Preliminary Statement of Results 2016 February 2017
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, net debt or other financial measures, the impact of foreign exchange fluctuations, the impact of raw material fluctuations and other competitive pressures. These and other forward looking statements reflect management expectations based on currently available data. However, actual results will be influenced by, among other things, macro-economic conditions, food industry supply and demand issues, foreign exchange fluctuations, raw material and commodity fluctuations, the successful acquisition and integration of new businesses, the successful execution of business transformation programmes and other, as of today, unknown factors. Therefore actual results may differ materially from these projections. These forward looking statements speak only as of the date they were made and the Group undertakes no obligation to publicly update any forward looking statement, whether as a result of new information, future events or otherwise. 2
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
REVIEW OF BUSINESS GROWTH RETURNS HIGHLIGHTS 2016 – • Good business growth in a Adjusted* EPS ROACE* +7.1% +12.9% competitive environment Another • Strong Q4 performance +12.3% constant currency Year of Ahead of target growth • Marketplace changes Successful accelerating innovation Volume Free Cash Flow • Health & wellness trends Growth +3.6% € 570m pervasive Outperforming our • Kerry Technology & Record year markets Innovation investment winning Trading Margin Dividends • Strong Kerry financial +12.0% +70bps performance despite currency volatility CAGR of 17.2% over Growth ahead of plan 30 years Note: * before brand related intangible asset amortisation and non-trading items (net of related tax) 4
REVIEW OF BUSINESS MARKETPLACE DYNAMICS DEVELOPED MARKETS DEVELOPING MARKETS FY 2016 • Less than buoyant • Varied economic growth • Nutrition, health & Market economic conditions wellness, clean-label and • Geopolitical issues convenience driving Overview • Continued currency continue to impact product differentiation and volatility growth in some increased product churn geographies • ‘Nutritionally’ minded • Foodservice growth consumption drives • Continuing dynamic outperforming retail demand for Taste & growth in Asian Taste & Nutrition Nutrition end-use- • Channel disruption – markets increased market • Convenience trends lead fragmentation innovation for snacking • Strong foodservice and ‘out -of- home’ regional growth • Localisation of taste – catalyst for product offerings launches at regional level 5
Revenue and Margin – A Year of Strong Growth REVIEW OF BUSINESS GROUP € 6,131m Volume +3.6% Margin +70bps CONSUMER FOODS TASTE & NUTRITION € 1,333m € 4,880m Volume +4.0% Volume +2.1% Margin +60bps Margin +30bps 6
Business Review – Taste & Nutrition REVIEW OF BUSINESS 2016 2016 GROWTH GR 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 all regions • Taste & Nutrition technologies well positioned to deliver for 3.8% consumers 3.3% 3.1% • Price deflation of 2.1% reflecting raw material pricing and customer partnership agreements • Margin progression – innovation investment enhancing business quality Q1 Q2 Q3 Q4 2015 2016 Note: * volume growth 7
Business Review – Taste & Nutrition REVIEW OF 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 10.7% improved performance in across customer base delivers • Culinary, Beverage and Latin America encouraging results Foodservice key drivers of • Strong performance in • Developed regional growth Beverage, Meat, Savoury and – impacted by deflationary • Continued Kerry investment for Functional Ingredients environment regional growth – good growth in Dairy and • Developing – Brazil improved, Beverage • Agreement to acquire Mexico solid performance – Sweet & Cereal demand weak – Tianning Flavours in China 4.0% 3.9% • 2015 acquisitions performing – Taste Master in Australia • Developing – Russia progressing well to be completed by end of well, South Africa and Middle East Q1 2017 challenging but early signs of recovery 0.7% AMERICAS EMEA APAC T&N REVENUE REVENUE REVENUE € 765m € 2,589m € 1,447m 10.7% VOLUME GROWTH 3.9% VOLUME GROWTH 0.7% VOLUME GROWTH 8
Our Taste & Nutrition Business Today REVIEW OF BUSINESS 54% 30% 16% Developed Developing 74% 26% AMERICAS ASIA-PACIFIC EMEA 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 & Dressings Beverage Systems & Flavours TECHNOLOGY END-USE-MARKET 5% Confectionery +9.3% 5% Cereal & Bars Pharma/Functional Ingredients 5% Ice-cream & Desserts (3.6%) 5% Prepared Meals & Sides Cereal & Sweet Systems & Flavours 5% Savoury Snacks 5% Pharma Regional Ingredients 2% Appetisers 2% Others 9
Business Review – Consumer Foods REVIEW OF BUSINESS 2016 2016 GR GROWTH Revenue € 1,333m +2.1%* Trading profit € 117m (6.7%) Trading margin 8.8% +30bps DAIRY • Kerry Foods – good performance despite Brexit QUARTERLY VOLUME GROWTH uncertainty Growth in cheese snacking • Spreads – traditional category decline • • Channel proliferation due to growth of convenience Cheestrings ‘ Scoffies ’ and ‘ Yollies ’ – encouraging • and discounters growth 2.5% 2.1% 2.1% Ossett (GB) investment in Centre of Excellence for 1.7% • • Decline in deep-cut promotions ‘spreadable’ butter • Blurring lines between foodservice and ‘food -to- go’ MEAT PRODUCTS Q1 Q2 Q3 Q4 • Trading profit – improved underlying business more Fridge Raiders – extension to young adult segment • 2015 2016 than offset by currency and 2015 disposals Richmond – impacted by EDLP strategies • Wall’s – continued brand growth • • Continued investment in ecommerce Fire & Smoke range – successful launch in the UK • • Continued margin enhancement through improved MEAL SOLUTIONS business portfolio Strong innovation in chilled category • • Innovation driven by snacking trends and ‘better -for- Frozen category challenged but growing in • foodservice and ‘direct -to- consumer’ channels you’ products Note: * volume growth 10
Financial Highlights FINANCIAL REVIEW € 6,131m € 750m 323.4 Revenue Trading Profit Adjusted EPS Brian Mehigan, CFO 11
FINANCIAL Strong Underlying Financial Performance REVIEW • 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 INVESTMENT* TASTE & NUTRITION 12.2% 3.6% 5.1% 4.7% 4.3% 1.5% 9.6% +260bps Market Kerry 2012 2013 2014 2015 2016 2007 2016 2014 2015 2016 Sources: Kerry estimates, FAO annual food price index | * R&D spend as a % of divisional revenue 12
FINANCIAL REVIEW TRANSLATION EFFECT – TRANSACTION EFFECT – YOY RATES EURO – STERLING EXPOSURE USD 1% 3-4% of Group Revenue CAD Currency (4%) net euro – sterling exposure MXN (18%) Dynamics BRL (3%) STG (12%) ZAR € 6.1bn (16%) RUB (9%) GROUP REVENUE AUD (1%) MYR (7%) CNY (5%) 5% EPS headwind 1% EPS headwind in FY 2016 in FY 2016 13
2016 Financial Highlights FINANCIAL REVIEW € 6,131m +3.6% volume growth REVENUE € 750m +7.1% TRADING PROFIT 12.2% +70bps TRADING MARGIN +7.1% 323.4c ADJUSTED EPS* (+12.3% constant currency) 302.9c +1.4% BASIC EPS € 570m 100% conversion** FREE CASH FLOW Note: * before brand related intangible asset amortisation and non-trading items (net of related tax) | ** expressed as a percentage of adjusted earnings after tax 14
Revenue Analysis FINANCIAL REVIEW 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
Revenue – Volume Growth Ahead of Markets FINANCIAL REVIEW € m GROUP VOLUME +3.6% 7,000 GROWTH BY QUARTER +1.5% 6,000 +4.0% € 6,131 +1.7% 5.0% 5,000 € 4,880 4,000 3.5% 3.1% 3,000 2.9% +2.1% +1.0% 2,000 € 1,333 1,000 0 Group Taste & Nutrition Consumer Foods Q1 Q2 Q3 Q4 2015 2016 Kerry volume growth Market volume growth* * Kerry estimates 16
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