Good morning and welcome to our Q1 2025 trading update call. I'm joined on the call by our CEO, Edmond Scanlon, and our CFO, Marguerite Larkin. As usual, Edmond and Marguerite will take you through our presentation, and we will then open the lines up for your questions. Before we begin, please note the usual disclaimer on our Q1 presentation regarding forward-looking statements. I will now hand over to Edmond.
Thanks, William, and good morning, everyone, and thank you for joining our call. Moving to slide four and my overview comments for Q1. We delivered a good overall performance in the first quarter, particularly given market conditions. Beginning with revenue, we delivered Q1 volume growth of 3.1%, which represented another strong end-market outperformance. This was driven by good volume growth in the Americas and Latin America, with Europe similar to the prior year. From a channel perspective, Foods ervice delivered another good performance driven by new menu innovations, LTOs, and solutions to reduce operational cost and complexity, with growth in the retail channel supported by increased nutritional enhancement activity with our customers.
Across our end-use markets, growth was led by beverage, bakery, and snacks, driven by our savory taste and Tastesense and salt and sugar reduction technologies, as well as integrated solutions incorporating our botanicals, natural extracts, and enzymes. Moving to margins, we delivered strong EBITDA margin expansion of 90 basis points in the first quarter, primarily driven by accelerated operational excellence. We continue to see good margin expansion opportunity as we look out across the year. On guidance, which I'll touch on in a little bit more detail later on, we remain on track to deliver our full-year guidance and are maintaining our range of 7-11% constant currency earnings per share growth in 2025. I'll now hand you over to Marguerite for the performance overview.
Thanks, Edmond, and good morning, everyone. Moving to slide five and the business review. Volume growth in Q1 was 3.1%, which was led by a good performance across Foods ervice and some of our emerging markets in particular. Pricing for the period was up 0.2%, reflecting overall input cost inflation. On the EBITDA margins, we delivered strong continuing business margin progression of 90 basis points, primarily driven by cost efficiencies, contribution from acquisitions, operating leverage, and portfolio mix, as we continue to make good progress towards our targets. Looking at our end markets, despite challenging market conditions in places, we delivered strong growth in beverage, bakery, and snacks, which remain highly dynamic markets. In Foods ervice, we had growth of 4.7%, with good growth in retail, and volumes in emerging markets increased by 6.4% across the period, led by a strong performance in Southeast Asia.
Turning to slide six now and our performance by region. In the Americas, we delivered volume growth of 3.5% in the period, with good performances in both North America and Latin America. Within North America, we had good growth in bakery, snacks, and dairy, with continued customer focus on improving the nutritional profiles of their products. Growth in the retail channel was supported by renovation activity across both customer and retailer brands, with growth in the Foods ervice channel led by quick service and fast casual restaurants. Within Latin America, we had strong growth in Brazil and Central America, and most notably within the snacks and meals end markets in particular. In Europe, overall volumes were similar to the prior year at 0.1%.
Good growth was achieved in beverage through Kerry's integrated taste technologies and ProActive Health ingredients, with growth in bakery led by performance in texture systems, with softer dynamics within the meals and dairy markets. In Foods ervice, we delivered good growth led by quick service restaurants and coffee chains, while retail channel volumes reflected subdued demand. In APMEA, we delivered volume growth of 5.1%, primarily driven by strong growth in Southeast Asia, the Middle East, and Africa, with volumes in China remaining challenged. Across our end markets, growth was led by beverage, bakery, and snacks. In Foods ervice, we delivered strong volume growth with leading regional coffee chains and quick service restaurants, while performance in the retail channel was driven by growth in authentic savory taste profiles with local customers.
Turning to our Q1 revenue bridge on slide seven, reported revenue from continuing operations was up 6.3% in the first quarter. The main driver of this was volume growth of 3.1%. Pricing was up 0.2%, transaction currency favorable 0.5%, with translation currency favorable 1.7%. On acquisitions and disposals, net 0.8% revenue increase was primarily driven by the lactase enzymes business we acquired last year. Finally, to cover off a number of other matters on slide eight. Firstly, on tariffs, we have an extensive global manufacturing footprint of 124 facilities. This, combined with our well-established local supply network, enables us to predominantly source and manufacture within the markets we serve. We are continuing to monitor the ongoing tariff developments, and we are working with our customers to manage the implications of these, including mitigating options such as deploying alternative sources for inputs where feasible or product reformulation options.
We will manage residual on-cost via our well-established pricing model. On the input costs, while we are seeing variation within our input cost basket, we are currently looking at low single-digit input cost inflation and therefore limited overall pricing in the full year. We will update you as we progress through the year. On currency, as you will be aware, we have seen significant movements versus the US dollar in recent months. Based on prevailing rates, we are forecasting a translation currency headwind of 3-4% in the full year. We have a strong balance sheet with net debt at the end of the period of EUR 1.9 billion, reflecting cash generation, capital investment, and share buyback. Aligned to our capital allocation framework, we will be initiating a further EUR 300 million share buyback program, which will commence post the completion of the current program.
To summarize, we delivered a good overall financial performance in the quarter with good volume growth along with strong margin expansion. With that, I'll pass you back to Edmond.
Thanks, Marguerite. Finally, before we move to Q&A, I'd like to close off with our full-year outlook. Against the backdrop of the current macroeconomic environment, with the continually evolving tariff and global trade landscape, Kerry's extensive local footprint, global sourcing network, and customer-centric business model positions us well to navigate through this period. When recognizing the heightened level of market uncertainty, we remain well-positioned for good volume growth and strong margin expansion in the year as we continue to support our customers as an innovation and renovation partner. We are maintaining our full-year constant currency earnings per share guidance of 7-11% growth. With that, I'll hand you back to the operator, and we look forward to taking your questions.
We're now opening the floor for a question-and-answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Your first question comes from the line of Alex Sloane of Barclays. Your line is now open.
Yeah, hi. Morning all. Thanks for taking the questions, two from me, please. Just firstly, within the overall guidance you talked to, being positioned for good volume growth, I think previously you'd indicated you were aiming for in line to better volumes in 2025 versus 2024. Is that still a reasonable base case? That would be the first one. The second one, just in North America, I mean, several of your peers, perhaps more focused on flavors, have called out this region as a weak spot in Q1, referencing some customers slowing orders in the face of weaker macro backdrop. Your performance doesn't seem to reflect this with decent volume growth, obviously helped by the innovation agenda. Could you talk to the performance in April in North America and your expectations for the full year for that region? Thanks.
Good morning, Alex, and I'll kick off here. Look, just in terms of the outlook for the full year, there's no change to the parameters around our guidance for the full year. Looking specifically in volumes, our Q1 was in line with expectations, and we still believe we can achieve similar or better volume growth for 2025 over 2024. With respect to North America, look, for us, the reality is that the North America market is a highly dynamic market. We had a strong Q1 with volume growth around 3% in North America, which we believe is an industry-leading volume performance in the quarter. Look, visibility is lower in general, and clearly there is a heightened level of volatility, and there is quite a bit of variability at a customer level.
I would remind you just to think back on our investor conference back last October, where we talked about that renovation and reformulation opportunity. The reality is that we call that right in that the renovation opportunity, that penetration opportunity is the biggest driver of growth for us right now. We are winning market share through these reformulation opportunities, be it salt or sugar reformulation or reformulating for availability of raw materials, be it citrus or cocoa. There is nothing really notable to call out, let's say, April versus March or April versus Q1.
Thanks very much.
Your next question comes from the line of Ed Hockin of JPMorgan. Your line is now open.
Hi there. Thank you very much for taking my questions. My first one is following up on the volumes. I think before you'd pointed to end markets growing just above 0%, 0.5%. Obviously, we see the reporting of global food companies, of some of the Foods ervice operators and such. What's your best view of how the end markets volumes growth was in Q1? My second question is on, to your point on reformulation, how do you see the brief pipeline ahead, the innovation pipeline? Are there any KPIs or data points that you can point to on whether this innovation pipeline is bigger than it has been in past years, whether reformulation activity is picking up versus past years? That would be helpful. Thank you.
Hi, Ed. Good morning. Maybe taking the second part of your question first. For sure, we've seen an uptick in reformulation opportunities, especially in North America. This is something we flagged at our investor day back last October. We talked about it at our full-year results in February, and it has ticked on again since February. Quite a strong innovation pipeline, primarily driven by reformulation, either reformulation for nutritional reasons or reformulation as it relates to raw material availability and raw material cost and raw material price. I'm referring back to those examples of citrus and cocoa that I might have touched on previously. In terms of overall market growth, I think it's fair to say that visibility is a little bit less than it typically has been.
We have not really changed what our perspective is on consumption growth, somewhere around that half a percent level or maybe a little bit less. I guess that kind of overall volume growth kind of perspective from a market perspective does not really tell the full story as such. There is a lot of moving parts. We have seen good growth in retailer brands in many geographies. We have seen some positivity around local and emerging brands. I guess renovation really is the big driver, and we do see it as a significant opportunity for us. It is a key driver of growth for us so far this year, and we believe that will continue throughout the course of the year. Specifically at a customer level, we are very much focused on supporting our customers to enhance the nutritional profiles of the products while also addressing cost challenges.
Within the Foods ervice channel, the needs for supporting customers, frankly, continue to grow. Foods ervice customers are aggressively out there looking for ways to drive excitement in their menu, to drive novelties across their menu, aggressively trying to find ways to get customers into their stores. LTOs are running at more than 50% of where they were back in 2019. On the wellness agenda or the wellness innovation side, there are opportunities to address a variety of customer needs, be it around functionality in beverage and specific, let's say, functionality around cognitive health, digestive health, gut health, or women's health. What is crucial for us right now is that we are managing resources effectively to allocate them to the areas where we see the best potential.
Thank you.
Next question comes from the line of Fulvio Cazzol of Berenberg. Your line is now open.
Yes, good morning, and thank you for taking my questions. My first one is, in terms of any sort of volume acceleration from Q1, where could this become more visible in the coming quarters? Should we expect Europe to recover a little bit from the flattish growth that you achieved in Q1? Also, across the channels, do you expect slightly better growth in Foods ervice as you cycle weaker comps, or could the retail business also improve? That is my first question on the volume developments. My second question is on the potential risk of a recession. There seems to be more and more chatter about a recession in the U.S. Can you remind us on your experience on the consumer trends back in 2009 and the risk you would see to your business in the event of a recession later in the year, please?
Thank you.
Hi, Fulvio. Good morning. Look, I think we're being very pragmatic here. I mean, clearly, there's more variability in general, which does make it harder to predict the overall market dynamics. Like we said in February, we see overall volume similar to last year, and we haven't really changed our view on that. Our pipeline is progressing, especially in North America. We see the APMEA region having the potential to progress in the second half. While Europe, we haven't changed our overall perspectives in Europe. We continue to see that relatively flattish throughout the course of the year. Taking that into account and on all the moving pieces, we're still looking at volumes being similar or better than last year. From a channel perspective, we're looking at continued good growth in the Foods ervice channel, with Foods ervice outperforming retail in the year.
The level of that outperformance, we just have to see how that progresses throughout the year. In terms of your other question around consumer dynamics and what have you, the reality is that the consumers continue to be very value-conscious, and they are trading down in places. We have seen private label take on market share, and we are very well positioned to enable those customers within the private label space to develop products that are pitched at the right level for those consumers. We've also seen an uptick in terms of innovation as it relates to more value options or value price points to focus on those consumers. I guess that's pretty much in line with what we have seen at any time in our history where there's been an element of trading down.
This is something that we see. We believe we're well positioned to be able to help customers in this environment. Frankly speaking, customers need more help in this environment and lean into their partners that can help them even more in this type of environment. We have to see how things play out, but we feel we're well positioned overall.
Thank you. Very helpful.
Before we move on to our next question, if you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Your next question comes from the line of Cathal Kenny of Davy Research. Your line is now open.
Good morning. Two questions from my side. Firstly, on APMEA, not a good performance there despite challenges in China, which have persisted now for a couple of quarters. Just interested in your view in terms of the outlook for that region, in particular China, as we get into the second half of 2025. Second question is just on margin. Marguerite, perhaps you can remind us of the cadence of margin and the levers for 2025 as well, please. They're my two questions.
Thanks, Cathal. Good morning. In terms of the APMEA region, Middle East Africa continues to perform well, and we also see Southeast Asia progressing nicely as well. On China specifically, we haven't seen a notable change per se in the overall market conditions. We had a softer performance in the quarter, and this was in line with expectations. We did say back in February that we did expect volumes to progress in H2, and we continue to have that perspective. Progression here from after H1.
Excuse me, good morning, Cathal. Just on the margin question, firstly, we're pleased with the strong margin expansion of 90 basis points in the quarter. There is no change to what we would have said at the time of our full-year results. We expect to deliver 50 basis points or greater margin expansion in 2025. As we would have said at the time, that will be more first half based versus the second half. That is purely due to the phasing of the benefits coming through earlier than anticipated from the Accelerate program. We will continue to see margin expansion as well as efficiencies from operating leverage and mix. As we would have said, we're on track to deliver another year of good margin expansion in 2025.
Thank you. Very helpful.
Your next question comes from the line of Patrick Higgins of Goodbody. Your line is now open.
Thanks. Good morning, everyone. Most of my questions have been answered, but just one on, I guess, competitive intensity across your customer base. It seemed like there has been a ramp-up in terms of promo activity and innovation, not just renovation, but at the start of this year. Just interested to see how that's kind of progressed through the quarter and clearly post-April as well, given the tariff situation.
Yeah. I mean, we've seen a pickup in innovation for planned launches in 2025, Patrick. We are seeing this right across both CPG, private label, and Foods ervice. The level of competition for share of consumer wallet is fierce. It feels like if one doesn't innovate right now, it's hard for our customers to protect and grow their market shares. Look, for us, what we're seeing is that the renovation and reformulation opportunities are driving very good activity for us. We have seen an uptick in our pipeline. I feel we're very well positioned to give the opportunity to our customers to capitalize on the opportunities that they see out there.
We have seen scenarios with customers that have not really been very active in the past around developing new products or reformulating existing products in areas like meals, while that is something we have seen an uptick in, especially in North America. I think within North America specifically, we are seeing activity from customers that, frankly, we have not seen in quite some time. Let us see how that plays out for the remainder of the year or next year, but it is an overall positive development from our perspective.
Okay. Thank you.
Our final question for today comes from the line of Nicola Tang of BNP Paribas. Your line is now open.
Hi, everyone. Thanks for taking the questions. First, just to come back a bit on Europe, I was wondering if you could talk a little bit more around what you're seeing looking forward here, particularly on the retail side, which was a little bit weak. Secondly, just on the buyback, I think announcing the new program today, I think that had been broadly expected, but perhaps the timing of the announcement was a bit earlier. Could you just share your thoughts around sort of timing? Also, this is your fourth buyback, so can we assume that this is really a sort of core part of your capital allocation priorities going forward? Thanks.
Thanks, Nicola. Just maybe to take your question first, and maybe just to put it out there, when one is looking at our performance in Europe, maybe versus peers, most of our peers include Middle East and Africa within their Europe region, whereas our Europe region is exclusively a developed, pretty much almost exclusively a developed Europe view. Maybe just to give some color on our performance within the region, we had good growth in Foods ervice while the volumes in the retail channel were slightly back. That is primarily driven by softer dynamics we saw on the meals and dairy end-use markets, where, frankly, we just saw less innovation in those categories. On the bright side, we did see good activity in beverage and bakery. In the Foods ervice channel, like I said, we saw good growth there.
I guess from an overall Europe expectation standpoint, like we said back in February, we do expect Europe to have limited growth this year with overall growth for the business, for the company being led by the Americas and APMEA.
Nicola, just a couple of comments on your share buyback question. Firstly, we expect to complete the current share buyback by the end of the second quarter. Just given our good cash generation, the strong balance sheet, and the current market backdrop, we felt it would be helpful to announce our intention to have a further buyback, and that will commence sometime just after the completion of the current share buyback program. The share buyback that we've announced is very much consistent with our capital allocation strategy, and it enables us to retain flexibility as to our capital allocation priorities. It provides that flexibility between returning cash through the share buyback and flexibility for acquisitions, which we want to retain given the synergistic platform we have to create value. Very much in line with our capital allocation framework.
Thank you.
We have a couple of additional questions. First, coming from the line of Charles Bentley of Jefferies, your line is now open.
Thanks so much for taking my questions. Just a couple. When you talked about some of the kind of raw material-driven reformulation that you're seeing from customers around citrus and cocoa, I mean, I guess if I look at citrus prices, they've essentially halved on a one-year view. I mean, still a very elevated level, but just I guess how do you think about customers' stickiness to some of these shifts? Do you think they are basically reactionary, or do you think that the kind of, I guess, taste profile they're getting and the cost profile they're getting, the reliability of the cost profile they're getting and such to kind of retain that business long-term? Secondly, I guess from a customer perspective, I guess there's a tension between defending growth and defending margin.
How much you focus on A&P investment or potentially cut it, and maybe we're seeing kind of different responses from some of the European clients and the US clients. I guess how do you kind of see that evolving, and is that why we're seeing such a split in the growth dynamics between the regions? Do you think maybe more customers kind of go to try to defend margin, maybe look to cut A&P? Thank you.
Thanks, Charles. Maybe just kicking off on the raw material side. I mean, I guess the challenge on citrus, Charles, is that this issue around citrus has been there for quite some time, and it's more around, frankly, availability than price at this moment in time. I think any changes that are going to be made, any reformulations that are going to be made on the citrus side and on the cocoa side as well. What we've seen in the past when these types of changes happen is that they do not revert back. They do stay in place. Typically, customers are very, very slow to reformulate. They are going to be very, I would say, conscious on the taste profile differences, etc., etc. Even more so in this environment, nobody wants to be losing market share, and nobody wants to be losing consumers.
They are typically very cautious, but when they do make a change, those changes stick. I guess in terms of your second question, I mean, without getting into the details of A&P expenditures by customers, we are seeing a very significant level of variability across regions where customers in Western Europe are just not seeing that level of innovation, that level of just competitive intensity that we are seeing in North America. We are seeing North America being very dynamic. We are seeing private label being very dynamic. We are seeing new products being launched in private label, frankly, on a monthly basis. We are seeing more fixtures within certain categories being allocated towards private label. We are also seeing emerging brands getting opportunities inside major retailers to show their products.
We are seeing a situation right now where the level of dynamism in North America is at a significantly more elevated level versus Europe. I also think that from what we've seen, that level of elevated innovation and renovation is at a higher point today than it even was back in February or back even on October last year when we called out that innovation and renovation opportunity. A lot of variability also down at a customer level where different customers are taking different approaches. At a category level, we're seeing beverage continuing to be quite dynamic, especially in North America with new launches of functional drinks, nutritional drinks, drinks with elevated protein levels that require masking from Kerry and sugar reduction from Kerry.
On the snack side and on the bakery side, we're seeing a significant level of activity around salt reduction, new taste experiences. We are very well positioned to help customers in those areas as well. Quite a bit of variability exists both from a geographic perspective, an end-use market perspective, and also an individual customer perspective.
Great. That's very helpful. If I could just quickly follow up, I mean, you talked about the renovation piece for a long period of time. I guess, do you think it kind of applies? Is it broad-based in terms of there's kind of, I guess, a volume kicker to that in terms of technology? I.e., you're getting both a salt reduction or a sugar reduction piece or some form of functionality, masking or whatever, as well as just a pure taste piece? Is that kind of how we should be thinking about it?
When we talked about this back at our investor day at Charles, we sized this opportunity at about $15 billion. Incremental volume growth opportunity for the entire industry. The reason that we sized it at that scale is because when customers actually look at salt or sugar within their formulations, just take those two, for example. Obviously, colors now is another one that is starting to bubble up. There is no one-for-one replacement for an artificial color or for sugar or salt in a formulation. The customer actually has to blow open their formulations, and it gives us the opportunity to work with the complete formulation around taste, texture, and functionality, and also in the case of salt, food protection, preservation.
That is why we are sounding confident about that penetration opportunity and have been since last October, because from a pragmatic standpoint, when you engage with customers around these formulations, there is a lot more opportunity there, and there is a lot bigger part of the formula for us to go at. Frankly, we target that opportunity to grow market share for ourselves. I think you are seeing that here over the course of the last couple of quarters, especially in North America.
Great. Very helpful. Thank you.
Our last question comes from the line of Charles Eden of UBS. Your line is now open.
Hi. Morning, Edmond, Marguerite, morning William. I have a more medium-term question on the taste enzymes business. Can you talk through some of the benefits or early wins that this has driven since it's been part of the Kerry portfolio? Linked to this, biotech is clearly a priority for Kerry, and I assume this won't be the last acquisition in this space we see in the coming years. Could you talk a little bit more about what other areas you'd like to add to within your biotech toolkit? Thanks.
Thanks, Charles. I mean, a few areas maybe on the second part of your question first. The areas that we have identified to add to are probiotics, enzymes, food protection, preservation, and also yeast fermentation. We already have foundations across each of those four platforms, but we will continue to look out there for opportunities to add capability right across the biofermentation space, building on those four platforms. Maybe let's see, maybe there might be another platform we add, but for right now, it's those four platforms that I just called out. In terms of sorry, what was the first part of your question, Charles?
Yeah, just in terms of what the biotech enzymes.
Specifically on that acquisition, I guess what we're with any acquisition, but with that one specifically, what's really important to us is that we're able to combine technologies that we have within Kerry with the technology that we acquired through the acquisition to create incremental benefits for the customer. An example of that specifically on lactase is that we've been able to combine the lactase enzyme technology with taste modulation, specifically sugar modulation technology that already existed within Kerry. By combining those technologies together, we're able to give a reduced sugar option to customers specifically within the dairy category that maintains the right level of taste that is consumer preferred.
It is a perfect example for us where we have been able to create incremental benefit with the customer that we could not do on our own as Kerry or that the previous owner of that lactase business could not do on their own. It was the combination of both technologies coming together that has created that growth opportunity for us. That for us is really the cracking the code of creating incremental benefit for customers when we combine technologies together. It is something we are frankly very excited about, and I think will continue to give us good growth opportunities here in the future.
Appreciate it. Thanks, Edmond.
As we have no further questions, I would now like to hand it back to Kerry for any closing remarks.
All we want to say is thank you for everyone for joining us on the call today. If you have any further follow-ups, please do reach out to the IR team. Wish you all a very good day. Thank you.