Kerry Group Plc · EURONEXT:KRZ
Kerry — Investor Presentation (October 2012)
65 slides from Kerry's investor presentation, October 2012
Slide 1: Kerry Group Background Presentation October 2012
[KERRY | Kerry Group Background Presentation October 2012
Slide 2: Disclaimer: Forward Looking Statements
Disclaimer: Forward Looking Statements This presentation / announcement may contain forward looking statements with projections concerning, among other things, the Company’s strategy, revenues, earnings, trading profit, trading margin, finance costs, tax rate, capital expenditure, dividends, cashflo
Slide 3: Introduction
Introduction CONSISTENCY DIVERSITY CHANGE STRATEGY PRODUCT RANGE CONSUMER MANAGEMENT TEAM CUSTOMERS FOOD REGULATION FINANCIAL PERFORMANCE GEOGRAPHIES RAW MATERIALS
Slide 4: Kerry at a Glance
Kerry at a Glance Kerry is the global leader in Ingredients & Flavours Sample Customer End Products » Kerry Ingredients & Flavours develops, manufactures and delivers innovative technology-based ingredients & taste solutions and pharma, nutritional and functional ingredients for the food, beverage a
Slide 5: Facts and Figures
Facts and Figures Revenue – 2011 Trading Profit - 2011 » Revenue €5.3bn Consumer Consumer Foods 31% Foods 23% » EBITDA €601m » Enterprise Value €8bn* Ingredients Ingredients & Flavours & Flavours 69% 77% » Market Capitalisation €7bn* Ingredients & Flavours €3,706m Ingredients & Flavours €439m » List
Slide 6: A Long Track Record in the Food & Beverage Industry
A Long Track Record in the Food & Beverage Industry » Opened US/UK headquarters in » # 26 acquisitions in Flavours costing c€830m Chicago and in London » # 29 acquisitions in Cereal & Sweet costing c€414m » Company founded » 1st LATAM acquisition » 1st Asian acquisition – Milestones » Consortium – P
Slide 7: Revenue and Adjusted EPS 1986-2011
Revenue and Adjusted* EPS 1986-2011 Revenue 1986-2011 (€m) 6000 5,302 4,960 5000 4,646 4,788 4,791 4,521 4,430 4,129 4000 3,755 3,693 3,003 3000 2,456 2,622 2,200 2000 1,523 1,566 1,707 959 1,050 1,117 1,121 1000 710 742 337 370 504 0 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Slide 8: Se
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Slide 9: Introduction to the Consumer Staples Industry
Introduction to the Consumer Staples Industry » The consumer staples industry is worth $4.5 trillion (1) Global Consumer Staples Market by Category (1) » Spans packaged food, hot drinks, soft drinks, pet care, personal care, household care, consumer health, alcohol and tobacco Kerry relevant categor
Slide 10: Strong Customer Alliances
Strong Customer Alliances* % World Market Share Ingredients and Flavours Customers* % Market Share 3.5 3 2.5 2 1.5 1 0.5 0 Danone Kellogg's Nestlé General Mills Unilever Mars PepsiCo Ferrero Kraft Foods Source: Euromonitor 2010 Note: * above is a sample of key customer alliances
Slide 11: $50bn Ingredients and Flavours Market
$50bn Ingredients and Flavours Market » Kerry is the largest Revenue player in the (Revenue $bn) (1) ingredients and 6 flavours market 5 » Highly fragmented, 4 but growing market 3 2 » Benefits to being a scale player 1 0 » Consolidation DSM (Food Specialties) Chr Hansen Novozymes Symrise DuPont ABF
Slide 12: Industry Supply Chain
Industry Supply Chain Functional Ingredients & Retail Brands Flavours Emulsifiers Enzymes Cultures Hydrocolloids Ingredients & Taste Solutions Colours Proteins Kerry is the leader in the development of a Flavours Pharma new sector of the supply chain: supplying Store Brands Customised Ingredient & F
Slide 13: Ingredients & Flavours Market Outlook/Top Line Drivers
Ingredients & Flavours Market Outlook/Top Line Drivers » Consumer trends The Key Driver of Repurchase Decisions » Health & wellness – sodium reduction; clean labels; food safety for Food and Beverages (1) » Snacking and convenience; ready-to-use; easy preparation 50% 45% » Medical nutrition 40% 30%
Slide 14: Drivers of Growth
Drivers of Growth » Drivers of growth in mature markets » Innovation » Reformulation » Health and wellness e.g. satiety and dietary control, aging population » Outsourcing of production by food and beverage manufacturers » Technology layering » Consolidation » Food regulation
Slide 15: Kerry Ingredients & Flavours technology-based ingredients and taste solutions
Kerry Ingredients & Flavours develops, manufactures and delivers innovative technology-based ingredients & taste solutions and pharma, nutritional and functional ingredients for the food, beverage and pharmaceutical markets “TT = wr - ———
Slide 16: Business Description
Business Description Kerry Ingredients & Flavours Technology » Kerry Ingredients & Flavours develops, manufactures and Savoury & Dairy Systems & delivers innovative technology-based ingredients & taste Flavours 46% solutions and pharma, nutritional and functional ingredients for the food, beverage a
Slide 17: Revenue and Trading Profit – Ingredients & Flavours
Revenue and Trading Profit – Ingredients & Flavours Ingredients and Flavours – Revenues* Ingredients and Flavours – Trading Profit and Margin* (€m) (€m) 3,800 500 11.8% 11.9% 3,600 12.0% 11.3% 450 3,400 10.4% 11.0% 10.3% 400 3,200 10.0% 350 3,000 9.0% 300 2,800 8.0% 250 2,600 7.0% 2,400 200 6.0% 2,2
Slide 18: Kerry Group Worldwide
Kerry Group Worldwide Head Offices Manufacturing Plants Sales Offices Extensive manufacturing (#133) and sales footprint supports sales to 140 countries * As at 31/12/2011
Slide 19: Technology Innovation Delivering Consumer-Preferred Taste Solutions
Technology Innovation Delivering Consumer – Preferred Taste Solutions Technology Innovation Strategies Delivering Consumer-Preferred Taste Solutions Taste Global Taste Solutions Platform Next-generation Flavour Modulation Citrus Platform Expansion Spinning Cone Technology Sauce Platform Natural Food
Slide 20: Processing Capability
Processing Capability Core Processes Flavour Drying & Encapsulation Blending Encapsulation Wet Processing Compounding Cheese Manufacturing Reaction FLAVOUR Baking & Ohmic Cooking Extraction Encapsulation/Compounding Extraction Panning, Enrobing & Crocking Distillation Pyrolysis Gun Puffing Pyrolysis
Slide 21: Customer Benefits Delivered Via 1 Kerry
Customer Benefits Delivered Via 1 Kerry Technology & Product Groups Functional Ingredients: Bio-ingredients, Emulsifiers and Texturants By working together Processing Capability in the 1 Kerry model, EUMs & Applications FLAVOUR Encapsulation/Compounding we are uniquely able Extraction Beverage Pyrol
Slide 22: Customer Intimacy Model
Customer Intimacy Model CUSTOMER MARKETING CUSTOMER CUSTOMER PURCHASING R&D CUSTOMER MANUFACTURING
Slide 23: Pricing Power – Ability to Pass Through Input Costs
Pricing Power – Ability to Pass Through Input Costs Group Raw Material % Cost Increase » Raw material inputs consist of technical 13% ingredients and commodities 11% 8% 9% 7% 7% 5% 5% 3% 1% 0% » Technical ingredients are generally priced -1% 2007 2008 2009 2010 2011 -3% on an annual basis -5% -7% -9
Slide 24: Kerry Ingredients & Flavours Drivers of Growth
Kerry Ingredients & Flavours Drivers of Growth » GDP growth » Flexibility to focus on growth segments » Increase market share » Innovation/reformulation » Kerry ‘Go to Market Strategy’ » Outsourcing by global food manufacturers » Global capability » Emerging markets » Global customers
Slide 25: Kerry Ingredients & Flavours Business Growth Strategies
Kerry Ingredients & Flavours Business Growth Strategies » Continue to maximise organic growth opportunity » Technology layering and cross-selling opportunities » Continue to expand geographic market base Drive Global Accelerate Growth Leverage Alignment in Emerging Capabilities & » Maximise opportun
Slide 26: Global Technology and Applications Leadership
Global Technology and Applications Leadership » Execute through regional Centres of R&D Expenditure Excellence (COE) supported by satellite (€m) 220 4.7% 4.7% 4.9% 4.6% 4.5% customer centres 200 180 0.0% 160 -20.0% » Best-in-class global development and 140 120 -40.0% applications model 100 80 156.4
Slide 27: Emerging Markets Dynamics
Emerging Markets Dynamics Kerry’s strategy in emerging markets – in line with global market trends Global Dynamics » Multinationals globalising their brands (CPG, Foodservice Chains) » Consolidation will accelerate as producers seek greater efficiencies » Demand for convenience in retail & foodservi
Slide 28: Kerry Ingredients & Flavours Emerging Markets Strategy
Kerry Ingredients & Flavours Emerging Markets Strategy Strategies Emerging Markets - % of KIF 2011 Revenues » Capitalise on brand globalisation in regions & key growth accounts Mature 79% » Leverage global purchasing power to Emerging 21% deliver maximum value » Capitalise on population & GDP growth
Slide 29: Kerry's Competitive Advantage
Kerry’s Competitive Advantage » Strong customer alliances » Regionally managed commercial care to support 360 degree Customer Care » All major food and beverage manufacturers » Technology breadth » Raw material technology management » Layer and leverage development and process capability » Applicati
Slide 30: Consumer Foods Industry Overview Great Britain & Ireland
Slide 31: GB and Ireland Industry Overview
GB and Ireland Industry Overview » Consumer food companies manufacture their own branded goods and Great Britain private label foods on behalf of retailers % Market Share » Packaged food accounts for the largest proportion of spend on 30 consumer staples 25 » Economic Environment 20 » Demand tends t
Slide 32: GB and Ireland: Market Dynamics
GB and Ireland: Market Dynamics Commodity Food Price Index % Sold on Deal 250 GB 34.4 33.9 33.9 33.8 200 32.2 150 31 100 50 52 w/e 13 Jun 10 52 w/e 12 Jun 11 52 w/e 10 Jun 12 0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-
Slide 33: A Leading Player in GB/Ireland Food & Beverage Focused on Chilled Foods Markets
A Leading Player in GB/Ireland Food & Beverage Focused on Chilled Foods Markets Premier Kerry Foods Vion Kraft Bakkavor Boparan Coke Greencore Nestle Pepsico Tulip ABF Bakkavor Samworth Kerry Foods Arla Cranswick Morrisons Produce Dairy Crest Vion Consumer Foods Muller Muller competes in Tulip Chill
Slide 34: Chilled Ready Meals
Chilled Ready Meals £2.1bn Retail Value Italian Ethnic Premium British Health Share 2012 Share 2011 Other 15.7 16.2 14.3 15.1 9.7 10.1 8.9 9.7 8.4 8.4 7.4 7.0 Source: Nielsen Scantrack 52 w/e 30 June 2012, Kantar Worldpanel 52 w/e 10 June 2012
Slide 35: Added Value Chilled Categories Market
Added Value Chilled Categories Market Dairy €4.9bn Meat & Savoury €6.8bn Ireland Ireland GB Cooked Meats GB Sausage GB Cheese GB Rasher GB Yellow Fats GB Pastry Meal Solutions €3.6bn Ireland GB Frozen Ready Meals GB Chilled Ready Meals GB Ready To Cook Source: Nielsen Scantrack (mid 2012)
Slide 36: Consumer Foods Business Overview
Slide 37: Business Description
Business Description Kerry Consumer Foods Significant Customers » Supplies added value chilled foods across Ireland and the UK » 2011 Revenues of €1.7bn » Has achieved #1 brand position in most of its markets through a process of organic growth, acquisitions and strategic investment » Leading suppli
Slide 38: Revenue and Trading Profit – Consumer Foods
Revenue and Trading Profit – Consumer Foods Consumer Foods – Revenues* Consumer Foods – Trading Profit and Margin* (€m) (€m) 1,900 8.1% 140 7.8% 7.7% 8.0% 1,800 7.3% 7.2% 7.5% 1,700 130 7.0% 1,600 120 6.5% 1,500 1,400 6.0% 110 1,300 5.5% 1,200 5.0% 100 1,100 4.5% 1,000 90 4.0% 2007 2008 2009 2010 20
Slide 39: Manufacturing Locations
Manufacturing Locations Dairy Charleville, Ireland Ossett, UK Listowel, Ireland Portadown, N. Ireland Killarney, Ireland Meat & Savoury Enniskillen, N. Ireland Poole, UK Finglas, Ireland Shillelagh, Ireland Hyde, UK Spalding, UK Meal Solutions Attleborough, UK Carrickmacross, Ireland Burton-on-Trent
Slide 40: Diversified Product Portfolio and Strong Market Position
Diversified Product Portfolio and Strong Market Position Consumer Foods – Added Value Chilled Categories Segment Markets Key Products Market Position Meat & Savoury Provisions #1&2 breakfast product brands in Ireland #1&2 cooked meat brands in Ireland #1&2 sausage brands in GB #2 (fastest growing) m
Slide 41: Brand Priorities
Brand Priorities Corporate Priorities Local Brands Others
Slide 42: With Significant Opportunity for Growth
With Significant Opportunity for Growth 70% of the most frequently consumed foods are stored in the fridge… That’s how many chances you have 42 each week to stand out in the Fridge 24 In the Cupboard 8 In the Freezer (average number of times consumer opens each week) Source: Kantar
Slide 43: Using Superior Technology to Create Food That is Delicious, Healthy and Affordable
Using Superior Technology to Create Food That is Delicious, Healthy and Affordable Using superior technology to create food that is delicious, healthy and affordable 43
Slide 44: Return on Net Operating Assets by Division
Return on Net Operating Assets by Division 2011 2010 2009 2008 Ingredients & Flavours 19.5% 20.8% 19.0% 17.6% Consumer Foods 19.9% 19.9% 19.8% 21.4% Note: RONOA= trading profit divided by average net operating assets. Net operating assets exclude net debt, deferred tax and net assets of corporate en
Slide 45: Consumer Foods Strategy
Consumer Foods Strategy » Continued investment in ‘Fridge Fresh’ » Leverage brand heritage » Innovation to lead category growth » Continued brand and marketing investment » Reposition Irish brands for value-conscious consumer » Drive efficiencies through ‘lean’ programme
Slide 46: Performance and Strategic Initiatives
Performance and Strategic Initiatives ae }
Slide 47: Revenues and Profitability
Revenues and Profitability Group Revenues (€bn) Group Trading Profit (€m) 10 Year CAGR 5.9% 10 Year CAGR 6.7% 5.3 501 5.0 470 4.6 4.8 4.8 4.5 409 422 4.4 380 384 401 3.8 4.1 356 3.7 309 305 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Ingredient
Slide 48: Cashflow & EPS
Cashflow & EPS* EBITDA (€m) Free Cash Flow (€m) 618 601 620 600 580 560 500 503 519 410 367 540 390 520 500 370 480 350 305 460 440 330 279 420 310 400 290 257 380 360 270 227 340 250 320 300 230 280 210 260 190 240 220 170 200 150 180 160 130 140 110 120 90 100 80 70 60 50 40 20 30 0 10 -10 2007 20
Slide 49: Performance v Current Targets
Performance v Current Targets Performance v Targets to Date KPI Target 4 Year Avg 2008 to 2011 5 Years to 2012 2% to 4% LFL On track Revenue ✔ +3.6% volume growth 10% trading margin Margin +25bps pa On track** (+30bps pa) CAGR Adjusted* EPS Growth 10%+ On track ✔10.6% ROAE* 15%+ ✔ 16.4% On track CFR
Slide 50: Kerry Business Transformation
1 Kerry Business Transformation
Slide 51: The Kerryconnect Programme Plan
The Kerryconnect Programme Plan Kerryconnect is estimated to be a 7 year programme, investing circa €50m p.a. on average 2009 2010 2011 2012 2013 2014 2015 2016 Phase 0 Phase 1 Phase 1 and 2 Kerryconnect Phase 0: » This was focused on C.R.M. and Business Intelligence to enable the “Go to Market Stra
Slide 52: Operating Model/Kerryconnect – Financial Impact
Operating Model/Kerryconnect – Financial Impact 1% margin increase 0 This 1% margin increase attributable to efficiency gains arising from the operating model and Kerryconnect investment is in addition to the 30bps group margin expansion target arising from operating leverage and business mix
Slide 53: Acquisition and Development Strategy
Acquisition and Development Strategy Kerry Ingredients & Flavours Consumer Foods
Slide 54: 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 55: Summary: Our Next Phase of Profitable Growth
Summary: Our Next Phase of Profitable Growth » 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 d
Slide 56: Consistency
Consistency CONSISTENCY STRATEGY MANAGEMENT TEAM FINANCIAL PERFORMANCE
Slide 57: Diversity
Diversity DIVERSITY PRODUCT RANGE CUSTOMERS GEOGRAPHIES
Slide 58: Change
Change CHANGE CONSUMER FOOD REGULATION RAW MATERIALS
Slide 59: Consistency Diversity Change
CONSISTENCY DIVERSITY CHANGE STRATEGY PRODUCT RANGE CONSUMER MANAGEMENT TEAM CUSTOMERS FOOD REGULATION FINANCIAL PERFORMANCE GEOGRAPHIES RAW MATERIALS
Slide 60: Additional Background Information
Slide 61: Trading Margin % 1986-2011
Trading Margin % 1986-2011 10% 9.5% 9.4% 9.3% 8.9% 9% 8.7% 8.6% 8.6% 8.4% 8.5% 8.3% 8.3% 8.4% 8.1% 8% 7.8% 7.9% 7.2% 7.3% 7% 6.3% 6% 5.6% 5.5% 5.6% 5.6% 5.7% 5% 4.5% 4.2% 3.9% 4% 3% 2% 1% 0% 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Slide 62: Five Year Free Cash Flow (€m)
Five Year Free Cash Flow (€m) 2011 2010 2009 2008 2007 Trading profit 501 470 422 409 401 Depreciation (net) and impairment 101 148 97 94 99 Movement in working capital (4) (21) 133* 18 (9) Pensions contributions paid less pension expense (34) (41) (42) (34) (29) Capital expenditure (net) (162) (139
Slide 63: The Major Acquisitions
The Major Acquisitions » 1988 Beatreme Food Ingredients US$130m » 1994 DCA US$400m » 1998 Dalgety Food Ingredients €396m » 2001 Golden Vale €391m » 2004 Quest Food Ingredients US$440m » 2005 Noon Foods Stg£124m » 2009 Breeo Foods €140m » 2011 Cargill’s flavours business US$230m
Slide 64: Shareholder Analysis
Shareholder Analysis Institutions 52% Kerry Co-op 17% Retail 31% Institutional Analysis UK 17% North America 17% Continental / Rest of Europe 13% Ireland 5% Shares in issue 31 December 2011: 175,534,812 Shares in issue at July 2012 was 175,625,013
Slide 65: Kerry Group Background Presentation October 2012
[KERRY | Kerry Group Background Presentation October 2012