Kerry Group posts 3% volume growth despite 'soft' consumer demand

Edmond Scanlon, Chief Executive Officer, Kerry Group.

Food giant Kerry saw its volumes grow by 3% in the last three months, underpinned by strong end market performances across bakery, snacks and dairy, the company said on Thursday.

In a trading statement, the group welcomed volume growth in foodservice of 4.1%, which represented a "significant channel outperformance" in the period, while business volumes in emerging markets increased by 5.3% across the period, led by a strong performance in Southeast Asia.

Kerry said the food and beverage market environment across the period reflected soft consumer demand, given macroeconomic and geopolitical uncertainty across different geographies.

The group's continuing business earnings before interest, tax, depreciation and amortisation (Ebitda) margin increased by 90bps, primarily driven by cost efficiencies, operating leverage, product mix and the contribution from acquisitions and disposals.

The company reported strong results across its American and Asian markets, which offset a more modest performance across Europe. 

In its Americas region, Kerry has posted volume growth of 3.6% so far this year, driven by snacks, dairy, bakery, and food service, with particularly strong performances across Brazil and Central America. 

Across Asia and Africa, food services and retail posted strong demand, with particular strength in South Asia which offset continued challenges in China. Business developments in the period included continued investment and expansion of Kerry’s local taste capacity in the Middle East and East Africa.

Speaking to investors on Thursday, Kerry Group CEO Edmond Scanlon said he expected growth in this region to remain in the high single digits.

"Obviously, we are not there at the moment, but we do remain very positive and have developed our business significantly there in recent years, particularly in the Middle East and Africa."

Meanwhile, Europe saw modest volume growth of just 0.4%, with a strong performance in food services and softer dynamics in Kerry's retail channel. Across the period, Kerry opened its new Biotechnology Innovation Centre in Leipzig, Germany, an enzyme capacity expansion in Cork, and the enhancement of Kerry’s cocoa taste capabilities in Grasse, France.

"The market in Europe has remained fairly challenged," Mr Scanlon told investors. "We are expecting to be in that 1-2% volume growth range, but it will be a slow burn.

"We are expecting to have a proactive approach in that Europe, similar to that of emerging markets."

Speaking on the group's overall results, Mr Scanlon added: "We delivered a good performance across the first nine months of the year, with volume growth well ahead of our markets, combined with strong margin expansion."

"We achieved good growth in the Americas supported by product launch activity, with Europe and APMEA delivering sequential volume growth improvement in the third quarter."

"Looking to the remainder of the year, while recognising continued market uncertainty, we remain well positioned for volume growth and strong margin expansion, as we continue to support our customers as an innovation and renovation partner.”

On its future outlook, Kerry said its strong end-market outperformance in the period "demonstrates the strength of its strategic positioning within its markets, channels and across its customer base.

"Looking to the remainder of the year, while recognising a heightened level of market uncertainty, Kerry remains well positioned for volume growth and strong margin expansion, as it supports its customers as an innovation and renovation partner," the company said.

The group maintained its constant currency adjusted earnings per share guidance of 7% to 11% growth for the full year.