Kerry : Interim Management Report 2015 Press Release

NEWS RELEASE

Thursday 6 August 2015

Interim Management Report

for the half year ended 30 June 2015

Kerry, the global ingredients & flavours and consumer foods group, reports a solid financial performance for the half year ended 30 June 2015 and increases guidance for full year 2015.

Highlights

• Adjusted* EPS up 8.1% to 124.5 cent
• Group revenue of €3 billion
• Volume growth +2.7%
• Trading profit increased by 9% to €300m
• Group trading margin up 40 basis points to 9.9%
• • Ingredients & Flavours +40 bps to 12.1%
  • Consumer Foods +20 bps to 8.0%
• Interim dividend per share increased by 11.1% to 15 cent
• Free cash flow of €192.2m (H1 2014: €101.6m)
• Earnings guidance for full year increased

*Before brand related intangible asset amortisation and non-trading items (net of related tax)

Commenting on the results Kerry Group Chief Executive Stan McCarthy said; "We delivered a strong financial performance in the first half of 2015 reporting continued business margin expansion and an 8.1% increase in adjusted earnings per share. Based on Group year-to-date performance, current exchange rates and business momentum, we are increasing our market guidance for the full year".

For further information please contact:

Media	Investor Relations
Frank Hayes, Director of Corporate Affairs	Brian Mehigan, Chief Financial Officer
Tel: [phone]	Ronan Deasy, Group Financial Controller
Email: [e-mail]	William Lynch, Head of Investor Relations
Web: www.kerrygroup.com	Tel: [phone]
	Email: [e-mail]

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INTERIM MANAGEMENT REPORT

for the half year ended 30 June 2015

Kerry delivered a strong financial performance throughout its core businesses in the first half of 2015, notwithstanding challenging market conditions and volatility in many geographies. Consumer food and beverage markets worldwide continued to reflect increasing demand for 'clean-label', natural, tasteful offerings which address convenience, health & wellness and life- stage preferences. Increased volatility and currency fluctuations have contributed to inflationary trends in some countries and conversely to deflationary trends in some mature developed markets. Geopolitical issues persist in some developing market zones, impacting market development. Against this background and the significant growth in online activity, retail and foodservice channels continue to evolve and restructure rapidly.

In ingredients and flavours markets, Kerry maintained solid business development and continued to advance its Taste, Nutrition & General Wellness and Developing Market strategies. Speed of innovation and localisation of taste are key drivers of growth in the rapidly evolving global marketplace - providing solid innovation opportunities for Kerry's industry-leading Global and Regional Technology & Innovation Centres and Regional Development & Application Centre network.

While improved economic conditions in the Irish and UK markets have boosted spend in some consumer categories, food and beverage segments remain highly competitive due to increased retail fragmentation and channel diversification. However the restructured Kerry Foods' portfolio is performing well - benefiting from snacking and convenience trends.

RESULTS

Group revenue increased by 4.7% to €3 billion on a reported basis. Business volumes grew by 2.7% in the period reflecting a strong overall performance in American markets, an improved performance in the EMEA region and continuing good growth in Asia despite a slowdown in some regional markets. Net pricing was 2.7% lower against a background of approximately 6% lower raw material costs. Currency tailwinds relative to the first half of 2014 contributed a positive 8.4% translation impact to revenue.

Ingredients & Flavours achieved 3% growth in business volumes relative to H1 2014 and pricing was 2.8% lower. Kerry Foods' business volumes grew by 1.9% and pricing reduced by 2.6%.

The consistent improvement in Group trading performance was maintained due to operational improvements arising from the 1 Kerry Business Transformation Programme, improved product mix and portfolio repositioning in Kerry Foods. Group trading profit increased by 9% to €300m. The Group trading profit margin increased by 40 basis points to 9.9%. This reflects a 40 basis points improvement in trading margin in Ingredients & Flavours to 12.1% and a 20 basis points improvements in Consumer Foods' margin to 8%.

Adjusted earnings per share increased by 8.1% to 124.5 cent (H1 2014: 115.2 cent). Basic

earnings per share increased to 135.2 cent (H1 2014: 110.8 cent). The interim dividend of 15 cent per share represents an increase of 11.1% over the 2014 interim dividend.

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BUSINESS REVIEWS

INGREDIENTS & FLAVOURS

	H1 2015	Growth
Revenue	€2,318m	3%*
Trading profit	€281m	12.3%
Trading Margin	12.1%	+40 bps

*volume growth

Kerry provides the largest, most innovative portfolio of taste & nutrition solutions and functional ingredients & actives for the global food, beverage and pharmaceutical industries.

In the rapidly changing global marketplace, Kerry's Taste & Nutrition technologies and systems, and Functional Ingredients & Actives platforms continued to achieve sustained business development and a solid innovation pipeline in developed and developing markets. Demand for nutritional, 'free-from','better-for-you' authentic taste and ingredients is increasingly driving product development across food and beverage categories for retail and foodservice channels. Reported revenue increased by 8.6% to €2.3 billion. Business volumes increased by 3% and pricing was 2.8% lower. Trading profit grew by 12.3% to €281m with the division's trading margin increased by 40 basis points to 12.1%.

Americas Region

Kerry delivered a solid performance in the Americas region in the period despite some industry sectorial issues in North America and inflationary pressures in Brazil. Sales revenue on a reported basis increased by 18.0% to €1,080m. Business volumes grew by 3.3% and pricing declined by 2%.

Excellent progress was achieved in the meat sector through Kerry Taste technologies - particularly in North American retail and foodservice markets. Trends in international dairy markets and the adverse impact of consumer trends in culinary applications limited development through dairy and culinary systems. Performance in North American culinary segments was assisted by Wynnstarr Flavors. Brazil based Junior Alimentos acquired in Q4 2014 performed in line with expectations.

In June, Kerry acquired KFI Savory, the U.S. based savoury flavour business of Kraft Food Ingredients. KFI Savory significantly strengthens Kerry's Taste technology portfolio in meat systems and culinary applications. Industry leader in grilled flavours, the acquired business includes authentic savoury flavours with natural and speciality grill flavours, savoury enhancers and dairy flavours.

Kerry's 'clean-label' technologies continue to be a key driver of growth in particular in the meat and bakery industries. While the RTE cereals sector has declined, Kerry continues to achieve satisfactory growth through increased demand for snack applications. The savoury snack sector also continues to provide good growth opportunities, particularly in Mexico and Central American markets. Seasonal launches in the ice cream sector offset a decline in sweet

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applications. Beverage systems and flavours again delivered solid growth through aseptic offerings in nutritional segments and through its branded offerings in the foodservice sector. Kerry's Big Train, Da Vinci Gourmet and Oregon Chai brands continue to benefit from growing consumption of out-of-home beverage products through c-stores and specialist outlets. Solid growth in Latin American markets was achieved through integration of the Big Train range in Kerry's branded offering in the region.

Insight Beverages, a leading U.S. based supplier of custom beverage solutions (including cocoa and speciality offerings, fruit-flavoured beverages, and functional beverages to foodservice and convenience store channels in North American markets) acquired by the Group in May, performed in line with expectations.

Nutritional ingredients and systems recorded new wins through medical nutrition applications. Pharma ingredients achieved strong growth through excipient and cell nutrition applications throughout Kerry's global markets.

The Group has reached agreement to acquire Baltimore Spice, a Costa Rican based spices, seasonings and condiments producer. With production facilities in Costa Rica, Guatemala and Panama, Baltimore Spice further strengthens Kerry's leadership positioning in the meat, culinary and snack sectors in Central America and the Caribbean.

EMEA Region

While economic conditions in EMEA developed markets have broadly stabilised, consumer spend in the food and beverage sector remains relatively flat. Regional developing markets continue to be adversely impacted by geopolitical issues and currency related pressures. However Kerry's realigned business structures and technology development initiatives through establishment of the Group's Global Technology & Innovation Centre in Ireland, supported by Kerry Development

• Application Centres in Moscow, Dubai and Durban, have achieved solid market development opportunities to-date and generated an encouraging innovation pipeline. Business volumes grew by 0.7% and pricing reduced by 3.8%. Reported sales revenue declined by 0.2% to €789m.

Kerry achieved an improved performance in regional developing markets as the half year progressed. Development in West Africa was impacted by adverse currency movements but overall market conditions in Sub-Saharan Africa improved relative to the first half of 2014. MENAT market conditions stabilized providing encouraging market development opportunities. Notwithstanding the continuing economic impact of political issues in Russia, Kerry maintained good progress particularly through seasonings and coatings technologies in the meat sector.

Dairy systems recorded good growth in the EMEA foodservice sector and through branded 'Kerrymaid' offerings. Kerry's branded beverage products continued to expand market penetration in the region. Beverage systems & flavours maintained good growth in Western Europe and regional developing markets. The meat sector again proved challenging but Kerry achieved good progress through the fast growing snacking sector and through gluten-free coatings lines. In the savoury snacks sector demand for 'health' lines also provided good development opportunities. 'Clean label' requirements in the bakery sector assisted Kerry performance through its fermentation technologies and systems.

The ongoing investment programme at the Group's facilities in Ireland assisted continued growth in nutritional applications across all life-stageend-use-markets, particularly in the infant sector in Asia. In the primary dairy sector, the continuing increase in output in exporting

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countries coupled with softer demand in importing countries significantly reduced international market price returns.

In April, Kerry and IOI Loders Croklaan reached agreement to form a joint venture company to develop and market the nutrition lipid Betapol® business. The joint venture partnership will significantly extend the Betapol® portfolio for infant nutrition and broaden application to other key nutrition market segments globally.

Since period end, Kerry has acquired PST Pastacilik Gida - a Turkey based branded foodservice provider of sweet ingredient solutions to the fine bakery, confectionery, ice cream and foodservice sectors in Turkey and the Middle East. The acquisition establishes multi-technology manufacturing capability in the region, providing a wide portfolio of fillings, creams, sauces, toppings, chocolate products, ice cream bases and cake mixes marketed under PST's industry- leading Krater brand.

Asia-Pacific Region

Despite the reported lower level of economic growth in the Asia-Pacific region in the half year, Kerry maintained good overall market development through its Taste and Nutrition strategies. Reported sales revenues increased by 5.6% to €414m. Business volumes increased by 7.2% and pricing reduced by 2.4%.

Kerry continues to record good progress in delivering nutritional & wellness applications and customised products to meet the needs of global, regional and local brands across the region. Dairy systems and 'Dairy Complete' achieved significant new business in Indonesia, the Philippines, China and Vietnam. Culinary systems grew solidly through snack categories in South East Asia. Premium sauce systems maintained strong growth in Malaysia and China, particularly in the foodservice channel.

Establishment of a new sauce systems production facility at the Kerry Plentong facility in Malaysia will be completed later in the year. The major investment programme at the Group's Nantong, China production facility, acquired in 2014, continues to be progressed.

The growing penetration of e-commerce in the Chinese infant nutrition sector has contributed to destocking in traditional market channels, leading to lower sales in the period. However Kerry continues to advance market development through nutritional systems and ingredients tailored to infant and adult life stages throughout Asian markets. Beverage systems maintained strong growth in the foodservice sector in Asia and Australia. Kerry's branded beverages offerings including Da Vinci, Café D'Amore and Big Train continue to broaden market reach into new territories and channels including c-stores. Solid market development continues to be achieved in India through beverage flavours, emulsifiers, texturants and meat systems. Savoury and dairy applications in Australia and New Zealand were impacted by continuing industry competitive issues. The sale of the Pinnacle lifestyle bakery business in Australia was completed in May.

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