Kerry Group Plc · EURONEXT:KRZ
Kerry — FY2011 Earnings Presentation
48 slides from Kerry's earnings presentation, Feb 21, 2012
Slide 1: Preliminary Statement of Results
KERRY GROUP Preliminary Statement of Results 21 February 2012
Slide 2: Disclaimer: Forward Looking Statements
Disclaimer: Forward Looking Statements This presentation contains forward looking statements which reflect management expectations based on currently available data. However actual results will be influenced by macro economic conditions, food industry supply and demand issues, foreign exchange fluct
Slide 3: 2011 Full Year Results
2011 Full Year Results » Review of Business Stan McCarthy CEO » Financial Review Brian Mehigan CFO » Outlook and Future Prospects Stan McCarthy CEO » Q&A
Slide 4: 2011 Full Year Results Highlights
2011 Full Year Results Highlights GROUP GROUP ADJUSTED* TOTAL VOLUMES TRADING MARGIN EPS DIVIDEND REVENUE + 6.9 % +3.3% 9.4% +11.1% +11.8% » Strong Group-wide performance in developed and developing markets » Group revenue increased by 6.9% to €5.3 billion (6.4% LFL) » Volume growth +3.3% » Trading
Slide 5: 2011 Industry: Consumer Environment
2011 Industry: Consumer Environment » Over 8% increase in raw material costs in 2011 » Success through customer alliances in cost recovery » Innovation driver of product differentiation in challenging marketplace » Growing demand for natural ingredients & flavours and healthy reformulation » High le
Slide 6: Like-for-Like Revenue Growth Analysis
Like-for Like Revenue Growth Analysis INGREDIENTS CONSUMER GROUP & FLAVOURS FOODS €5,302m €3,706m €1,674m +6.4% LFL +7.7% LFL +3.2% LFL +3.3% VOL +4.0% VOL +1.1% VOL +3.2% PRICE +3.8% PRICE +2.3% PRICE Note: like-for-like represents revenue growth before subsidiary translation and acquisitions/dispo
Slide 7: Business Review – Ingredients & Flavours
Business Review – Ingredients & Flavours 2011 Like-for-like Revenue €3,706m 7.7% Trading profit €439m 9.4% Trading margin 11.9% +10bps » All technology clusters delivering growth through innovation » Despite cost recovery challenge – satisfactory growth achieved in all regions » Business volumes +4%
Slide 8: Kerry Ingredients & Flavours Revenue Analysis
Kerry Ingredients & Flavours Revenue Analysis Revenue by Technology Year on Year Reported Growth Savoury & Dairy +7.9% Cereal & Sweet +5.4% Beverage +12.6% Pharma/Functional Ingredients +9.1% Ingredients & Regional Technologies +11.2% Taste Solutions Total +8.5% Savoury & Dairy 46% Cereal & Sweet 19
Slide 9: Business Review – Consumer Foods
Business Review – Consumer Foods 2011 Like-for-like Revenue €1,674m 3.2% Trading profit €130m 1.0% Trading margin 7.8% -30bps » Challenging marketplace – particularly in Ireland » Business volumes +1.1% (UK up 2.6%; ROI down 2.6%) » Efficiency programmes assisting cost recovery » Lag in cost recover
Slide 10: 1 Kerry Business Transformation
1 Kerry Business Transformation
Slide 11: 2011 Acquisitions: Group Impact
2011 Acquisitions: Group Impact New factories acquired in 2011
Slide 12: Financial Review
Financial Review
Slide 13: 2011 Financial Highlights
2011 Financial Highlights Revenue > €5,302m +6.4% like-for-like +6.9% reported Trading profit > €501m +7.1% like-for-like +6.4% reported Trading margin > 9.4% -10bps Adjusted* profit after tax > €375m +11.2% Adjusted* EPS > 213.4 cent +11.1% Free cash flow > €279m 2010: €305m Note: * before brand re
Slide 14: Reconciliation of Revenue & Trading Profit
Reconciliation of Revenue & Trading Profit - from reported FY 2010 to re-presented FY 2010 (€m) Reconciliation of business segment revenue Ingredients Consumer & Flavours Foods Eliminations Total FY 2010 – reported 3,675 1,768 (483) 4,960 as Reclassification of intersegment revenue (404) - 404 - Rec
Slide 15: Revenue Growth Components
Revenue Growth Components Revenue Like for like Growth 9 €1.7 b +7.7% 8 +6.4% 7 6 3.8% 5 3.2% +3.2% 4 3 4.0% 2.3% 2 3.3% 1 1.1% 0 €3.7 b -0.1% -0.1% -0.2% -1 Ingredients Consumer Group & Flavours Foods Consumer Foods Ingredients & Flavours Volume Price Trading currency Note: year on year % change
Slide 16: Revenue Growth Continuing Volumes
Revenue Growth Continuing Volumes 3 Yr Average 2011 2010 2009 » KIF Americas* 4.5% 3.3% 7.2% 3.0% » KIF EMEA* 3.3% 2.7% 4.8% 2.3% » KIF Asia-Pacific* 11.1% 10.0% 14.3% 9.1% Ingredients & Flavours 4.6% 4.0% 6.8% 2.9% Consumer Foods 1.4% 1.1% 3.0% 0.0% Group 3.7% 3.3% 5.5% 2.2% Note: * third party rev
Slide 17: Trading Margin by Business
Trading Margin by Business 2011 2010 Revenue Trading Profit Revenue Trading Profit €m €m % €m €m % Ingredients & Flavours 3,706 439 11.9% 3,416 402 11.8% Consumer Foods 1,674 130 7.8% 1,623 131 8.1% Eliminations/unallocated (78) (69) – (79) (63) – Group 5,302 501 9.4% 4,960 470 9.5%
Slide 18: 2011 Trading Margin Progression
2011 Trading Margin Progression 600 €501m 500 €470m 400 300 200 FY 2010 Operating leverage/ Kerryconnect Net price/mix Other* FY 2011 efficiencies (divisions & centre) Margin 9.5% +1.4% (0.3%) (1.0%) (0.2%)* 9.4% Note: * other includes reporting currency, trading currency and the impact of acquisiti
Slide 19: Raw Material Costs
Raw Material Costs Group Raw Material % Cost Increase » Highly volatile in recent years 11% 9% 8% 7% 7% » 8%+ increase in 2011 5% 5% 3% 1% 0% -1% 2007 2008 2009 2010 2011 » Successfully mitigated by formula -3% -5% -7% -9% pricing and business efficiency (8%) savings as Group Trading Profit Growth 9
Slide 20: The Kerryconnect Programme Plan (€350m)
The Kerryconnect Programme Plan (€350m) Kerryconnect is estimated to be a 7 year programme, investing circa €50m p.a. on average 2009 2010 2011 2012 2013 2014 2015 2016 Phase 0 Phase 1 Phase 1 and 2 Kerryconnect Phase 0: » This was focused on C.R.M. and Business Intelligence to enable the “Go to Mar
Slide 21: 2011 Kerryconnect Impact
2011 Kerryconnect Impact » Total spend in 2011 €65m » Trading profit impact in centre €26m » Trading profit impact in businesses €9m » Capital spend €30m » Software amortisation charge increasing » Phase 1 » Successful pilot deployments in Germany and Northern Ireland » First full large scale deploy
Slide 22: 2011 Free Cash Flow
2011 Free Cash Flow €101m (€4m) (€34m) (€47m) 550 (€76m) €501m (€162m) 400 €279m 250 100 Trading profit Depreciation Working capital Pension Finance costs Taxation Capital Free cash flow (net) expenditure (net) 2010 €470m €305m
Slide 23: Financial Ratios
Financial Ratios 2011 2010 EBITDA : net interest* 13.5x 10.1x Net debt : EBITDA* 2.0x 1.8x 3 Year Average 2011 2010 ROAE** 16.7% 16.5% 17.0% as ROACE** 12.4% 12.1% 12.7% CFROI 12.1% 9.4% 11.6% Note: * calculated in accordance with lenders facility agreements | ** before brand related intangible asse
Slide 24: Maturity Profile of Net Debt (€m)
Maturity Profile of Net Debt (€m) 31 Dec 2011 31 Dec 2010 Within 1 year (199) 31 Between 1 and 2 years 179 261 Between 2 and 5 years 894 408 Over 5 years 414 412 1,288 1,112 Weighted average maturity (years) 4.9 4.8 Maturity profile of committed facilities extended via 5yr €1bn revolving credit faci
Slide 25: Other Financial Matters
Other Financial Matters FINANCE ADJUSTED* TAXATION PENSION CURRENCY COSTS EPS Down €14.5m – Tax on normal trading Net deficit increased Adverse average Calculation basis strong cash flows activity 17.1% by €68m to €213m exchange rates: amended to and lower interest (FY 2010: 17.5%) due mainly to USD
Slide 26: Outlook and Future Prospects
Outlook and Future Prospects
Slide 27: 1 Kerry Operating Model
1 Kerry Operating Model Support Functions Supply Functions Demand Functions Obtain maximum consistency, Seek consistency across Group, Pursue consistency across Group understanding customer base and standards & synergies across Group where most appropriate commercial strategies differ » Procurement
Slide 28: Kerry Ingredients & Flavours Business Growth Strategies
Kerry Ingredients & Flavours Business Growth Strategies Drive Global Accelerate Growth in Leverage Capabilities & Alignment Emerging Markets Grow Expertise - Global Customer & Market - Asia Pacific - Effective & Efficient Management - Latin America Functional Expertise - Global Technology & Applicat
Slide 29: 1 Kerry Implementation Initiatives: Ingredients & Flavours
1 Kerry Implementation Initiatives Kerry Ingredients & Flavours Driving Market Optimising Scale and Building Talent for a Leadership and Efficiency Benefits Global Organisation Global Alignment • Optimised Supply Chain and • Full Implementation of ‘Go to Manufacturing Network • Functional Excellence
Slide 30: Key Elements of Kerry Foods Strategy
Key Elements of Kerry Foods Strategy Turn Deep Consumer Foster Customer Support Superior Technology to Fantastic Quality With Insight Into Compelling To Grow Together Create Delicious, Healthy Lean Efficiency Propositions Affordable Food
Slide 31: 1 Kerry Implementation Initiatives: Kerry Foods
1 Kerry Implementation Initiatives Kerry Foods Driving Market Optimising Scale and Building Talent for a Leadership and Efficiency Benefits Global Organisation Global Alignment • Kerry Production System in place throughout all manufacturing sites • Functional Excellence 1 Kerry • Full Implementation
Slide 32: Manufacturing Processes
Manufacturing Processes Core Processes Drying & Encapsulation Flavour Blending Encapsulation Wet Processing Compounding Cheese Manufacturing Reaction FLAVOUR Baking & Ohmic Cooking Extraction Encapsulation/Compounding Panning, Enrobing & Crocking Distillation Extraction Gun Puffing Pyrolysis Pyrolys
Slide 33: Kerry Group Manufacturing Footprint
Kerry Group Manufacturing Footprint Manufacturing Excellence » Broad processing capability to support customer specific solutions » Requires large manufacturing footprint » Manufacturing Operating Model alignment review will: » Capture and share knowledge across Kerry » Build on existing capabilitie
Slide 34: Performance Framework
Performance Framework Performance v Targets to Date KPI Target 4 Year Avg 2008 to 2011 5 Years to 2012 2% to 4% LFL Revenue ✔ +3.6% On track volume growth 10% trading margin Margin +25bps pa On track** (+30bps pa) CAGR Adjusted* EPS Growth 10%+ On track ✔10.6% ROAE* 15%+ ✔ 16.4% On track CFROI 12%+
Slide 35: Future Prospects
Future Prospects » 1 Kerry » Realisation of Kerry business potential » Enabling improved performance along the value chain » Aligning operational and functional footprint for competitive advantage (e.g. Cargill’s flavours business integration) » Maximising business development and innovation opportu
Slide 36: Additional Information
Additional Information
Slide 37: Business Review – Ingredients & Flavours Americas
Business Review – Ingredients & Flavours Americas 2011 Like-for-like Revenue €1,558m 7.1% » Volumes +3.3% » Good cost recovery (pricing/mix +3.8%) » Dairy systems – good growth through yoghurt and smoothies » Good growth through coating systems in meat applications » Sweet systems growth through bit
Slide 38: Business Review – Ingredients & Flavours EMEA
Business Review – Ingredients & Flavours EMEA 2011 Like-for-like Revenue €1,475m 6.9% » Volumes +2.7% » Some lag in cost recovery (pricing/mix +4.2%) » Continued momentum towards clean label solutions » Good uptake of Kerry’s SFT™ all-natural shelf life extension technology in meat sector » Acquisit
Slide 39: Business Review – Ingredients & Flavours Asia-Pacific
Business Review – Ingredients & Flavours Asia-Pacific 2011 Like-for-like Revenue €605m 12.0% » Volumes +10% » Pricing/mix +2.8% » Savoury & Dairy and Culinary Systems continued expansion in Asian markets » Platform for growth established in India » Meat technologies grew strongly in Australia and Ne
Slide 40: EPS Reconciliation
EPS Reconciliation 2010 2011 Growth € cent € cent % 192.1 Adjusted* EPS 213.4 11.1% (6.7) Brand related intangible asset amortisation (7.9) (0.4) Non-trading items (net of tax) – 185.0 Basic EPS 205.5 11.1% Note: * before brand related intangible asset amortisation and non-trading items
Slide 41: Adjusted EPS – Revised Calculation Basis
Adjusted EPS – Revised Calculation Basis FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 Adjusted earnings €m 246.1 249.0 257.5 268.9 291.4 340.9 (as reported) Computer software €m (1.5) (2.0) (2.6) (3.6) (4.5) (4.2) amortisation Adjusted earnings €m 244.6 247.0 254.9 265.3 286.9 336.7 (re-presented
Slide 42: Net Debt Profile (€m) as at 31 Dec 2011
Net Debt Profile (€m) as at 31 Dec 2011 Net @ Floating @ Fixed debt rates rates Euro 648 418 230 US Dollar 556 91 465 Sterling 96 96 – Other (12) (12) – 1,288 593 695 100% 46% 54% Weighted average period for which rate is fixed: 3.6 years
Slide 43: Euro – Sterling Trend
Euro – Sterling Trend H1 H2 0.92 0.9 0.88 0.88 0.86 0.86 0.86 0.84 2011 0.84 2010 0.82 0.82 0.8 0.78 0.76 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 2010 Avg fx rate 0.87 0.86 % change (1.2%)
Slide 44: Euro – US Dollar Trend
Euro – US Dollar Trend H1 H2 1.5 1.45 1.45 1.4 1.40 2011 1.35 1.34 2010 1.34 1.3 1.29 1.25 1.23 1.2 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 2010 Avg fx rate 1.40 1.33 % change (5.3%)
Slide 45: Shareholder Analysis
Shareholder Analysis Institutions 51% Kerry Co-op 17% Retail 32% Institutional Analysis UK 16% North America 16% Continental / Rest of Europe 14% Ireland 5% Shares in issue 31 December 2011: 175,534,812
Slide 46: Revenues and Profitability
Revenues and Profitability Group Revenues (€bn) Group Trading Profit (€bn) 10 Year CAGR 5.9% 10 Year CAGR 6.7% 6 5.3 600 4.8 4.8 5.0 501 4.6 4.5 470 5 4.4 500 4 3.8 3.7 4.1 as 400 305 309 356 380 384 401 409 422 3 300 2 200 1 100 0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2002 2003 2004 2
Slide 47: Cash Flow and Adjusted EPS
Cash Flow and Adjusted EPS* EBITDA (€m) Free Cash Flow (€m) 700 400 367 618 601 600 350 519 305 500 503 279 300 500 257 400 as 250 200 227 300 150 200 100 100 50 0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Adjusted EPS* and Dividends (cent) 200 180 160 140 213.4 120 192.1 100 151.8 163.9 8
Slide 48: Kerry Group
KERRY GROUP Preliminary Statement of Results 21 February 2012