Kerry Group Announces Continued Volume Growth for Q3

Kerry Group reported revenue in the first nine months of the year decreased by 4.2%, reflecting business volume growth of 0.4%, pricing of 1.3% and a contribution from acquisitions of 1.1%, more than offset by the effect of disposals of 5.1% and adverse translation currency of 1.9%. Group EBITDA margin increased by 10bps as benefits from cost efficiency initiatives and portfolio developments were partially offset by the mathematical impact of passing through overall input cost inflation.

Overall volumes in the division remained solid considering customer and industry dynamics. Foodservice achieved high-single digit volume growth driven by ongoing innovation with QSRs and coffee chains on menu enhancement, seasonal products, and back-of-house efficiency solutions. Volumes in the retail channel were impacted by customer inventory management in North America.

“We delivered a good overall performance in the period recognising varying conditions across our markets. North America saw good improvement through the third quarter, Europe performed in line with expectations while APMEA continued to deliver strong growth,” said Edmond Scanlon, Chief Executive Officer. “Our unique positioning in foodservice supported our continued strong growth in the channel. We made good strategic progress through the period with further footprint expansion and strategic acquisitions, and given the Group’s strong balance sheet and cash flow, we are also initiating a share buyback programme. Taste and Nutrition remains strongly positioned for volume growth and margin expansion while recognising current market conditions, however Dairy Ireland performance continues to be impacted by challenging industry dynamics. Given this context, we expect our constant currency earnings growth to be at the low end of our guidance range.”

The highlights of the Q3 report are:

• Taste & Nutrition Q3 volume growth of 1.6% and Group Q3 volumes +0.1%
• Overall YTD pricing of 1.3%, with third quarter pricing reflecting deflationary environment
• Group margin expansion of +100 bps in Q3, driven by Taste & Nutrition +130bps
• Dairy Ireland YTD volumes -6.2% with margins also impacted by challenging market conditions
• Full year earnings guidance expected to be at low end of previously stated 1% to 5% constant currency range
• Share buyback programme of €300m to commence at the beginning of November

Overall performance in North America improved through the period, with volumes in the third quarter similar to the prior year. Snacks delivered good growth driven by authentic taste-led innovations across global leaders, emerging brands and private label, while Dairy performed well through taste system innovations. Within the Meat market, we continued to see good launch activity with culinary taste and texture solutions against a backdrop of challenging industry conditions.

The European Region achieved continued excellent growth in the foodservice channel driven by seasonal products, new menu innovations and ongoing nutritional profile improvements. The retail channel delivered a solid performance in the region considering the significant consumer inflationary environment.

The Group will continue to manage through the current input cost environment in collaboration with customers. Kerry will continue to develop the business through capital investment and acquisitions aligned to its strategic priorities. Taste and Nutrition is strongly positioned for volume growth and margin expansion; however Dairy Ireland performance continues to be impacted by challenging market conditions. Given this context, the Group expects constant currency adjusted earnings growth to be at the low end of the previously stated 1% to 5% guidance range.