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Kerry Group sees revenue growth

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By Jim Cornall+


Kerry Group issued its 2016 financial results this week, and said it expects good revenue growth in 2017.
Kerry Group issued its 2016 financial results this week, and said it expects good revenue growth in 2017.

Kerry Group has released its financial results for 2016, and announced group revenue increased slightly by 0.4% to €6.1bn ($6.43bn).

The Irish company saw its profit after tax rise to €533.1m ($561.8m) in 2016, compared to €525.4m ($553.7m) in 2015.

Its net debt to EBITDA ratio dropped to 1.5 from 1.9 in 2015, with EBITDA at €882.4m ($929.8m), up from €828.5m ($873m) the previous year, while the group achieved a record free cash flow of €570m/$600m (2015: €453m/$477m).

Business acquisition

The company said health and wellness trends continued to drive ‘nutritionally minded’ consumer choice, increasing demand for taste, active nutrition, higher protein, natural, ‘free-from’, authentic, clean-label, convenient food and beverage products.

Kerry said performance was assisted by businesses acquired in 2015, which provided a strong platform for international market development.

It noted continued market development progress in all regions and recorded growth in Asia - particularly in Q4.

Business performance

Business volumes grew during the year, reflecting 3.6% growth year-on-year, growth in North America, an improved performance in Latin American markets, challenging market conditions in the EMEA region (due to the prevailing deflationary environment and instability in regional developing markets) and a strong business performance throughout Asia.

Net pricing was 2.1% lower against a background of approximately 4% lower raw material costs. Currency headwinds relative to 2015 contributed an adverse 4.1% translation impact and an adverse 0.3% transaction currency impact relative to revenue.

Expenditure on research and development increased significantly due to increased investment in Taste & Nutrition to €261m ($275m), compared to €234m ($246.6m) in 2015.

Americas growth

Sales revenue in the Americas region on a reported basis increased by 12.2% to €2.59bn ($2.7bn), reflecting 3.9% volume growth and 2.1% lower pricing.

The dairy, dairy-free and yogurt sectors also provided good growth opportunities for Kerry’s taste technologies.

Kerry said progress was achieved in integrating the Wellmune branded natural food, beverage and supplement immune enhancing ingredients business, which was acquired in September 2015.

In 2016, Wellmune saw launches in sports nutrition, functional dairy beverages, yogurt products and dietary supplements.

EMEA region

Sales revenue in the EMEA region on a reported basis declined to €1.4bn ($1.5bn), reflecting a 6.4% adverse translation currency impact, an adverse 0.2% transaction currency impact, 0.7% volume growth and 2.1% lower pricing.

Dairy & Culinary achieved volume growth in the foodservice sector due to menu extension capitalizing on appetizer and snacking trends. ‘DairySource’, Kerry’s clean-label dairy portfolio, was launched in 2016.

Primary dairy production declined in some major exporting countries in H2 2016, which Kerry said contributed to improved trading conditions in international dairy markets.

It noted Europe-based nutritional technologies benefited from increased demand, particularly from Asian markets, for sustainably-produced nutritional ingredients for all life-stage applications, including infant nutrition products.

Asia-Pacific Region

Regulatory changes in the Chinese infant nutrition sector helped Kerry’s Europe based nutritional technologies. A major expansion programme at the Group’s Nantong, China production and distribution center was completed prior to year-end.

To support an expanding customer base in the region, two production facilities were also commissioned in Batangas, the Philippines, and in Cikarang, Indonesia.

Kerry Group chief executive Stan McCarthy said the group remains confident of its ability to sustain profitable growth throughout global markets.

“In 2017, we expect to achieve good revenue growth and 5% to 9% growth in adjusted earnings per share,” McCarthy said.

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