Kerry Group has reported a double-digit fall in profits after the COVID-19 pandemic caused major disruption across its business units.

On Friday, Kerry Group announced half year results which showed the first six months of 2020 have been challenging for the company.

Kerry reported a 20% decline in adjusted earnings before tax to €266m, while adjusted earnings per share were also down 20% to 132.1c.

Kerry Group’s trading profit fell by 17% in the first half of the year to €316m as profit margins narrowed from 10.7% last year to 9.3% this year.

Sharp decline

Kerry Group blamed the fall in profits on the sharp decline in foodservice orders during the lockdown period in Europe and North America, along with additional COVID-related costs.

Kerry reported a 4% decline in sales to €3.4bn for the first half of the year, which included a 6% decline in sales volumes. This was partially offset by a 0.4% increase in pricing as well as positive contribution of 1.2% from acquisitions.

Kerry Group’s free cashflow plunged 45% during the period to €107m, reflecting the impact of COVID-19 and increased working capital needs. The company said it spent just over €52m on the acquisition of South American company Tecnispice.

Performance

“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 and nutrition business, particularly our foodservice channel, where the impact was most pronounced in April, with the channel recovering well since then,” said Kerry Group CEO Edmond Scanlon.

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

“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,” he added.

By division

Taste and nutrition

Kerry Group’s taste and nutrition business recorded a 6% decline in sales in the first half of the year to €2.8bn, while profit margins in the business narrowed from 13.3% last year to 11.6% in 2020.

After a strong start to the year, Kerry said its taste and nutrition sales fell sharply by 12% in the second quarter. This was driven by a 50% collapse in sales to foodservice customers in the second quarter, which was slightly offset by a 5% growth in sales to retail customers.

Consumers foods

Kerry’s consumer foods division recorded an 8% decline in sales to €647m. However, this was mostly related to the loss of a ready meals contract with Tesco. Overall, Kerry will be pleased to see profit margins in its consumer foods business holding steady at 7% in the first half of the year.

This was down to a very strong performance from a number of Kerry’s consumer food brands such as Richmond Sausages, Dairygold butter, Denny and Cheesestrings.