Kerry Group has reported organic growth of 8.5% (volume +0.2% and pricing +8.3%) for the first three months of 2023 (Q1).

Overall volume growth for the Taste & Nutrition element of the business grew while the company said pricing of +7.2% reflected the management of input cost inflation.

There was a volume reduction for Dairy Ireland of -5.8% and increased pricing of 14.4% according to the quarterly report.

Edmond Scanlon, chief executive officer at Kerry said: “Our performance in the first quarter was driven by good volume growth in APMEA [Asia Pacific / Middle East / Africa] and Europe, led by strong growth in the foodservice channel, as customers in the North America retail channel worked through elevated inventory levels across the period.

“Overall growth was led by the dairy, snacks and pharma markets, as customers continued to innovate their offerings while navigating the heightened inflationary environment.

“We continued to make good strategic progress through footprint expansion and portfolio evolution with the sale of our Sweet Ingredients portfolio, further enhancing and developing our business in areas where we can add most value,” he added.

“While recognising the current market uncertainty, we believe we remain strongly positioned for growth and we reiterate our full year constant currency earnings guidance.”

Markets and performance

According to the Q1 report, consumer demand remained resilient through the period given the heightened inflationary environment.

Kerry said customer innovation was “primarily focused on new taste profiles, enhancing their products’ nutritional characteristics and providing more value options for consumers”.

Kerry Group reported revenue increased by 10.3% in the period. This comprised increased business volumes of 0.2%, increased pricing of 8.3%, favourable translation currency of 1.5% and contribution from business acquisitions net of disposals of 0.3%.

Group EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin decreased by 70bps primarily driven by the mathematical impact of passing through input cost inflation, partially offset by the positive effect from cost efficiency initiatives, according to Kerry.

At the end of the period, the group completed the sale of the trade and assets of its Sweet Ingredients portfolio to IRCA.

Taste and Nutrition

The report details that the Taste and Nutrition segment of Kerry delivered solid overall volume growth through the period despite the effect of increased pricing.

Foodservice continued its momentum with strong volume growth, supported by innovation with quick service restaurants and coffee chains on new menu development, seasonal products and solutions to enhance back-of-house efficiency, the report stated.

Overall performance in the retail channel was muted in the period, reflecting customers’ inventory management in North America, according to Kerry.

The report also states that growth in the period within the Food EUM (end user monitoring) was led by dairy, snacks and meat, supported by continued innovation and strong performances in savoury taste and Tastesense salt and sugar reduction technologies.

Business volumes in emerging markets increased by 6% in the period, driven by strong growth in the Middle East, Southeast Asia and Latin America.

The global pharma EUM achieved good volume growth, led by a strong performance in cell nutrition.

Dairy Ireland

Overall volumes in the period in Dairy Ireland were lower and pricing was higher given the heightened year-on-year inflationary cost environment.

Dairy Ingredients volumes were impacted by high market prices and expectations of inflation turning to deflation, given global market supply and demand dynamics across the first quarter, according to the report.

Dairy Consumer Products performed well in the period, with overall growth led by Kerry’s branded cheese ranges and private-label spreads, supported by increased promotional activity.

Financial Review

At the end of March, the group’s net debt of €1.7 billion reflected cash generation and proceeds from the disposal of the Sweet Ingredients portfolio.

Kerry has said that the group’s consolidated balance sheet remains strong, which will facilitate the continued organic and acquisitive growth of group businesses.

Foreign exchange translation is currently expected to be a headwind of approximately 3% on earnings in the full year based on prevailing rates.

As announced in February, the group has proposed a final dividend of 73.4c/share for approval at the Annual General Meeting (AGM).

Future prospects for Kerry

While market conditions are currently uncertain, Kerry said that it remains strongly positioned for growth with a good innovation pipeline.

The group said that it will continue to manage input cost fluctuations with its well-established pricing model. Kerry will continue to invest capital and develop its portfolio aligned to its strategic priorities, the report stated.

The group expects to achieve adjusted earnings per share growth in 2023 of 1% to 5% on a constant currency basis.