KERRY GROUP INTERIM MANAGEMENT REPORT 2024

Companies

Kerry Group 'A' Shares (CDI) (KYGA)

UK 100

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Half year ended 30 June 2024 - Unaudited									Half year ended 30 June 2023 - Unaudited									Year ended 31 December 2023 - Audited

	Taste &			Dairy					Taste &			Dairy							Taste &				Dairy
	Nutrition			Ireland		Total			Nutrition			Ireland			Total				Nutrition				Ireland		Total
	€'m			€'m		€'m			€'m			€'m			€'m				€'m				€'m		€'m


Food	2,224.7			479.8		2,704.5			2,329.2			573.3			2,902.5				4,637.3				1,051.9		5,689.2
Beverage	918.4			8.4		926.8			928.9			27.3			956.2				1,798.6				31.7		1,830.3
Pharma & other	249.1			-		249.1			262.9			-			262.9				500.8				-		500.8


External revenue	3,392.2			488.2		3,880.4			3,521.0			600.6			4,121.6				6,936.7				1,083.6		8,020.3


Analysis by primary geographic market
Disaggregation of revenue from external customers is analysed by geographical split:


		Half year ended 30 June 2024 - Unaudited						Half year ended 30 June 2023 - Unaudited									Year ended 31 December 2023 - Audited

			Taste &		Dairy					Taste &			Dairy							Taste &		Dairy
			Nutrition		Ireland		Total			Nutrition			Ireland	Total						Nutrition		Ireland				Total
			€'m		€'m		€'m			€'m			€'m	€'m						€'m		€'m				€'m


Republic of Ireland			34.8		176.0		210.8			56.9			233.3	290.2						134.7		405.3				540.0
Rest of Europe			673.4		278.6		952.0			714.5			322.4	1,036.9						1,382.5		600.3				1,982.8
Americas			1,890.2		13.8		1,904.0			1,936.4			17.7	1,954.1						3,772.5		32.5				3,805.0
APMEA			793.8		19.8		813.6			813.2			27.2	840.4						1,647.0		45.5				1,692.5


External revenue			3,392.2		488.2		3,880.4			3,521.0			600.6	4,121.6						6,936.7		1,083.6				8,020.3


The accounting policies of the operating segments are the same as those detailed in the Statement of accounting policies in the 2023 Annual Report. Under IFRS 15 'Revenue from Contracts with Customers' revenue is primarily recognised at a point in time. Revenue recorded over time during the period was not material to the Group.

3. Non-trading items


																Half year					Half year			Year
																ended					ended			ended
																30 June 2024					30 June 2023			31 Dec. 2023
																Unaudited					Unaudited			Audited
											Notes					€'m					€'m			€'m


Global Business Services expansion											(ii)					-					(2.8)			(4.1)
Acquisition integration costs											(iii)					(2.9)					(1.1)			(16.5)
Accelerate Operational Excellence											(iv)					(22.3)					(25.1)			(53.5)


																(25.2)					(29.0)			(74.1)

Profit/(loss) on disposal of businesses and assets											(i)					0.9					69.5			82.9

Tax on above																4.1					24.5			8.6


Non-trading items (net of related tax)																(20.2)					65.0			17.4


(i) Profit/(loss) on disposal of businesses and assets
The Group disposed of property, plant and equipment primarily in North America and Europe for a consideration of €2.2m resulting in a profit of €0.9m during the period ended 30 June 2024. A tax charge of €0.4m arose on the disposal of assets for the period.

In the period ended 30 June 2023 the Group disposed of property, plant and equipment primarily in North America and Europe for a consideration of €11.5m resulting in a profit of €6.0m. This profit on disposal of property, plant and equipment was offset by the further impairment of certain assets classified as held for sale based in North America to their fair value less costs to sell by €15.0m, consisting of property, plant and equipment of €10.5m and €4.5m of estimated costs to sell. A tax credit of €1.5m arose on the disposal of assets for the period.

In the year ended 31 December 2023 the Group disposed of property, plant and equipment primarily in North America and Europe for a consideration of €13.9m resulting in a profit of €2.6m. This profit on disposal of property, plant and equipment was offset by an impairment charge of €15.3m in North America and a €13.5m charge with respect to related disposal costs. In addition to these charges, a number of additional assets were disposed across the Group and a €3.9m loss on disposal was recognised. A tax credit of €6.0m arose on the disposal of assets for the period.

In 2023 the Group completed the sale of the trade and assets of its Sweet Ingredients Portfolio and also disposed of small operations in South Africa and South Korea for a combined final consideration of €481.8m resulting in a gain of €113.0m for the year ended 31 December 2023 (30 June 2023: €78.5m gain), with the related tax charge of €9.8m. The profit on disposal of these businesses includes the associated costs in relation to these divestments.

(ii) Global Business Services expansion
In 2020, the Group commenced a programme to evolve, migrate and expand its Global Business Services model to better enable the business and support further growth. This phase of the programme completed at the end of 2023 and the Group has incurred no costs in the period ended 30 June 2024 (30 June 2023: €2.8m; 31 December 2023: €4.1m). The costs in the prior year reflected relocation of resources, advisory fees, redundancies and the streamlining of operations. The associated tax credit was €nil (30 June 2023: €0.3m; 31 December 2023: €0.5m).

(iii) Acquisition integration costs
These costs of €2.9m (30 June 2023: €1.1m; 31 December 2023: €16.5m) reflect the restructuring of operations in order to integrate the acquired businesses into the existing Kerry operating model and external costs associated with deal preparation, integration planning and due diligence. A tax credit of €0.4m (30 June 2023: €0.1m; 31 December 2023: €2.8m) arose due to tax deductions available on acquisition related costs.

(iv) Accelerate Operational Excellence
These costs of €22.3m (30 June 2023: €25.1m; 31 December 2023: €53.5m) predominantly reflect consultancy fees, project management costs and costs of streamlining operations incurred in the period relating to our Accelerate Operational Excellence Transformation Programme, which will run until the end of 2024. This material transformation project deploying next generation manufacturing processes, including advanced process controls, is combined with building capabilities within the Group to enhance continuous improvement in manufacturing processes which will deliver step change manufacturing excellence across the organisation. This project is also focused on supply chain excellence, optimising the Group's warehousing and distribution network. A tax credit of €4.1m (30 June 2023: €5.8m; 31 December 2023: €9.1m) arose due to tax deductions available on accelerate operational excellence costs.

4. Finance income and costs

31 July 2024 LEI: 635400TLVVBNXLFHWC59
KERRY GROUP
HALF YEAR RESULTS 2024
Strong H1 Performance & Guidance Upgrade
HIGHLIGHTS

> Group revenue of €3.9bn > Taste & Nutrition volume growth of 3.1% (Q2: +3.2%) \| Group volumes +1.7% (Q2: +1.5%) > Taste & Nutrition EBITDA margin +130bps \| Group +160bps > Dairy Ireland EBITDA of €35m (H1 2023: €29m) > Group EBITDA of €552m (H1 2023: €518m) > Adjusted EPS of 194.1 cent, up 9.1% on a constant currency basis (7.8% reported currency growth) > Free cash flow of €445m reflecting 131% cash conversion > Interim dividend per share increase of 10.1% to 38.1 cent > Share repurchases of €279m in H1 \| Intention to initiate a further programme > Full year constant currency adjusted EPS guidance range of 7% to 10%


Edmond Scanlon, Chief Executive Officer
"We are pleased to report a good performance across the first half of the year. Taste & Nutrition delivered good volume growth ahead of our end markets, with strong profit growth and margin expansion across the business, contributing to our earnings per share growth of 9.1% in the period. Taste & Nutrition volume growth was led by strong performances in the foodservice channel across all three regions, as we continue to support established foodservice chains evolve and develop their businesses, while working with emerging leaders to upscale their operations and offerings. Volume growth in the retail channel was driven by good performances in the Americas and APMEA, led by very strong growth in Snack applications with Kerry's leading range of savoury taste profiles and Tastesense^® salt-reduction technologies. From a capital allocation perspective, we continued to invest to support the organic development of our business, while also completing the Lactase enzymes business acquisition and progressing our share repurchase activity through the period. Given the strength of our financial performance and our innovation pipeline, today we are updating our full year constant currency adjusted earnings per share guidance to 7% to 10%."
Markets and Performance
The demand environment across food & beverage markets remained relatively muted through the first half of the year, given the recent inflation across many geographies. Customer innovation activity focused mainly on new taste profiles and relative value options, along with product renovation to enhance nutritional characteristics of food and beverage products, while many customers initiated measures to stimulate growth towards the end of the period through increased promotional and advertising activity. Group revenue of €3.9 billion in the period comprised volume growth of 1.7%, pricing deflation of 4.0%, unfavourable translation currency of 0.9% and the effect from disposals net of acquisitions of 2.7% resulting in lower reported revenue for the period of 5.9%. Group EBITDA increased by 6.6% to €552m. Group EBITDA margin increased by 160bps to 14.2%, driven by benefits from the Accelerate Operational Excellence Programme, a positive impact from portfolio developments, operating leverage, product mix, and the net effect from pricing. Constant currency adjusted earnings per share increased by 9.1% to 194.1 cent and an increase of 7.8% in reported currency. Basic earnings per share decreased to 166.7 cent (H1 2023: 201.7 cent) primarily reflecting the profit on disposal of businesses and assets in the prior year. Free cash flow of €445m (H1 2023: €232m) represented cash conversion of 131%, driven by increased profit and an improvement in working capital on an average basis. The interim dividend of 38.1 cent per share reflects an increase of 10.1% over the 2023 interim dividend. During the period, the Group repurchased €279m of Kerry Group plc 'A' ordinary shares as part of its Share Buyback Programmes. Given good cash generation and current market conditions, the Group intends to initiate a further programme post the completion of the current programme.
Business Reviews
Taste & Nutrition
Volume growth led by strong foodservice performance

	H1 2024	Performance


Revenue	€3,419m	+3.1%¹


EBITDA	€551m	+5.5%


EBITDA margin	16.1%	+130bps

¹ volume performance
> Volume growth of 3.1% (Q2: +3.2%) was ahead of end markets > Growth led by Snacks, Meals and Beverage EUMs > Pricing -3.0% (Q2: -2.2%) reflected some input cost deflation > EBITDA margin expansion of 130bps driven by cost efficiencies, portfolio developments, operating leverage, product mix and the net effect of pricing
Taste & Nutrition delivered good volume growth ahead of its end markets, which remained relatively muted through the period. Foodservice continued to perform strongly with volume growth of 7.3%, supported by new menu innovations, seasonal products and solutions to reduce operational cost and complexity, while growth in the retail channel reflected good performances in the Americas and APMEA. Growth in the period was led by innovations incorporating Kerry's range of taste and proactive health technologies. This was supported by strong performance across savoury taste, botanicals and natural extracts, Tastesense^® salt and sugar reduction technologies, as well as proactive health technologies for digestive and cognitive need states in particular. Volume growth in food protection and preservation was driven by new clean label launches in food applications. Business volumes in emerging markets increased by 6.6% in the period, led by strong growth in the Middle East and Africa. Within the global Pharma EUM, growth in excipients was more than offset by phasing of volumes in cell nutrition. The previously announced carve-out acquisition of part of the global lactase enzyme business of Novonesis (formerly Chr. Hansen Holding A/S and Novozymes A/S) was completed during the period. This acquisition² is strongly aligned to Kerry's recent strategic enhancement of its biotechnology capabilities, while extending Kerry's enzyme manufacturing capabilities and footprint to three continents with its focus on food, beverage and pharma applications. ² See note 10 - Business Combinations in the Notes to the Condensed Interim Financial Statements for details.

Americas Region
> Volumes +3.4% (Q2: +3.2%) > Growth led by Snacks, Meals and Bakery EUMs > Retail achieved good growth with continued strong growth in Foodservice > LATAM growth led by Mexico
Reported revenue in the Americas region of €1,890m reflected good broad-based volume growth across end markets. Within North America, Snacks achieved excellent growth with new business wins incorporating Kerry's leading range of savoury taste profiles and Tastesense^® salt-reduction technologies. Meals delivered good growth through a number of new culinary taste launches across both retail and foodservice channels. Growth in Bakery was supported by performance in preservation and taste systems. Beverage performed well across botanicals, coffee extracts and Tastesense^® sugar reduction technologies, with growth in functional beverage driven by Kerry's proactive health technologies. Foodservice delivered strong volume growth in the period, supported by innovations with quick service restaurants, fast-casual outlets and coffee chains, while good growth in the retail channel was achieved across both customer and retailer brands. Within LATAM, good growth was achieved in Mexico across Beverage and Snacks, with Brazil delivering a solid performance.

Europe Region
> Volumes -1.0% (Q2: -0.5%) against strong comparatives > Meals and Beverage achieved good growth > Foodservice performed well while the retail channel reflected soft market dynamics
Reported revenue in the Europe region of €708m reflected strong comparatives and market conditions, particularly in the retail channel given recent inflation across the region. Within the Food EUM, Meals delivered good growth through solutions incorporating Kerry's food protection, preservation and authentic taste technologies, while performance in Dairy and Snacks reflected strong prior year comparatives. Beverage performed well in functional and refreshing beverages supported by a number of new innovations with Kerry's proactive health portfolio. Foodservice continued to deliver good growth supported by launches in meat and beverage applications with a number of customers, combined with increased seasonal and limited time offering activity across the region.


	Half year	Half year	Year
	ended	ended	ended
	30 June 2024	30 June 2023	31 Dec. 2023
	Unaudited	Unaudited	Audited
	€'m	€'m	€'m


Finance income:
Interest income on deposits	6.4	3.4	14.5
Interest income on vendor loan note	5.0	2.3	7.3


Finance income	11.4	5.7	21.8


Finance costs:
Interest payable and finance charges	(37.7)	(34.1)	(72.8)
Interest on lease liabilities	(1.5)	(0.9)	(2.6)
Interest rate derivative	(0.7)	0.2	0.2


	(39.9)	(34.8)	(75.2)
Net interest income on retirement benefits obligation	0.7	1.6	3.1


Finance costs	(39.2)	(33.2)	(72.1)


Net finance costs	(27.8)	(27.5)	(50.3)


5. Earnings per A ordinary share


	Half year	Half year	Year
	ended	ended	ended
	30 June 2024	30 June 2023	31 Dec. 2023
	Unaudited	Unaudited	Audited
	EPS	EPS	EPS

			Cash at bank and in hand €'m		Interest Rate Swaps €'m	Overdrafts due within 1 year* €'m		Borrowings due within 1 year* €'m		Borrowings due after 1 year* €'m	Net Debt - pre lease liabilities €'m		Lease liabilities* €'m	Net Debt €'m


At 31 December 2022 - audited			970.0		15.5	(0.2)		(700.9)		(2,432.6)	(2,148.2)		(69.2)	(2,217.4)

Cash flows			(294.9)		(34.5)	0.2		688.3		4.5	363.6		17.4	381.0
Foreign exchange adjustments			(14.3)		1.4	-		12.9		(0.3)	(0.3)		1.3	1.0
Other non-cash movements			-		1.7	-		(1.6)		1.9	2.0		(13.1)	(11.1)


At 30 June 2023 - unaudited			660.8		(15.9)	-		(1.3)		(2,426.5)	(1,782.9)		(63.6)	(1,846.5)


Cash flows			286.0		0.1	(34.7)		(1.0)		-	250.4		19.0	269.4
Foreign exchange adjustments			(3.1)		1.1	-		-		-	(2.0)		-	(2.0)
Other non-cash movements			-		5.2	-		(0.1)		(6.1)	(1.0)		(24.0)	(25.0)


At 31 December 2023 - audited			943.7		(9.5)	(34.7)		(2.4)		(2,432.6)	(1,535.5)		(68.6)	(1,604.1)


Cash flows			(296.1)		-	34.3		2.4		-	(259.4)		16.8	(242.6)
Foreign exchange adjustments			11.9		(5.7)	-		-		-	6.2		(0.6)	5.6
Other non-cash movements			-		11.8	-		-		(1.5)	10.3		(13.1)	(2.8)


At 30 June 2024 - unaudited			659.5		(3.4)	(0.4)		-		(2,434.1)	(1,778.4)		(65.5)	(1,843.9)


*Liabilities from financing activities.

10. Business combinations

The following acquisition was completed by the Group during the period to 30 June 2024:


Acquisition	Type	Completion date		Percentage acquired			Segment		Principal activity			Strategic rationale


Part of the global lactase enzymes business of Novonesis (formerly Chr. Hansen Holding A/S ("Chr. Hansen") and Novozymes A/S ("Novozymes")).	Asset & Equity	April 2024		Certain trade and assets of Chr.Hansen's global lactase enzyme business on a carve-out basis and 100% of the share capital of Nuocheng Trillion Food (Tianjin) Co., Ltd., a Chinese subsidiary of Novozymes.			Taste & Nutrition		The Lactase Enzymes Business which includes NOLA^® Products, further enhances Kerry's biotechnology solutions capability.			This acquisition adds enzyme technology which helps create lactose-free and sugar reduced dairy products, while preserving their authentic clean taste. Global demand for lactase is being driven by increased awareness of lactose intolerance, while many consumers are also choosing lactose-free for lifestyle and health reasons.