Kerry Group financial report reveals review of dairy-related businesses
The company said is conducting a strategic review of its dairy-related businesses in Ireland and the UK. This business has activities across both Taste & Nutrition and Consumer Foods businesses. The company noted there is no certainty the review will lead to a transaction.
Kerry said due to the pandemic, at-home consumption has been elevated, as consumers adapted to changes in daily routines and work practices, but the foodservice channel has been significantly impacted due to restrictions on operations and consumer mobility, leading to increased demand for online and delivery.
The company’s foodservice business was most impacted in the second quarter, as many customers were closed for extended periods, with performance significantly improving through the year as they adapted their offerings to cater for the changing marketplace.
The Covid-19 pandemic has served to accelerate key trends that were on the rise at the beginning of the year, with increased demand for health and immunity enhancement, plant protein options, and products addressing a diverse range of sustainability criteria.
Customers are increasingly focusing on sustainability as an enabler of growth, leading to significant opportunity for the company’s differentiated portfolio of sustainable nutrition solutions, Kerry said.
Performance
Group revenue of €7bn ($8.45bn) reflected a reported decrease of 4.0%, with an overall volume reduction of 2.9% in the year. This performance reflected a recovery since April with a return to volume growth of 2.2% in the fourth quarter. Performance in Taste & Nutrition continued to improve through the year and returned to volume growth in the fourth quarter, while performance in Consumer Foods improved with a very strong finish to the year.
The Group reported trading profit of €797.2m/$962m (2019: €902.7m/$1.09bn) due to the impact of Covid-19. Group trading margin decreased by 100bps to 11.5% as a result of operating deleverage and Covid‐related costs partially offset by cost mitigation actions, with significant recovery in business margins across the second half of the year.
Constant currency adjusted earnings per share decreased by 9.4% to 345.4 cent (2019 currency adjusted: 381.4 cent). Basic earnings per share decreased by 2.3% to 313.0 cent (2019: 320.4 cent). The board recommended a final dividend of 60.6 cent per share, an increase of 10.0% on the final 2019 dividend. Together with the interim dividend of 25.9 cent per share, this brings the total dividend for the year to 86.5 cent, an increase of 10.1% on 2019.
Net capital expenditure was €311m/$375m (2019: €315m/$380m) and research and development expenditure was €282m/$340m (2019: €291m/$351m) as the group continued to invest in its strategic priorities for growth across taste, nutrition, developing markets and foodservice.
Group free cash flow of €412m ($497m) and cash conversion of 67% in the year (2019: €515m/$621.5m/74%) reflected the impact of the pandemic and investments to support the ongoing progression of the Kerryconnect program across sites in North America.
In October, Kerry launched its new sustainability strategy - Beyond the Horizon. This details Kerry’s key sustainability 2030 commitments and targets, while reflecting how innovation and co-creation will continue to be central to Kerry’s growth strategy. The aim is to increase reach to more than 2bn people with sustainable nutrition solutions by 2030, which will be achieved by deploying and enhancing Kerry’s solutions across the nutrition spectrum.
Taste & Nutrition reported revenue was €5.8bn ($7bn), reflecting a reported decrease of 4.4%, primarily due to lower volumes and adverse translation currency, partially offset by contribution from business acquisitions.
Taste & Nutrition began the year strongly before the global spread of Covid‐19. While performance was most impacted in the second quarter, business volumes recovered well since then and returned to growth in the fourth quarter. Kerry said its nutrition and wellness technology portfolio had a good performance within the retail channel through customized solutions incorporating its broad protein portfolio, fermented ingredients, probiotics and immunity enhancing technologies.
Business volumes in the foodservice channel declined 19% in the year, with many out‐of‐home food and beverage outlets closed for an extended period of time. This impact was the primary driver of overall performance in developing markets, where business volumes declined by 1.2%.
Looking to the year ahead, within Taste & Nutrition, the company said it sees strong growth prospects in the retail channel, with continued recovery in foodservice, underpinned by a very good innovation pipeline and strong customer engagement. The shorter-term impact from COVID-19 will continue through Q1, where Kerry expects flat to positive volume growth in this quarter, with an overall outlook for strong recovery and good growth in the full year.
Kerry said its Consumer Foods business has a good growth outlook supported by continued innovation and the strength of its brands.
The company said it will continue to invest for growth and enablement of its business model, while continuing to pursue M&A opportunities aligned to strategic growth priorities.
During the year, the Group completed three acquisitions at a total consideration of €280m ($338m). These were Bio-K Plus International Inc., a biotechnology company with probiotics in beverage and supplement applications in Canada, and it acquired Jining Nature Group in China and Tecnispice, S.A. in Guatemala, both of which are local leaders in savory taste in their respective markets within APMEA and LATAM.
The company’s CEO, Edmond Scanlon, said, “This has been a truly unique year, with the daily lives of people across the world profoundly impacted by the Covid‐19 pandemic. I am exceptionally proud of the response of our people, and how they have supported our customers and local communities throughout the year, aligned to our Purpose, Inspiring Food, Nourishing Life.
“In the year, there were notable distinctions in business performance by channel. Sustained strong growth was achieved in the retail channel, primarily through growth in authentic cooking, plant-based offerings and health and wellness products.
“Performance in our foodservice channel was most significantly impacted in the second quarter, as the introduction of restrictions affected our customers’ operations. The proactive nature of our business model has been a key driver of our strong recovery through the year, as we supported foodservice customers in adapting their operations and menus to cater for increased consumer demand for takeaway, online and delivery.
“We made very good progress on a number of strategic fronts. We commenced the strategic development of our Georgia, US facility, which will have world-leading capabilities. We launched our 2030 sustainability strategy - Beyond the Horizon, which details Kerry’s sustainability targets and will be central to our growth strategy, as we continue to innovate with our customers and expand our reach of sustainable nutrition solutions. We completed a number of key acquisitions aligned to our strategic growth priorities in the year, and have since announced our intention to acquire Spanish listed Biosearch Life.
“While uncertainty from COVID-19 continues to impact our customers, consumers and industry, we will continue to cocreate with our customers to meet accelerating consumer demands, and look forward to a year of strong recovery and good growth.”
