Kerry Group Plc · EURONEXT:KRZ
Kerry — H1 2014 Earnings Presentation
45 slides from Kerry's earnings presentation, August 2014
Slide 1: Interim Management Report August 2014
INTERIM MANAGEMENT REPORT AUGUST 2014 KERRY
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 2014 Interim Management Report
H1 2014 INTERIM MANAGEMENT REPORT Review of Business Financial Review Outlook & Future Prospects Stan McCarthy, CEO Brian Mehigan, CFO 3
Slide 4: H1 2014: Results Highlights
H1 2014: RESULTS HIGHLIGHTS CONTINUING GROUP ADJUSTED ROACE VOLUMES TRADING MARGIN EPS* +2.7% +50bps +5.8% 14.3% › Continuing volume growth +2.7% › Ingredients & Flavours +4.2% › Consumer Foods (1.2%) › Group revenue at €2.9 billion reflecting 3.2% underlying sales growth › Trading profit increased
Slide 5: H1 2014: A More Challenging Environment
H1 2014: A MORE CHALLENGING ENVIRONMENT › Macro-economic conditions impact consumer spend › Significant headwinds – including adverse currency movements › Developed markets slower – catalyst for niche market development and innovations › Developing markets – increased volatility and political issues
Slide 6: Revenue Growth Analysis and Trading Profit & Margin %
REVENUE GROWTH ANALYSIS AND TRADING PROFIT & MARGIN % REVENUE GROWTH ANALYSIS TRADING PROFIT & MARGIN % Underlying Sales Growth +3.2% 9.5% +0.6% (0.1%) +50 €275m 275 bps +2.7% 270 9.0% €267m 265 260 255 Continuing volumes Price Tx currency H1 2013 H1 2014 6
Slide 7: Business Review – Ingredients & Flavours
BUSINESS REVIEW – INGREDIENTS & FLAVOURS H1 2014 GROWTH Revenue €2,133m +4.7%* Trading profit €251m +4.9% Trading margin 11.7% +60bps › Continuing volumes +4.2% and pricing +0.6% › Like-for-like trading profit growth of 9.8% › Improved performance in Q2 vs Q1 › Kerry Taste & Nutritional platforms ou
Slide 8: Ingredients & Flavours Revenue Analysis
INGREDIENTS & FLAVOURS REVENUE ANALYSIS REVENUE BY TECHNOLOGY* CONTINUING VOLUME GROWTH Americas +4.3% EMEA +0.9% Asia-Pacific +11.5% Ingredients & Total +4.2% Taste Solutions Savoury & Dairy 44% Beverage 19% Cereal & Sweet 18% Pharma/Functional Ingredients 10% Regional Technologies 9% * As at 31 De
Slide 9: Business Review – Consumer Foods
BUSINESS REVIEW – CONSUMER FOODS H1 2014 GROWTH Revenue €801m (0.9%)* Trading profit €62m (2.4%) Trading margin 7.8% +10bps › Continuing volumes (1.2%) and pricing +0.2% › Like-for-like trading profit growth of (3.3%) › More fragmented marketplace – heightens competition › Consumers in control in IR
Slide 10: Financial Highlights
FINANCIAL HIGHLIGHTS €2,894m REVENUE €275m TRADING PROFIT 115.2 cent ADJUSTED EPS hl Za a Bee AN
Slide 11: H1 2014 Financial Highlights
H1 2014 FINANCIAL HIGHLIGHTS +2.7% Cont Vol Growth REVENUE €2,894m (1.9%) Reported +7.1% LFL TRADING PROFIT €275m +3.0% Reported TRADING MARGIN 9.5% +50bps ADJUSTED EPS* 115.2 cent +5.8% BASIC EPS 110.8 cent +65.9% Investment in Business FREE CASH FLOW €102m Transformation Note: like-for-like repres
Slide 12: Revenue Growth Analysis
REVENUE GROWTH ANALYSIS 0.6% (0.1%) (1.6%) 2.7% (3.2%) €2.9bn (0.3%) €2.9bn H1 2013 revenue Continuing volumes Price Transaction currency Rationalisation Reporting currency Acquisitions / H1 2014 revenue volumes disposals 12
Slide 13: Continuing Sales Growth
CONTINUING SALES GROWTH Continuing Volumes +2.7% Price +0.6% +4.2% 3,000 €2,894m 2,500 +0.6% 2,000 €2,133m (1.2%) 1,500 +0.2% 1,000 €801m 500 0 Group Ingredients & Flavours Consumer Foods 13
Slide 14: Trading Profit Growth & Margin %
TRADING PROFIT GROWTH & MARGIN % Like-for-like growth +7.1% Margin progression +9.8% +50bps 300 +60bps €275m 250 €251m 200 (3.3%) 150 +10bps 100 50 €62m 0 Group Ingredients & Flavours Consumer Foods 14
Slide 15: Trading Margin Progression – H1 2014
TRADING MARGIN PROGRESSION – H1 2014 GROUP 280 €275m €267m 260 240 220 200 H1 2013 Operating leverage Mix/efficiencies Net price Currency Acquisitions/disposals H1 2014 Margin 9.0% +0.2% +0.5% (0.1%) (0.1%) 0.0% 9.5% 15
Slide 16: Free Cash Flow (€M)
FREE CASH FLOW (€M) H1 2014 H1 2013 Trading profit 275 267 Depreciation (net) 52 57 Movement in average working capital (73) 11 Capital expenditure (excluding R&D centres) (75) (53) Business operating cash flow 179 282 Capital expenditure on R&D centres (23) (7) Pension contributions paid less pensi
Slide 17: Financial Ratios
FINANCIAL RATIOS BANKING RATIOS H1 2014 H1 2013 Net debt: EBITDA* 1.5x 1.8x EBITDA: net interest* 13.3x 14.0x RETURN RATIOS ROAE** 18.2% 17.1% ROACE** 14.3% 13.1% CFROI 10.7% 13.8% Note: * calculated in accordance with lenders’ facility agreements | ** before brand related intangible asset amortisat
Slide 18: Maturity Profile of Net Debt (€M)
MATURITY PROFILE OF NET DEBT (€M) H1 2014 H1 2013 Weighted average maturity years 5.8 6.5 630 573 530 430 330 240 230 136 140 130 84 74 50 45 30 2014 2014 2015 2016 2017 2020 2022 2023 2025 (70) (170) (232) (270) At 30 June 2014, the Group had undrawn committed bank facilities of €926m, primarily a
Slide 19: Currency Basket
CURRENCY BASKET 2014 1.54 1.52 1.50 1.48 1.46 1.44 2014 2013 July 2014 rates 1.42 1.40 1.38 Jan Feb Mar April May June Jul Aug Sep Oct Nov Dec H1 2014 % change (4%) 19
Slide 20: KerryConnect Programme Update
KERRYCONNECT PROGRAMME UPDATE › Full suite deployment across all EMEA sites › Deferral of certain site implementations from H1 to H2 › Working capital investment in EMEA › Asia-Pacific regional design underway › Programme to run into 2017 20
Slide 21: Other Financial Matters
OTHER FINANCIAL MATTERS FINANCE €31.9m – a decrease of €4.2m, primarily due to cash COSTS generated from operations Tax on normal trading activity 14.7% (H1 2013: 15.6%) TAXATION benefiting from geographical split of profits and R&D investment Net deficit increased by €70m since year end to €277m PE
Slide 22: Outlook and Future Prospects
OUTLOOK AND FUTURE PRORIECTS
Slide 23: Kerry: Global Positioning
KERRY: GLOBAL POSITIONING › The largest, most innovative portfolio of Taste & Nutrition Systems and Functional Ingredients & Actives for the global food, beverage and pharmaceutical industries › The leading sensory, applications and culinary experts › Connected, unique, innovative 23
Slide 24: Kerry: Global Capability
KERRY: GLOBAL CAPABILITY Kerry provides the foresight and technology to help develop products that delight and nourish consumers across the globe 24
Slide 25: Kerry: Global Growth Strategy
KERRY: GLOBAL GROWTH STRATEGY › Market leading Taste & Nutrition platforms › Global and Regional customer alliances › Accelerate growth in Developing Markets › Leverage capabilities & expand Foodservice platforms 25
Slide 26: Kerry: Globally Integrated Technology Portfolio
KERRY: GLOBALLY INTEGRATED TECHNOLOGY PORTFOLIO TASTE & NUTRITION SYSTEMS CEREAL DAIRY & & BEVERAGE NUTRITION SAVOURY SWEET › Dairy Flavour Solutions › Cereal & Sweet Flavour › Beverage Flavour Solutions › Nutritional Beverages Solutions › Customised Dairy › Beverage Sauces & Syrups › Infant Nutriti
Slide 27: Kerry's Leading Taste Position
KERRY’S LEADING TASTE POSITION › No.1 globally for Taste and Ingredients solutions › Food & Beverage focused › Leading culinary, applications and sensory expertise › Top 5 player in global flavours 27
Slide 28: Kerry: General Wellness & Nutrition Position
KERRY: GENERAL WELLNESS & NUTRITION POSITION › Leading portfolio of General Wellness & Enabling Technologies, Nutritional Ingredients & Actives and Nutrition Delivery Systems › Food Heritage › In-depth understanding of biological sciences › World class applications expertise 28
Slide 29: Global Technology Application and Culinary Leadership
GLOBAL TECHNOLOGY APPLICATION AND CULINARY LEADERSHIP R&D EXPENDITURE › Best-in-class global development and applications model 220 › Unique Kerry Global Technology & 200 185.9 186.4 180 167.1 156.4 Innovation Centres network supported 160 147.8 by Regional Development & Application 140 120 Centres
Slide 30: Kerry Global Technology & Innovation Centre Development (Ireland)
KERRY GLOBAL TECHNOLOGY & INNOVATION CENTRE DEVELOPMENT (IRELAND) › €100m investment › 900 employees › Over 200 food scientists › 20 state of the art R&D labs › Completion in 2015 › Access to Kerry’s unrivalled technology platforms, global expertise and support resources › Global hub for Infant & He
Slide 31: Kerry: Accelerating Growth in Developing Markets
KERRY: ACCELERATING GROWTH IN DEVELOPING MARKETS › Increased Kerry resource deployment › Local market/consumer insights › Local Culinary & Applications expertise › Kerry Centre engagement › Leverage global technology portfolio & expertise › Expanding regional production footprint › Bringing together
Slide 32: Kerry Global Foodservice Strategy
KERRY GLOBAL FOODSERVICE STRATEGY DUAL STRATEGY CHARACTERISTICS GLOBAL FOODSERVICE › Deep relationship with focused chain operators CHAIN STRATEGY › Leveraging all Kerry technology and solutions (custom and brands) › Innovation focused menu applications; driven by chefs, mixologists and R&D › Insigh
Slide 33: Kerry Foods: Repositioning Portfolio for Growth
KERRY FOODS: REPOSITIONING PORTFOLIO FOR GROWTH CHANNEL OUR SNACKING ALIGNMENT BRANDS ‘ON-THE-GO’ › Omni-Channel strategy › Leadership › Snacking occasions › Growth through › C Store › Relevant innovation › Discounters › Trusted › Growth through diversification › Innovative › E-Comm › Mattessons › D
Slide 34: 2014 Outlook: Summary
2014 OUTLOOK: SUMMARY › Continuing development despite headwinds and challenging conditions in developed markets › Good innovation pipeline and customer engagement › Kerry Technology & Innovation Platforms – key differentiator › Taste strategy capitalising on health trends › Strong development throu
Slide 35: Questions and Answers
QUESTIONS AND ANSWERS L oe = cll INS a Ei
Slide 36: Additional Information
ADDITIONAL INFORMATION
Slide 37: Business Review – Ingredients & Flavours: Americas
BUSINESS REVIEW – INGREDIENTS & FLAVOURS AMERICAS H1 2014 GROWTH Revenue €915m +4.7%* › Continuing volumes +4.3% and pricing +0.6% › Solid demand for innovation despite sectoral challenges › Positive momentum towards clean-label, health offerings and snacking › Strong growth through beverage flavour
Slide 38: Business Review – Ingredients & Flavours: EMEA
BUSINESS REVIEW – INGREDIENTS & FLAVOURS EMEA H1 2014 GROWTH Revenue €791m +1.3%* › Continuing volumes +0.9% and pricing +0.4% › Good progress in aligning business structures and customer service › Expanded footprint in EMEA developing markets › Progress impacted by currency movements and geopolitic
Slide 39: Business Review – Ingredients & Flavours: Asia-Pacific
BUSINESS REVIEW – INGREDIENTS & FLAVOURS ASIA-PACIFIC H1 2014 GROWTH Revenue €392m +12.2%* › Continuing volumes +11.5% and pricing +1.0% › Strong overall performance and market development › Regional developed markets slower growth (Japan, ANZ) › Excellent progress in Nutritional sectors › Continued
Slide 40: Trading Margin by Business
TRADING MARGIN BY BUSINESS H1 2014 H1 2013 REVENUE TRADING PROFIT REVENUE TRADING PROFIT €M €M % €M €M % Ingredients & Flavours 2,133 251 11.7% 2,159 239 11.1% Consumer Foods 801 62 7.8% 830 64 7.7% Eliminations/unallocated (40) (38) – (40) (36) – Group 2,894 275 9.5% 2,949 267 9.0% 40
Slide 41: EPS Reconciliation
EPS RECONCILIATION H1 2013 H1 2014 GROWTH € CENT € CENT % 108.9 Adjusted EPS* 115.2 +5.8% (4.4) Brand related intangible asset amortisation (4.3) (37.7) Non-trading items (net of tax) (0.1) 66.8 Basic EPS 110.8 +65.9% Note: * before brand related intangible asset amortisation and non-trading items (
Slide 42: Net Debt Profile (€M) as at 30 June 2014
NET DEBT PROFILE (€M) AS AT 30 JUNE 2014 NET @ FLOATING @ FIXED DEBT RATES RATES Euro 537 227 310 Sterling (66) (66) – US Dollar 649 171 478 Other (10) (10) – 1,110 322 788 100% 29% 71% 42
Slide 43: KerryConnect
KERRYCONNECT DESIGN EMEA ASIA-PACIFIC AMERICAS 2010 2014 – 2015 2016 REGIONAL DESIGN REGIONAL REGIONAL COMPLETED DESIGN DESIGN UNDERWAY 2010 2010 – 2012 GLOBAL 2015 – 2016 2017 DESIGN PHASE 1 DEPLOYED COMPLETED COMBINED COMBINED PHASE 1 AND PHASE 1 AND PHASE 2 PHASE 2 2013 – 2015 DEPLOYMENT DEPLOYME
Slide 44: Shareholder Analysis
SHAREHOLDER ANALYSIS Institutions 54% Kerry Co-operative 14% Retail 32% INSTITUTIONAL ANALYSIS UK 16% North America 20% Continental Europe/Rest of World 15% Ireland 3% Shares in issue at 30 June 2014: 175,794,953 44
Slide 45: Interim Management Report August 2014
INTERIM MANAGEMENT REPORT AUGUST 2014 KERRY