Good morning, and thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kerry Group third quarter 2026 results webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. To withdraw your question, simply press star one again. I would now like to turn the call over to William Lynch, Head of Investor Relations. Please go ahead.
Thank you, operator. Good morning and welcome to our Q3 2026 results update call. I am joined on the call by our CEO, Edmond Scanlon, and our CFO, Marguerite Larkin. As usual, Edmond will begin with his overview comments before handing over to Marguerite for the Q3 performance review, and Edmond will close out before opening the lines for questions. Before we begin, please take note of the disclaimer regarding forward-looking statements. Now over to Edmond.
Thanks, William, and good morning, everyone. Beginning with my overview comments on slide four. We are pleased to report a strong performance in the period, reflecting a further step-up in volume growth across all three regions in the third quarter, combined with continued strong margin expansion. Firstly, on volume growth.
The 4.1% volume growth we achieved in the third quarter reflects continued strong growth in the Americas, a further step-up in APMEA, and good growth in Europe. Growth in the period was led by good innovation activity in the foodservice channel and continued product renovation activity in the retail channel. Growth was broad-based across a number of end markets, driven by our extensive range of our taste in biotechnology-enabled solutions, including savory tastes, Tastesense™ Salt and sugar reduction technologies, botanicals, natural extracts, taste solutions for high-protein applications, bio fermentation-based preservation systems, and enzymes. We are pleased with the good volume growth of 4.1% in the third quarter, and we are expecting to deliver a similar performance in Q4. Moving to EBITDA margins.
We delivered 200 basis points of margin expansion over the past two years, and we are on track to deliver a further 50 basis points of margin expansion in 2026. We recently updated our EBITDA margin target to be in the 20%-21% range by 2030. Good progress on the top line as well as margin. Before I hand you over to Marguerite to bring you through the results in more detail, I would like to give you an overview of our Investor Day on slide five, which we hosted in Beloit, Wisconsin, a couple of weeks ago, where we provided further insight into our leading market positions and growth plans aligned to our newly announced 2030 targets. The theme for the day was solving for a complex world, and my three key messages were as follows.
Firstly, we are operating in a highly dynamic market, and despite the current market backdrop, there are significant growth opportunities across both innovation and renovation. We see these markets being particularly attractive for Kerry. Second, we have the industry's most relevant technology portfolio with our taste and biotechnology-enabled solutions. This, combined with our problem-solving business model, means we are ideally positioned to meet the ever-increasing demands of our customers in today's more complex world. Thirdly, we are in execution mode, delivering on our strategy and delivering on our financial performance. We held a number of interactive breakout sessions, the first being accelerating innovation through biotechnology, where we showcased a number of our latest innovations along with our next-generation innovation in five specific areas, each with a potential opportunity to be over EUR 50 million for Kerry.
The next breakout was on renovation, which has been a key underpin of our consistent end market outperformance. We touched on this in the past on areas like sugar and salt reduction, which have contributed to significant growth for Kerry in areas like snacks. We see tremendous opportunity right across all food and beverage categories for healthier, cleaner label, and better-tasting products. While the evolving regulatory landscape is an important factor, renovation activity is being driven first and foremost by the consumer, and this with all customer types. It will support significant growth across our addressable markets in the coming years. Moving to the taste breakout. We have a broad taste technology toolbox, but what really sets us apart is how we deploy flavors, food science, biotechnology, and our application expertise to deliver next-generation solutions.
Like our natural fermentation-based taste enhancement system, our taste and sugar and salt reduction technologies, and our industry-leading protein masking technology. Next to food service, which for Kerry is a structural tailwind, thanks to our dedicated business model. This has supported our consistent long-term track record of mid-single-digit plus volume growth. We highlighted a number of examples of how we are working with customers right across the food service channel, from scaling with emerging players to transforming established chains. We have a unique positioning in food service, which we feel gives us a sustainable right to win. Finally, onto the digital transformation breakout, where we shared how digital and AI are enabling our business strategy and financial delivery. Having piloted and proven several initiatives across the organization, we are now scaling across commercial, R&D, supply chain, manufacturing, and business functions.
It is about accelerating value delivery, and it is about solving real business challenges better, faster, more efficiently. If you would like to hear more, you will find the materials from the day on our website. For now, I will hand you over to Marguerite for more details on the Q3 performance.
Thanks, Edmond, and good morning, everyone. Moving now to the summary financial overview and key financial metrics on slide six. Revenue volume growth for the first nine months of the year was 3.6%, increasing to 4.1% in the third quarter, representing a significant end market outperformance. On the EBITDA margins, we delivered strong margin expansion of 50 basis points in the period. This was driven primarily by Accelerate 2.0, combined with benefits from operating leverage and product mix, net price, and the positive impact from disposals, while also reflecting increased investment in R&D and an adverse foreign currency translation impact. Turning to our business performance review on slide seven. Firstly, volume growth, as I mentioned in the period, was well ahead of our end markets, which remained broadly similar year on year.
Pricing was -0.6% for the period and +0.2% in the third quarter, with deflation in the first half turning to an inflation in the quarter. Volume growth by end-use market was led by snacks, meat, dairy, and beverage, driven by Kerry's leading capabilities across savory taste and Tastesense Salt and sugar reduction technologies, integrated solutions incorporating Kerry's botanicals and natural extracts, enzymes, food protection, and bio fermentation-based preservation systems. By channel, foodservice delivered strong volume growth of 5% in the period, driven by a range of new signature taste menu innovations, seasonal product launches, and solutions to address back of house complexity. Growth in the retail channel was supported by continued product renovation activity and innovation in high growth areas across global, regional, and local customers.
Business volumes in emerging markets increased by 4.9% in the period, reflecting a strong performance in the Middle East and Africa. Turning to performance by region on slide eight. In the Americas, we delivered strong volume growth of 4% year to date and 4.6% in the third quarter. Within North America, we had continued strong growth in snacks through savory taste and Tastesense Salt reduction, with growth in beverage and meat supported by strong performance across a range of Kerry technologies. Growth by channel was led by foodservice, with established chains and emerging players scaling up their businesses. In retail, growth was supported by renovation activity across global customers emerging and retail brands. Within LATAM, strong growth was achieved in Mexico in snacks and beverage end-use markets. Moving to Europe, volumes were up 0.7% year to date and 1.3% in the third quarter.
Good growth was achieved in beverage through Kerry's Taste sense technologies, in snacks through integrated savory taste, and in dairy through protein masking, partially offset by meals and bakery, where category volumes remained challenged. By channel, both retail and foodservice had growth in the period, broadly similar to the overall region. Finally, in APMEA, year to date volume growth was 5.2% and 5.7% in the third quarter. Performance in the period was driven by strong growth in the Middle East and Africa, a good performance in South Asia Pacific, and growth in China. Growth was led by dairy, meat, snacks, and bakery end-use markets. By channel, retail growth was supported by Kerry's range of local authentic taste profiles, with growth and foodservice led by performance with leading global and regional quick service restaurants.
Turning to the Q3 year-to-date reported revenue bridge on slide nine and taking each of the constituent parts in turn. Beginning with volume, we delivered growth of 3.6%, as mentioned. Pricing was 0.6% lower, reflecting overall input cost deflation in the period. Transaction currency was adverse 0.2%, and organic growth in the period was partially offset by an adverse translation currency impact of 2.5% given the significant movement in the U.S. dollar versus the euro, recognizing that it is expected to be favorable in the last quarter. Disposals net of acquisitions had a revenue impact of 0.9%, which are enabling the execution of our Accelerate 2.0 footprint optimization strategy and supporting the margin expansion, as referenced earlier.
Finally, moving to other matters on slide 10. Net debt at the end of the period was EUR 2.4 billion and reflects cash generation, the share buyback program, and an increase in capital investment in the period. On share buybacks, we expect to complete the current program before the end of this year, and we intend to initiate a new program of up to EUR 300 million when the existing program completes. On Accelerate 2.0, we are making good progress as planned with footprint optimization in both North America and Europe, and the scaling up of our digital initiatives, which we highlighted at our Investor Day and as Edmond referenced. Input costs turned to inflation in the quarter, with the overall forecast remaining slightly deflationary for the full year.
On currency, based on prevailing rates, we are forecasting a translation currency headwind of circa 1% on earnings per share in the full year. To summarize, we delivered a strong financial performance in the period, with a step up in volume growth across all regions, along with continued good margin expansion. With that, I'll pass you back to Edmond.
Thanks, Marguerite. Moving to our full-year outlook on slide 11. Our continued strong end market outperformance highlights the strength of our strategic positioning across our markets, channels, and customer base. We will continue to develop our business with further investment in our taste in biotechnology-enabled solutions, supporting our positioning as our customers' key innovation and renovation partner. Looking to the remainder of the year, while recognizing the macro and geopolitical uncertainty, we remain strongly positioned for volume growth and margin expansion, underpinned by a good innovation and renovation pipeline. We're maintaining our full-year adjusted earnings per share guidance of 6%-10% constant currency growth. With that, I'll hand you back to the operator for any questions.
Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Our first question comes from the line of Patrick Higgins with Goodbody. Please go ahead.
Thanks. Morning, everyone. Couple of questions, if that's okay. Firstly, maybe just in terms of, I guess, the cadence of growth through the quarter by region on exit rates into Q4. I guess I'm just trying to figure out if you've seen any kind of change in consumer behaviors as cost pressures have ramped up. Maybe linked to that, what has to happen in Q4 for you guys to get to either the top or the bottom end of the 6%-10% range? Then final question, maybe on FY 2027, and I appreciate it's early for any firm guidance, but is that kind of 4% level that you did in Q3, is that the right level for us to think about for underlying growth going forward? Or how should we think about the puts and takes as we go into next year? Thank you.
Thanks, Patrick. Good morning. I wouldn't be calling out any major change in the, let's say, overall cadence throughout the quarter or into Q4, nor would I call out any kind of notable change in the underlying demand from a consumer perspective. We would say it's similar to what we saw in the half year. Maybe then taking the last part of your question, I think it's fair to say we're pleased with the overall performance in the quarter with each of the regions going in the right direction with good progress in both Europe and APMEA. What has been really satisfying for us is the impact that renovation is having on the retail channel. Like we've said before, that renovation opportunity will drive growth in our addressable market, and we feel particularly well-placed to capitalize on those growth opportunities.
What we are saying is that the Q4 volume performance will be similar to Q3. There is a strong pipeline there. There is momentum in the business. Customers have a good understanding in terms of what we can do to help them. The investments that we are making on biotechnology-enabled solutions are paying off. We're doubling down on those investments because we're confident in the future outlook. We're guiding for Q4 to be similar to Q3. We believe that's a pragmatic approach. That approach has served us well throughout the year. We'll see where we are next February, and we'll share what we're thinking about 2027 at that point.
Our next question comes from the line with Alex Sloane with Barclays. Please go ahead.
Yeah, morning all. Thanks for the questions. The first one, a bit of a follow-up there, but just digging in on the renovation activity. It sounds like the step up in U.S. retail in the quarter has really been driven by that renovation activity that you talked about a lot in the Investor Day rather than any material change in the end market. In terms of thinking about the sustainability of that trend, if you think about next year, customers may be facing renewed input cost inflation. Do you think the renovation trend can be sustainable based on the underlying consumer demands that you talked about driving it? Or is there a kind of a risk that customers dial back ambitions on that front. The second one, just on raw material inflation. Pricing for Kerry moved back into positive territory in Q3 after deflation in the first half.
I appreciate it's very early to be giving any kind of firm guidance for next year, but, as you do look forward, where are you seeing the most meaningful input cost pressures and how should we think about the timing of pricing relative to those costs? Is there any reason to expect any kind of change in the price cost recovery versus history? Thanks.
Thanks, Alex. Good morning. I'll kick off here. Look, we actually continue to see pick up in renovation activity in North America, and actually starting to see it in the APMEA region as well. Look, we don't see any signs of this changing, especially in North America, and we do see it and continue to see it as a key underpin of our market outperformance going forward. Look, we've talked previously about our very strong performance in snack category. But even at that, there's still around 80% of that category in North America that has salt levels above WHO guidelines. And at the end of the day, consumers are much more focused today than they have been in the past on the healthfulness of the products they're consuming. Look, we did share a number of examples at the Investor Day a couple of weeks ago.
We talked about what we believe needs to happen in the meals category. While there has been fairly limited, I would say, reformulation to date in the meals category, we see that as a potential opportunity for us in 2027 and beyond. It is a category where salt levels are significantly multiple times higher than they are in snack. Again, we think, despite the market backdrop, that customers will be focused in trying to improve the quality of those products, from a health perspective, but also obviously without impacting the taste. All in all, we do feel, if anything, more of a pick-up in that customer renovation opportunity than anything else.
Good morning, Alex. I will take your inflation question. As you say, a little early on 2027. That being said, we currently expect 2027 to be an inflationary year. A number of raw materials driving that view at this juncture, but we will update in more detail as I referenced. Some callouts, dairy-based ingredients, some spices, and natural oils are the areas that we are seeing some uptick in inflation. I think importantly here, we have a very good track record of managing input cost inflation, and we plan to manage the input cost in a similar way as we go forward into 2027, working with our customers across all the levers, given the depth of our technology capability.
Very clear. Thank you very much.
Our next question comes from the line of Nicola Tang with BNP Paribas. Please go ahead.
Hi, everyone. Thanks for taking the questions. First, on the margin progression, both for 2026 and for 2027, I was wondering if you could give an update or a further update on Accelerate 2.0. You also mentioned step up in R&D investment, which I think you also spoke to at the October event. Could you share a little bit more color on where you're investing and perhaps an early view on margin progression into 2027? The second question, just on the buyback. I know your capital allocation framework balances buyback versus bolt-on M&A. So I was wondering on the bolt-on M&A side, could you talk to your current pipeline? I was wondering if the early reload of the buyback suggests that there aren't a lot of assets available, or am I just reading too much into that? Thank you.
I might kick off Nicola, and Marguerite then will jump in. We are accelerating our investment in biotechnology innovation and very much doubling down based on what we've seen to date in terms of the positive results we're seeing from those investments we've done previously. That's coming through, for instance, in our snack category, whereby we're very much winning in salt. We're winning in masking when it relates to high protein food and beverage products. I suppose on the go forward then, just to call out three areas we're talking about continuing to invest in next generation modulation for future nutrition, using biotechnology and biotransformation to create new solutions to replace traditional additives, and then continue to invest in new natural preservation solutions. Then in terms of the, let's say M&A pipeline, we continue to be active there.
One shouldn't read anything different into our overall capital allocation strategy. We're not calling out any change there. We continue to be active in bolt-on M&A, and buybacks will continue to be a feature.
Good morning, Nicola. I'll take your question on the margin. We expect FY 2026 to be a year of strong margin expansion, with circa 50 basis points of margin expansion in the full year, as we referenced. We're making very good progress on Accelerate 2.0, both on the footprint optimization, where we're a little bit ahead of plan, and also seeing delivery coming through on our digital excellence program. So in terms of the margin expansion, the Accelerate 2.0 will be the primary driver of the margin expansion in the current year, with some operational leverage mix and portfolio benefits, and also reflecting the accelerated R&D investments in the innovation areas that Edmond just outlined. Then in terms of FY 2027, a little early to comment in detail. That being said, we do expect FY 2027 to be another year of good margin expansion.
As we would have referenced at the Investor Day, we do see the Accelerate program being the primary driver, similar to FY 2026 in the earlier years of the plan. That will be the primary contributor of margin expansion in FY 2027. We will update in the normal course in February with more detail on our outlook.
Once again, if you would like to ask a question, please press star, followed by the number one on your telephone keypad. Our next question comes from the line of Victoria Nice, Bernstein. Please go ahead.
Hi there. I just wondered if you could talk a little bit more about what drove the acceleration in performance in Europe versus the second quarter, or really, what are the main points of difference versus last quarter, and how sustainable you think that is into next year beyond the soft comp in Q4. I was also curious about the strength in Latin America and how much of that could be related to the World Cup or any sugar tax changes that you are lapping versus what you would say is underlying. Thanks very much.
Good morning, Victoria. I might take those. Maybe in terms of LatAm first, and maybe just to share where we are, North America versus LatAm. Overall, the America's growth was 4.6% in the quarter, similar between North America and LatAm. I would not be calling out any major impacts from World Cup or anything like that. I think in terms of, let us say, sugar taxes and changes in regulatory, these have been features in various countries in Latin America for quite some time. We are very well placed to capitalize on those opportunities and continue to see those opportunities out there in front of us actually out into 2027. Then going back to Europe. From a performance perspective, it was primarily driven from an end-use market perspective by beverage, snacks, and dairy. From a channel perspective, the performance was driven or was led by the foodservice channel.
In Q4, we expect volume growth to be similar or better in the fourth quarter. We do have softer comparators in Europe in the fourth quarter. I think, overall, it's encouraging to see that the changes we have made across the region, the new team that we have put in there, the investments that we've made in new application centers in Barcelona, in Germany, the level of engagement we're having with customers increasing, etcetera. I think all these things are giving us confidence that we'll see progression as we look out into 2027. We'll give more context on that, obviously, in the new year.
Thank you.
Our final question for today comes from the line of Cathal Kenny with Davy. Please go ahead.
Thank you, and good morning, everyone. Two quick questions from me. One is a quick comment on China and the outlook for the Chinese market. Secondly, just an overall comment on the business pipeline as you look into 2027. Thank you.
Thanks, Cathal. Maybe on China first. We had a solid performance in China. It was led by good growth in the retail channel. We did say it back at the beginning of the year that we expect some modest growth in China this year, and there is no change to that expectation. I think, let's see what 2027 brings. But overall, we are pleased with the progression. Not satisfied about where we are at, but certainly pleased from an overall progression standpoint. In terms of the pipeline, like I said previously, there is a strong pipeline there. There is momentum in the business, and customers are really understanding what we can do for them in a challenging environment. I think for us, it is about converting that pipeline. Like we said, more than half the pipeline in North America is that renovation opportunity.
It is really pleasing to see those opportunities converting into the performance of the business, and that has been the key driver or the primary driver for the uptick in performance in the retail channel. What is also pleasing is that some of the new innovations that we have kicking in are performing well in the market, slightly ahead of expectations. I think, we feel pretty good about where the business is at overall. I feel that there is good momentum there, despite the fact that there is a lot of macro uncertainty out there.
Thank you.
Ladies and gentlemen, that concludes our Q&A session for today. I will now turn the call back over to the Kerry team for closing remarks.
Thank you. We just would like to say thank you for everyone for joining us on the call today. If you have any further follow-ups, please do reach out, and we wish you all a good day. Thank you.