Kerry Group CEO Signals Openness to Offers for Irish Dairy Business
Source: The DairyNews
Edmond Scanlon, CEO of Kerry Group, has expressed the company's willingness to consider offers for its Irish dairy business, which has been under review since 2021.
This statement follows the release of the company's 2023 preliminary earnings, reporting a challenging environment with earnings reaching €1.17bn and revenues at €8bn, reflecting an 8.6% decrease fr om the previous year.
Kerry's global flavors and nutrition business, a vital part of the company, focuses on supplying higher-margin products to international food producers. While the Irish dairy business remains a relative drag on margins, Scanlon emphasized its quality, stating it is "as good as any (dairy business) that exists out there."
Despite selective investments to enhance margins in the dairy unit, including a new cheese string plant set to open in May, the dairy business appears increasingly isolated from the group's strategy. A potential deal in 2021, wh ere Kerry Co-op would acquire it for around €800m, fell through, and subsequent negotiations have faced complexities, particularly involving cashing out Co-op-owned Kerry Group shares to fund the acquisition.
Scanlon highlighted the group's wider portfolio, expecting a target margin of 20%. Kerry anticipates potential benefits from the global impact of appetite suppressant drugs like Ozempic, having sold its sweets ingredients business last year. The company has invested in science-backed health ingredients and plans to launch new functional food and beverage products in 2024 and 2025, aligning with the evolving landscape of weight loss drugs.
In a challenging environment, Kerry reported a 4.2% decrease in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) from 2022. Organic profit growth was offset by disposals and translation currency impact. Volumes decreased by 0.9%, and pricing was down 0.7% due to deflation in the second half of 2023.
While the demand landscape was impacted by customer destocking, shrinkflation, and inflation affecting spending habits, favorable translation currency and acquisitions partially mitigated the overall 8.6% decrease in revenues. The EBITDA margin increased by 60 basis points to 14.5%.
In specific business segments, Kerry's taste and nutrition division experienced a 1.1% YoY increase in volumes and pricing. However, dairy pricing fell by 9.3% during the year, impacting Dairy Ireland's revenues, which decreased by 6.5% to €1.28bn. Growth in the European region was driven by Ireland and the UK, with volumes rising by 2.9%.
Kerry's global flavors and nutrition business, a vital part of the company, focuses on supplying higher-margin products to international food producers. While the Irish dairy business remains a relative drag on margins, Scanlon emphasized its quality, stating it is "as good as any (dairy business) that exists out there."
Despite selective investments to enhance margins in the dairy unit, including a new cheese string plant set to open in May, the dairy business appears increasingly isolated from the group's strategy. A potential deal in 2021, wh ere Kerry Co-op would acquire it for around €800m, fell through, and subsequent negotiations have faced complexities, particularly involving cashing out Co-op-owned Kerry Group shares to fund the acquisition.
Scanlon highlighted the group's wider portfolio, expecting a target margin of 20%. Kerry anticipates potential benefits from the global impact of appetite suppressant drugs like Ozempic, having sold its sweets ingredients business last year. The company has invested in science-backed health ingredients and plans to launch new functional food and beverage products in 2024 and 2025, aligning with the evolving landscape of weight loss drugs.
In a challenging environment, Kerry reported a 4.2% decrease in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) from 2022. Organic profit growth was offset by disposals and translation currency impact. Volumes decreased by 0.9%, and pricing was down 0.7% due to deflation in the second half of 2023.
While the demand landscape was impacted by customer destocking, shrinkflation, and inflation affecting spending habits, favorable translation currency and acquisitions partially mitigated the overall 8.6% decrease in revenues. The EBITDA margin increased by 60 basis points to 14.5%.
In specific business segments, Kerry's taste and nutrition division experienced a 1.1% YoY increase in volumes and pricing. However, dairy pricing fell by 9.3% during the year, impacting Dairy Ireland's revenues, which decreased by 6.5% to €1.28bn. Growth in the European region was driven by Ireland and the UK, with volumes rising by 2.9%.
