%) +0.1% (0.1%) +0.2% +12.2% 18
Slide 19: Strong Earnings Growth While Maintaining Return on Capital Employed
Strong Earnings Growth While Maintaining Return FINANCIAL REVIEW on Capital Employed ROACE % EPS* CENT 400 14% 12.9% 350 12% 11.1% 323.4 300 301.9 10% 278.9 250 257.9 8% 234.0 213.4 200 192.1 6% 163.9 150 151.8 142.4 4% 100 2% 50 0% 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 EPS* ROACE* Not
Slide 20: Free Cash Flow – Strong Performance
FINANCIAL Free Cash Flow – Strong Performance REVIEW 2016 2015 €m €m Trading profit 750 700 Depreciation (net) 130 126 Movement in average working capital 137 (2) Pension contributions paid less pension expense (118) (57) Cash inflow from operations 899 767 Finance costs (62) (47) Taxation (57) (38)
Slide 21: Financial Ratios
FINANCIAL Financial Ratios REVIEW Banking Ratios Covenant 2016 2015 Net debt: EBITDA* Max 3.5x 1.5x 1.9x EBITDA: net interest* Min 4.75x 14.0x 17.3x Return Ratios Target ROACE** 12% 12.9% 13.6% ROAE** 15% 16.5% 17.5% CFROI 12% 12.8% 11.3% Note: * calculated in accordance with lender covenants | ** b
Slide 22: Maturity Profile of Net Debt – Strong Balance Sheet Position
FINANCIAL Maturity Profile of Net Debt – Strong Balance REVIEW Sheet Position 805 688 156 144 85 2016 2017 2020 2022 2023 2025 (554) 2016 2015 Weighted average maturity years 6.4 7.5 22
Slide 23: Other Financial Matters
FINANCIAL REVIEW Other Financial Matters Increase of €1.1m to €70.4m principally due to €0.9bn acquisition spend in 2015, offset by reduction Finance Costs in pension interest and strong cash generation Additional cash contributions made in the year of €66m – de-risking pension plans Pension Deficit
Slide 24: Outlook and Future Prospects
Outlook and Future Prospects Stan McCarthy, CEO
Slide 25: Kerry Model Delivering in a Changing World
OUTLOOK AND FUTURE Kerry Model Delivering in a Changing World PROSPECTS Consumers Taste Nutrition Industry Dynamics Connected Pure & Simple Free from Economic Growth Better-for-you Globalisation/ Transparent Authentic & Familiar Nationalism Health & Wellbeing Pleasure & Indulgence Tailored-for-you C
Slide 26: Kerry Business Model: Our Future Advantage
OUTLOOK AND FUTURE 1 Kerry Business Model: Our Future Advantage PROSPECTS • Well balanced Portfolio Market Leadership • Focus: Global, Regional, Local #1 Consumer #1 Market, Customer, Consumer Taste & Nutrition Foods Holistic Partnerships • Proven growth strategy: Taste & Nutrition Consumer Foods Co
Slide 27: Kerry Taste & Nutrition: Technology Leadership
OUTLOOK AND FUTURE Kerry Taste & Nutrition: Technology Leadership PROSPECTS REGION Americas #1 #1 #1 €4.9bn EMEA Asia-Pacific Developed REVENUE TASTE & MARKET TECHNOLOGY Developing NUTRITION POSITIONS & INNOVATION CENTRE NETWORK Unique Taste & Nutrition growth TECHNOLOGY Savoury & Dairy Science mode
Slide 28: Kerry Global Technology & Innovation Network
OUTLOOK AND FUTURE Kerry Global Technology & Innovation Network PROSPECTS Manufacturing Footprint Australia Malaysia Naas Belarus Mexico Brazil Netherlands Canada New Zealand Beloit China Panama Shanghai Costa Rica Philippines San Juan del Rio Denmark Poland France South Africa Singapore Germany Sou
Slide 29: Developing Markets: Kerry's Footprint for Growth
OUTLOOK AND FUTURE PROSPECTS Developing Markets: Kerry’s Footprint for Growth • Dynamic growth economies • Population growth ASIA-PACIFIC EMEA LATAM • Greater China • South Africa • Brazil • Growing consumer spend • India • Nigeria • Mexico • Central America • Global, regional and local • Indonesia
Slide 30: Kerry: Leading Partner to Foodservice Channel
OUTLOOK AND FUTURE PROSPECTS Kerry: Leading Partner to Foodservice Channel • Largest, most integrated portfolio • Customised menu and branded solutions • Expertise from ideation to launch • Holistic partnership model • Kerry Technology & Innovation footprint facilitates global, regional, local devel
Slide 31: Kerry Foods: Well Positioned for Today's Marketplace
OUTLOOK AND FUTURE Kerry Foods: Well Positioned for Today’s PROSPECTS Marketplace TECHNOLOGY REGION CUSTOMERS Meat & Savoury Products Rest of Europe Brand Meal Solutions Ireland Private Label Dairy Products GB 31
Slide 32: Kerry Foods: Continued Innovation for Today's Consumer
OUTLOOK AND FUTURE Kerry Foods: Continued Innovation for Today’s PROSPECTS Consumer Authenticity/Flavour Snacking New Health ‘Free from’ Convenience 32
Slide 33: 'Securing Sustainable Growth' Kerry's 'Towards 2020' Programme
OUTLOOK AND FUTURE ‘Securing Sustainable Growth’ PROSPECTS Kerry’s ‘Towards 2020’ Programme • A comprehensive programme for sustainable growth • Four critical areas of focus which ENVIRONMENT MARKETPLACE WORKPLACE COMMUNITY reflect global concerns and issues • Climate change • Nutrition and • Our pe
Slide 34: Performance v 5 Year Group Targets (2013-2017)
REVIEW OF BUSINESS Performance v 5 Year Group Targets (2013-2017) GROWTH Target (p.a.) 4 Year Performance Adjusted EPS growth 10%+ +8.4% +9.8% constant currency Volume growth 3% - 5% +3.2% Margin expansion +50bps* +70bps RETURN ROACE 12%+ 13.8% ROAE 15%+ 17.7% CFROI 12%+ 11.5% – Realising Group Targ
Slide 35: Capital Markets Day Save the date
OUTLOOK AND FUTURE PROSPECTS Capital 1 Markets Day Save the date 11 October 2017, Global Technology & Innovation Centre, Naas, Ireland 35
Slide 36: Future Prospects: Kerry Model for Future Growth
OUTLOOK AND FUTURE PROSPECTS Future Prospects: Kerry Model for Future Growth • Technology leadership for global, regional and local customers • Aligned and agile for delivery in a changing marketplace • Focused on end-use-markets and consumer needs • Supported by the Group’s unrivalled Technology &
Slide 37: Additional Information
Additional Information
Slide 38: Business Review: Taste & Nutrition – Americas
ADDITIONAL Business Review: Taste & Nutrition – Americas INFORMATION 2016 GROWTH Revenue €2,589m +3.9%* • Volume +3.9%, pricing (2.1%) • Strong growth in Fermentation technologies for clean label in meat, culinary, dairy and bakery sectors • Taste technologies achieved good growth with innovations f
Slide 39: Business Review: Taste & Nutrition – EMEA
ADDITIONAL Business Review: Taste & Nutrition – EMEA INFORMATION 2016 GROWTH Revenue €1,447m +0.7%* • Volume +0.7%, pricing (2.1%) • Increased rate of product churn across a number of categories driven by consumer fragmentation trends • Developing commercial model to meet changing market needs in se
Slide 40: Business Review: Taste & Nutrition – Asia-Pacific
ADDITIONAL Business Review: Taste & Nutrition – Asia-Pacific INFORMATION 2016 GROWTH Revenue €765m +10.7%* • Volume +10.7%, pricing (1.9%) • Strong performance across all developing markets – urbanisation and convenience being key innovation drivers • Taste technologies achieve strong market develop
Slide 41: Leader in R&D and No. 1 in Developing Markets
ADDITIONAL Leader in R&D and No. 1 in Developing Markets INFORMATION LARGEST R&D SPEND 250 TASTE & NUTRITION 194 €’M 169 137 116 100 66 63 34 33 22 10 3 3 Kerry Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 DEVELOPING 1,248 MARKET SALES 1,042 1,027 TA
Slide 42: Revenue Growth Components FY 2016
ADDITIONAL Revenue Growth Components FY 2016 INFORMATION Trading Reporting Acquisitions/ Volumes Price Currency Currency Disposals Total Taste & Nutrition 4.0% (2.1%) (0.1%) (3.2%) 4.9% 3.5% Consumer Foods 2.1% (2.0%) (1.1%) (6.6%) (2.1%) (9.7%) Group 3.6% (2.1%) (0.3%) (4.1%) 3.3% 0.4% 42
Slide 43: Trading Margin by Business
ADDITIONAL Trading Margin by Business INFORMATION 2016 2015 Revenue Trading Profit Revenue Trading Profit €m €m % €m €m % Taste & Nutrition 4,880 716 14.7% 4,716 663 14.1% Consumer Foods 1,333 117 8.8% 1,476 126 8.5% Eliminations/unallocated (82) (83) – (87) (89) – Group 6,131 750 12.2% 6,105 700 11
Slide 44: EPS Reconciliation
ADDITIONAL EPS Reconciliation INFORMATION 2016 2015 Growth € cent € cent % Adjusted EPS* 323.4 301.9 7.1% Brand related intangible asset amortisation (13.1) (10.6) – Non-trading items (net of related tax) (7.4) 7.4 – Basic EPS 302.9 298.7 1.4% Note: * before brand related intangible asset amortisati
Slide 45: Adjusted Earnings Growth FY 2016
ADDITIONAL Adjusted Earnings* Growth FY 2016 INFORMATION Organic growth = +10.2% 569 531 2015 Underlying Transaction Kerryconnect Acquisitions Share options Constant Translation 2016 growth currency /disposals exercised currency currency % Growth +11.6% (1.3%) (0.1%) +2.2% (0.1%) 12.3% (5.2%) +7.1%
Slide 46: Free Cash Flow (€m)
ADDITIONAL INFORMATION Free Cash Flow (€m) €570m 5 YEAR FREE CASH FLOW OF €2.1BN €453m €412m €344m €303m 2012 2013 2014 2015 2016 Cash conversion* 84% 91% 62% 85% 100% Note: * free cash flow as a % of adjusted earnings after tax 46
Slide 47: Net Debt (€m) as at 31 December 2016
ADDITIONAL Net Debt (€m) as at 31 December 2016 INFORMATION @ Floating @ Fixed Debt Rates Rates Euro 1,128 229 899 Sterling - - – US Dollar 750 418 332 Other 11 11 – Gross debt 1,889 658 1,231 Cash (565) (565) - Net Debt 1,324 93 1,231 Gross Debt 2016 35% 65% Gross Debt 2015 36% 64% Weighted average
Slide 48: Exchange Rate Movements
ADDITIONAL INFORMATION Exchange Rate Movements AVERAGE EXCHANGE RATES – 2016 V 2015 1% USD GBP MXN BRL MYR AUD CAD ZAR RUB (3%) (1%) (4%) (7%) (9%) (12%) (16%) (18%) USD GBP MXN BRL MYR AUD CAD ZAR RUB 2016 1.11 0.82 20.67 3.84 4.58 1.48 1.46 16.08 74.13 2015 1.12 0.73 17.46 3.72 4.30 1.46 1.41 13.9
Slide 49: Group Long Term Targets (5 Years 2013-2017)
ADDITIONAL INFORMATION 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 50 bps p.a. Consumer Foods 2% to 3% p.a. Consumer Foods 20 bps p.a. Group 3% to 5% p.a. Group 30 bps p.a. (assumes ma
Slide 50: Revenues and Profitability
ADDITIONAL INFORMATION Revenues and Profitability GROUP REVENUES (€M) GROUP TRADING PROFIT (€M) 5 year CAGR 2.9% 5 year CAGR 8.4% 750 6,105 6,131 700 5,848 5,837 636 5,757 611 559 2012 2013 2014 2015 2016 2012* 2013 2014 2015 2016 TASTE & NUTRITION TRADING PROFIT CONSUMER FOODS TRADING PROFIT 14.7%
Slide 51: Earnings, Cash Flow and Dividend
ADDITIONAL INFORMATION Earnings, Cash Flow and Dividend ADJUSTED EARNINGS* (€M) FREE CASH FLOW (€M) 5 year CAGR 8.7% 5 year Average Cash Conversion 84% 569 570 531 490 453 453 412 411 344 303 2012** 2013 2014 2015 2016 2012** 2013 2014 2015 2016 ADJUSTED EPS* DIVIDEND PER SHARE (CENT) 5 year CAGR 8.
Slide 52: Shareholder Analysis
ADDITIONAL INFORMATION Shareholder Analysis Institutions 58% Kerry Co-operative 14% INSTITUTIONAL ANALYSIS North America 21% UK 16% Europe (excluding UK & Ireland) 12% Rest of World 5% Retail 28% Ireland 4% Shares in issue at 31 December 2016: 176,010,831 52
Slide 53: Preliminary Statement of Results 2016
Preliminary Statement of Results 2016 February 2017