Kerry Group plc

Ladies and gentlemen, thank you for standing by. I would like to welcome everyone to the full year results webcast and conference call. At this time, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star followed by the one once again. Thank you. I will now hand the call over to Mr. William Nitch Head of Investor Relations, you may begin your conference.

Thank you, operator. Good morning and welcome to Kerry's full year 2023 results call. I'm joined on the call by our CEO, Edmund Scanlon, and our CFO, Marguerite Larkin. Edmund and Marguerite will take you through today's presentation, and following this, we will open the lines up for your questions. Before we begin, please note the usual disclaimer regarding forward-looking statements. I will now hand over to Edmund.

Good morning, everyone, and thank you for joining our call. So beginning with slide four and the overview for 2023, where we delivered a solid overall performance and continued to strategically develop our business. In case nutrition, we delivered volume growth ahead of our markets, driven by growth in the food service channel, where we believe we are uniquely positioned. Dairy Ireland performance reflected the significant reduction in market prices in the year, which have now stabilized. On EBITDA, we delivered 60 basis points of margin expansion due to the benefits from our Accelerate program and portfolio developments. On cash, we had a strong performance with over 700 million free cash flow on the year. And returns were in line with our expectations, our flat year and year excluding currency. So a good overall scorecard in light of the varying market dynamics across the year. From a strategic perspective, we continue to make good progress and build on our significant recent portfolio developments. The acquisition of Proexcar strengthens our position in the LATAM meat market and provides a platform for business development in the Andean market. Greytown strongly compliments our leading authentic local taste position in China and expands our offering in the local food service channel. And the recently announced that is enzyme business acquisition further builds on our biotechnology capabilities, following the acquisitions of Selecta and NMICS, and extends our enzyme manufacturing footprint to three continents. We also divested our sweet ingredients portfolio during the year, as we continue to refine and develop our business in the areas where we believe we can create the most value. Next on organic investments, we continued to enhance and develop Kerry's global presence, including the expansion of our footprint in East Africa and the opening of our new authentic case facility in Tarawang in Indonesia to further support in key end-use markets across Southeast Asia. On capital returns, we increased our dividend again at a double-digit rate, which will mean an overall payout for the 2023 dividend of approximately 200 million euro. And we commenced an initial 300 million share buyback program during the last quarter of 2023, given market conditions and our strong cash generation. So we're pleased with our strategic and operational progress in 2023, thanks to the continued efforts of our people right across the organization. We will continue to develop our business for long-term success and remain agile and flexible as regards capital deployment, with a very clear priority of delivering the best return for our shareholders. So moving next to our case nutrition overview on slide five, where growth was driven by our strong performance in food service. Revenue for the division was seven billion in 2023, which included volume growth of 1.1%. While this is below the levels we're used to in our case nutrition business, it's important to recognize firstly our strong comparatives with almost 8% volume growth last year. And secondly, our volume growth represented a good market outperformance given the challenging market conditions which continued through the last quarter. Overall pricing for the year was up 1.1% as inflation in H1 turned to deflation in H2. EBITDA margin of 17% was up 50 basis points in the year with a strong H2 performance. From an induced market perspective, Volume growth was led by performance in dairy applications, in snacks through savory taste, and in meat with taste and texture systems. Looking at our channels, we achieved excellent growth of 9.3% in food service, while volumes in the retail channel were back 2.2% due to customary inventory management and softer market conditions and cases. And our emerging markets delivered 4.1% volume growth led by a strong performance in the Middle East in particular. Turning to slide six and case nutrition performance by region. The Americas delivered revenue of 3.8 billion, with overall volumes back 1.8% in the full year and 1.9% in Q4. This was primarily due to customer inventory management, which was a little more than expected at the year end, along with the effect of shrinkflation and softer demand across a number of end markets. While these dynamics affected overall performance in North America, in the retail channel in particular, we had good volume growth in snacks with taste-led innovations across global leaders, emerging brands, and private label brands. And dairy also performed well through taste systems innovations. In LATAM, we had overall growth in the year led by Mexico while Brazil experienced softer market conditions in the second half of the year. Moving to Europe, where we had revenue of 1.5 billion and overall volume growth of 2.9%. This was driven by an excellent performance in food service and across the UK and Ireland in particular. As expected, performance in the retail channels softened through the year, reflecting consumer dynamics given the recent inflationary environment. In AFMEA, we had revenue of 1.6 billion with overall volume growth of 6.2% led by a strong performance in our food service channel and in the Middle East across the year. China delivered good growth considering local market dynamics while performance in Southeast Asia was impacted by challenging market conditions for the second half of the year. Turning to slide seven and our end use market breakdown. As you can see from the chart, we had overall volume growth of 3% across our food end-use markets, driven by meat, through taste, texture, and preservation systems, snacks with savory taste and taste sense salt reduction technologies, and dairy with authentic taste innovations. In the beverage EUM, we had lower volumes due to customer inventory management and shrinkflation, partially offset by good performance with our botanical extracts and casein sugar reduction technologies.