Kerry Group Plc · EURONEXT:KRZ
Kerry — H1 2018 Earnings Presentation
38 slides from Kerry's earnings presentation, Aug 9, 2018
Slide 1: 2018 Interim Management Report
KERRY Leading to Better 2018 Interim Management Report 9 August 2018 kerry group “com
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: 2018 Interim Management Report
2018 Interim Management Report Review of Business Financial Review Outlook & Future Prospects Edmond Scanlon, CEO Brian Mehigan, CFO Kerry 2018 | 3
Slide 4: H1 2018 Highlights
H1 2018 Highlights Strong volume driven From-food for-food heritage Strategic initiatives progressed – performance ahead of more relevant than ever enhancing Kerry’s unique our markets customer proposition ™ 3.6% 1.3% Kerry Market Kerry market estimates © Kerry 2018 | 4
Slide 5: Interim 2018 Performance – Delivering Growth & Return
Interim 2018 Performance – Delivering Growth & Return Volume Trading Margin Adjusted EPS* (CCY) Volume (LFL) Trading Margin Adjusted EPS (CCY) +4.3% 12.2% +9.4% ROACE* Free Cash Flow Dividends Note: * before brand related intangible asset amortisation and non-trading items (net of related tax) | 1 e
Slide 6: H1 2018 Market Overview
H1 2018 Market Overview • Consumer fragmentation • Economic conditions • Economic conditions varied continues – demand for relatively healthy but progressive overall product differentiation • Currency volatility persists • Localisation of new tastes • Supply chains being redefined • Focus on authent
Slide 7: Revenue and Margin Growth
Revenue and Margin Growth €3,225m Volume +3.6% Margin -10bps €2,579m €685m Volume +4.1% Volume +1.3% Margin +10bps Margin -60bps © Kerry 2018 | 7
Slide 8: Business Review – Taste & Nutrition
Business Review – Taste & Nutrition Revenue €2,579m +4.1 %1 Trading margin 13.1 % +10bps • Continued volume growth ahead of our markets: Pharma Meat – Meat, Beverage & Snacks End Use Markets (EUMs) growing strongly – Clean label portfolio, natural extracts and TasteSense™ sugar reduction technology
Slide 9: Business Review – Taste & Nutrition
Business Review – Taste & Nutrition Business Growth by Region REVENUE REVENUE REVENUE 10.1% • North America – Meat, Snacks & • Beverage, Dairy & Meat EUMs • Bakery, Meals & Snacks EUMs – Beverage EUMs delivered good delivered good growth strong growth growth • Foodservice chains – number of • Southe
Slide 10: Business Review – Consumer Foods
Business Review – Consumer Foods Revenue €685m +1.3%1 Trading margin 7.0% (60bps) • Volume growth ahead of market – good performance across ‘Food to Go’ range • Raw materials inflation eased – pricing of +0.9% on average across the period • Trading profit – increased by 3.7% excluding the impact of
Slide 11: Financial Highlights
KERRY Leading to Better Financial Highlights €3,225m €340m = 144.2c Revenue Trading Adjusted Profit EPS
Slide 12: Kerry Model Underpinning Continued Delivery
Kerry Model Underpinning Continued Delivery • Sustained volume growth ahead of market • Currencies remaining volatile • Managing input cost environment • Continued investment for long term growth 3.6% Authentic Nutrition, Developing 1.3% Wellness & Foodservice Taste Markets Functionality Kerry Marke
Slide 13: H1 2018 Financial Highlights
H1 2018 Financial Highlights Revenue +3.6% volume growth +8.7% constant currency Trading profit (+0.5% reported) -10bps reported Trading margin (impacted by 40bps fx headwinds) Adjusted EPS* +9.0% constant currency +0.5% reported Basic EPS (post currency & NTIs) Free cash flow 79% conversion1 Note:
Slide 14: Revenue Growth Analysis
Revenue Growth Analysis H1 2017 H1 2018 €3,181m €3,225m 1.4% Volume Volume 3.6% 3.6% Translation Transaction Acquisition/ Price currency currency disposal (6.6%) (0.1%) 0.6% 3.9% © Kerry 2018 | 14
Slide 15: Revenue – Continued Volume Growth Ahead of Markets
Revenue – Continued Volume Growth Ahead of Markets +3.6% +1.3% +4.1% €3,225m +1.5% €2,579m +1.3% +0.5% €685m Group Taste & Nutrition Consumer Foods Kerry volume growth Market volume growth* * Kerry market estimates based on published data and company volume disclosures © Kerry 2018 | 15
Slide 16: Trading Profit: Currency Impact
Trading Profit: Currency Impact Taste & Nutrition 2.5% (8.1%) 10.6% (0.6%) 11.2% Consumer Foods (6.9%) (1.8%) (5.1%) (8.8%) 3.7% Group 0.5% (8.2%) 8.7% (1.9%) 10.6% 2018 2017 16
Slide 17: Group Trading Margin Breakdown
Group Trading Margin Breakdown H1 2017 Operating leverage Net price KerryExcel KerryExcel Currency Acquisitions H1 2018 / portfolio mix Efficiencies Investments © Kerry 2018 | 17
Slide 18: Trading Margin – Business Breakdown
Trading Margin – Business Breakdown -10bps +10bps 10.5% 13.1% €340m €339m -60bps 7.0% €48m Group Taste & Nutrition Consumer Foods Margin progression Trading margin % © Kerry 2018 | 18
Slide 19: Free Cash Flow – Solid Result
Free Cash Flow – Solid Result Trading profit 340 338 Depreciation (net) 67 69 Movement in average working capital (29) 118 Pension contributions paid less pension expense (22) (23) Cash inflow from operations 356 502 Finance costs (net) (23) (21) Taxation (18) (22) Capital expenditure (net) (114) (1
Slide 20: Financial Ratios & Debt Profile – Disciplined Growth
Financial Ratios & Debt Profile – Disciplined Growth ROACE 12% 12.4% 13.2% Net debt: EBITDA1 Max 3.5x 1.5x 1.3x EBITDA: net interest1 Min 4.75x 14.8x 14.9x 792 644 141 86 2018 2019 2020 2021 2022 2023 2024 2025 (260) Note: before brand related intangible asset amortisation and non-trading items (net
Slide 21: Other Financial Matters
Other Financial Matters Deficit of €35m – down €67m from year end – driven by favourable movements in discount and inflation rates Charge of €15m (net of tax) due to acquisition integration and the Brexit Mitigation Programme LATAM deployment progressing well, as programme builds for North America L
Slide 22: Outlook and Future Prospects
KERRY Leading to Better Outlook and Future Prospects
Slide 23: Localisation Continues to Drive Innovation and Capture Market Share
Localisation Continues to Drive Innovation and Capture Market Share • Private and smaller brands have seen growth in market share % 2.5 • The pace of this growth has 2.0 2.0% increased in recent years 1.5 1.3% 1.0 0.6% 0.5% 0.4% • Smaller brands are growing 0.5 0.1% 0.2% 0.3% 0.0 particularly in sof
Slide 24: Winning with Kerry Business Model in Local Markets
Winning with Kerry Business Model in Local Markets Consumer intimacy through proprietary insights framework • Encapsulation • Ultrafiltration • In-market application labs • Distillation • Hydrolysis • In-country marketing • Pyrolysis • Centrifugation • Local business development • Fermentation • Ext
Slide 25: Winning with '5R' Clean Label Approach Across Taste & Nutrition
Winning with ‘5R’ Clean Label Approach Across Taste & Nutrition Replace Reduce Replace Leverage clean label ingredient(s) with technologies to reduce clean label specific ingredients and alternatives while simplify ingredient retaining key statements functionality, taste and/or nutrition profiles Re
Slide 26: The Growing Demand for Plant Protein
The Growing Demand for Plant Protein Plant protein for bars application TNT An Allergen Free, Vegan Protein for Refresh Functional Waters, Juices & Energy Refresh Drinks Natural Citrus Flavours Plant protein Using our ProDiem™ Refresh and Taste Technology our Plant protein application specialists, t
Slide 27: Outlook 2018
Outlook 2018 • Continued performance ahead of our markets – Taste & Nutrition: unique business model delivering strong innovation with good momentum in both developed and developing markets – Consumer Foods: realigned business positioned to deliver against a cautious consumer outlook • Continued inv
Slide 28: Leading to Better
Leading to Better
Slide 29: Questions & Answers
KERRY Leading to Better Questions & Answers
Slide 30: Additional Information
KERRY Leading to Better Additional Information
Slide 31: Translation Currency – Significant Headwinds in H1
Translation Currency – Significant Headwinds in H1 USD CAD MXN BRL CNY MYR AUD GBP ZAR RUB (0%) (2%) (4%) (4%) (7%) (9%) (10%) (12%) (15%) (20%) Source: ECB rates © Kerry 2018 | 31
Slide 32: Revenue Growth Components H1 2018
Revenue Growth Components H1 2018 Taste & Nutrition 4.1% 0.6% 0.0% (7.9%) 4.6% 1.4% Consumer Foods 1.3% 0.9% (0.4%) (1.6%) 1.0% 1.2% Group 3.6% 0.6% (0.1%) (6.6%) 3.9% 1.4% © Kerry 2018 | 32
Slide 33: Trading Margin by Business
Trading Margin by Business Taste & Nutrition 2,579 339 13.1% 2,543 331 13.0% Consumer Foods 685 48 7.0% 677 51 7.6% Eliminations/unallocated (39) (47) – (39) (44) – Group 3,225 340 10.5% 3,181 338 10.6% © Kerry 2018 | 33
Slide 34: EPS Reconciliation
EPS Reconciliation Basic EPS 128.3 127.6 0.5% Brand related intangible asset amortisation 7.2 6.1 – Non-trading items (net of related tax) 8.7 10.1 _ Adjusted EPS* 144.2 143.8 0.3% Retranslating PY adjusted EPS at current year average fx rates – (11.5) – Basic EPS 144.2 132.3 9.0% Note: * before bra
Slide 35: Net Debt (€m) as at 30 June 2018
Net Debt (€m) as at 30 June 2018 Euro 1,066 276 790 Sterling – – – US Dollar 596 381 215 Other 31 31 – Gross debt 1,693 688 1,005 Cash (290) (290) – Net debt 1,403 398 1,005 Gross debt 100% 41% 59% Net debt 100% 28% 72% © Kerry 2018 | 35
Slide 36: Strategic Targets (2018-2022)
Strategic Targets (2018-2022) On average across the 5 years Taste & Nutrition 4% to 6% p.a. Taste & Nutrition 40 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 2% above market growth Adjusted EPS Growth* 10%+ p.a. ROACE 12%+ Cash C
Slide 37: Shareholder Analysis
Shareholder Analysis North America 20% UK 14% Continental Europe | Rest of World 22% Ireland 3% Shares in issue at 30 June 2018: 176,287,141 © Kerry 2018 | 37
Slide 38: 2018 Interim Management Report
KERRY Leading to Better 2018 Interim Management Report 9 August 2018 kerry group “com