Kerry Group chief executive Edmond Scanlon unveiled targets on Wednesday to increase annual volume sales by up to 6 per cent a year to 2026 and achieve solid expansion in its earnings margins over the period, helped by a €70 million cost savings plan.
The objectives are for annual revenue volume growth of 4-6 per cent over the next five years, driven by Kerry’s key Taste & Nutrition (T&N) unit and growth in emerging markets.
The group's legacy consumer foods business shrank two weeks ago with the completion of the €819 million sale of its low-margin meat and meals unit, including the Richmond, Denny and Galtee brands, to US poultry giant Pilgrims Pride.
Kerry has now set itself a target of achieving an earnings before interest, tax, depreciation and amortisation (ebitda) margin of over 18 per cent by 2026, underpinned by expanding the margin in T&N to above 20 per cent.
Davy analyst Cathal Kenny said that the T&A margin target implies a 2.4 percentage point increase over the lifetime of the plan. "This marks a step-up to our T&N forecast model," he said.
Earnings will be boosted as the group invests €120 million in streamlining its operations, focusing on manufacturing and Kerry’s supply chain. This is aimed at delivering €70 million of annual savings from 2025, it said.
Market valuation
Shares in Kerry rose as much as 1.7 per cent to €119.10 on Wednesday, to give the company a market valuation of more than €21 billion. However, they subsequently pulled back from their highs to close 0.2 per cent higher.
In an effort to boost its green credentials, the company plans to reduce its so-called scope one and two greenhouse gas emissions by 55 per cent by 2030, compared to a previous target of 33 per cent. Scope one covers direct emissions from a company, while scope two covers indirect emissions from the likes of purchased electricity.
Kerry plans to have a return of average capital employed (ROCE) of 10-12 per cent over the medium term.
"Overall, we consider the group's future growth expectations to be solid and believe the company is taking a prudent approach with its ROCE target, which is at the lower end of our expected range, particularly as it continues to expand its offering and presence via [mergers and acquisitions]," said Goodbody Stockbrokers analyst Jason Molins.
