Kerry Group Posts €6.4 Billion Sales Amid Currency Challenges
Kerry Group has posted a revenue growth of 4.5% to €6.4 billion in the year ended 31 December 2017, while facing negative currency impacts.
The group reported strong volume growth of 4.3% year-on-year, offset by adverse currency movements, while the its adjusted earnings per share were up 5.5% to 341.2 cent (+9.4% on a constant currency basis).
The group’s Taste & Nutrition revenue increased by 5.7% to €5.2 billion (+4.7% volume growth), while its Consumer Foods decreased slightly by 0.1% to €1.3 billion (+2.4% volume growth), due to negative currency impacts of 0.9%.
Free cash flow decreased by 12.11% to €501 million, down from €570 million the year before.
Negative Currency Impact
Net pricing increased by 2% against a background of about 4% raw material price inflations. Currency headwinds accelerated during 2017, contributing an adverse 2.4% translation impact and an adverse 0.2% transaction currency impact relative to revenue, while business acquisitions contributed 0.8%, according to the group.
“The US Dollar had a significant impact on our business, as did Sterling of course,” Edmond Scanlon, Kerry Group CEO, told Brian Finn on RTÉ’s Morning Ireland. “There’s been substantial devaluation in Sterling and our Sterling mitigation plans are well-progressed and in terms of insuring our business, structures are optimised.”
Scanlon continued to say that while the UK’s inflation had yet to impact the group’s customers, 2018 could certainly see negative impacts on demand on the UK consumer.
“We’re not really seeing it impacting our customers yet,” he said. “But I think 2018 could certainly have negative impact on demand on the UK consumer.”
While the plummeting Sterling rates as a result of Brexit have yet to affect Kerry Group customers, employees of the company have already taken a hit.
One of the first casualties was Kerry Group’s decision last week to cut back 31 jobs at its Carrickmacross factory in Co Monaghan, less than 10km from the UK border.
The redundancies came as a result of a review in January which sought to optimise efficiency and ensure the plant remain sustainable and viable in light of the negative currency effects resulting from the Brexit referendum, according to the group.
“Certainly there is some of our plants in Ireland, including Carrickmacross, that is selling into the UK market and as we mentioned the Sterling impact has had a negative impact on our business,” said Scanlon. “We have to make sure that we’re as best positioned as possible to be competitive in the UK market.”
Yesterday, SIPTU announced that its members at the Carrickmacross facility would ballot for strike action on Friday 23 February if management refuses to remove a threat to make the 31 workers redundant without agreement.
"On Thursday, 15 February, our members balloted on company proposals to make 31 members of the workforce compulsorily redundant," said Jim McVeigh, SIPTU organiser. "In this vote, they overwhelmingly rejected the proposals. Our members have instead asked the company to agree to a voluntary redundancy scheme and a fair package for those who wish to leave."
“As a consequence, we will be balloting our members for strike action on Friday, 23 February," McVeigh continued. "SIPTU representatives will be meeting management between now and then to try and reach an agreement that would allow us to avoid strike action.”
When asked by Finn on Morning Ireland as to whether the redundancies would be forced or voluntary, Scanlon responded:
“Look, I think we have to bear in mind that we have 400 people employed in that plant and it’s our job to make sure that we’re as efficient as we possible can, and we’ll run our business as efficiently as we possibly can to make sure the long term viability of that facility.”
During the year, the group completed eight acquisitions at a cost of €397 million, with the acquisition of Hangman Flavours in China being completed shortly after year end.
“2017 has been very substantial for acquisitions; we spent over €400 million on eight acquisitions and a further €80 million in acquisitions since the beginning of the year in the last month,” Scanlon said. “We do expect to continue on acquisition trail, we’ll continue to invest both organically and through acquisitions for the growth of our business.”
The Kerry Group chief executive said that 2018 would see further delivery of adjusted earnings per share growth in the upper single-digit range.
“In 2018 we expect to deliver adjusted earnings per share growth of 6% to 10% on a constant currency basis,” he said.
© 2018 - Checkout Magazine by Kevin Duggan