Innovative Integrated Solutions for a Global Market

Innovative Integrated Solutions for a Global Market

Innovative integrated solutions for a global market. Kerry Group Annual Report & Accounts 2010 Dorset, England Results for the year Sales revenue up 9.7% to Trading profit up 11.3% to 2010 €5 billion €470 million 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 4,645.9 4,787.8 4,790.8 4,520.7 4,960.0 294.7 309.4 316.7 335.8 393.7 261.7 279.3 288.0 296.9 352.9 4,645.9 4,787.8 4,790.8 4,520.7 4,960.0 294.7 309.4 316.7 335.8 393.7 261.7 279.3 288.0 296.9 352.9 Revenue Profit before taxation Cash (EBITDA*) per share and non-trading items (€ Million) (cent) (€ Million) Mumbai, India Adjusted EPS* up 16.8% to Final dividend per share Free cash flow of R&D investment of up 15.6% to 194.5 cent 20 cent €305 million €156 million Contents 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Financial Highlights 1 Chairman’s Statement 20 Chief Executive’s Review 22 Business Review: Ingredients & Flavours 26 Business Review: Consumer Foods 32 Financial Review 36 Sustainability Review 42 95.6 137.4 101.3 115.0 185.0 133.9 143.8 153.9 166.5 194.5 95.6 137.4 101.3 115.0 185.0 133.9 143.8 153.9 166.5 194.5 Financial History 49 Directors and Other Information 50 Report of the Directors 51 Independent Auditors’ Report 67 Group Financial Statements 69 Earnings per share Earnings per share Statement of Accounting Policies 77 After intangible asset amortisation Before intangible asset amortisation and non-trading items (cent) and non-trading items (cent) Notes to the Financial Statements 87 * Before intangible asset amortisation and non-trading items Note: Pages 2 – 19 of this Annual Report which contain picture images have been removed for the web version of this Report. Hard copies of the Kerry Group Annual Report 2010 are available on request. Chairman’s Statement I am pleased to report that Kerry achieved excellent Strategic Development results and a strong operational performance Details of the performance of Group businesses in 2010. Business development in the Group’s in 2010 are presented in the Chief Executive’s established and emerging markets proved highly Review and in the Business Reviews successful delivering strong volume of the report. The Group has made growth and margin progression. Our Business development in excellent progress in building our global food and beverage key customer global leadership in ingredients & accounts all performed well, benefiting the Group’s established and flavours and in consolidating our from strong demand for innovative emerging markets proved chilled foods’ leadership position in concepts and health & wellness trends highly successful delivering the UK and Irish markets. The success which continue to drive category strong volume growth and of Kerry’s ‘go-to-market’ strategies growth. The Group’s consumer foods’ and customer-centric business model brands and customer brands performed margin progression. continues to achieve excellent business well in the UK market and by year-end development momentum, forging ever the market positioning of the division’s stronger customer alliances with food Irish brands had stabilised. and beverage manufacturers and foodservice providers. Our broad range of ingredients & flavours Results technologies and end-use-market focus gives Kerry Group sales revenue increased by 9.7% to €5 billion an unrivalled position as the leading integrated reflecting growth of 4.6% on a like-for-like basis. solutions provider to global and regional accounts. Good volume growth was achieved across ingredients The Group’s consumer foods’ businesses in the UK & flavours end-use-markets and in the Group’s and Ireland have withstood the challenges posed selected consumer foods categories. Trading profit by the economic conditions in both countries. increased by 11.3% to €470m. Adjusted earnings Kerry Foods’ investment and on-going efficiency per share increased by 16.8% to 194.5 cent programmes will enable the division’s leading (2009: 166.5 cent). brands and its selected private label offerings to meet the value requirements of consumers without compromising product quality. 20 Dividend Prospects The Board recommends a final dividend of 20 cent Management’s views regarding the prospects per share, an increase of 15.6% on 2009. Together for the Group in 2011 are outlined in the Chief with the interim dividend of 8.8 cent per share, Executive’s Review. Building on the Group’s this raises the total dividend for the year to 28.8 cent excellent performance in 2010 and its strong per share, reflecting an increase of 15.2% on the operating momentum coming into 2011, total 2009 dividend. The final dividend will be paid the Board is confident that Kerry Group is well on 13 May 2011 to shareholders registered on the positioned to deliver sustained business growth record date 15 April 2011. and value for all stakeholders. May I take this opportunity to record the Board Changes appreciation of the Board to Stan McCarthy I would like to thank Donal O’Donoghue and John Chief Executive, to management at all levels, Twomey, who retired from the Board at year-end, and to all employees for their individual for their individual contributions and service to the contributions to the Group’s strong performance Kerry organisation. Donal and John were succeeded in 2010. as non-executive Directors of the company by Kieran Breen and Patrick Flahive who joined the Board in January 2011. Denis Buckley, Chairman 21 February 2011 21 Chief Executive’s Review 10% 32% 25% 30% 60% 68% 75% Group Revenue by Destination Revenue Trading Profit EMEA 60% Ingredients & Flavours 68% Ingredients & Flavours 75% Americas 30% Consumer Foods 32% Consumer Foods 25% Asia-Pacific 10% Kerry Group achieved excellent growth and and also benefit private label offerings. However development in 2010. Strong business volume Kerry Foods achieved strong top line growth in growth was achieved throughout the Group’s the UK market through its branded and private established and emerging markets. label offerings. The division’s brand investment Building on the positive business and innovation programmes achieved development momentum reported at The Group has made excellent results. the half year stage, good progress was In Ireland, as consumer sentiment maintained in the second half despite excellent progress in remains cautious due to the prevailing the return of significant input cost building our global economic conditions, the consumer foods inflation as the year progressed. leadership in ingredients market remained challenging in 2010. The Group’s ingredients & flavours Targeted brand and range investment & f lavours and in global business continued to enhance by Kerry Foods tailored to consumer its leadership position across food and consolidating our chilled requirements in Ireland has stabilised beverage end-use-markets through foods’ leadership position the positioning of Kerry’s key brands industry-leading innovation – driven by in the UK and Irish markets. and protected the brands’ category Kerry’s broad technology capabilities leadership for future growth. and integrated approach to meeting Due to the success of the Group’s ‘go- customer requirements speedily and to-market’ strategies and necessary investment in cost effectively. In particular the Group benefited additional manufacturing capacity to meet customer through increased integration of Kerry’s flavour requirements, capital expenditure in 2010 increased expertise in a wider range of food and beverage to €139m (2009: €108m). Investment in research and applications in response to increasing demand for development increased to €156m (2009: €148m). all-natural solutions and clean product labelling. In the Group’s selected consumer foods business Results segments of the UK and Irish markets, sectoral Group sales revenue in 2010 at €5 billion reflects growth continued to be impacted by reduced an increase of 9.7% on a reported basis and growth consumer spending and push-back to higher prices. of 4.6% on a like-for-like (LFL) basis when account Trading down to value offerings continues to be the is taken of currency translation, acquisitions and predominant market trend. In 2010 this continued business disposals. Sales growth momentum to drive value sales through promotional activity increased as the year progressed. Continuing 22 Analysis of revenue and trading profit Revenue Ingredients & Flavours €3,675m Consumer Foods €1,768m Trading Profit Ingredients & Flavours €401m Consumer Foods €132m business volumes were 5.5% ahead on a Group- relative to the prior year. Underlying continuing wide basis over the full year. Ingredients & flavours business volume growth was strong at 6.8%. Trading continuing business volumes increased by 6.8% profit grew by 12.8% (LFL) to €401m which reflects and the Group’s consumer foods business achieved a 50 basis points improvement in trading margin to a 3% increase in continuing business volumes, 10.9%. The solid growth in business volumes and notwithstanding the challenges of the Irish market. trading profits was achieved despite the significant upward trend in input costs, including cereal, dairy, Trading profit increased by 11.3% to €470m sugar, edible oils and energy costs in the second (2009: €422m). Trading profit margin increased by half of 2010. This performance was driven by the 50 basis points in Ingredients & Flavours to 10.9% successful execution of Kerry’s ‘go-to-market’ and by 40 basis points in Consumer Foods to 7.5%. strategies in all regions and delivery of successful The Group trading margin increased by 20 basis innovative applications in partnership with key points to 9.5% as the strong performance of Group customer accounts throughout the food processing, businesses and savings generated from recent beverage and foodservice industries.

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