Kerry’s financial results for the first half of 2022 increased by 13.3 percent to € 4.1 billion (US$4,19 billion), showcasing an organic growth of 15.2 percent overall.
The ingredients company celebrates the overall performance and hopes this will continue despite the concerns over inflation and geopolitical uncertainty, shares its CEO, Edmond Scanlon.
“Volume growth was solid in both retail and foodservice channels, driven by an increased level of innovation activity,” he explains. “This growth was broad-based across our regions, led by excellent performances in Beverage, Meat and Bakery end-use markets in particular.”
“We also made good strategic progress by expanding our footprint and completing several strategic acquisitions in the period. While recognizing the marketplace is facing a period of heightened uncertainty and volatility, this also presents significant opportunities. We remain confident in our outlook and reaffirm our full-year earnings guidance,” Scanlon underscores.
Group reported revenue in the period increased by 13.3 percent to €4.1 billion, reflecting a volume increase of 6.8 percent, increased pricing of 8.3 percent, a favourable transaction currency impact of 0.1 percent, a favourable translation currency impact of 5.8 percent and contribution from acquisitions of 4.7 c, partially offset by the dilutive impact of the disposal of the Consumer Foods Meats and Meals business of 12.4 percent.
Group EBITDA increased by 13.1 percent to €518 million, with an EBITDA margin maintained at 12.8 percent, primarily driven by the benefits from operating leverage, mix, efficiencies and portfolio development, offset by the impact of passing through raw material cost inflation.
Constant currency-adjusted earnings per share increased by 9.0 percent to 176.4 cent (H1 2021: +24.1%), which represented an increase of 16.1 percent in reported currency (H1 2021: +15.1%). Basic earnings per share of 128.4 cent (H1 2021: 128.2 cent) reflects the growth in the period offset by the impairment of the Group’s Russia and Belarus assets and the charges related to the previously announced Accelerate Operational Excellence programme.
Free cash flow was €226m (H1 2021: €222m), representing a cash conversion of 72 percent, with increased investment in working capital in the period partially offset by lower net capital expenditure due to the timing of projects.
The interim dividend of 31.4 cent per share reflects an increase of 10.2 percent from the prior year’s interim dividend.
The overall demand environment was positive throughout the period. As preferences continue to evolve with heightened demand for new food and beverage experiences, the importance of value options has increased for consumers, while sustainability remains an important consideration.
The resilience of supply chains remains a key focus across the industry due to geopolitical volatility and inflationary pressures. Despite these challenges, the level of customer innovation remains strong, and the level of innovation support needs continues to expand, with customers continuing to evaluate the relevance and uniqueness of their product ranges and their readiness to adapt to further changes in the consumer landscape.
Taste & Nutrition reported revenue increased by 27.5 percent to €3,445m in the period, driven by volume growth, positive pricing, favourable foreign currency impacts and a positive contribution from acquisitions net of disposals.
Strong business volume development was achieved through the period, with growth led by the Beverage, Meat and Bakery markets in particular. The retail channel achieved excellent growth due to customers’ increased requirements for innovation support. The foodservice channel delivered strong double-digit growth across all regions, supported by increased seasonal menu offerings, innovations to reduce operational complexity and solutions designed to improve their overall sustainability impact.
Overall growth across the Group’s key growth platforms was strong, led by increased demand for Kerry’s range of food waste solutions, with good growth across authentic taste and plant-based, while health and bio-pharma performed in line with expectations. The recently acquired Niacet³ business continued to deliver strong growth and business development.
Business volumes in emerging markets increased by 10.7 percent in the period, as very strong growth in the Middle East, Southeast Asia and LATAM were partially offset by challenging conditions in China due to localised restrictions in place and in Russia and Eastern Europe due to the ongoing war in the region.
Since the end of the period, the divestment of 100 percent of the share capital of Kerry’s subsidiary in Russia to local management was completed and an agreement has been reached for the sale of Kerry’s subsidiary in Belarus to a third party.
- Volume growth of 9.1% with Q2 performance of 11.4%
- Growth was led by Beverage, Meat and Bakery EUMs
- Excellent growth achieved across both retail and foodservice channels
- LATAM delivered strong growth led by Brazil and Mexico
Reported revenue in the Americas region increased by 29.1 percent to €1,934m in the period, driven by volume growth, positive pricing, favourable foreign currency impacts and contribution from acquisitions.
Growth in North America continued its strong momentum through the period, with high levels of activity across both the retail and foodservice channels. This was led by the Beverage EUM, which delivered particularly strong growth through innovations across refreshing beverages, functional beverages and the tea and coffee categories incorporating Kerry’s authentic natural taste, Tastesense™ sugar reduction and proactive nutrition technologies. Performance in Meat and Meat Alternatives was strong across food preservation, culinary taste and texture coating systems, supported by the Group’s expanded manufacturing facility in Rome, Georgia. Bakery delivered strong growth with customer launches in food protection and preservation and through increased LTO activity within the foodservice channel.
Within LATAM, Brazil and Mexico delivered strong growth. Volume growth in Brazil was driven by performance in Meals and Meat, while volumes in Mexico were led by growth in Beverage and Snacks with regional leaders.
Within the global Pharma EUM, good volume growth was achieved driven by strong performance in cell nutrition.
- Volume growth of 7.1% with Q2 performance of 5.9%
- Growth driven by food service, which saw increased consumption and innovation activity
- Beverage, Dairy and Snacks markets delivered the strongest growth
Reported revenue in the Europe region increased by 27.5 percent to €729m in the period, driven by volume growth, positive pricing, favourable foreign currency impacts and a positive contribution from acquisitions net of disposals.
Europe achieved strong overall growth in the food service channel throughout the period. This was driven by strong menu development activity, an increased level of seasonal products and softer prior year comparatives.
Growth in Beverage was led by refreshing beverages, tea and coffee, and low/no alcohol with launches featuring Kerry’s natural extracts, Tastesense™ sugar reduction technologies and enzymes. Dairy delivered strong growth with new innovations across dairy alternatives, ice cream and desserts within the food service channel. Good growth was achieved in Snacks driven by increased customer focus on enhancing their products’ nutritional profiles in light of the evolving regulatory requirements within the region. This resulted in a number of launches incorporating Kerry’s Tastesense™ salt reduction, taste modulation and bio-processing technologies.
Growth in the Europe region was led by Central and Southern Europe, driven by a particularly strong performance in the food service channel, while performance in Russia and Eastern Europe was impacted by the ongoing war in the region.
In the same period, the Group completed the acquisition of c-LEcta³, which is a leading biotechnology innovation company based in Leipzig, Germany.
- Volume growth of 9.1% with Q2 performance of 12.1%
- Growth was led by Meat, Snacks and Bakery EUMs
- Food service achieved strong overall growth and retail performed very well
Reported revenue in the APMEA region increased by 26.1 percent to €768m in the period, driven by volume growth, positive pricing, favourable foreign currency impacts and contribution from acquisitions.
Growth in the region was primarily driven by excellent performances in the Middle East and across Southeast Asia, partially offset by challenges resulting from the localised restrictions in China. The strong growth achieved in the second quarter reflected good business development across both the food service and retail channels.
Growth in Meat and Meat Alternatives was driven by increased demand across global, regional and local leaders for Kerry’s range of local authentic taste and texture systems. Snacks achieved excellent growth in savoury applications across the Middle East and Southeast Asia in particular, while Bakery delivered strong performance through new launch activity and increased demand for functional systems across the region.
The Group continued to enhance its local presence in APMEA through the acquisition of Almer³, and its continued footprint expansion in the Middle East, which has become an important contributor to growth in the region.
Dairy Ireland delivered solid overall volume growth through the period while managing the heightened inflationary cost environment, which resulted in significant price increases across the business.
Within Dairy Consumer Products, most categories saw significant price increases, which led to overall volumes being more challenged. Within the spreads category, good performance was achieved across our customer-branded ranges. Volumes in the period in cheese snacking were impacted by reduced promotional activity and operational issues, while a new plant-based range of Dairygold products was launched at the end of the period.
Dairy Ingredients achieved good volume growth, while prices were significantly higher as a result of constrained global supply dynamics.
Kerry remains strongly positioned for growth in a highly dynamic marketplace with a good innovation pipeline. The Group is confident in its ability to continue to manage through the current inflationary cycle with its well-established pricing model and cost initiatives. Kerry will continue to strategically evolve its portfolio and invest capital aligned to its strategic priorities and key growth platforms. While overall market conditions remain uncertain, the Group expects to achieve adjusted earnings per share growth* in 2022 of 5 percent to 9 percent on a constant currency basis.