Morning Wrap Today ’s Newsflow Equity Research 19 Apr 2016 Upcoming Events Select headline to navigate to article Kerry Group Mixed set of results from customers Company Events 19-Apr Associated British Foods; Q2'16 results Origin Enterprises ABF sees declines in agri sales Danone; Q1'16 results 20-Apr Packaging Corp. of America; Q1'16 results Cairn Homes Cairn turns attention from buying to building Punch Taverns PLC; Q2'16 results UK Economic View Brexit “remain” campaign moves up a gear Economic Events Ireland United Kingdom United States 19-Apr Housing Starts Mar'16 Europe 19-Apr Current Account Feb'16 21-Apr Consumer Confidence Indicator Feb'16 Goodbody Capital Markets Equity Research +353 1 6419221 Equity Sales +353 1 6670222 Bloomberg GDSE<GO> Goodbody Stockbrokers (trading as Goodbody) is regulated by the Central Bank of Ireland. For the attention of US clients of Goodbody Securities Inc, this third-party research report has been produced by our affiliate Goodbody Stockbrokers. Please see the end of this report for analyst certifications and other important disclosures. Goodbody Morning Wrap Kerry Group Mixed set of results from customers Danone reported Q1 results this morning, with lfl Group sales growth of 3.5% (vs. 3.2% Recommendation: Buy forecast) and volume growth of 0.8% (vs. 1.3% forecast). This is a slight regression from Q3 Closing Price: €82.15 and Q4 when volumes grew by +0.8% and +1.3% respectively. The Waters and Medical Liam Igoe Nutrition division grew volumes strongly, at +6.4% and +5.2% respectively. However, the +353-1-641 9450 Fresh Dairy’s division was down 2.1% while Early Life Nutrition saw volume growth of 1.3%. [email protected] FY16 guidance was reiterated for 3-5% sales growth. Elsewhere, Pepsico reported Q1 results yesterday, with earnings well ahead of estimates thanks to lower raw material costs and a better mix. The Group’s divisional performance mirrors Kerry’s end-channel performance, with Snacks and Beverages performing well (volumes were +1.5% and +3.0% respectively) and Cereals continuing to struggle (-2.0%). International sales continue to be impacted by the strong dollar and weakness in emerging markets. Overall Group volumes were up 2% (vs. +1% in Q315 and Q415). On the call, management highlighted its increased focus on ‘better-for-you’ offerings. This is obviously a strong theme across all packaged foods currently and plays into Kerry’s R&D strength / expertise. Overall, these are somewhat contrasting results from two of Kerry’s customers. Regression in volume growth from Danone and an acceleration of volume growth from Pepsico provide a mixed backdrop for Kerry ahead of its Q1 results on April 27th. We forecast lfl volume growth of 4.2% for Kerry’s Taste & Nutrition division in FY16. Home… Origin Enterprises ABF sees declines in agri sales In its interm results to end of February, ABF reported a 5% increase in constant currency Recommendation: Buy operating profits. Within its Frontier Agriculture business, which is a peer of Origin’s Agrii, it Closing Price: €6.79 noted lower demand for fertiliser and crop protection products. This was put down to the Liam Igoe “excellent growing conditions in the autumn and mild weather”. +353-1-641 9450 [email protected] The mild weather in the early spring has in fact led to outbreaks of disease which will require treatment, though most of this would only be applied from around now. While it is not appropriate to draw significant conclusions from ABF’s experience in the quiet period to end February, we are anticipating lower demand for Agrii this year, though mainly due to the anticipated impact of lower farm incomes on demand. Home… Page 2 19 Apr. 16 Goodbody Morning Wrap Cairn Homes Cairn turns attention from buying to building Press reports in the Irish Independent this morning flags some comments from the Cairn Recommendation: Restricted Homes CEO that the homebuilder is likely to be starting on sites in Adamstown (Dublin) and Closing Price: €1.15 Naas (Co. Kildare) later this year. The CEO commented that whilst the Project Clear Colm Foley acquisition was large, the recent Argentum deal also gave Cairn access to a number of +353-1-641 6042 “shovel ready” sites, with the Project Clear deal giving the firm a steady pipeline of some [email protected] ready-to-go sites and some that are 6-8 months away from being ready to go. The CEO adds that “the whole capital raising aspect of the business is now finished to some extent”. Whilst not clear from the article, the CEO was likely speaking at yesterday’s EGM to approve its recent capital raise. In the recent FY15 results presentation, Cairn highlighted it was likely to be live on seven sites within the next 12 months (p9 of its investor deck). It was already live on two sites (Parkside & Killiney) and is set to commence on a further five sites, including the two mentioned in the media report (Rathgar, Adamstown, Kildare, Wicklow and Hannover Quay). Home… UK Economic View Brexit “remain” campaign moves up a gear The UK government kicked off its official “remain” campaign yesterday with a report from the Juliet Tennent +353-1-641 9469 Treasury outlining the negative financial impact that leaving the EU would have on the UK [email protected] economy. The Chancellor of the Exchequer, George Osborne, outlined these in a speech yesterday that was notable for highlighting the costs on a per household basis. Overall, the Treasury estimate that over 15 years UK GDP would be 6.2% lower in the event of a Brexit, which would translate into a loss of £4,300 per household. This is the first time that an attempt has been made to crystallise the potential impact of Brexit at a household level and the UK Government will be hoping that this will focus the minds of voters. While overall the opinion polls continue to call the outcome of the vote as too close to call, a recent poll by YouGov showed that support for the “Remain” camp rose to 45% from 40% when a potential loss in living standards was factored in. We will have to wait for the next set of polls to see if that is indeed the case. Home… Page 3 19 Apr. 16 Goodbody Morning Wrap Market Data Top 10 Covered Companies Company Price Mkt Cap Absolute Relative to European Sector P/E (LC) (LCM) 1 Day 1 Week 1 Mth Ytd 1 Day 1 Week 1 Mth Ytd 2016f 2017f AIB Group 8.90 24,306 -1.2 -1.1 -9.2 33.6 -1.6 -4.4 -9.8 42.0 17.2 25.0 CRH 25.62 20,897 -0.2 1.3 2.1 -4.0 -0.6 -2.0 1.4 2.0 16.1 12.8 Ryanair 13.02 17,818 -0.5 -1.3 -4.3 -13.3 -0.9 -4.6 -5.0 -7.8 14.1 10.8 HeidelbergCement 78.56 15,588 0.9 5.7 6.5 3.9 0.5 2.2 5.8 10.4 14.3 13.6 Kerry Group 82.15 14,442 1.0 -0.7 2.2 7.7 0.6 -4.0 1.4 14.4 24.9 21.9 IAG 5.36 10,886 0.3 0.6 -5.2 -12.3 -0.1 -2.7 -5.9 -6.8 6.0 4.9 Wolseley 38.62 10,043 0.3 -1.0 0.5 4.6 0.3 -3.2 -2.2 3.3 15.8 14.0 Paddy Power Betfair 95.25 7,973 -1.1 1.1 7.4 4.9 -1.1 -1.1 4.6 3.5 30.9 25.5 Mondi 13.42 6,516 1.0 3.4 2.3 0.6 0.6 -0.0 1.5 6.9 12.1 11.5 Bank of Ireland 0.24 7,772 -0.8 -1.6 -8.0 -29.0 -1.2 -4.9 -8.7 -24.5 9.7 9.0 Indices ISEQ performance % Price 1 Day 1 Week 1 Mth Ytd 7,000 ISEQ 6,206.89 -0.07 0.16 0.25 -8.61 6,800 FTSE 100 6,353.52 0.15 2.47 2.65 1.78 6,600 DAX 30 10,120.31 0.68 4.52 1.70 -5.80 6,400 CAC 40 4,506.84 0.26 4.50 0.99 -2.81 6,200 FTSE Eurofirst 300 1,355.26 0.36 3.60 0.90 -5.72 6,000 Nasdaq 4,960.02 0.44 2.62 3.43 -0.95 S&P 500 2,094.34 0.65 2.56 2.18 2.47 5,800 Dow Jones 18,004.16 0.60 2.55 2.28 3.32 5,600 Apr-15 Jul-15 Oct-15 Jan-16 Nikkei 225 16,275.95 -3.40 3.33 -2.68 -14.49 Exchange Rates Current Px 1 day Px 1 Week Px Dec15 Avg Ytd Stg/€ 0.794 0.797 0.802 0.737 0.775 STOXX 600 performance US$/€ 1.133 1.130 1.144 1.086 1.108 CHF/€ 1.091 1.092 1.089 1.087 1.095 420 JPY/€ 123.169 122.843 123.373 130.676 126.572 400 Bonds 380 Yield 1 Day Yld 1 Wk Yld 1 Mth Yld 3 Mth 360 US 2 Yr 0.73 0.00 0.73 -0.10 -0.12 340 US 10 Yr 1.77 0.02 0.05 -0.11 -0.27 320 UK 2 Yr 0.47 0.05 0.07 0.00 0.01 300 Apr-15 Jul-15 Oct-15 Jan-16 UK 10 Yr 1.48 0.06 0.08 0.03 -0.22 BD 2 Yr -0.50 0.02 0.03 -0.50 -0.11 BD 10 Yr 0.16 0.03 0.05 0.16 -0.31 Irish 10 Yr 0.85 0.04 0.03 0.06 -0.12 Commodities FTSE 250 performance % Current 1 day 5 day 1 Mth 1 Yr Brent (ICE $/bbl) 42.91 -0.44 -2.87 4.15 -32.37 18,000 Gasoline (NYM $/Gal) 1.46 - -4.47 2.38 -24.21 17,500 Heat Oil (NYM $/Gal) 1.23 - -2.64 -0.56 -34.54 17,000 Nat.Gas 1.94 2.00 -4.72 1.73 -26.35 Gold $/oz 1,234.30 0.59 -0.92 -1.42 2.57 16,500 Silver $/ozt 16.20 0.19 1.38 1.63 -0.98 16,000 Copper U$/MT 4,798.00 -0.32 -0.83 -5.98 -21.10 15,500 Wheat $/BU 4.60 - -0.38 -0.70 -6.03 15,000 Apr-15 Jul-15 Oct-15 Jan-16 Source : FactSet Page 4 19 Apr.