Kerry Group plc

Thank you, operator. Good morning and welcome to our 2025 half-year results call. I'm joined in the call by our CEO, Edmund Scanlon, and our CFO, Marguerite Larkin. Edmund and Marguerite will take you through our presentation, and following this, we will then open up the lines for your questions. Before we begin, please take note of the disclaimer on our H1 presentation regarding forward-looking statements. I'll now pass over to Edmund.

Thanks, William, and good morning, everyone, and thanks for joining our call. So beginning with slide four and the summary overview of H1, where we delivered a good overall performance, particularly given market conditions, with continued volume growth and strong margin expansion, driving strong constant currency earnings growth. So firstly on revenue, we delivered 3% volume growth, which was well ahead of end market and channel growth. This was led by a strong performance in the food service channel, with continued innovation activity on new menu items, seasonal launches, as well as cost reduction solutions. Growth in the retail channel was supported by increased retailer brand innovation and nutritional renovation across a range of customers. On EBITDA margins, we delivered very strong margin expansion of 100 basis points in the first half, with a key driver being its accelerated operational excellence, along with operating leverage and also product and portfolio and mixed benefits. And on earnings per share, the combination of volume growth and margin expansion enabled us to deliver strong constant currency growth of 9.8% in the first half. I'll touch on the outlook in a little more detail later, but to summarize, There's no change to our full year constant currency EPS guidance range. We're slightly moderating our volume growth outlook for the full year to similar to what we delivered in H1, while increasing our expectations for full year margin expansion, which we will touch on shortly. Moving next to the business performance overview in slide five. Volume growth was 3% for both Q2 and H1. This represented a strong outperformance over food and beverage end markets, which were flattish overall. Pricing of 0.2% reflected limited overall inflation across our basket of input costs. Across our end-use markets, volume growth was led by beverage, bakery and snacks end-use markets, This was supported by strong growth in savory taste, taste sense salt and sugar reduction technologies, as well as botanicals, natural extracts, and proactive health ingredients. And then in emerging markets, we had volume growth of 5.6%, led by a strong performance in Southeast Asia and LATAM. Turning next to the performance by region and starting with the Americas in slide six, where we had continued strong performance. Reported revenue for the region increased to over 1.9 billion euro, driven by volume growth of 3.7% in H1 and 3.9% in Q2. EBITDA margins for the region increased by 90 basis points to 18.5%. driven by accelerate operational excellence benefits, operating leverage, and product mix. In North America, we had strong growth in snacks through our range of savory taste profiles and taste sense salt reduction technologies across global and emerging brands, given the increased customer focus on improving nutritional profiles. Growth in bakery was driven by taste and texture solutions, as well as enzymes. While in beverage, we had good performances in the refreshing and low no alcohol categories through botanicals and natural extracts. Across our channels, we had a good performance in retail, supported by innovation and renovation activity across both customer and retailer brands. with food service continuing to strongly outperform traffic in the channel. Within LATAM, strong growth was achieved in Brazil and Central America across the snacks and meals and markets in particular. Business developments in the region included investment in enhancing our coffee extraction capabilities, which continues to be an area of innovation focus for our customers across many food and beverage applications and also across channels. Moving to Europe on slide 7, where performance was in line with expectations. Reported revenue for the region was €731 million, with volume growth of 0.2% in H1 and 0.3% in Q2. On margins, we delivered strong EBITDA margin expansion of 90 basis points. And looking at our end-use markets, volume growth in beverage was led by nutritional beverages through our integrated taste technologies and proactive health ingredients, while growth in bakery was led by texture systems. Across our channels, food service had good growth through seasonal and new launch activity with quick service restaurants, with performance in retail remaining challenged. Business investments in the region included strong progress in the development of our new biotechnology center in Leipzig in Germany, enzyme capacity expansion in Ireland, as well as the expansion of our cocoa extraction capabilities in grass in France. Turning to slide eight, Anatmia, where growth in the region was primarily driven by Southeast Asia, with solid growth in the Middle East and Africa given disruption in places, and volumes in China remaining challenged. Reported revenue for the region increased to €821 million, led by volume growth of 4.2% in H1 and 3.2% in Q2. On margins, we had EBITDA margin expansion of 60 basis points for the region in H1. And across our end markets, growth was led by bakery through food protection and preservation systems, as well as reformulation activity in areas including cocoa. Beverage continued to achieve good growth across refreshing, nutritional, and functional beverages through natural extracts, botanicals, and taste sense sugar reduction technologies with both local and regional customers. Meals also had good growth, while performance in snacks was impacted by disruption to order patterns during the period. Growth in our channels was led by food service, with leading regional coffee chains and quick service restaurants, while growth in retail was led by good performance and taste. Finally, business developments across the region included continued investment and expansion of our local taste capacity in the Middle East and Africa. And with that, I'll hand you over to Marguerite for the financial review.

Thanks Edmund and good morning everyone. We delivered a good financial performance in the first half. Now turning to slide 10 and the financial overview to give you more detail. Revenue increased to 3.5 billion euro with volume growth of 3%. EBITDA increased by 7.5% to 556 million euro with EBITDA margins up 100 basis points. Adjusted earnings per share of 209.2 cent was up 9.8% in constant currency and 7.8% in reported currency. Return on capital employed of 10.7% reflected continued progression in the period and free cash flow was 309 million with a cash conversion of 89% on an average basis. Turning to our group revenue bridge on slide 11, volume growth was 3%, as I mentioned. Pricing was positive 0.2%, reflecting limited overall input cost inflation, and transaction currency was positive 0.3%. Foreign currency translation was adverse 1.9%, due to movements in the US dollar and weakness of some emerging market currencies versus the euro. The contribution from acquisitions of 0.6% related to the lactase enzymes acquisition. And the effect from disposals of 0.9% related to firstly, the divestment of two small non-core businesses and assets in the prior year. And secondly, the revenue associated with the exit of a manufacturing agreement at a taste and nutrition facility in Northern Ireland, which following the Kerry Dairy Ireland transaction has now been separated into two distinct manufacturing operations. Next to the margin bridge on slide 12. We delivered strong EBITDA margin expansion of 100 basis points with EBITDA increasing to 556 million. Looking at the key moving parts. Firstly, on operating leverage and portfolio mix, we had a 30 basis points improvement led by portfolio mix. Pricing was net neutral, given limited overall inflation in the period. The Accelerate Operational Excellence Program contributed strongly to growth, delivering 50 basis points of EBITDA margin expansion in the first half. Foreign currency was net neutral from a margin perspective, and acquisitions and disposals contributed a net positive 20 basis points, with acquisitions and disposals both contributing circa 10 basis points each. Overall, we are pleased with our margin expansion in the period. And as we previously said, EBITDA margin expansion is greater in the first half due to the timing of the Accelerate Operational Excellence benefits. In the second half, we expect strong EBITDA margin expansion and we are increasing our expectations for the full year to 70 basis points or greater. Moving now to free cash flow on slide 13. We generated good free cash flow in the period of 309 million, reflecting 89% average cash conversion on earnings and 83% on a point to point basis. Looking at the component parts for the first half, EBITDA increased to 556 million, as I mentioned. Average working capital represented an investment of 66 million aligned to the growth and development of the business. For the full year, we are looking at a similar level of working capital investment. And capital expenditure of 120 million was similar to the prior year, reflecting various strategic capital investments as Edmund referenced earlier. Overall, we delivered good cash conversion in the first half, and we remain well on track to deliver cash conversion in the 80 to 90% range in the full year. Finally, on cash, as a reminder, when looking at the free cash flow statement, the reported H1 2024 comparable period includes the impact of Kerry Dairy Ireland, which contributed circa 35 million to EBITDA and was the main driver of the significantly positive working capital inflow in the prior year. Turning to our debt profile and credit metrics on slide 14. Net debt at the end of June was 2.1 billion with a weighted average maturity of 5.1 years and seven years after the repayment of the refinanced 950 million bond maturing later this year. Our credit metrics are strong with a net debt to EBITDA ratio of 1.7 times and we have a very strong balance sheet which will continue to support the further development of our business. Finally, to cover off a number of other financial matters on slide 15. Finance costs of 26.5 million were similar to the prior year. Net non-trading items were 15 million, primarily reflecting costs related to the closeout of the Accelerate Operational Excellence Programme. We have initiated Accelerate 2.0 as planned, which will focus on footprint optimization and enabling digital excellence across the organization. And we will update you in due course as we progress the program. On the input costs, we saw a limited overall input cost inflation in the first half, which we expect to be somewhat similar for the full year. On capital returns, we have announced an interim dividend of 42 cents per share, a year-on-year increase of 10.2%. On share buybacks, we repurchased 256 million worth of shares during the period. And on currency, we are currently expecting a foreign currency translation headwind of 4% to 5% on adjusted earnings per share in the full year. To summarise, we delivered a good financial performance in the first half with good volume growth ahead of end markets, strong EBITDA margin progression and good cash generation. And with that, I'll pass you back to Edmund.