Kerry : Preliminary Results 2019 Presentation

Preliminary

Statement

of Results

18 February 2020

Disclaimer: Forward Looking Statements

This presentation/announcement may contain forward looking statements with projections regarding, among other things, the Group's strategy, revenues, earnings, trading profit, trading margin, finance costs, tax rate, capital expenditure, dividends, cash flow, net debt or other financial measures, the impact of foreign exchange fluctuations, the impact of raw material fluctuations and other competitive pressures. These and other forward looking statements reflect management expectations based on currently available data.

However, actual results will be influenced by, among other things, macro-economic conditions, food industry supply and demand issues, foreign exchange fluctuations, raw material and commodity fluctuations, the successful acquisition and integration of new businesses, the successful execution of business transformation programmes and other, as of today, unknown factors. Therefore actual results may differ materially from these projections.

These forward looking statements speak only as of the date they were made and the Group undertakes no obligation to publicly update any forward looking statement, whether as a result of new information, future events or otherwise.

Preliminary Statement of Results 2019

1 Review of

Business

2 FinancialReview

3	Outlook & Future
	Prospects

Edmond Scanlon, Chief Executive Officer

Marguerite Larkin, Chief Financial Officer

Key Highlights - Continued Delivery and Strategic Development

Growth

Integrated Solutions

Developing Markets

Driven by Taste & Nutrition	Kerry's leading integrated	Continued strong growth,
volume growth and	solutions capability driving	technology deployment
strategic acquisitions	performance and innovation	and strategic expansion

Revenue
+10%	€7.2bn
€6.6bn
2018	2019

		Vol
Trading Profit	Developing Markets	+10%

€1.6bn

+12%	€903m
€806m
2018	2019

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

© Kerry | 4 |

Business Review - Taste & Nutrition

	2019	Growth
Revenue	€6,018m	+4.0%1
Trading margin	15.3%	+20bps

Continued volume growth ahead of our markets:

• Nutrition and wellbeing a key driver of growth
• Winning across a diverse customer base
• Developing markets +10.0%
• Foodservice +5.5%

Pricing +0.1% - reflecting broadly neutral raw material costs

Margin progression primarily driven by enhanced product mix and operating leverage

© Kerry | 5 |

¹ Volume growth

Taste & Nutrition - End Use Market Overview

Food EUMs overall delivered good growth - led by Meat and Snacks

• Meat - excellent performance driven by clean label, natural preservation and plant-based innovations
• Snacks - very strong growth through healthier snacking
• Dairy - good performance within ice cream through healthy indulgence innovations
• Bakery & Confectionery - a number of successful LTOs in Europe
• Meals - significant churn across the category
• Cereal & Sweet - overall remained challenged

Beverage EUMs performed well - particularly in Europe & APMEA, led by health & wellness innovations across category

Pharma EUMs achieved good growth driven by excipients

+3%

+9%+1%

0%

+9% Taste & Nutrition

End Use Market

Analysis1-3%

	+6%
+5%
Food EUMs	Meat
Beverage EUMs	Snacks
Pharma EUMs	Dairy
	Bakery & Confectionery
	Meals
	Cereal, Sweet & Other

© Kerry | 6 |

¹ Volume growth by End Use Market

Taste & Nutrition - Business Growth by Region

Volume Growth	Americas
by Region	€3.2bn
10.3%

EuropeAPMEA

€1.5bn€1.3bn

			• North America - good growth
			versus softer market volumes,
			with Meat and Snacks EUMs
2.7%	2.0%		performing strongly
			• LATAM - good growth in
Americas	Europe	APMEA	Mexico and Brazil, with
Kerry	Market	Central America solid

• Strategic acquisitions further

Developed Developing enhancing our technology

72%28%capabilities

• Performed well, led by good growth in Beverage, Meat and Snacks EUMs
• Eastern Europe & Russia delivered strong growth and business development
• Foodservice - strong growth with Beverage menu innovations

• Strong growth across all Food and Beverage EUMs
• Southwest Asia and MENAT delivered excellent growth
• Strategic investments in capacity expansion and additional processing capability in China, India and the Middle East

© Kerry 2020| 7 | | 7 |

Note: Kerry third party reported revenue | Kerry market estimates based on published data and company disclosures

Business Review - Consumer Foods

	2019	Growth
Revenue	€1,307m	-2.2% / +0.9%1
Trading margin	7.6%	+10bps

• Solid underlying performance against a backdrop of softer markets
• Overall volume performance impacted by ready meals contract exit
• Pricing of -0.5% reflective of lower input costs and market pricing
• Trading margin improvement - Realignment programme completed and delivered to plan
• Successful launch of meat-free ranges

Everyday Fresh

• Richmond - good growth in chilled, while frozen challenged
• Spreadable butter - solid overall performance

Convenience Meal Solutions

• New business offset by contract exit and reduced promotional activity
• Frozen - solid performance across the range

Food to Go

• Dairy snacking - Cheestrings grew strongly, supported by new listings
• Meat snacking - Fridge Raiders snacking range continued to reach into broader consumer markets

© Kerry | 8 |

Note: ¹ volume growth excluding contract exit

Acquisitions Completed - Aligned to Strategic Priorities

Strategic	Acquisitions Completed
Priorities

Taste

Nutrition

Developing

Markets

Foodservice

Total Consideration of €562m

Strategic Value

Creation

Improved Taste

Enhanced Nutrition

New Functionality

New Applications

New Geographies

New Channels

New Solutions

© Kerry | 9 |

Note: Completed 11 acquisitions in 2019 (inclusive of four other acquisitions completed in the year not highlighted above)

FY 2019 Financial Review

€7.2bn		€903m		393.7c
Revenue		Trading		Adjusted
	Profit		EPS

Marguerite Larkin, Chief Financial Officer

FY 2019 Financial Highlights

Revenue	€7.2bn	+2.8% volume growth
+9.6% reported growth
Trading profit	€903m	+9.5% constant currency
+12.1% reported growth
Trading margin	12.5%	+30bps margin expansion
Adjusted EPS	393.7c	+8.3% constant currency
+11.4% reported growth
Basic EPS	320.4c	+4.7% reported growth
ROACE	11.8%	FY 2018: 12.0%
Free cash flow	€515m	74% cash conversion1

© Kerry | 11 |

1 expressed as a percentage of adjusted earnings after tax

Group Revenue Growth Analysis

2018

2019

€6,608m€7,241m

9.6%

		Volume
Translation	2.8%	Acquisitions
currency	/ disposals
2.1%		4.7%

© Kerry | 12 |

Note: Group net pricing was flat in the year

Group Revenue Breakdown

Group Revenue 2019

+2.8%

Taste & Nutrition Volume Growth

€7bn

+4.0%

€6bn

4.4%

3.8% 3.8% 4.0%

-2.2%1

€1bn

Group	Consumer	Taste &
	Foods	Nutrition

Kerry Reported Revenue

Q1

Q2

Q3

Q4

Kerry Volume Growth

Market Volume Growth

© Kerry | 13 |

¹ Excluding the impact of the ready meals contract exit, Consumer Foods volumes would have increased by +0.9% | Kerry market volumes estimates based on published data and company disclosures

Group Trading Margin Breakdown

Kerryexcel

€903m

€806m

FY 2018	Portfolio Mix /	Net Price	Kerryexcel	Kerryexcel	Currency	Acquisitions	Other¹	FY 2019
	Operating Leverage		Efficiencies	Investments

Trading	12.2%	0.4%	0.0%	0.3%	(0.4%)	0.0%	0.1%	(0.1%)	12.5%
Margin

© Kerry | 14 |

¹ Other comprises Brexit risk management costs incurred (-11bps) and impact from IFRS 16 'Leases' (+5bps)

Free Cash Flow

	2019	2018
	€m	€m
Trading profit	903	806
Depreciation (net)	191	134
Movement in average working capital	(89)	(57)
Pension contributions paid less pension expense	(27)	(40)
Cash inflow from operations	978	843
Finance costs (net)	(81)	(65)
Taxation	(67)	(46)
Capital expenditure (net)	(315)	(285)
Free cash flow	515	447
Cash conversion1	74%	72%

© Kerry | 15 |

¹ Expressed as a percentage of adjusted earnings after tax

Strong Credit Metrics with Long Maturity Profile

Extended Maturity Profile of Net Debt

Undrawn

€1.1bn

RCF

2019

2020

2021

2022

2023

2024

2025

2029

Net Debt of €1.9bn

On demand

Up to 1 year

< 2 years

2 to 5 years

> 5 years

(€550m)

€140m

€1m

€733m

€1,539m

Strong Credit Metrics

2019

2018

Net debt: EBITDA*

1.8x

1.7x

EBITDA: Net interest *

13.2x

14.7x

© Kerry | 16 |

* Calculated on a pro-forma basis

Other Matters

Finance costs (net)	Increase of €15m primarily due to acquisitions and the transition to IFRS 16
Pension	Net deficit of €9m - decrease of €35m due to strong return on assets offset by movements in
discount rates
Non-trading items	Net charge of €92m - due to M&A integration & transaction-related costs and Foods realignment
Kerryconnect	North America deployment commenced and progressing well
Dividends	Final dividend of 55.1 cent proposed - an increase of 12.0%
Raw materials	Overall flat in 2019
Currency	2019 EPS translation impact: +3.1%
2020 EPS translation outlook: c. +2-3%

© Kerry | 17 |

Outlook & Future Prospects

Edmond Scanlon, Chief Executive Officer

Accelerating Consumer Change is Reshaping Our Industry

Traditional Models Being Redefined

Consumer Revolution	Driving Customer Transformation		Reshaping Industry

Food for Life & Wellbeing	Managing Accelerating Fragmentation	Organisational Agility Critical
New Taste Experiences	Elevated Nutrition that Tastes Great	Integrated Innovation Processes
Trust is Core	Being Trusted	Supply Chains Being Redefined
'Made-for-me'	Digital Transformation	Manufacturing Needs Evolving

Sustainability Driving Change Across the End-to-End Supply Chain

© Kerry | 19 |

Our Sustainability Strategy - Innovation Enabling Sustainable Nutrition

Innovation Vision		2030 Commitments		Impact We
		Will Deliver
Sustainable Solutions		Sustainable Agriculture			Better for People
Co-creating solutions with		100% of key raw materials			Enabling more sustainable
customers that address the		are sustainably sourced			nutrition for millions of
industry's biggest challenges	+ Climate Action	=	consumers
Investing for the Future	Better for Communities
Leading investment in		Net Zero Emissions by			Partnering for a food system
RD&A to shape a		2050 with absolute			that works for everyone
sustainable food future		reduction of 1/3 by 2030
Sustainable by Design		Circularity			Better for the Planet
Our innovation programme		100% waste recovered and			Protecting the planet and
will be deliberately focused		50% reduction in food waste			vital ecosystems on which
on delivering sustainable					we depend
nutrition

© Kerry | 20 |

The Nutrition & Wellness Partner … right across the beverage market

Categories being redefined and reinvented

Examples

Oat Frappe for Foodservice

Functional Oats	Ebi-Frappe
TasteSenseTM	ProDiem

Fermented Probiotic Kombucha Tea

Natural Flavour	Tea Vinegar
GanedenBC30	TasteSenseTM

Zero Alcohol Whiskey

Natural Flavour	Wine Spirit Extract
Whiskey Absolute	Red Arrow Smoke Sugar
Natural Extracts

Sensory	Customer &
Consumer Insights

Authentic

Recipes &

Formulas

Analytical

Testing

Regulatory

& Quality

Processing Application

Technology Expertise

Nutrition & Wellness now spans across all beverage categories

© Kerry | 21 |

Outlook 2020

• Continued Delivery and Strategic Development
• • Taste & Nutrition: Strong innovation pipeline and good growth prospects, as we continue to further deploy our customer-centric business model
  • Consumer Foods: Continue to selectively focus on growth opportunities
• Invest for growth aligned to changing market landscape opportunities
• Pursue M&A opportunities aligned to our strategic growth priorities

In 2020, we expect to deliver adjusted EPS growth

of 5% to 9% on a constant currency basis

© Kerry | 22 |

Note: Full year guidance reflects estimated impact of coronavirus in Q1 2020

Additional Information

Revenue Growth Components FY 2019

			Transaction	Translation	Acquisitions/
	Volume	Price	Currency	Currency	Disposals	Total
Taste & Nutrition	4.0%	0.1%	0.0%	2.6%	5.8%	12.5%
Consumer Foods	(2.2%)	(0.5%)	0.0%	0.3%	0.0%	(2.4%)
Group	2.8%	0.0%	0.0%	2.1%	4.7%	9.6%

© Kerry | 24 |

Trading Margin by Business

		2019			2018
	2019	Trading		2018	Trading
	Revenue	Profit		Revenue	Profit
	€m	€m	%	€m	€m	%
Taste & Nutrition	6,017.6	918.5	15.3%	5,350.6	805.3	15.1%
Consumer Foods	1,306.6	98.9	7.6%	1,339.0	100.1	7.5%
Eliminations/unallocated	(82.9)	(114.7)		(82.0)	(99.8)
Group	7,241.3	902.7	12.5%	6,607.6	805.6	12.2%

© Kerry | 25 |

EPS Reconciliation

	2019	2018
	€ cent	€ cent
Basic EPS	320.4	305.9
Brand related intangible asset amortisation	21.4	16.3
Non-trading items (net of related tax)	51.9	31.2
Adjusted EPS	393.7	353.4
Retranslating PY adjusted EPS at current year average fx rates		10.1
Adjusted EPS in constant currency	393.7	363.5

© Kerry | 26 |

Net Debt as at 31 December 2019

		@ Floating	@ Fixed
	Debt	Rates	Rates
	€m	€m	€m
Euro	1,793	245	1,548
Sterling	-	-	-
US dollar	620	397	223
Other	5	5	-
Gross debt	2,418	647	1,771
Cash	(555)	(555)	-
Net debt	1,863	92	1,771
Gross debt	2019	27%	73%
Gross debt	2018	50%	50%

Weighted average maturity of debt: 5.9 years

© Kerry | 27 |

Exchange Rate Movements

Average Exchange Rates - 2019 v 2018

5%

5%

3%

2%

1%1%

AUD

BRL

CNY

GBP

MXN

MYR

RUB

USD

ZAR

(2%)

(2%)

(2%)

© Kerry | 28 |

Strong Growth While Maintaining Return on Average Capital Employed

									500
14%
									450
12%									12%
									400
									393.7
10%
								353.4	350
							341.2
8%						323.4			300
					301.9
6%				278.9
								250
			257.9
		234.0
4%	213.4								200
192.1
2%									150
0%									100
2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
				Adjusted EPS	ROACE

© Kerry | 29 |

Adjusted EPS, ROACE and Cash Conversion as defined in the Annual Report

Leader in R&D | No. 1 in Developing Markets

Largest R&D Spend Taste & Nutrition

€m

Developing Market Sales Taste & Nutrition

€m

283

261

180 175

108 105 97 97

79 76

35 23 13

Kerry Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 T&N

1,647

1,385

1,180

1,033

821

732 654

392

303 298 264 190 155

Kerry Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 T&N

© Kerry | 30 |

Kerry estimates based on most recent accounts published & available information

Share Register

Institutional Analysis

Institutions 60%	Kerry Co-operative 13%	North America 20%

UK 15%

Continental Europe | Rest of World 23%

Ireland 2%

Retail 27%

© Kerry | 31 |

Shares in issue at 31 December 2019: 176,514,942

Preliminary

Statement

of Results

18 February 2020