edmond scanlon – chief executive officer · 20 hours ago · label and ‘better for you’...

31 July 2020

Kerry Group – Interim Management Report 2020

Unprecedented first half due to COVID‐19 impact, withbusinessrecoveringwellacrossthesecondquarterKerry Group, the global taste & nutrition and consumer foods group, reports business performance for the half year ended 30 June 2020.

OVERVIEW

Strong response to COVID‐19 pandemic aligned to key priorities of our people, customers and communities,as restrictions on movement impacted performance, particularly in the foodservice channel

Group revenue of €3.4 billion, reflecting a business volume reduction of 6.0%

Group trading margin of 9.3% (H1 2019: 10.7%)

Adjusted EPS of 132.1 cent (H1 2019: 164.1 cent)

Basic EPS of 120.4 cent (H1 2019: 135.5 cent)

Free cash flow of €107m (H1 2019: €195m)

Interim dividend per share of 25.9 cent (Interim 2019: 23.5 cent)

Edmond Scanlon – Chief Executive Officer

“The first half of 2020 has been an unprecedented period due to the COVID‐19 pandemic, and I am immensely

proud of the tremendous efforts of our people in supporting our customers and local communities throughout

this period, aligned to our purpose to Inspire Food and Nourish Life.

We had a strong start to the year, prior to restrictions on movement impacting business performance as we moved

through the first quarter. As anticipated, we have seen a significant impact on our Taste & Nutrition business –

particularly our foodservice channel, where the impact was most pronounced in April, with the channel recovering

well since then. Performance in our retail channel improved in the second quarter, primarily through increased

consumer demand for authentic cooking, plant‐based offerings and health and wellness products.

In spite of the challenges arising from COVID‐19, we continued to make good progress on a number of fronts

aligned to our key strategic priorities. Our global operations and supply chain continue to demonstrate resilience

and engagement with our customers has been overwhelmingly positive, which gives us confidence in the trajectory

of business recovery. We will emerge a stronger organisation, as this period of uncertainty continues to enhance

Kerry’s role as our customers’ most valued partner.”

Contact Information

Media

Catherine Keogh VP Corporate Affairs & Communications

+353 66 7182304 [email protected]

Investor Relations

Marguerite Larkin Chief Financial Officer +353 66 7182292 [email protected]

William Lynch Head of Investor Relations +353 66 7182292 [email protected]

Website

www.kerrygroup.com

Kerry Group plc - Interim Management Report 2020 1

INTERIM MANAGEMENT REPORT

For the half year ended 30 June 2020

The Marketplace

The first half of the year has seen major changes in the daily lives of consumers across the globe, with purchasing

and consumption behaviours being significantly disrupted. Food and beverage purchases were impacted by

restrictions on movement and closure of foodservice operators, with online and delivery experiencing a surge in

demand. During the period, a number of key consumer trends accelerated, with increased demand for health and

immunity enhancement, natural authentic cooking, sustainability and plant protein, while many consumers

reverted to centre‐of‐store offerings.

These changes meant customers have had to rapidly adapt to this new dynamic operating environment, where

interpreting demand has become much more challenging and the strength of supply chains has been tested.

Customers’ primary focus was on ensuring the continuity of supply but has since moved to evaluating their product

portfolios and new product development strategies aligned to these rapidly changing consumer demands. This

has resulted in significant business development opportunities, as customers seek partners with full support

models to move at pace and navigate this changing market environment.

COVID-19

Our teams continue to ensure the safety of all employees and to support customers as they supply food and

beverage products across the globe. Throughout this turbulent time, our actions have been focussed on three

main priorities:

Our People: protecting the health and wellbeing of employees has been prioritised at all times. Measures

taken have included remote working where possible, segregation and zoning, use of appropriate personal

protective equipment and increased sanitisation and screening measures

Our Customers: ensuring continuity of supply to our customers around the globe despite challenges

presented by the pandemic, sharing COVID‐19 quality control and health & safety playbooks, while

supporting customers with insights to adapt their offerings to address changing consumer demands

Our Communities: donating food, personal protective equipment and sanitiser to front‐line staff, producing

hand sanitiser in our facilities when global supply was impacted, and through the MyCommunity Initiative,

pledging 26,000 volunteer days and a €1 million fund to support local community initiatives

The restrictions on mobility in the period significantly impacted demand in the foodservice channel, while the retail

channel experienced increased demand in places. We have worked on a number of actions to reduce the short‐

term cost impact of lower volumes and higher oncosts, including the suspension of all non‐essential and

discretionary expenditure and targeted cost management initiatives in impacted business areas.

Group Performance

The Group reported revenue of €3.4 billion decreased by 4.3% versus the same period last year, reflecting a volume

reduction of 6.0%, increased pricing of 0.4%, contribution from acquisitions of 1.2%, and a favourable translation

currency impact of 0.1%.

The Group reported trading profit of €316 million (H1 2019: €383 million), with trading profit margin decreasing

by 140bps to 9.3%, primarily due to the significant operating deleverage impact resulting from the sharp decline

in foodservice orders once lockdown measures were introduced globally, with additional COVID‐related costs

being partially offset by cost mitigation actions.

Constant currency adjusted earnings per share decreased by 19.8% to 132.1 cent (H1 2019 currency adjusted:

164.7 cent). Basic earnings per share decreased by 11.1% to 120.4 cent (H1 2019: 135.5 cent).

In line with our dividend strategy, the interim dividend of 25.9 cent per share (H1 2019: 23.5 cent) reflects an

increase from the prior year interim dividend. The Group achieved free cash flow of €107m in the period (H1 2019:

€195m).


Business Reviews

Taste&Nutrition

H1 2020 Performance

Revenue €2,799m ‐5.6%¹

Trading margin 11.6% ‐170bps

¹ volume performance

Overall volume reduction in H1 driven by Q2 decline of 11.8% reflecting the impact of COVID‐19

Q2 retail channel growing by 4.8%, with foodservice channel declining 49%

Strong volume growth in the second quarter within the retail channel across Food (particularly Snacks and

Dairy), Beverage and Pharma EUMs

Trading margin decrease principally driven by operating deleverage, with some additional COVID‐related costs

partially offset by cost mitigation actions

Taste & Nutrition began the year strongly before the global spread of COVID‐19. While performance in Q2 was

impacted most in April, business volumes have been recovering well since then. Kerry’s nutrition and wellness

technology portfolio had a very good performance within the retail channel through customised solutions

incorporating Kerry’s broad protein portfolio, fermented ingredients, probiotics and immunity enhancing

technologies.

Business volumes in the foodservice channel declined 27% in the first half of the year, with many out‐of‐home

food and beverage outlets closed for an extended period of time. The impact from these closures was a major

contributor to overall performance in developing markets, where business volumes declined by 3.8%.

The Group completed the acquisition of Tecnispice, S.A. in the period – a leading savoury taste business based in

Guatemala. The Group also announced the strategic development of its Georgia, US facility, creating a world‐

leading manufacturing facility to meet increasing demand for integrated solutions across a variety of protein

applications.

Americas Region

‐3.9% business volumes as the foodservice channel was considerably impacted in Q2

North America recovering well, aligned to lifting of restrictions

Good performance in Beverage, Meals and Snacks within the retail channel

Revenue in the region was €1,547m, reflecting a reported decrease of 0.6%, with lower business volumes partially

offset by marginally positive pricing, positive foreign currency translation and contribution from acquisitions.

The foodservice channel in North America was impacted considerably in April, but performance has seen a

significant improvement since then, benefitting from a more established infrastructure to cater for drive‐through,

curbside pickup and delivery options.

The North American retail channel achieved excellent growth in Beverage, particularly in nutritional and plant‐

based beverages with a number of innovations incorporating Kerry’s immunity enhancing technologies, broad

protein portfolio and natural extracts. Meals delivered very strong growth through authentic culinary solutions,

with demand for natural stocks and broths increasing, as consumers turned to more home cooking once lockdown

measures were introduced. Overall Meat category performance was impacted by customer product availability on

retail shelves. Snacks performed very well with an increase in demand for healthy and clean label solutions, while

Cereals and other centre‐of‐store categories experienced a rejuvenation in the period.

In LATAM, the foodservice channel in Brazil was significantly impacted, along with some impulse driven categories

within the retail channel including ice‐cream and confectionery, while Beverage experienced good growth.

Performance in Mexico was better, due to good growth across a number of key end use markets.

The global Pharma EUM delivered very strong growth, led by excipients and immunity enhancing technologies.


Europe Region

‐8.8% business volumes as foodservice channel significantly impacted in Q2

Good performance in Beverage, Meat and Snacks within the retail channel

Russia and Eastern Europe delivered very good growth in the retail channel

Revenue in the region was €657m, reflecting a reported decrease of 8.4%, with lower business volumes partially

offset by contribution from acquisitions.

The foodservice channel in the region was significantly impacted in the first half of the year, as most operators

were temporarily closed for an extended period of time, with the UK, Italy and Spain most affected. As restrictions

began to lift in a phased manner towards the end of the period, the pace of recovery varied from country to

country depending on local conditions.

The retail channel performed well, with Beverage achieving good growth through a number of launches in

low/non‐alcoholic and refreshing beverage categories incorporating Kerry’s botanicals, natural extracts and sugar‐

reduction technologies. Meat performed well, driven by strong growth and business development in plant‐based

alternatives, while Snacks had good growth in savoury applications with a number of large customers. Dairy

delivered a solid performance in the period, while international dairy markets were impacted by global

supply/demand dynamics. Meals performance was softer due to reduced impulse purchases, however cleaner

label and ‘better for you’ innovations performed well.

APMEA Region

‐5.9% business volumes as restrictions on movements impacted performance beyond China from March

Strong growth in Meat, Dairy and Snacks within the retail channel

Progressing strategic expansion and business development across the region

Revenue in the region was €566m, reflecting a reported decrease of 6.9%, with lower business volumes, adverse

impact from currency transaction and translation, partially offset by marginally positive pricing and the

contribution from acquisitions.

Performance in the period was most impacted in China, Sub‐Saharan Africa and India, while performance in South

East Asia, the Middle East, Australia and New Zealand was more robust.

After the initial lockdown period, foodservice in China continued to recover across the second quarter. Foodservice

performance outside of China varied by country depending on the level of restrictions in place, with India being

most impacted.

Retail performance in the region was led by Meat, Dairy and Snacks through a number of launches with regional

leaders, while Beverage and Meals were more challenged, as consumers opted for more traditional food and

beverage offerings in many geographies across the region.

The Group continued to make good progress in expanding its capacity and deploying technology capabilities in

China and the Middle East, while also moving into our new Technology & Innovation Centre in Shanghai.


ConsumerFoods

H1 2020 Performance

Revenue €647m ‐7.8% (‐0.7%)¹

Trading margin 7.0% 0bps

¹ volume performance (excluding contract exit)

Overall volume performance impacted by ready meals contract exit in the prior year

Positive impact from COVID‐19 in Q1 was more than offset in Q2

Pricing of 1.7% reflective of increases in input costs and market pricing

Trading margin maintained as efficiencies offset COVID‐19 impacts and pricing

The market was highly volatile across the period due to COVID‐19, with major swings in category performance

resulting from overnight changes in consumers’ purchasing and consumption behaviours. Shopping habits became

more functional with centre‐of‐store aisles benefitting most. Retailers scaled back many category product listings

and their freshly prepared over‐the‐counter operations. The large traditional retailers benefitted versus the

discounters, with increased average basket sizes and reduced promotional activity, while demand for online and

delivery has increased dramatically.

Revenue in the division was €647m, reflecting a reported decrease of 6.2%, as lower business volumes primarily

due to the impact of the previously reported ready meals contract exit and transaction currency were partially

offset by increased net pricing.

The Richmond sausage range delivered a strong performance, while the recently launched meat‐free ranges under

both Richmond and Naked Glory brands performed very well in the period. The Denny brand in Ireland performed

well, while meat sales were impacted by deli counter operations being reduced by retailers. Spreadable butter and

the Dairygold range benefitted from an uplift in consumer demand during the period.

The chilled meals category was impacted by reduced consumer impulse purchases, while frozen meals had a good

performance across the range.

The ‘Food to go’ range experienced variability in sales performance across the period. Fridge Raiders delivered

good growth in the first quarter but was challenged across the second quarter. The Strings & Things range, led by

Cheestrings delivered overall good growth, while the Oakhouse Foods range of home delivery meals delivered

exceptionally strong growth across the second quarter.


Financial Review

As anticipated, the COVID‐19 pandemic significantly impacted business performance in the period, with restrictions on

movement impacting performance particularly in the foodservice channel.

H1 2020 H1 2019 Analysis of Results % Change €’m €’m

Revenue ‐4.3% 3,414.0 3,568.9

Trading profit ‐17.5% 315.9 382.9

Trading margin 9.3% 10.7%

Computer software amortisation (13.1) (12.9)

Finance costs (net) (37.3) (38.9)

Adjusted earnings before taxation 265.5 331.1

Income taxes (excluding non‐trading items) (31.8) (41.1)

Adjusted earnings after taxation 233.7 290.0

Brand related intangible asset amortisation (20.6) (16.4)

Non‐trading items (net of related tax) ‐ (34.2)

Profit after taxation 213.1 239.4

EPS EPS Cent Cent

Basic EPS ‐11.1% 120.4 135.5

Brand related intangible asset amortisation 11.7 9.3

Non‐trading items (net of related tax) ‐ 19.3

Adjusted* EPS ‐19.5% 132.1 164.1

Impact of retranslating prior period adjusted EPS at current period average exchange rates

‐ 0.6

Adjusted* EPS in constant currency ‐19.8% 132.1 164.7

* Before brand related intangible asset amortisation and non‐trading items (net of related tax)

Analysis of Results

Revenue

On a reported basis, Group revenue decreased by 4.3% to €3.4 billion (H1 2019: €3.6 billion), including a volume

decrease of 6.0%, positive pricing of 0.4%, a positive translation currency impact of 0.1% and contribution from

business acquisitions of 1.2%.

H1 2019: Group reported revenue +10.7%, volume +3.3%, neutral pricing, translation currency +2.7%, acquisitions

+4.7%.

In Taste & Nutrition, reported revenue decreased by 4.0% to €2.8 billion (H1 2019: €2.9 billion), including a volume

decrease of 5.6%, positive pricing of 0.1%, a positive translation currency impact of 0.1% and contribution from

business acquisitions of 1.4%.

H1 2019: Taste & Nutrition reported revenue +13.0%, volume +3.8%, neutral pricing, translation currency +3.3%,

acquisitions +5.9%.

In Consumer Foods, reported revenue decreased by 6.2% to €647m (H1 2019: €689m), including a volume

decrease of 7.8%, positive pricing of 1.7% and an adverse transaction currency impact of 0.1%. Excluding the

impact of the ready meals contract exit, divisional volumes would have decreased by 0.7%.

H1 2019: Consumer Foods reported revenue +0.6%, volume +0.6%, pricing (0.3%), translation currency +0.3%.


Trading Profit & Margin

Group trading profit decreased by 17.5% to €315.9m (H1 2019: €382.9m).

Group trading profit margin decreased by 140 basis points to 9.3%, reflecting significant operating deleverage and COVID‐related costs partially offset by cost mitigation actions, negative net pricing and a benefit from net operational efficiencies.

Trading profit margin in Taste & Nutrition decreased by 170 basis points to 11.6%, reflecting significant operating deleverage and COVID‐related costs partially offset by cost mitigation actions, and a benefit from net operational efficiencies.

Trading profit margin in Consumer Foods was maintained at 7.0%, as efficiencies delivered from the 2019 Realignment Programme were offset by net operating deleverage/portfolio mix, net COVID‐related costs partially offset by cost mitigation actions, and negative net pricing in a challenging market.

Finance Costs (net)

Finance costs (net) for the period decreased to €37.3m (H1 2019: €38.9m) as cash generation and lower interest

rates were partially offset by acquisition activity.

Taxation

The tax charge for the period before non‐trading items was €31.8m (H1 2019: €41.1m) which represents an effective tax rate of 13.0% (H1 2019: 13.0%).

Acquisitions

During the period, the Group completed the acquisition of Tecnispice, Sociedad Anónima at a cost of €52.2m.

Adjusted EPS

Adjusted EPS in constant currency decreased by 19.8% in the period due to the impact from COVID‐19 on business

performance (H1 2019: +8.4%). Adjusted EPS in reporting currency decreased by 19.5% to 132.1 cent (H1 2019:

164.1 cent).

Basic EPS

Basic EPS decreased by 11.1% to 120.4 cent in the period (H1 2019: 135.5 cent).

Free Cash Flow

The Group achieved free cash flow of €107.0m (H1 2019: €194.8m), reflecting the impact of COVID‐19 on trading

profit and increased investment in working capital as we supported our customers through this period.

H1 2020 H1 2019

Free Cash Flow €’m €’m

Trading profit 315.9 382.9

Depreciation (net) 101.2 94.0

Movement in average working capital (116.4) (77.3)

Pension contributions paid less pension expense (3.8) (11.2)

Cash flow from operations 296.9 388.4

Finance costs paid (net) (25.1) (30.4)

Income taxes paid (35.7) (28.7)

Purchase of non‐current assets (129.1) (134.5)

Free cash flow 107.0 194.8

Cash conversion¹ 46% 67%

¹ Cash conversion is free cash flow expressed as a percentage of adjusted earnings after tax


Balance Sheet

A summary balance sheet as at 30 June 2020 is provided below:

H1 2020 H1 2019 FY 2019

€’m €’m €’m

Property, plant and equipment 2,017.2 1,928.8 2,062.9

Intangible assets 4,564.1 4,380.0 4,589.7

Other non‐current assets 202.2 171.1 179.5

Current assets 2,991.7 2,453.5 2,672.2

Total assets 9,775.2 8,933.4 9,504.3

Current liabilities 1,812.5 2,018.9 2,014.0

Non‐current liabilities 3,454.2 2,728.0 2,928.1

Total liabilities 5,266.7 4,746.9 4,942.1

Net assets 4,508.5 4,186.5 4,562.2

Shareholders’ equity 4,508.5 4,186.5 4,562.2

Property, Plant and Equipment

Property, plant and equipment decreased by €45.7m to €2,017.2m (Dec 2019: €2,062.9m, H1 2019: €1,928.8m)

due to the depreciation charge and the impact of foreign exchange translation partially offset by additions made

in the period.

Intangible Assets

Intangible assets decreased by €25.6m to €4,564.1m (Dec 2019: €4,589.7m, H1 2019: €4,380.0m) due to the

amortisation charge and the impact of foreign exchange translation partially offset by the acquisition made in the

period.

Current Assets

Current assets increased by €319.5m to €2,991.7m (Dec 2019: €2,672.2m, H1 2019: €2,453.5m), mainly due to

increases in cash, inventory and trade and other receivables.

Retirement Benefits

At the balance sheet date, the net deficit for all defined benefit schemes (after deferred tax) was €78.8m (Dec

2019: €8.6m, H1 2019: €64.4m). The increase in the net deficit from year end was driven primarily by a reduction

in scheme assets valuation arising from market reaction to COVID‐19 and adverse movements in discount rates.

Net Debt

At 30 June 2020, net debt was €1,996.4m. This increase of €133.6m relative to the December 2019 net debt of

€1,862.8m reflected acquisition investment and dividends, partially offset by cash generated in the period. The

Group completed a €200m tap issuance onto its 2025 notes, a drawdown of €250m under the revolving credit

facility and exercised the first of the two ‘plus one’ extension options on the revolving credit facility to further

enhance the maturity date of this facility to June 2025.

Return on Average Capital Employed (ROACE)

The Group achieved ROACE of 10.5% (H1 2019: 11.9%) reflecting reduced profits as a result of the impact on

business performance from COVID‐19.

Financial Ratios

The Group’s balance sheet is in a healthy position. With a Net debt to EBITDA* ratio of 2.0 times, the organisation

has sufficient headroom to support future growth plans. Other than €178.5m of US$ Private Placements, the

Group’s debt is not subject to financial covenants. Treasury monitors compliance with financial covenants and at

30 June the covenants were as follows:

Covenant

H1 2020 Times

H1 2019 Times

FY 2019 Times

Net debt: EBITDA* Maximum 3.5 2.0 1.9 1.8

EBITDA: Net interest* Minimum 4.0 12.8 14.4 13.2

*Calculated on a pro‐forma basis


Related Party Transactions

There were no changes in related party transactions from the 2019 Annual Report that could have a material

effect on the financial position or performance of the Group in the first half of the year.

Exchange Rates

Group results are impacted by fluctuations in exchange rates year‐on‐year versus the euro. The average rates below

are the principal rates used for the translation of results. The closing rates below are used to translate assets and

liabilities at period end.

Average Rates Closing Rates

H1 2020 H1 2019 H1 2020 H1 2019

Australian Dollar 1.68 1.60 1.63 1.63

Brazilian Real 5.15 4.38 5.92 4.37

British Pound Sterling 0.87 0.87 0.90 0.89

Chinese Yuan Renminbi 7.74 7.66 7.93 7.83

Malaysian Ringgit 4.65 4.65 4.80 4.72

Mexican Peso 23.49 21.68 25.40 21.76

South African Rand 17.98 16.16 19.58 16.09

US Dollar 1.10 1.13 1.12 1.14

Principal Risks and Uncertainties Details of the principal risks and uncertainties facing the Group can be found in the 2019 Annual Report on pages 76 to 87. The Group actively manages all risks through its control and risk management process and these risks include butare not limited to; portfolio management, Brexit, geopolitical/developing markets, business acquisition and divestiture,talent management, quality, food safety & regulatory, health & safety, margin management, Kerryconnect, informationsecurity & cybercrime, intellectual property management, taxation and treasury.

Within our geopolitical/developing markets strategic risk, outlined on pages 78 and 79 of the 2019 Annual Report, global pandemic outbreaks are identified as an area of potential impact. The risks associated with a pandemic include the health and wellbeing of our employees, disruption to our customers and supply chain and, depending on scale, the potential impact on liquidity. A key focus of the Group over the first half of the year has been managing the impact of the COVID‐19 pandemic which has had significant consequences across the globe. Given the Group’s position as a leader in the food industry, it has played a role in providing a safe and continuous food supply for people around the world and this crisis has heightened the interdependencies between a number of the Group’s principal risks.

The Group’s global crisis management team has led the Group’s response and focussed on:

Our People – protecting the health and wellbeing of employees has been prioritised at all times and the Group has taken all necessary steps and precautions as advised by global and local authorities. These measures have included remote working where possible, segregation and zoning, use of appropriate personal protective equipment and increased sanitisation and screening measures

Our Customers and Supply Chain – ensuring continuity of supply as well as supporting customers on numerous fronts as they navigate the short‐term disruption caused by the crisis

Our Community – the Group has ensured that it has fulfilled its responsibilities in relation to supporting the communities in which it operates through its MyCommunity Initiative which has pledged 26,000 volunteer days and a €1 million fund to support local community initiatives

The Group also further strengthened its liquidity position through this period – by completing a €200m tap issuance onto our 2025 notes, a drawdown of €250m under the revolving credit facility and also exercising the first of the two ‘plus one’ extension options on our revolving credit facility to further enhance the maturity date of this facility to June 2025.

In addition to managing the ongoing impact of the COVID‐19 crisis in the second half of the year and beyond, the Group will continue to monitor the impact of ongoing Brexit trade negotiations as outlined previously. The Group has considered a number of different scenarios and appropriate mitigation plans have been developed.


Dividend

In line with our dividend strategy, the Board has declared an interim dividend of 25.9 cent per share, compared

to the prior year interim dividend of 23.5 cent, payable on 13 November 2020 to shareholders registered on the

record date 16 October 2020.

Future Prospects

Due to the continued uncertainty in relation to the extent and duration of the COVID‐19 pandemic, we are not

providing full year earnings guidance at this time.

Our Taste & Nutrition business is focussed on managing through the short‐term challenges to emerge an even

stronger customer partner. The foodservice channel continues to recover well, and we are focusing on particular

growth areas in the channel, while continuing to partner with customers on new menu developments. The retail

channel continues to deliver good growth due to Kerry’s co‐creation model and leading solutions offering. We

have a good innovation pipeline with strong customer engagement to meet the demands of the post‐COVID

consumer. Based on the current prevailing environment, we see continued good recovery and momentum in Taste

& Nutrition and are currently estimating modestly lower volumes in the third quarter versus the prior year.

Our Consumer Foods business continues to see short‐term changes in consumer purchasing behaviour with some

variability across categories. The business continues to selectively focus on growth opportunities.

We will continue to invest for growth and pursue M&A opportunities aligned to strategic growth priorities. Kerry’s

unique business model, broad taste and nutrition portfolio and industry‐leading integrated solutions capabilities

are more critical than ever, as we support our customers through this changing environment.

Responsibility Statement

The Directors are responsible for preparing the Half Yearly Financial Report in accordance with the Transparency

(Directive 2004/109/EC) Regulations 2007 of Ireland (S.I. No. 277 of 2007) (‘the Regulations’), the Transparency

Rules of the Central Bank of Ireland and with IAS 34 ‘Interim Financial Reporting’ as adopted by the European

Union.

The Directors confirm that to the best of their knowledge:

the Group Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2020

have been prepared in accordance with the international accounting standard applicable to interim

financial reporting adopted pursuant to the procedure provided for under Article 6 of the Regulation (EC)

No. 1606/2002 of the European Parliament and of the Council of 19 July 2002;

the Interim Management Report includes a fair review of the important events that have occurred during

the first six months of the financial year, and their impact on the Group Condensed Consolidated Interim

Financial Statements for the half year ended 30 June 2020, and a description of the principal risks and

uncertainties for the remaining six months; and

the Interim Management Report includes a fair review of the related party transactions that have

occurred during the first six months of the current financial year and that have materially affected the

financial position or the performance of the Group during that period, and any changes in the related

parties’ transactions described in the last Annual Report that could have a material effect on the financial

position or performance of the Group in the first six months of the current financial year.

On behalf of the Board

Edmond Scanlon Marguerite Larkin Chief Executive Officer Chief Financial Officer 30 July 2020


Disclaimer: Forward Looking Statements

This Announcement contains forward looking statements which reflect management expectations based on currently

available data. However actual results may differ materially from those expressed or implied by these forward looking

statements. These forward looking statements speak only as of the date they were made and the Company undertakes

no obligation to publicly update any forward looking statement, whether as a result of new information, future events

or otherwise.


for the half year ended 30 June 2020

Half year Half year Year

ended ended ended

30 June 2020 30 June 2019 31 Dec. 2019

Unaudited Unaudited Audited

Notes €'m €'m €'m

Revenue 2 3,414.0 3,568.9 7,241.3

Trading profit 2 315.9 382.9 902.7

Intangible asset amortisation (33.7) (29.3) (64.3)

Non-trading items - (42.3) (110.9)

Operating profit 282.2 311.3 727.5

Finance income 3 0.1 0.2 0.3

Finance costs 3 (37.4) (39.1) (81.9)

244.9 272.4 645.9

Income taxes (31.8) (33.0) (79.4)

Profit after taxation attributable to owners of the parent 213.1 239.4 566.5

Earnings per A ordinary share Cent Cent Cent205.5

- basic 4 120.4 135.5 320.4

- diluted 4 120.3 135.4 319.9

Condensed Consolidated Income Statement

Continuing operations

Profit before taxation




ended ended ended

30 June 2020 30 June 2019 31 Dec. 2019


€'m €'m €'m


Other comprehensive income:

Items that are or may be reclassified subsequently to profit or loss:

Fair value movements on cash flow hedges 18.1 7.6 7.2

Cash flow hedges - reclassified to profit or loss from equity (5.2) 0.1 0.1

Net change in cost of hedging 0.1 1.5 0.6

Deferred tax effect of fair value movements on cash flow hedges (1.7) (1.2) (1.4)

Exchange difference on translation of foreign operations (116.4) 23.6 67.0

Fair value movement on revaluation of financial assets held at fair value through other comprehensive income (1.3) - (1.0)

Items that will not be reclassified subsequently to profit or loss:

Re-measurement on retirement benefits obligation (87.9) (34.7) 14.0

Deferred tax effect of re-measurement on retirement benefits obligation 17.3 5.1 (2.0)

(177.0) 2.0 84.5

36.1 241.4 651.0

Condensed Consolidated Statement of Comprehensive Income

Net (expense)/income recognised directly in other comprehensive income

Total comprehensive income


Condensed Consolidated Balance Sheetas at 30 June 2020

30 June 2020 30 June 2019 31 Dec. 2019



Non-current assets

Property, plant and equipment 2,017.2 1,928.8 2,062.9

Intangible assets 4,564.1 4,380.0 4,589.7

Financial asset investments 39.8 39.5 41.7

Investment in associates and joint ventures 16.9 15.9 16.2

Other non-current financial instruments 105.9 79.3 82.7

Deferred tax assets 39.6 36.4 38.9

6,783.5 6,479.9 6,832.1

Current assets

Inventories 1,093.4 1,029.8 993.3

Trade and other receivables 1,140.5 1,093.2 1,066.3

Cash at bank and in hand 7 736.1 267.4 554.9

Other current financial instruments 21.7 61.1 57.7

Assets classified as held for sale - 2.0 -

2,991.7 2,453.5 2,672.2

Total assets 9,775.2 8,933.4 9,504.3

Current liabilities

Trade and other payables 1,640.8 1,663.4 1,643.0

Borrowings and overdrafts 7 4.6 201.1 190.8

Other current financial instruments 9.5 5.2 12.1

Tax liabilities 128.7 123.9 140.7

Provisions 26.5 24.9 25.2

Deferred income 2.4 0.4 2.2

1,812.5 2,018.9 2,014.0

Non-current liabilities

Borrowings 7 2,833.8 2,107.9 2,355.3

Other non-current financial instruments - 0.2 -

Retirement benefits obligation 6 98.3 77.0 11.9

Other non-current liabilities 147.0 167.3 167.9

Deferred tax liabilities 322.8 324.8 338.9

Provisions 32.6 29.8 33.2

Deferred income 19.7 21.0 20.9

3,454.2 2,728.0 2,928.1

Total liabilities 5,266.7 4,746.9 4,942.1

Net assets 4,508.5 4,186.5 4,562.2

Issued capital and reserves attributable to owners of the parent

Share capital 8 22.1 22.0 22.1

Share premium 398.7 398.7 398.7

Other reserves (216.2) (167.7) (119.0)

Retained earnings 4,303.9 3,933.5 4,260.4

Shareholders' equity 4,508.5 4,186.5 4,562.2


Share

Capital

Share

Premium

Other

Reserves

Retained

Earnings Total

Note €'m €'m €'m €'m €'m

At 31 December 2018 - audited 22.0 398.7 (207.3) 3,821.0 4,034.4

Adjustment on initial application of IFRS 16 'Leases' - - - (9.4) (9.4)

Adjusted balances at 1 January 2019 22.0 398.7 (207.3) 3,811.6 4,025.0

Profit after tax attributable to owners of the parent - - - 239.4 239.4

Other comprehensive income/(expense) - - 32.8 (30.8) 2.0

Total comprehensive income - - 32.8 208.6 241.4

Dividends paid 5 - - - (86.7) (86.7)

Share-based payment expense - - 6.8 - 6.8

At 30 June 2019 - unaudited 22.0 398.7 (167.7) 3,933.5 4,186.5


Other comprehensive income - - 41.1 41.4 82.5

Total comprehensive income - - 41.1 368.5 409.6

Shares issued during the period 0.1 - - - 0.1

Dividends paid 5 - - - (41.6) (41.6)


At 31 December 2019 - audited 22.1 398.7 (119.0) 4,260.4 4,562.2


Other comprehensive expense - - (104.7) (72.3) (177.0)

Total comprehensive (expense)/income - - (104.7) 140.8 36.1

Dividends paid 5 - - - (97.3) (97.3)


At 30 June 2020 - unaudited 22.1 398.7 (216.2) 4,303.9 4,508.5

Other Reserves comprise the following:

FVOCI

Reserve

Capital

Redemption

Reserve

Other

Undenominated

Capital

Share-Based

Payment

Reserve

Translation

Reserve

Hedging

Reserve

Cost of

Hedging

Reserve Total

€'m €'m €'m €'m €'m €'m €'m €'m

At 1 January 2019 1.6 1.7 0.3 63.3 (256.7) (15.5) (2.0) (207.3)

Other comprehensive income - - - - 23.6 7.7 1.5 32.8

Share-based payment expense - - - 6.8 - - - 6.8

At 30 June 2019 - unaudited 1.6 1.7 0.3 70.1 (233.1) (7.8) (0.5) (167.7)

Other comprehensive (expense)/income (1.0) - - - 43.4 (0.4) (0.9) 41.1


At 31 December 2019 - audited 0.6 1.7 0.3 77.7 (189.7) (8.2) (1.4) (119.0)

Other comprehensive (expense)/income (1.3) - - - (116.4) 12.9 0.1 (104.7)


At 30 June 2020 - unaudited (0.7) 1.7 0.3 85.2 (306.1) 4.7 (1.3) (216.2)

Condensed Consolidated Statement of Changes in Equityfor the half year ended 30 June 2020


Condensed Consolidated Statement of Cash Flows



ended ended ended

30 June 2020 30 June 2019 31 Dec. 2019



Operating activities

Trading profit 315.9 382.9 902.7

Adjustments for:

Depreciation (net) 101.2 94.0 191.4

Change in working capital (197.9) (133.5) (63.9)

Pension contributions paid less pension expense (3.8) (11.2) (26.7)

Payments on non-trading items (25.3) (29.3) (89.1)

Exchange translation adjustment 2.2 (0.5) (2.5)

Cash generated from operations 192.3 302.4 911.9

Income taxes paid (35.7) (28.7) (67.2)

Finance income received 0.1 0.2 0.5

Finance costs paid (25.2) (30.6) (81.3)

Net cash from operating activities 131.5 243.3 763.9

Investing activities

Purchase of assets (net) (111.4) (123.8) (315.6)

Proceeds from the sale of assets - 6.4 32.8

Capital grants received - - 3.0

Purchase of businesses (net of cash acquired) 9 (30.8) (324.0) (562.7)

Payments relating to previous acquisitions (3.8) (5.3) (5.3)

Income received from joint ventures 0.7 0.2 -

Net cash used in investing activities (145.3) (446.5) (847.8)

Financing activities

Dividends paid 5 (97.3) (86.7) (128.3)

Payment of lease liabilities (17.7) (17.1) (35.5)

Issue of share capital 8 - - 0.1

Repayment of borrowings (net of swaps) (141.2) (3.9) (564.4)

Increase in borrowings 463.6 155.5 950.0

Net cash movement due to financing activities 207.4 47.8 221.9

Net increase/(decrease) in cash and cash equivalents 193.6 (155.4) 138.0

Cash and cash equivalents at beginning of period 549.7 403.9 403.9

Exchange translation adjustment on cash and cash equivalents (11.8) 2.3 7.8

Cash and cash equivalents at end of period 7 731.5 250.8 549.7

Reconciliation of Net Cash Flow to Movement in Net Debt

Net increase/(decrease) in cash and cash equivalents 193.6 (155.4) 138.0

Cash flow from debt financing (322.4) (145.0) (385.6)

Changes in net debt resulting from cash flows (128.8) (300.4) (247.6)

Fair value movement on interest rate swaps (net of adjustment to borrowings) 8.2 7.9 12.5

Exchange translation adjustment on net debt (13.0) (2.2) (4.2)

Movement in net debt in the period (133.6) (294.7) (239.3)

Net debt at beginning of period (1,862.8) (1,623.5) (1,623.5)

Net debt at end of period 7 (1,996.4) (1,918.2) (1,862.8)


Notes to the Condensed Consolidated Interim Financial Statements


1. Accounting policies

Effective Date

- Business Combinations 1 January 2020

- Interest Rate Benchmark Reform

IFRS 7 (Amendments)

- Presentation of Financial Statements 1 January 2020

- Accounting Policies, Changes in Accounting Estimates and Errors 1 January 2020

- Revised Conceptual Framework for Financial Reporting 1 January 2020

Effective Date

- IFRS 17 Insurance Contracts 1 January 2021

Going concern

Critical accounting estimates and judgements

The key impacts of COVID-19 up to 30 June 2020 include:

-

-

-

-

The COVID-19 pandemic has become a worldwide crisis and at the date of this report it continues to evolve. We have considered the impact of this on our business

and reassessed our principal risks and uncertainties.

The impact of the mobility restrictions globally has impacted the Group’s revenue and profitability, most significantly in the foodservice part of the Group’s

business; however, this channel is showing signs of recovery as mobility restrictions are lifted. The foodservice business represented approximately 30% of the

Taste & Nutrition business segment in 2019.

The Group considered the impact of the global pandemic on its impairment risk on the carrying value of the goodwill and indefinite life intangible assets and

given there was significant headroom, no impairment was identified.

All plants remained open except for a limited number of those that were mandated to close temporarily in specific jurisdictions. While there were changes to shift

patterns and ways of working to ensure the safety of employees through additional segregation and cleaning routines, there were no indicators of impairment to

property, plant and equipment. There were also no rationalisations as a result of COVID-19.

These Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2020 have been prepared in accordance with the requirements of IAS

34 'Interim Financial Reporting' and using accounting policies consistent with International Financial Reporting Standards as adopted by the European Union. The

accounting policies applied by the Group in these Condensed Consolidated Interim Financial Statements are the same as those detailed in the 2019 Annual Report.

The following Standards and Interpretations are effective for the Group from 1 January 2020 but do not have a material effect on

the results or financial position of the Group:

The preparation of the Group Condensed Consolidated Interim Financial Statements requires management to make certain estimations, assumptions and

judgements that affect the reported profits, assets and liabilities. Estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting

estimates may be necessary if there are changes in the circumstances on which the estimate was based or as a result of new information or more experience. Such

changes are recognised in the period in which the estimate is revised.

In preparing the Group Condensed Consolidated Interim Financial Statements, the significant judgements made by management in applying the Group’s accounting

policies and the key sources of estimation uncertainty were the same as those applied to the Consolidated Financial Statements for the year ended 31 December

2019 with the addition of COVID-19 related uncertainty as set out below.

While supporting our customers during this crisis through the carrying of additional inventory and receivable balances, the Group has assessed the additional

risks and to date, does not believe there is additional risks around the recovery of these assets.

The Group Condensed Consolidated Interim Financial Statements have been prepared on the going concern basis of accounting. The Directors have considered the

Group’s business activities and how it generates value, together with the main trends and factors likely to affect future development, business performance and

position of the Group including the impact of the current pandemic. Due to the uncertainty of the ongoing duration and impact of the pandemic on mobility

restrictions in different countries around the world, additional stressed scenarios, reflecting different levels and timing of recovery, have been considered. In these

scenarios, the Group has sufficient resources and liquidity headroom. There are no material uncertainties that cast a significant doubt on the Group's ability to

continue as a going concern over a period of at least 12 months.

The current unprecedented economic environment has created uncertainty in relation to the timing of a return to efficient production in certain categories of the

Group's business, future consumer behaviour and the associated recovery of sales volumes and trading margins. The timing and shape of recovery is uncertain,

and accordingly, the Group has considered a number of scenarios, taking account of current levels of trading and the consequential impact on cash flows, including

working capital.

The Directors report that they have satisfied themselves that the Group is a going concern, having adequate resources to continue in operational existence for the

foreseeable future. In forming this view, the Directors have reviewed the Group’s budget for a period not less than 12 months, the medium term plans as set out in

the rolling five year plan, and have taken into account the cash flow implications of the plans, including proposed capital expenditure, and compared these with the

Group’s committed borrowing facilities and projected gearing ratios.

The Conceptual

Framework

The following Standard is not yet effective for the Group and is not expected to have a material effect on the results or financial

position of the Group:

IFRS 3 (Amendments)

IFRS 9, IAS 39 & 1 January 2020

IAS 1 (Amendments)

IAS 8 (Amendments)


Notes to the Condensed Consolidated Interim Financial Statements (continued)

2. Analysis of results

Group Group Group

Eliminations Eliminations Eliminations

Taste & Consumer and Taste & Consumer and Taste & Consumer and

Nutrition Foods Unallocated Total Nutrition Foods Unallocated Total Nutrition Foods Unallocated Total

€'m €'m €'m €'m €'m €'m €'m €'m €'m €'m €'m €'m

External revenue 2,770.1 643.9 - 3,414.0 2,882.2 686.7 - 3,568.9 5,939.1 1,302.2 - 7,241.3

Inter-segment revenue 28.5 2.7 (31.2) - 32.6 2.7 (35.3) - # 78.5 4.4 (82.9) -#

Revenue 2,798.6 646.6 (31.2) 3,414.0 2,914.8 689.4 (35.3) 3,568.9 2 6,017.6 1,306.6 (82.9) 7,241.3

Trading profit 324.8 45.1 (54.0) 315.9 388.1 48.0 (53.2) 382.9 918.5 98.9 (114.7) 902.7

Intangible asset amortisation (33.7) (29.3) (64.3)

Non-trading items - (42.3) (110.9)

Operating profit 282.2 311.3 727.5

Finance income 0.1 0.2 0.3

Finance costs (37.4) (39.1) (81.9)

Profit before taxation 244.9 272.4 645.9

Income taxes (31.8) (33.0) (79.4)


Revenue analysis

Analysis by EUM

Taste & Consumer Taste & Consumer Taste & Consumer

Nutrition Foods Total Nutrition Foods Total Nutrition Foods Total

€'m €'m €'m €'m €'m €'m €'m €'m €'m

Food 1,944.0 643.9 2,587.9 2,021.9 686.7 2,708.6 4,161.5 1,302.2 5,463.7

Beverage 680.1 - 680.1 734.0 - 734.0 1,507.6 - 1,507.6

Pharma 146.0 - 146.0 126.3 - 126.3 270.0 - 270.0

External revenue 2,770.1 643.9 3,414.0 2,882.2 686.7 3,568.9 5,939.1 1,302.2 7,241.3

Analysis by primary geographic marketDisaggregation of revenue from external customers is analysed by geographical split:

Taste & Consumer Taste & Consumer Taste & ConsumerNutrition Foods Total Nutrition Foods Total Nutrition Foods Total

€'m €'m €'m €'m €'m €'m €'m €'m €'m

Republic of Ireland 79.5 142.5 222.0 88.0 144.8 232.8 184.9 252.5 437.4

Rest of Europe 577.7 501.4 1,079.1 629.7 541.9 1,171.6 1,271.5 1,049.7 2,321.2

Americas 1,546.5 - 1,546.5 1,556.3 - 1,556.3 3,197.8 - 3,197.8

APMEA* 566.4 - 566.4 608.2 - 608.2 1,284.9 - 1,284.9

External revenue 2,770.1 643.9 3,414.0 2,882.2 686.7 3,568.9 5,939.1 1,302.2 7,241.3


Year ended 31 December 2019 - Audited

* Asia Pacific, Middle East and Africa

The accounting policies of the reportable segments are the same as those detailed in the Statement of accounting policies in the 2019 Annual Report. Under IFRS 15 'Revenue from

Contracts with Customers' revenue is primarily recognised at a point in time. Revenue recorded over time during the period was not material to the Group.

Half year ended 30 June 2020 - Unaudited Half year ended 30 June 2019 - Unaudited Year ended 31 December 2019 - Audited

Disaggregation of revenue from external customers is analysed by End Use Market (EUM), which is the primary market in which Kerry's products are consumed. An EUM is defined as

the market in which the end consumer or customer of Kerry's product operates. The economic factors within the EUMs of Food, Beverage and Pharma and within the primary

geographic markets which affect the nature, amount, timing and uncertainty of revenue and cash flows are similar.

The Group has determined it has two reportable segments: Taste & Nutrition and Consumer Foods. The Taste & Nutrition segment is the global leader in the development of taste and

nutrition solutions for the food, beverage and pharmaceutical industries across Ireland, Europe, Americas and APMEA. Our broad technology foundation, customer-centric business

model, and industry-leading integrated solutions capability make Kerry the co-creation partner of choice. The Consumer Foods segment is a leader in its categories in the chilled

cabinet primarily in Ireland and in the UK.

Half year ended 30 June 2020 - Unaudited Half year ended 30 June 2019 - Unaudited Year ended 31 December 2019 - Audited

Half year ended 30 June 2020 - Unaudited Half year ended 30 June 2019 - Unaudited



3. Finance income and costs


ended ended ended


€'m €'m €'m

Finance income:

Interest income on deposits 0.1 0.2 0.3

Finance costs:

Interest payable (36.9) (39.7) (84.0)

Interest rate derivative (0.5) 1.0 2.9

(37.4) (38.7) (81.1)

Net interest cost on retirement benefits obligation - (0.4) (0.8)

Finance costs (37.4) (39.1) (81.9)

4. Earnings per A ordinary share

Year

ended ended

Unaudited Audited

EPS

cent €'m

EPS

cent €'m

EPS

cent €'m

Basic earnings per share

Profit after taxation attributable to owners of the parent 120.4 213.1 135.5 239.4 320.4 566.5

Diluted earnings per share

Profit after taxation attributable to owners of the parent 120.3 213.1 135.4 239.4 319.9 566.5


Number of Shares m's m's m's

Basic weighted average number of shares 176.9 176.7 176.8

Impact of share options outstanding 0.2 0.1 0.3

Diluted weighted average number of shares 177.1 176.8 177.1

5. Dividends


ended ended ended


€'m €'m €'m

Amounts recognised as distributions to equity shareholders in the period

97.3 86.7 86.7

Interim 2019 dividend of 23.50 cent per A ordinary share paid 15 November 2019 - - 41.6

97.3 86.7 128.3

30 June 2019 31 Dec. 201930 June 2020

ended

30 June 2020

Half year Half year

30 June 2019 31 Dec. 2019

Final 2019 dividend of 55.10 cent per A ordinary share paid 15 May 2020

(Final 2018 dividend of 49.20 cent per A ordinary share paid 10 May 2019)

Since the end of the period, the Board has proposed an interim dividend of 25.90 cent per A ordinary share which amounts to €45.8m. The payment date for the interim dividend will be

13 November 2020 to shareholders registered on the record date as at 16 October 2020. These Condensed Consolidated Interim Financial Statements do not reflect this dividend.

Unaudited

30 June 2020 30 June 2019 31 Dec. 2019

30 June 2020 30 June 2019 31 Dec. 2019





6. Retirement benefits obligation

The net deficit recognised in the Condensed Consolidated Balance Sheet for the Group's defined benefit post-retirement schemes was as follows:


ended ended ended

30 June 2020 30 June 2019 31 Dec. 2019


€'m €'m €'m

Net recognised deficit in plans before deferred tax (98.3) (77.0) (11.9)

Net related deferred tax asset 19.5 12.6 3.3

Net recognised deficit in plans after deferred tax (78.8) (64.4) (8.6)

7. Financial instruments

Liabilities Derivatives

Financial Assets/ at Fair Value Designated as Assets/

(Liabilities) at through Hedging (Liabilities) at

Amortised Cost Profit or Loss Instruments FVOCI Total

€'m €'m €'m €'m €'m

Assets:

Interest rate swaps - - 105.9 - 105.9

Cash at bank and in hand 736.1 - - - 736.1

736.1 - 105.9 - 842.0

Liabilities:

Bank overdrafts (4.6) - - - (4.6)

Bank loans (250.0) - - - (250.0)

Senior notes (2,544.6) (39.2) - - (2,583.8)

Borrowings and overdrafts (2,799.2) (39.2) - - (2,838.4)

At 30 June 2020 - unaudited (2,063.1) (39.2) 105.9 - (1,996.4)

Assets:



267.4 - 123.4 - 390.8

Liabilities:


Bank loans (499.9) - - - (499.9)

Senior notes (1,763.0) (29.5) - - (1,792.5)


At 30 June 2019 - unaudited (2,012.1) (29.5) 123.4 - (1,918.2)

Assets:



554.9 - 128.4 - 683.3

Liabilities:


Bank loans (1.2) - - - (1.2)

Senior notes (2,514.8) (24.9) - - (2,539.7)


At 31 December 2019 - audited (1,966.3) (24.9) 128.4 - (1,862.8)

At 30 June 2020, the net deficit before deferred tax for defined benefit post-retirement schemes was €98.3m (30 June 2019: €77.0m; 31 December 2019: €11.9m). This

was calculated by rolling forward the defined benefit post-retirement schemes' liabilities at 31 December 2019 to reflect material movements in underlying assumptions

over the period while the defined benefit post-retirement schemes' assets at 30 June 2020 are measured at market value. The increase in the net deficit before deferred

tax of €86.4m was driven by both a reduction in scheme assets arising from market reactions to the COVID-19 pandemic and adverse movements in discount rates.

i) The following table outlines the financial assets and liabilities in relation to net debt held by the Group at the balance sheet date:


Notes to the Condensed Consolidated Interim Financial Statements (continued)for the half year ended 30 June 2020

7. Financial instruments (continued)

Total Pre CCS Impact of CCS Total after CCS

Half year ended Half year ended Half year ended Half year ended Year ended

30 June 2020 30 June 2020 30 June 2020 30 June 2019 31 Dec. 2019

Unaudited Unaudited Unaudited Unaudited Audited€'m €'m €'m €'m €'m

Euro (1,427.1) (226.6) (1,653.7) (1,509.0) (1,594.1)

Sterling 74.0 - 74.0 47.0 77.9

US Dollar (717.4) 226.6 (490.8) (498.3) (475.8)

Other 74.1 - 74.1 42.1 129.2

(1,996.4) - (1,996.4) (1,918.2) (1,862.8)

On demand & Up to

up to 1 year 2 years 2 - 5 years > 5 years Total

€'m €'m €'m €'m €'m


Interest rate swaps - 33.2 63.2 9.5 105.9


Bank loans - - (250.0) - (250.0)

Senior notes - (117.9) (758.5) (1,707.4) (2,583.8)

At 30 June 2020 - unaudited 731.5 (84.7) (945.3) (1,697.9) (1,996.4)


Interest rate swaps 44.2 - 44.9 34.3 123.4


Bank loans - (1.4) (498.5) - (499.9)

Senior notes (184.5) - (775.1) (832.9) (1,792.5)

At 30 June 2019 - unaudited 110.5 (1.4) (1,228.7) (798.6) (1,918.2)


Interest rate swaps 45.7 - 52.0 30.7 128.4


Bank loans - (1.2) - - (1.2)

Senior notes (185.6) - (784.6) (1,569.5) (2,539.7)

At 31 December 2019 - audited 409.8 (1.2) (732.6) (1,538.8) (1,862.8)

a) Fair value of financial instruments carried at fair value

-

-

-

At 30 June 2020, the Group had cash on hand of €736.1m, including €250m of a drawdown under the revolving credit facility. At the period end, the Group had

undrawn committed bank facilities of €850m.

All Group borrowings are guaranteed by Kerry Group plc. No assets of the Group have been pledged to secure the borrowings.

Part of the Group’s debt portfolio includes US$750m of senior notes issued in 2013 and US$408m of senior notes issued in 2010. At the time of issuance, US$250m

of the 2013 senior notes and US$500m of the 2010 US$600m senior notes were swapped, using cross currency swaps, to euro. US$192m of the 2010 senior notes

were repaid in January 2017 and the related swaps matured at that date. In addition, the Group holds €750m of senior notes issued in 2015, of which €175m wereswapped, using cross currency swaps, to US dollar. No interest rate derivatives were entered into for the September 2019 €750m senior notes issuance or on the

€200m tap issuance of the 2015 senior notes issued during the period, which will mature in 2025.

The adjustment to senior notes classified under liabilities at fair value through profit or loss of €39.2m (30 June 2019: €29.5m; 31 December 2019: €24.9m)

represents the part adjustment to the carrying value of debt from applying fair value hedge accounting for interest rate risk. This amount is primarily offset by the fair

value adjustment on the corresponding hedge items being the underlying cross currency interest rate swaps.

ii) The Group's exposure to interest rates on financial assets and liabilities are detailed in the table below including the impact of cross currency swaps (CCS) on the

currency profile of net debt:

iii) The following table details the maturity profile of the Group's net debt:

Financial instruments recognised at fair value are analysed between those based on:

quoted prices in active markets for identical assets or liabilities (Level 1);

those involving inputs other than quoted prices included in Level 1 that are observable for the assets or liabilities, either directly (as prices) or indirectly (derived

from prices) (Level 2); and

those involving inputs for the assets or liabilities that are not based on observable market data (unobservable inputs) (Level 3).

iv) Fair value of financial instruments

Following the renewal of the revolving credit facility in June 2019 and the issuance of €750m senior notes in September 2019, the Group entered 2020 with

significant available liquidity. Since the beginning of 2020, this position was further strengthened by (a) completing a €200m tap issuance onto our 2025 notes and

(b) the exercise of the first of the two 'plus one' extension options on our revolving credit facility to further enhance the maturity date of this facility to June 2025.



7. Financial instruments (continued)

The following table sets out the fair value of financial instruments carried at fair value:

30 June 2020 30 June 2019 31 Dec. 2019

Fair Value Unaudited Unaudited Audited

Hierarchy €'m €'m €'m

Financial assets

Interest rate swaps: Level 2 105.9 79.2 82.7

Current Level 2 - 44.2 45.7

Forward foreign exchange contracts: Level 2 - 0.1 -

Current Level 2 21.7 16.9 12.0

Financial asset investments: Level 1 36.8 34.2 37.4

Level 3 3.0 5.3 4.3

Financial liabilities

Forward foreign exchange contracts: Level 2 - (0.2) -

Current Level 2 (9.5) (5.2) (12.1)

b) Fair value of financial instruments carried at amortised cost

Carrying Fair Carrying Fair Carrying Fair

Amount Value Amount Value Amount Value

30 June 2020 30 June 2020 30 June 2019 30 June 2019 31 Dec. 2019 31 Dec. 2019

Fair Value Unaudited Unaudited Unaudited Unaudited Audited Audited

Hierarchy €'m €'m €'m €'m €'m €'m

Financial liabilities

Senior notes - Public Level 2 (2,366.1) (2,464.4) (1,404.0) (1,465.6) (2,151.4) (2,217.1)

Senior notes - Private Level 2 (178.5) (195.1) (359.0) (376.9) (363.4) (372.9)

(2,544.6) (2,659.5) (1,763.0) (1,842.5) (2,514.8) (2,590.0)

c) Valuation principles

The fair value of financial assets and liabilities are determined as follows:

-

-

-

-

Net debt reconciliation

Cash at

bank and

in hand

Interest

Rate

Swaps

Overdrafts

due within

1 year*

Borrowings

due within

1 year*

Borrowings

due after

1 year*

Net

debt

Lease

liabilities* Total

€'m €'m €'m €'m €'m €'m €'m €'m

At 31 December 2018 - audited 413.8 96.2 (9.9) (3.9) (2,119.7) (1,623.5) - (1,623.5)

Cash flows (148.8) - (6.6) 3.9 (148.9) (300.4) (17.1) (317.5)

Foreign exchange adjustments 2.4 - (0.1) - (4.5) (2.2) - (2.2)

Other non-cash movements - 27.2 - (184.5) 165.2 7.9 (93.1) (85.2)

At 30 June 2019 - unaudited 267.4 123.4 (16.6) (184.5) (2,107.9) (1,918.2) (110.2) (2,028.4)

Cash flows 281.9 - 11.5 - (240.6) 52.8 (18.4) 34.4

Foreign exchange adjustments 5.6 - (0.1) - (7.5) (2.0) - (2.0)

Other non-cash movements - 5.0 - (1.1) 0.7 4.6 19.2 23.8

At 31 December 2019 - audited 554.9 128.4 (5.2) (185.6) (2,355.3) (1,862.8) (109.4) (1,972.2)

Cash flows 193.1 (45.4) 0.5 185.3 (462.3) (128.8) 17.7 (111.1)

Foreign exchange adjustments (11.9) - 0.1 - (1.2) (13.0) 2.8 (10.2)

Other non-cash movements - 22.9 - 0.3 (15.0) 8.2 0.3 8.5

At 30 June 2020 - unaudited 736.1 105.9 (4.6) - (2,833.8) (1,996.4) (88.6) (2,085.0)

* Liabilities from financing activities.

Non-current

Fair value through profit or loss

Fair value through other comprehensive income

Non-current

Non-current

There have been no transfers between levels during the current or prior financial period.

Except as defined in the following table, it is considered that the carrying amounts of financial assets and financial liabilities recognised at amortised cost in the

Condensed Consolidated Interim Financial Statements approximate their fair values.

assets and liabilities with standard terms and conditions which are traded on active liquid markets are determined with reference to quoted market prices. This

includes equity investments;

other financial assets and liabilities (excluding derivatives) are determined in accordance with generally accepted pricing models based on discounted cash flow

analysis using prices from observable current market transactions and dealer quotes for similar instruments. This includes interest rate swaps and forward foreign

exchange contracts which are determined by discounting the estimated future cash flows;

the fair values of financial instruments that are not based on observable market data (unobservable inputs) requires entity specific valuation techniques; and

derivative financial instruments are calculated using quoted prices. Where such prices are not available, a discounted cash flow analysis is performed using the

applicable yield curve for the duration of the instruments. Forward foreign exchange contracts are measured using quoted forward exchange rates and yield curves

derived from quoted interest rates adjusted for counterparty credit risk, which is calculated based on credit default swaps of the respective counterparties. Interest

rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest

rates adjusted for counterparty credit risk, which is calculated based on credit default swaps of the respective counterparties.



8. Share capital


ended ended ended

30 June 2020 30 June 2019 31 Dec. 2019


€'m €'m €'m

Authorised

280,000,000 A ordinary shares of 12.50 cent each 35.0 35.0 35.0

Allotted, called-up and fully paid (A ordinary shares of 12.50 cent each)

At beginning of the financial period 22.1 22.0 22.0

Shares issued during the financial period - - 0.1

At end of the financial period 22.1 22.0 22.1

Kerry Group plc has one class of ordinary share which carries no right to fixed income.

Shares issued during the period

The total number of shares in issue at 30 June 2020 was 176,681,437 (30 June 2019: 176,477,146; 31 December 2019: 176,514,942).

9. Business combinations

During the period, the Group completed one acquisition which is 100% owned by the Group.

Acquired Principal activity

April

10.

11.

In relation to seasonality, trading profit is lower in the first half of the year due to the nature of the food business and stronger trading in December. While revenue is

relatively evenly spread, margin has traditionally been higher in the second half of the year due to product mix and the timing of promotional activity. There is also a

material change to the levels of working capital between December and June mainly due to the seasonal nature of the dairy and crop-based businesses. Due to the

impact of the COVID-19 pandemic, the Group's performance was negatively impacted in the first half of the year. The level of impact in H2 2020 will depend on the

duration of the current COVID-19 mobility restrictions globally and the pace of recovery, as these restriction measures are eased.

As permitted by the Transparency (Directive 2004/109/EC) Regulations 2007 this Interim Report is available on www.kerrygroup.com. However, if a physical copy is

required, please contact the Corporate Affairs department.

General information

Events after the Balance Sheet date

Since the period end, the Group has proposed an interim dividend of 25.90 cent per A ordinary share (see note 5).

The provisional fair value of net assets acquired before combination were €10.6m and the Group recognised goodwill on this acquisition of €41.6m. Given that the

valuation of the fair value of assets and liabilities recently acquired is still in progress, these values are determined provisionally. The goodwill is attributable to the

expected profitability, revenue growth, future market development and assembled workforce of the acquired business and the synergies expected to arise within the

Group after the acquisition. None of the goodwill recognised is expected to be deductible for income tax purposes.

These unaudited Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2020 are not full financial statements and were not reviewed

by the auditors. These Condensed Consolidated Interim Financial Statements were approved by the Board of Directors and authorised for issue on 30 July 2020. The

figures disclosed relating to 31 December 2019 have been derived from the consolidated financial statements which were audited, received an unqualified audit report

and have been filed with the Registrar of Companies. This report should be read in conjunction with the 2019 Annual Report which was prepared in accordance with

International Financial Reporting Standards ('IFRS') and the International Financial Reporting Interpretations Committee ('IFRIC') and those parts of the Companies

Act, 2014 applicable to companies reporting under IFRS. The Group financial statements have also been prepared in accordance with IFRS adopted by the European

Union ('EU') which comprise standards and interpretations approved by the International Accounting Standards Board ('IASB'). The Group financial statements comply

with Article 4 of the EU IAS Regulation. IFRS adopted by the EU differs in certain respects from IFRS issued by the IASB. References to IFRS refer to IFRS adopted

by the EU.

These unaudited Condensed Consolidated Interim Financial Statements have been prepared on the going concern basis of accounting as set out in note 1. The

Directors report that they have satisfied themselves that the Group is a going concern, having adequate resources to continue in operational existence for the

foreseeable future. In forming this view, the Directors have reviewed the Group’s budget for a period not less than 12 months, the medium term plans as set out in the

rolling five year plan, and have taken into account the cash flow implications of the plans, including proposed capital expenditure, and compared these with the

Group’s committed borrowing facilities and projected gearing ratios.

The acquisition method of accounting has been used to consolidate the business acquired in the Group Condensed Consolidated Interim Financial Statements. Due

to the fact that this acquisition was recently completed, the revenue and results included in the Group's reported figures are not material. For the acquisitions

completed in 2019, to date, there have been no material revisions of the provisional fair value adjustments since the initial values were established.

The Group performs quantitative and qualitative assessments of each acquisition in order to determine whether it is material for the purposes of separate disclosure

under IFRS 3 'Business Combinations'. As a result, the acquisition completed during the period was not considered material to warrant detailed separate disclosure in

line with IFRS 3 requirements.

There have been no other significant events, outside of the ordinary course of business, affecting the Group since 30 June 2020.

During the period a total of 166,495 A ordinary shares each with a nominal value of 12.50 cent, were issued at nominal value per share under the Long Term Incentive

Plan and Short Term Incentive Plan.

Tecnispice, located in Guatemala, is a leading savoury taste business servicing the meat and

snacks markets incorporating spices, herbs and seasonings.

Acquisition

Tecnispice, Sociedad Anónima

The total consideration for this acquisition was €52.2m, of which €18.0m was prepaid in December 2019 and €3.3m is a deferred element. The resulting cash outflow

in the period, net of cash acquired of €0.1m for this acquisition, was €30.8m. Transaction expenses related to this acquisition were charged against trading profit in the

Group Condensed Consolidated Income Statement during the period and represented less than one percent of the total consideration.


FINANCIAL DEFINITIONS

1. Revenue

Volume performance

Revenue Reconciliation

H1 2020

Volume

performance Price

Transaction

currency

Acquisitions/

Disposals

Translation

currency

Reported

revenue

performance

Taste & Nutrition (5.6%) 0.1% - 1.4% 0.1% (4.0%)

Consumer Foods (7.8%) 1.7% (0.1%) - - (6.2%)

Group (6.0%) 0.4% - 1.2% 0.1% (4.3%)

H1 2019

Taste & Nutrition 3.8% - - 5.9% 3.3% 13.0%

Consumer Foods 0.6% (0.3%) - - 0.3% 0.6%

Group 3.3% - - 4.7% 2.7% 10.7%

2. EBITDA

H1 2020 H1 2019

€'m €'m

213.1 239.4

(0.1) (0.2)

37.4 39.1

31.8 33.0

- 42.3

33.7 29.3

Depreciation (net of capital grant amortisation) 101.2 94.0

EBITDA 417.1 476.9

3. Trading Profit

H1 2020 H1 2019

€'m €'m

Operating profit 282.2 311.3

Intangible asset amortisation 33.7 29.3

Non-trading items - 42.3


4. Trading Margin

H1 2020 H1 2019

€'m €'m


Revenue 3,414.0 3,568.9

Trading margin 9.3% 10.7%

5. Operating Profit

H1 2020 H1 2019

€'m €'m

Profit before taxation 244.9 272.4

Finance income (0.1) (0.2)

Finance costs 37.4 39.1

Operating profit 282.2 311.3

Profit after taxation attributable to owners of the parent

Volume performance is an important metric as it is seen as the key driver of top-line business improvement. This is used as the key revenue metric, as

Kerry operates a pass-through pricing model with its customers to cater for raw material price fluctuations. Pricing therefore impacts like-for-like revenue

performance positively or negatively depending on whether raw material prices move up or down. A full reconciliation to reported revenue performance is

detailed in the revenue reconciliation below.

This represents the sales performance year-on-year, excluding pass-through pricing on raw material costs, currency impacts, acquisitions (net of disposals)

and rationalisation volumes.

EBITDA represents profit before finance income and costs, income taxes, depreciation (net of capital grant amortisation), intangible asset amortisation and

non-trading items.

Finance income

Finance costs

Trading profit refers to the operating profit generated by the businesses before intangible asset amortisation and gains or losses generated from non-

trading items. Trading profit represents operating profit before specific items that are not reflective of underlying trading performance and therefore hinder

comparison of the trading performance of the Group’s businesses, either year-on-year or with other businesses.

Trading margin represents trading profit, expressed as a percentage of revenue.

Operating profit is profit before income taxes, finance income and finance costs.

Intangible asset amortisation

Income taxes

Non-trading items


6. Adjusted Earnings Per Share and Performance in Adjusted Earnings Per Share on a Constant Currency Basis

H1 2020 H1 2019

EPS EPS

cent cent

Basic earnings per share 120.4 135.5


Non-trading items (net of related tax) - 19.3

Adjusted earnings per share 132.1 164.1

Impact of retranslating prior period adjusted earnings per share at current period average exchange rates - 0.6

Adjusted earnings per share on a constant currency basis 132.1 164.7

Performance in adjusted earnings per share on a constant currency basis (19.8%) 8.4%

7. Free Cash Flow

H1 2020 H1 2019

€'m €'m

131.5 243.3

81.5 56.2

25.3 29.3

(111.4) (123.8)

Payment of lease liabilities (17.7) (17.1)

- 6.4

- -

(2.2) 0.5


8. Cash Conversion

Cash conversion is defined as free cash flow, expressed as a percentage of adjusted earnings after tax.

H1 2020 H1 2019

€'m €'m


Profit after taxation attributable to owners of the parent 213.1 239.4


Non-trading items (net of related tax) - 34.2

Adjusted earnings after tax 233.7 290.0

Cash Conversion 46% 67%

9. Financial Ratios

H1 2020 H1 2019

Covenant Times Times

Net debt: EBITDA Maximum 3.5 2.0 1.9

EBITDA: Net interest Minimum 4.0 12.8 14.4

The Net debt: EBITDA and EBITDA: Net interest ratios disclosed are calculated in accordance with lenders' facility agreements using an adjusted EBITDA,

adjusted finance costs (net of finance income) and an adjusted net debt value to adjust for the impact of non-trading items, acquisitions (net of disposals),

deferred payments in relation to acquisitions and lease liabilities. As outlined on page 185 of the 2019 Annual Report, these ratios are calculated in

accordance with lenders' facility agreements and these agreements specifically require these adjustments in the calculation.

Net cash from operating activities

The performance in adjusted earnings per share on a constant currency basis is provided as it is considered more reflective of the Group’s underlying

trading performance. Adjusted earnings is profit after taxation attributable to owners of the parent before brand related intangible asset amortisation and

non-trading items (net of related tax). These items are excluded in order to assist in the understanding of underlying earnings. A full reconciliation of

adjusted earnings per share to basic earnings per share is provided below. Constant currency eliminates the translational effect that arises from changes in

foreign currency year-on-year. The performance in adjusted earnings per share on a constant currency basis is calculated by comparing current year

adjusted earnings per share to the prior year adjusted earnings per share retranslated at current year average exchange rates.

Free cash flow is trading profit plus depreciation, movement in average working capital, capital expenditure, payment of lease liabilities, pension costs less

pension expense, finance costs paid (net) and income taxes paid.

Free cash flow is seen as an important indicator of the strength and quality of the business and of the availability to the Group of funds for reinvestment or

for return to shareholders. Movement in average working capital is used when calculating free cash flow as management believes this provides a more

accurate measure of the increase or decrease in working capital needed to support the business over the course of the period rather than at two distinct

points in time and more accurately reflects fluctuations caused by seasonality and other timing factors. Average working capital is the sum of each month's

working capital over 12 months. Below is a reconciliation of free cash flow to the nearest IFRS measure, which is 'Net cash from operating activities'.

Expenditure on acquisition integration and restructuring costs

Capital grants received

Exchange translation adjustment

Purchase of assets

Proceeds from the sale of property, plant and equipment

Difference between movement in monthly average working capital and movement in the period end working capital


10. Net Debt

11. Average Capital Employed

H1 2020 2019 H1 2019 2018 H1 2018

€'m €'m €'m €'m €'m

Shareholders' equity 4,508.5 4,562.2 4,186.5 4,034.4 3,773.6

Goodwill amortised (pre conversion to IFRS) 527.8 527.8 527.8 527.8 527.8

Adjusted equity 5,036.3 5,090.0 4,714.3 4,562.2 4,301.4

Net debt 1,996.4 1,862.8 1,918.2 1,623.5 1,403.3

Total 7,032.7 6,952.8 6,632.5 6,185.7 5,704.7

Average capital employed 6,872.7 6,590.3 6,174.3

12. Return on Average Capital Employed (ROACE)

12 months to 12 months to

H1 2020 H1 2019 FY 2019

€'m €'m €'m


Non-trading items (net of related tax) 57.5 73.9 91.7

Brand related intangible asset amortisation 42.0 32.5 37.8

Net finance costs 80.0 72.1 81.6

Adjusted profit 719.7 731.7 777.6

Average capital employed 6,872.7 6,174.3 6,590.3

Return on average capital employed 10.5% 11.9% 11.8%

Average capital employed is calculated by taking an average of the shareholders' equity and net debt over the last three reported balance sheets plus an

additional €527.8m relating to goodwill written off to reserves pre conversion to IFRS.

This measure is defined as profit after taxation attributable to owners of the parent before non-trading items (net of related tax), brand related intangible

asset amortisation and finance income and costs expressed as a percentage of average capital employed.

Net debt comprises borrowings and overdrafts, interest rate derivative financial instruments and cash at bank and in hand. See full reconciliation of net debt

in note 7 of these Condensed Consolidated Interim Financial Statements.


KERRY GROUPPrince’s Street, Tralee, Co. Kerry, V92 EH11, Ireland.T: +353 66 718 2000

www.kerrygroup.com

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