IRELAND: Charges hit Kerry H1 profits

NEWS RELEASE
Thursday 9 August 2012
Interim Management Report
for the half year ended 30 June 2012
Kerry, the global ingredients & flavours and consumer foods group, reports a solid business performance for the half year ended 30 June 2012 and increases guidance for full year.

Commenting on the results Kerry Group Chief Executive Stan McCarthy said; "Kerry achieved a strong financial and operating performance in the first half of 2012 which augurs well for the full year. We have a strong innovation pipeline and continue to make good progress in implementation of our 1 Kerry Business Transformation programme. The Group is confident of delivering our full year growth objectives and has revised adjusted earnings per share guidance upwards. We now expect to achieve eight to twelve per cent growth in adjusted earnings per share in 2012".

INTERIM MANAGEMENT REPORT
for the half year ended 30 June 2012 Kerry Group delivered a strong financial and operating performance in the first half of 2012 despite the difficult global economic situation. Consumer confidence remains weak across
developed markets resulting in constrained retail and foodservice spend. However Kerry performed well against this background and continued to make good progress in aligning and optimising our business infrastructure and resources for today's market requirements and positioning for continued growth through our strong customer alliances.

Group ingredients and flavours businesses continued to benefit from our market leading technologies, innovation
capabilities and speed to market - assisted by our 1 Kerry strategies and Kerry Centres of Excellence. Good progress was also made in further deployment of resources to meet the Group's growth objectives and customer requirements in developing markets. Performance in the period under review also benefited from the impact of acquisitions completed in 2011.
While the UK and Irish consumer foods markets remain intensely competitive due to the prevailing economic situation and consumer's pursuit of value offerings, Kerry Foods innovation and efficiency programmes have continued to deliver greater product differentiation supporting
development of the division's leading brands and growth in selected private label categories.

RESULTS
Group sales revenue on a reported basis increased by 10% to €2.9 billion, reflecting like-for-like (LFL) growth of 2.5% when account is taken of acquisitions net of disposals and currency translation. Continuing business volumes increased by 1.8% and pricing / mix increased by
1.1%. Cost recovery programmes proved successful offsetting input cost increases where necessary.
As outlined in the Preliminary Statement of Results for 2011, business intersegment trading was realigned during 2011 to reflect changes in management responsibility for some European manufacturing facilities. This does not impact Group revenue, trading profit or trading margin.
The H1 2011 comparatives have been re-presented on a similar basis.
Trading performance progressively improved in Q2 2012. Ingredients & flavours business volumes increased by 2.4% relative to the first half of 2011. Allowing for a 1.5% rationalisation volume loss due to restructuring of production across consumer foods' sites, continuing
business volumes in the division were 0.7% ahead of the same period last year.
Group trading profit increased by 12.6% to €241m. Notwithstanding the increased level of expenditure relating to the Group's ongoing 1 Kerry Business Transformation and global
‘Kerryconnect' IT project, the Group trading profit margin increased by 20 basis points to 8.3%.
As previously signalled, arising from the 1 Kerry Business Transformation programme the Group has undertaken a strategic review of Kerry's manufacturing footprint to align and optimise manufacturing to our global technology strategies. The two year programme, including the
integration of recent acquisitions, streamlining of existing manufacturing facilities and the disposal of non-core activities, will incur an estimated total charge of approximately €200m - with a cash cost of just over €100m before any disposals.
Ingredients & flavours achieved 30 basis points margin improvement to 10.3%. Consumer foods margin was held at 7.3% despite the aforementioned competitive market situation and level of promotional activity.

Original source: Kerry Foods