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Article Excerpt
STAN MCCARTHY, CEO, KERRY GROUP PLC: Welcome everybody and thank you for joining us this morning. Perhaps just as an outset and to give context to the presentation this morning in regards to Kerry Group reflecting back on 2008, it was a very good year for Kerry. A very good year from our financial performance perspective and a very good year from a business development prospective, all of which we'll touch on and later on.
We don't need to mention the contracting economic activity that is taking place everywhere and change in consumer patterns, and buying patterns of consumers and consumption worldwide.
The volatility curve that we dealt with in 2007 carried over into 2008 but it has obviously subsided in the back end of the year, but financial volatility did not decrease in anyway. In fact that actually picked up momentum as we came into the end of the year.
We're very pleased and happy about our go-to-market strategy that we spoke at length about last year and the benefits that it brought in 2009. And we were very comforted by the fact that we had a very strong portfolio brand in our performance in 2008 for our Foods business, where they outperformed the actual market itself. We spoke about, and you will see it in the financials, the efficiency programs that we've got going and we'll continue to look at going into 2009, and they have also contributed significantly.
So with that it sets the background in terms of how we got -- and where we are at the December 31, 2008.
Strong top line growth on a like-for-like basis. We'll see the impact of currency and we'll separate that out later. But basically we've got a 6.3% top line growth and when you grow on your top line, it obviously gives great comfort in terms of being able to deliver targets once you get down to earnings per share, with both sides of the business performing strongly at 7.5% and 5.4% respectively.
You may have heard me speak in the past about the quality of our profit. And if you reflect back to 2006, our average margin was at 8.3%. Last year we brought that up to 8.4% and again this year, we moved it up another notch to 8.5%. And for me, in terms of sustainability, in terms of growth, we view that as just a hugely critical barometer.
When all that flows down through the P&L we got a 7% earnings per share growth, bringing the total to EUR1.539 up from I believe it was EUR1.439 in 2007. And now we're proposing to increase our final dividend by 12.2% to EUR0.156. Now that would bring our total dividend for the year to EUR0.225 a share compared with EUR0.20 in 2007, a 12.5% overall. So very strong performance overall and very consistent with the long term trend of the Kerry Group Organization over many years.
Just a quick snapshot geographically looking at where the growth came from. Starting on the left, our Americas business and I'll stick with Ingredients and Flavors for the moment, 6.7%. Our European business growing at 4% and our Asian business growing at 19.3%. Very strong on the back of 17% back in 2007.
Meanwhile closer to home our Foods business growing like-for-like at 6.3%. So a very good distribution of growth overall but obviously Asia sticking out in terms of being the bones of 20% growth.
This page, our revenue growth looking back over the last three years. A little bit crowded in numbers but basically just a graph, the trend where we had perhaps maybe lower growth in 3.6% back in 2006. And against all the challenges we have managed to get 6.7% and 6.3% over the last two years. And obviously Asia continuing to steam roll ahead with very strong double-digit growth.
Just to talk a little bit about each business, our Ingredients and Flavors business, the 65% or so of the Group, EUR3.3 billion, making EUR320 million of trading profit growing at 8.9%. And you will see later in Brian's presentation that's a 9.5% business at this point in time.
We've had very good technology development and innovation benefit throughout the Organization. The realignment of Ingredients and Flavors and Bioscience progressing as planned, introduced in the States back in 2006. That's very well progressed now, in the States, as we go into 2009. And fair to say we're knee-deep in it in Europe and other parts of the world, and I'll comment on that later.
Efficiency programs, you will see somewhere in the presentation where our capital expenditure has been relatively high and we will touch on some of the projects that have been driving some of those efficiencies. But we've still got very good volume growth in the region -- across all regions.
The three clusters of technologies, and we'll see in the back half of the presentation how those clusters of technologies are applicable, a very strong growth across all regions. And obviously Asia we spoke about.
Perhaps the not so good news in the more challenging areas that we experienced in 2007 were dairy market, which came off obviously a high in 2007 and we dealt with that falling market that continued to fall all the way through to the end of 2008, and remains at the bottom as we speak. But that did pose us some challenges in 2008 as well. The whole consumer reaction to disposable income and the economy has a big impact in the restaurant food service business.
Two stories, our quick service restaurant business performing very well, however the full service restaurant business in decline and showing a lot of challenges there. However one has to take a long-term view that you just don't walk away from any particular [set] just like that because it's going through a tough cycle and you've got to look at it from the long-haul and perhaps the swings and the roundabouts at QSRs will obviously prove out that our food service strategy is right over the long-haul.
In the Americas, won't delay too much on it, we've covered it in many presentations in the past in terms of what we've been doing, but very good performance, very consistent with 2007. The go-to-market strategy is working very, very well for us, particularly with our larger customers in giving us great penetration. Perhaps the proof of the pudding is not always just on the results. We've received a number of awards from some of our key customers, whether it's in the area of innovation or just plain supplier of the year award, which cover a magnitude of benchmarks that they measure you on in terms of how we service them.
Culinary and complete meal solutions has provided very good growth and don't look at complete meal solutions as actually complete meal. Think of them as components going into complete meals. What you don't see perhaps in this side of the world is a frozen meal in a bag that's prepared to feed a family of four or five that would have the starch combined with the protein, combined with the sauce, and where we would actually apply the sauce to the meal for the branded customer.
Ice-cream, RTE cereal and nutritional bar area, where we've had very strong growth over the last couple of years, we did begin to see that taper off and obviously a reflection of the time that we're in. However we are deeply committed to this category and we now have a campus that's second to none in the St. Louis area that has been going on for two years. I mentioned it last year. We're in production with several months right now and it's complete. This is busy time of the year because we do get into ice-cream season and that plant is in full swing in preparation for ice-cream season in 2009.
Customized beverages, each restaurant is always looking for its signature menu item or its signature beverage, and our relationship now with many of the larger chains, and given the breath of technologies, enables us to be able to develop customized beverages for those restaurant chains.
In the area of other technologies, functional, fermented and pharma ingredients. Functional and fermented, emulsifiers, fermentation in the area of yeast, in the area of developing solutions from different substrates. Fermentation is hugely critical and you may have heard me mention that in the past in the area of not just clean labeling, but as customers look for alternative mechanisms of making existing products more economically. Fermentation is the tool to be able to make those products without having to address the label change. And to have that skill set and to have that capability embedded in our technology platform is huge.
Our Beloit center, which we spent over $50 million on over the course of last year, is now operational since the first of the year. And we are in the process of consolidating all the technologies and relocating people into it. We expect it to be fully complete by the middle of this year. And like I said, it's operational. It's a bit like moving into a house at this point in time, but by the middle of the year, that's fully operational.
Europe, 4% growth, challenging in that it suffered a little bit from the dairy markets. We made very good recovery in terms of the costs associated with raw materials and energy. And culinary is extremely strong. We would regard ourselves in this region as being extremely good at culinary, and our ability to be able to deliver solutions for branded customers, or for retailers in terms of bringing culinary solutions that are clean label and are what the consumer are looking for.
Geographies within the region, that performed very well for us, UK, Germany and Italy. France and Eastern Europe, a little bit more challenging perhaps, the ability to pass through price increases made it a little bit more challenging for us and we didn't see the growth there that we enjoyed in Germany or the UK.
However, that being said, Eastern Europe is not something that we're forgetting about or abandoning in any way and you will see later on that we will continue to invest to progress our business into that region. Perhaps just on a side note, many years ago back in 1995, when we invested in Mexico for the first time, I think we saw the peso collapse and equally so down in Brazil, that happens. So it's not something that scares us in terms of progressing our business geographically.
Cereal and sweet performed in this region very well, and obviously the savory snacks that we have a very, very strong position, in terms of our integrated technologies and our ability to be able to compete with the flavor houses...
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