Full Year 2024 Kerry Group PLC Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Alexander Sloane - Barclays - Analyst : A few questions from my side, if that's okay. Just the first one, in terms of volume expectations embedded in the guidance, I guess, excluding the Dairy Ireland dilution, it looks like you're guiding to pretty strong underlying EPS growth, which would seem to support solid volume expectations, but perhaps you could give some more color on that in terms of what you're seeing for the end market and Kerry's level of outperformance embedded in the guidance that you've given and any phasing that you might be calling out within that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 18, 2025 / 8:00AM, KYGa.I - Full Year 2024 Kerry Group PLC Earnings Call And then the second one, just on the balance sheet, obviously, in good shape, thanks to the strong cash generation last year despite the buyback activity. What's the outlook on the cash conversion front in '25 and what are the priorities for cash? Could we expect further shareholder returns? And can we assume that the returns hurdle target on new M&A is perhaps higher than a few years ago, given higher cost of capital.

Question: Alexander Sloane - Barclays - Analyst : That's very helpful. And just to squeeze in one follow up. Just on the returns point. I mean, obviously, good to see 60 basis point improvement. How would you see that evolving in '25, please? Just as a follow up.

Question: Alexander Sloane - Barclays - Analyst : Thanks very much.

Question: Charles Eden - UBS - Analyst : My first question on the '28 targets and to deliver on the sort of high-single-digit plus percentage EPS CAGR through to '28, and I guess assuming 4% to 5% T&N volume CAGR over that period and no real sort of fluctuations in finance costs, tax rate, then it would imply reaching the sort of mid- to upper-end of the 19% to 20% EBITDA margin by 2028. I just wanted to clarify, is that the correct way to think about it? And then my second one, just a sort of clarification. What are you expecting in terms of raw material inflation for 2025, please?

Question: Charles Eden - UBS - Analyst : That's great. Thank you, both.

Question: Edward Hockin - JPMorgan - Analyst : Thank you very much for taking my question. I've got two, please. My first one is following up on the volume outlook for 2025 and really using Q4 as a bit of a reference point, you did very well in North America, maybe 1% or 2% of this, I think, is helped by the comp, but would it be fair to say that 4% plus run rate in the Americas is something we could be thinking about for 2025? And then on the other hand, APMEA, what visibility you have on growth improving from a bit of a lower level in Q4 as we head through 2025 basically in China and in developed markets in APMEA, what your outlook for these countries, these regions are in particular? And then my second question, please, is a bit more on the midterm. So since you last reported, we now have a new US Health Secretary. There was proposed ruling by the FDA potentially on front of pack labeling. You've got large food companies as well quite publicly talking about doing more on healthy offerings. So can you remind us, please, in the midterm, some of the key risks and opportunities you see from some of these changes? And remind us as well how sizable your natural and clean label portfolio is, please? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 18, 2025 / 8:00AM, KYGa.I - Full Year 2024 Kerry Group PLC Earnings Call

Question: Edward Hockin - JPMorgan - Analyst : Thank you. Thanks very much.

Question: Patrick Higgins - Goodbody Stockbrokers - Analyst : My first question -- and I appreciate the kind of comments you made around wanting them to have flexibility on capital allocation. But just interested to hear your thoughts on what the pipeline from M&A perspective looks like now versus, I guess, the past year where it was a little bit more muted. How do valuation expectations look like? And then the second question is just around your expected performance across channels. Should we expect a similar kind of, I guess, cadence or kind of growth being driven by foodservice versus retail? Or is there an expectation for retail to kind of pick up from here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 18, 2025 / 8:00AM, KYGa.I - Full Year 2024 Kerry Group PLC Earnings Call

Question: Patrick Higgins - Goodbody Stockbrokers - Analyst : All right, sir. Thank you.

Question: Lisa De Neve - Morgan Stanley - Analyst : This is Lisa De Neve from Morgan Stanley. I have two questions for me. The first one is on your savings program. I understand that you mentioned during the presentation that you intend to reduce your footprint of 124 manufacturing assets by 10% over the coming years. I mean, would it be possible to provide some granularity around your process to decide where and what plans to close and to which extent this is weighted to certain regions, given you've now disclosed your EBITDA margins per region. And we can see that Americas is quite well ahead the two other regions? And then the second question follows up from the previous question on emerging markets and the potential M&A pipeline. Could you outline where you are in establishing your presence in emerging markets? You've done a number of acquisitions. You've added some capacity in recent years. Where are you in that penetration opportunity? And how should we think about the profitability profile from APMEA or emerging markets as a whole over the coming years?

Question: Lisa De Neve - Morgan Stanley - Analyst : Thank you. It's super helpful.

Question: Alex Jones - BofA Global Research - Analyst : Thanks for taking my questions. The first, just on the savings program again. Could you give us any color on the phasing of those savings? Should we expect them to be fairly even out to '28 or any sort of back-end loaded aspect to that? And then the second question, just on the Pharma segment within T&N. I think there's a number of years now where that's been at or below the group volume growth. So do you see any prospects of reacceleration there? Or does it make you reassess the sort of role of that business in your portfolio?

Question: Fulvio Cazzol - Berenberg - Analyst : Thank you for taking my question. So I just had a couple of follow ups. So the first one is on the volume phasing. And I understood what you said, Edmond, about the H1, H2 phasing. There's nothing really to call out. But what about Q1 versus Q2? Because I remember last year, you had some customers shifting orders from Q4 into Q1. So does that give you a tougher comparative in Q1 of 2025. And also, I know that many of the food companies that have reported have highlight at a slow start to the year expected for 2025 and then subsequent acceleration. So again, can you maybe just elaborate a little bit on how we should think about Q1? Is it going to be slower start and then accelerate through the year? And then my second question is on the Kerry Accelerate 2.0. So the total cost of EUR140 million, is that just the P&L cost? Or does that also include costs that come into the cash flow through the CapEx line? And further to that, I was just wondering, Marguerite, if you can give a bit more color on where the money is going to be invested in predominantly in the 4% to 5% CapEx guidance for 2025? Will there be much investment behind the digital excellence program that will fall into this period like you said, in the back half? Is that what's contributing to that fairly high CapEx number?

Question: Nicola Tang - BNP Paribas Exane - Analyst : Thanks for taking my questions. I think most have been covered, but maybe to focus a bit more on the Americas again. And thinking about those midterm targets, the new ones to 2028. I mean Americas is already within that 2028 range at 19.7%. So can you talk about the midterm aspirations across the different divisions? You said there would always be a difference with Americas, but is it fair to say that Americas is not staying still in terms of margin performance? And then shorter-term, Edmond, you mentioned that there was a particularly strong innovation pipeline in North America as we look into this year. Are there any specific technologies or end market callouts that you would want to flag. And then maybe tagging in a longer-term question related to Ed's question on the reformulation opportunity. At the Capital Markets Day, you talked about this EUR15 billion incremental addressable market from reformulation on a global basis. I was wondering if you'd be able to size the potential reformulation opportunity within the US within that EUR15 billion?

Question: Nicola Tang - BNP Paribas Exane - Analyst : Thanks (multiple speakers) -- I was wondering if on the other question around midterm EBITDA margins in the Americas given that they're already ahead of the kind of within the 2028 target and bearing in mind what you said there in terms of reformulation and by technology and so on. How should we think about those margins going forward?

Question: Nicola Tang - BNP Paribas Exane - Analyst : Got it. Thank you so much.