Kerry Group Benefits From Unique Business Model
Kerry Group, the global taste, nutrition and consumer foods business, has reported a 3.1% increase in revenue to €6.6 billion for the year ended 31 December 2018, reflecting strong volume growth and contribution from acquisitions, partially offset by adverse currency movements. Business volumes grew by 3.5% and pricing decreased by 0.5% against a backdrop of lower raw material costs in the year.
Kerry Group’s trading profit increased by 3.1% to €805.6 million in 2018. The trading margin was maintained at 12.2% in 2018, reflecting a 20 basis points improvement in the Taste& Nutrition business, positive underlying margin improvement in the Consumer Foods division offset by adverse sterling exchange rates resulting in a 60 basis points margin reduction, and increased net investment on the KerryExcel programme.
Major global consumer trends such as authenticity, healthfulness, convenience, clean label, sustainability and premiumisation, aligned with local consumer preferences are continuing to generate increased innovation opportunities for Kerry Group. During the year, Kerry Group increased its industry leading research and development expenditure to €275 million – up from €269 million in 2017. Net capital expenditure amounted to €286 million (2017: €297m) as Kerry Group continued to invest in its strategic priorities for growth, in particular taste technologies and developing market facilities.
With revenue of €5.351 billion in 2018, Kerry Group’s Taste & Nutrition business delivered 4.1% volume growth and pricing decreased by 0.5%. Trading profit grew by 5.0% to €805 million, reflecting a 20 basis points improvement in trading margin to 15.1%. Taste& Nutrition achieved sustained volume growth in North America, solid growth in Latin America, a good performance in Europe and continued strong growth in APMEA.
While the UK and Irish consumer foods markets encountered, Kerry’s Consumer Foods division delivered a solid underlying performance. Volumes increased by 1.1% and pricing decreased by 0.4%. Reported revenue increased by 0.6% to €1.339 billion, as volume growth and the contribution from business acquisitions were partially offset by foreign currency headwinds. The divisional trading profit margin decreased by 60 basis points to 7.5% as the underlying margin improvement was more than offset by transaction currency headwinds, resulting in a trading profit decrease of 7.1% to €100 million.
Edmond Scanlon (pictured), chief executive of Kerry Group, comments: “We are pleased with our performance in 2018, with volume growth well ahead of our markets, underlying margin expansion in line with expectations and adjusted earnings per share growth of 8.6% in constant currency. This performance continues to highlight the uniqueness of Kerry’s business model in supporting customers, as consumers continue to look for innovation and drive further marketplace fragmentation. We have also made good progress across our strategic growth priorities, including further developing our industry leading portfolio of taste and nutrition foundational technologies, completing a number of strategic acquisitions and investments aligned to growth priorities as planned. In 2019 we expect to deliver adjusted earnings per share growth of 6% to 10% on a constant currency basis.”
During the year Kerry Group completed ten acquisitions at a total consideration of €502.2 million and an investment in a joint venture of €15.6 million. These investments were aligned to the group’s strategic priorities for growth, bringing additional taste and nutritional technologies, expanding its presence in developing markets and adding to the foodservice offering.
Kerry Group has reached agreement for two further strategic acquisitions for an expected total consideration of €325.0 million, subject to regulatory approval and customary closing conditions. The acquisition of Southeastern Mills’ North American coatings and seasonings business (SEM) was completed after the year end. Kerry Group also expects to complete the acquisition of Ariake USA, a leading producer of natural clean label savoury taste solutions, in the first half of 2019.
