Ingredients business Kerry Group has reported growth of 8.5% in the first quarter of 2023.
Edmond Scanlon, chief executive officer said: “Our performance in the first quarter was driven by good volume growth in APMEA and Europe, led by strong growth in the foodservice channel, as customers in the North America retail channel worked through elevated inventory levels across the period. Overall growth was led by the Dairy, Snacks and Pharma markets, as customers continued to innovate their offerings while navigating the heightened inflationary environment.
“We continued to make good strategic progress through footprint expansion and portfolio evolution with the sale of our Sweet Ingredients Portfolio, further enhancing and developing our business in areas where we can add most value.
“While recognising the current market uncertainty, we believe we remain strongly positioned for growth and we reiterate our full year constant currency earnings guidance.”
Markets and Performance
Kerry said consumer demand remained resilient through the period given the heightened inflationary environment. Customer innovation was primarily focused on new taste profiles, enhancing products’ nutritional characteristics and providing more value options for consumers.
The Group reported revenue increased by 10.3% in the period. This comprised increased business volumes of 0.2%, increased pricing of 8.3%, favourable translation currency of 1.5% and contribution from business acquisitions net of disposals of 0.3%. Group EBITDA margin decreased by 70bps primarily driven by the mathematical impact of passing through input cost inflation, partially offset by the positive effect from cost efficiency initiatives.
At the end of the period, the Group completed the sale of the trade and assets of its Sweet Ingredients Portfolio to IRCA.
Taste & Nutrition
Growth driven by strong performance in its foodservice channel:
- Overall volume growth of 1.2% with good growth in APMEA and Europe
- Growth led by Dairy, Snacks and Pharma
- Pricing of 7.2% reflected the management of input cost inflation
- EBITDA margin reduction of 80bps with the effect of passing through input costs partially offset by efficiencies
Taste & Nutrition was reported to have delivered solid overall volume growth through the period despite the effect of increased pricing. Foodservice continued its momentum with strong volume growth, supported by innovation with quick service restaurants and coffee chains on new menu development, seasonal products and solutions to enhance back-of-house efficiency. Overall performance in the retail channel was muted in the period, reflecting customers’ inventory management in North America.
Growth in the period within the Food EUM was led by Dairy, Snacks and Meat, supported by continued innovation and strong performances in savoury taste and Tastesense® salt and sugar reduction technologies. Business volumes in emerging markets increased by 6.0% in the period, driven by strong growth in the Middle East, Southeast Asia and LATAM.
Europe Region
- Volume growth of 3.9%
- Growth led by Snacks, Dairy and Meals
- Strong growth in foodservice with retail delivering a solid performance
The region achieved another strong quarter of growth, while managing significant price inflation. Snacks delivered strong growth through savoury taste systems and Tastesense™ salt reduction technologies. Growth in Dairy was supported by new innovations in ice-cream and dairy applications in the foodservice channel, while Meals achieved good growth through taste technologies and functional solutions.
Growth was broad-based across the region with strong growth in the foodservice channel, particularly in quick service restaurants and coffee chains, while the retail channel delivered a solid performance given the current inflationary environment.
Dairy Ireland
Overall performance reflective of market conditions
- Volume reduction of 5.8% and increased pricing of 14.4%
- EBITDA margin reduction of 80bps resulting from input cost inflation
Overall volumes in the period in Dairy Ireland were lower and pricing was higher given the heightened year-on-year inflationary cost environment.
Dairy Ingredients volumes were impacted by high market prices and expectations of inflation turning to deflation, given global market supply and demand dynamics across the first quarter.
Dairy Consumer Products performed well in the period, with overall growth led by Kerry’s branded cheese ranges and private-label spreads, supported by increased promotional activity.
Future Prospects
While market conditions are currently uncertain, Kerry said it remains strongly positioned for growth with a good innovation pipeline. The Group plans to continue to manage input cost fluctuations with its well-established pricing model and invest capital and develop its portfolio aligned to its strategic priorities.
The Group expects to achieve adjusted earnings per share growth in 2023 of 1% to 5% on a constant currency basis.
