‘Strong balance sheet’ facilitates Kerry’s €300m share buyback scheme
The news coincided with the company’s recent quarter three, interim management statement which revealed that the dairy side of the business has been impacted by ‘significant reduction in dairy prices’. It also revealed that full-year earnings guidance are expected to be at the low end of the previously stated 1-5 per cent constant currency range.
Dairy volumes were down by 12 per cent in quarter three, and 6.2 per cent year to date (YTD) ‘as challenging industry dynamics persisted; pricing dropped by 17.6 per cent in quarter three, and 6.5 per cent YTD, ‘driven by the significant impact from changes in dairy market prices’. And group earnings were down 110 basis points, driven by the significant impact from changes in dairy market prices.
Volumes in Dairy Ireland were lower through the period, as input cost dynamics continued to impact overall market demand, the interim report stated. Within Dairy Ingredients, volumes principally reflected softer market supply dynamics with prices continuing to reduce through the period. Overall growth in dairy consumer products was led by Kerry’s branded cheese ranges and private-label spreads. However, Kerry’s Taste and nutrition division saw overall volume growth of 1.5 per cent with growth of 1.6 per cent in quarter three. This was driven by continued strong foodservice performance. And this contributed to group margin expansion of +100 basis points in quarter three. Meat, snacks and dairy markets achieved good growth also.
In relation to markets and performance, the report stated that given the prevailing industry dynamics through the period, the overall demand environment remained quite resilient. “Customer innovation activity primarily focussed on new taste profiles, continued improvements to products’ nutritional characteristics, products targeting health needs, and providing more relative value options for consumers.”
Commenting on the results, Edmond Scanlon, chief executive officer said: “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 Asia Pacific/Middle East/Africa (APMEA) continued to deliver strong growth. 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”.
Europe region
Here, overall volumes were up 3.7 per cent, with quarter three growth of 2 per cent in line with expectations. This volume growth was led by meat, snacks and meals markets. There were also strong performances in the UK and Ireland. The 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.
Growth in meat was driven by culinary taste and texture system launches combined with continued nutritional enhancement innovations. Snacks delivered strong growth through savoury taste and Tastesense salt reduction technologies, while meals also achieved strong growth through nutritional enhancements and authentic taste solutions for stocks and broths.