Comprehensive Analysis of Kerry Group's Financial and Strategic Report

This report provides an analysis of Kerry Group's financial and strategic management, focusing on its 2016 interim report. It examines revenue and margin overviews, including volume growth, price fluctuations, and currency impacts, comparing performance across Taste & Nutrition and Consumer Foods divisions. The business review highlights revenue growth, trading profits, and margin improvements, emphasizing the company's financial strategies and market penetration. The marketing review details the company's research programs, product offerings for various life stages, and customer retention strategies. Key financial metrics such as EPS, free cash flow, and financial ratios like ROACE and ROAE are also assessed, providing a comprehensive overview of Kerry Group's financial health and strategic initiatives.

FINANCE
AND
STRATEGIC
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Revenue and Margin Overview..................................................................................................1
Business Review.........................................................................................................................4
Marketing Review.......................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Finance and strategic management understand through financial tools, economic
organisation and strategic processes of a company (Alkhafaji, and Nelson, 2013). After learning
of this management provide support for internal decision making and evaluate the potential risks
and outcomes of these decisions. This report is on Kerry Group which is a public food company
founded in 1972 and its headquarter is in Ireland.
In this report present interim report of KERRY 2016, that is related to directors point of
view so it will evaluate according to business overview, marketing overview and revenue margin
overview of this case.
MAIN BODY
Revenue and Margin Overview
Finance and strategic management is an aspect that remain related to financial
management and control. As per the interim management report of Kerry, it is considered that
organisation is concerned with its quality management and standards subject to great tasting as
nutritious foods and beverages products. The strategic management mainly associated with
carrying out the differences and management of macro economical factors and industry supply
chain management. The process of management and integration indicates that the activities and
plans are executed with business transformation and programs with actual results and
management. As per the report the EPS was counted as 7.5% to 133.8%, free cash flow was
counted as movement in average working capital and pension contribution paid less pension
expenses. Finance cost in terms of payment and capital expenditure was counted with respect of
€379 million for the year 2016 and €192 million for the year 2015. the total increment was
calculated as 49.34% form last year (Engert, Rauter and Baumgartner, 2016). Complexities in
enabling the efficiency and consistently found in more effective way to develop the financial
management and control. Financial costs and pension in terms of net deficit enhance by €61
million.
Variation in terms of dividing the strategies and plans are consolidated with creating the
primarily and secondary changes with various discount rates are also analysed with deflationary
cycle and continuing into H2. The currency agreements and management also created with
structural changes in structural integration and progression. Unprecedented change and
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variations are analysed with food and beverage industry. There is a systematic accounting
approach and procedure followed by organisation subject to demand for localised, authentic taste
profiles and the snacks sales in growth and reshaping the functions. New strategies and plans are
created with managing the sections and positioned with internal and external customers with
consumer needs. Kerry's unique with growth and development in pure and simple. The
authentication process mainly helps in clearing the food conflicts and reduced lactose and gluten
free food products (Ferraresi, and et. al., 2012).
Through this report represent revenues strategy, in this strategy including Revenues,
trading profit, finance costs, capital expenditure, cash flow, earnings, trading margin, tax rate, net
debt, dividend and other competitive pressures. These strategy impact on the foreign exchange
fluctuations, on competitive pressures and also impact on raw material fluctuations.
Revenue and margin overview divided in two groups €3037m, volume (+3.2%) and
margin (+70bps). first one is Taste & nutrition and customer foods. In Taste & nutrition €2379m,
that is calculated on the basis of volume (+3.5%) and margin (+70bps). Second one is consumer
foods €697m, that is calculated on the basis of volume (+2.3%) and (+30bps).
Revenue analysis in 2015, revenue was €3028m and in 2016, €3037m that is equal to
0.3%. After revenue analysis calculated volume growth is 3.2% and related to these factors
translation currency (3.7%), transaction currency (0.2%), price (2.2%) and acquisition/disposal
(3.2%).
volume growth related to market that is related to revenue, group volume growth rate is
+3.2%, taste & nutrition volume growth rate +3.5% and consumer foods volume growth rate
+2.3%.
Revenue growth components highlights of 2016 of taste & nutrition, consumer goods and
group. They are divided in price, transaction currency, translation currency and
acquisition/disposal. Taste & nutrition volume 3.5%, divided in price (2.2%), transaction
currency (0.2%), translation currency (3.8%), acquisition/disposal (5.3%) so total is 2.6%.
Consumer foods volume 2.3%, divided in price (2.1%), transaction currency (0.3%), translation
currency (3.15), Acquisition/Disposal ( 3.8%) so total is (7.0%). In the total group shows volume
increase by 3.2%, price was (2.2%), Transaction currency (0.2%), translation currency is (3.7%),
Acquisition/Disposal is 3.2% so total is 0.3%. Five Years revenue volume growth is of capital
expenditure from 2011 to 2015 is in 2011 growth rate is 3.3% after that decrease this growth rate
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in 2012 is 2.8%, in 2013 growth rate raise with 3.0%, in 2014 volume growth again decrease
with 2.4%, in 2015 volume growth rate increase with 3.8% so here is total of five years growth
rate is 15.3%. Five years capital expenditure from 2011 to 2015 in billion such as €162, €156,
€177, €257 and €229. KERRY maintain group long term target in interim report from 2013 to
2017 that growth adjusted on the basis of EPS* 10%+ p.a. The nutrition strategy also helps in
concreting the policies with free flow. Strategies are mapped subject to maintain the positive
flow of operations defined as follows;
Kerry's Unique Taste & Nutrition Growth model
This is one of the growth model and strategy associated with clean label and simple form.
Clean labelling procedure, authentic and familiar cooking process and style are considered in it
strategic process. Pleasure and indulgence subject to new taste and fie dining patisserie and
coffee house experience and fresh invigorating are also considered in this strategy. Nutrition and
management are also considered essential for connecting the free form of food intolerance and
reduced with clean and cleaner label (Greco, Cricelli, and Grimaldi, 2013.). Better for reduced
salt and fat balanced choice for protein forecasting are considering the process. The good for
health lipids for micronutrients fortification and natural goods were analysed with various
aspects. Infant food categories, performance management and health care nutrition weight
management are considered in this strategic management.
Kerry model of resilient and well placed managing process is also one of the strategic
management part of business and macroeconomic and consumer landscape are also taken for
better strategic management formation. This was associated with various forms such as unique
taste and nutrition, functional ingredients and system capabilities, the domestic innovative and
speed to market. Food out performing and snacking, convenience and e-commerce growth rates
are also the main part considered in both strategic and quality management. Opportunities and
growth models for enhancing international tastes and nutrition policy for food service market
were recorded well. Delivering and underlying policies to perform the policies in various forms
are considered valuable for taking the previous tasks and guides (Hitt, Ireland, and Hoskisson,
2012). Increased currency headwinds of 5% at current exchange rates were also adjusted with
middle and lower of 6% to 10% range. The range was sited of 320 to 332 cent per share.
Financial ratios
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Performance evaluation of organisation mainly depends upon the key financial ratios and
analysis. Performance evaluation of Kerry is bifurcated in various forms such as;
Banking ratios
Net debts and EBITDA was counted as 1.7 times in 2016 and 1.6 times for 2015. there is
an increment recorded in net debt EBITDA subject to organisation. EBITDA with net interest
ratio was calculated as 15.7 times.
Return ratios
ROACE was calculated as 13.1% in 2016 and 14.1% that indicates that return on assets for
capital employed has increased subject to maintain interest and performance management. The
ROAE subject to 16.8% was counted with extra ordinary changes and reputation clarified as
14.5% in total.
Business Review
As analysed from annual reports of Kerry, the company is acquiring total revenues of
2379m Euro every year which helps to grab growth opportunities. Growth rate of revenues is
3.5% which is positive sign for the company that it can grow faster and acquire higher market
share. Good financial management and strategies helps the company to attain its organisational
goals and objectives. Higher growth rate is the result of proper implementation of policies that
are required to be followed. Profit of 304m Euro and the growth rate in trading profits is 7.9%.
Trading margin of the company is also very good and it has also increased as compare to prior
years. In current year the margin is 12.8% for the company which is because of good financial
management techniques (Julian, and Ofori‐dankwa, 2013).
The firm is offering good quality food item to its customers that helps to attain higher
growth volume. The food service channel which has been chosen by the company is very good
that facilitates customers to receive the products on time. Company it performing very good in
all the regions where it is executing its business activities. Price negotiation has decreased by
2.2% as customers are not bargaining for the products as they are getting good and effective
quality food items.
The pricing strategies that are adopted by the company are very good and company is
using market penetration strategy in which food items are introduced for every type of segment
of market. As company is getting continue growth hence it is very important to get it in
upcoming years which is possible with the help of effective pricing strategy. If Kerry is offering
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good on less price as compare to competitors and providing good quality food item than it can
result in increased number of customers in which existing and prospect customers are involved.
Good and effective supplying strategies are also adopted by the company in order to
increase profits. As the organisation is supplying food items to different regions of the nation so
that higher market share can be acquired. Enhanced interest of customers can result in increased
profits and revenues that can help to strength the financial position of the company. In consumer
food items the company has generated 697m Euro revenues and the trading profits are 58m Euro.
Organisation have attained a growth of 2.3% in revenues and the trading profits of consumer
food have decreased by 3.7%. Total trading margin of the company for current year is 8.3%.
Margin of the company has improved as compare to previous years and it has helped to enhance
financial position of the company (Levy, Weitz, and Grewal, 2012).
Dairy and meat products are offered by the company to its customers all the products are
generating profits for Kerry. This has helped the organisation to attain growth and long term
sustainability. As the company is applying effective strategies for the business so that higher
profits can be acquired in order to manage all the operational activities. Sufficient funds may
help to resolve critical problems that are faced by company due to lack of monetary resources.
Kerry nutrition research programme:
Research programs are conducted by the organisations to analyse market trends and
current market situation so that needs and demands of the customers. It helps to formulate proper
and effective promotional plans to aware customers about the products that are sold by Kerry. As
company is offering different range of products to different type of customers. Organisation is
delivering food items for various life stage of customers such as infant and toddlers, children and
adolescents, early adulthood, healthy ageing and senior citizens. The products that are sold by
Kerry are concerned with health management because now a days most of the customer are
concerned with healthy products. This can help to acquire more market share by attracting higher
number of customers by offering them products according to their demand (Purce, 2014).
A proper research can result in effective data that can be used by the marketers of the
company to modify or improve product according to customer's preference. Good marketing
strategies are used to position the food items in the mind of consumers who are using or
consuming the products of Kerry. Customers of Kerry are retained by the organisation by
offering them such products that they are willing to buy.
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Natural flavours, no preservatives, no contamination, natural colouring and preservatives
are used while producing the items that are supplied to the customers. Kerry is using an effective
approach to find solutions for customer's problems with the products that are offered by the
organisation. The approach is named as consumer insight and clean label evolution. In which
effective and efficient products are manufactured by the work force of the company so that
appropriate food item can be supplied to the customers. It has resulted in good profits that may
result in good financial strength and management of the company.
Marketing Review
Marketing can be said as combination of different activities related with purchasing as
well as selling of goods and services. Activities consists of advertising, promotion, publicity,
selling, delivering. A separate department is established in organization to handle and manage
functions of marketing. It is performed to attract customers along with maintaining relationship,
also keep them attentive towards goods and services (Taylor, Doherty, and McGraw, 2015).
Today, trend of digital marketing is popular in which digital channels are used for advertising.
Digital channels include websistes, email, search engines, social media, mobile apps etc.
Marketing has 4 P's that are product, price, place and promotion. Maketing strategies in Kerry
are designed to achieve some predetermined objectives. These strategies are arrives out of
Kerry's value proposition. As, Kerry is a public food company so marketing plan is made
accordingly. Key strategies are:
 Insisting potential customers to buy product
 Establishment of brand
 Enhancement in market share
 Customer loyalty
 Retaining existing customers
Kerry has adopted a model of Unique taste and Nutrition Growth. Also a taste research
programme is being carrying out which is focused on technology and innovation in making food.
In area of marketing, Kerry started Clean Label approach for customer positioning. According to
this approach, there is a concentration on four R's that are replace, reduce, remove and re-
position (Witcher, and Chau, 2012). All these are related to customer expectation and market
needs. Customer expections in relation to four R's are to replace ingredients to clean label
technology and maintaining same taste along with nutrition, reduce particular ingredients and use
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clean label. Customers wants to remove certain ingredients, also they want to adopt creative
ways for repositioning products. Market needs are those which are needed to identified for
differentiating products from competitors. Also to retain product in market. Market needs for
products of Kerry are to provide various natural flavours, colours and preservatives, reduce
ingredient decks, packaging design etc. This company has done continuous innovation to survive
in market. Innovations are in area of authenticity/flavours, snacking, convenience, new health
'free from'. Special focus of Kerry Group is on nutrition and taste (Meaning of strategic finance,
2018). Strategies that are made for nutrition aspect consists of food intolerance, low lactose,
clean label, gluten free, reduced fat, salt, weight management. Also quality of carbohydrate,
protein and micronutrient fortification, performance nutrition are covered. Taste aspect considers
fresh, healthy, artificial ingredients, authentic cooking style, ethnic, fine-dining, natural mood.
All these in total manner contributes to strategic management of Kerry.
CONCLUSION
From above discussion, it is concluded that business review as well as marketing view
are beneficial from point of view of financial and strategic management. These helps in making
out plans for growth and development of business. Continuous evaluation also assists in quality
control. Programmes that are conducted by Kerry contributes in enhancing health and safety
standards. Also there is continuous increase in revenue as well as magin due to adoption of
unique technology in food making and services delivering.
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REFERENCES
Books and Journals:
Alkhafaji, A. and Nelson, R. A., 2013. Strategic management: formulation, implementation, and
control in a dynamic environment. Routledge.
Engert, S., Rauter, R. and Baumgartner, R.J., 2016. Exploring the integration of corporate
sustainability into strategic management: a literature review. Journal of cleaner
production. 112. pp.2833-2850.
Ferraresi, A. A. and et. al., 2012. Knowledge management and strategic orientation: leveraging
innovativeness and performance. Journal of knowledge management. 16(5). pp.688-
701.
Greco, M., Cricelli, L. and Grimaldi, M., 2013. A strategic management framework of tangible
and intangible assets. European Management Journal. 31(1). pp.55-66.
Hitt, M. A., Ireland, R. D. and Hoskisson, R. E., 2012. Strategic management cases:
competitiveness and globalization. Cengage Learning.
Julian, S. D. and Ofori‐dankwa, J. C., 2013. Financial resource availability and corporate social
responsibility expenditures in a sub‐Saharan economy: The institutional difference
hypothesis. Strategic Management Journal. 34(11). pp.1314-1330.
Levy, M., Weitz, B.A. and Grewal, D., 2012. Retailing management (Vol. 6). New York:
McGraw-Hill/Irwin.
Purce, J., 2014. The impact of corporate strategy on human resource management. New
Perspectives on Human Resource Management (Routledge Revivals).67.
Taylor, T., Doherty, A. and McGraw, P., 2015. Managing people in sport organizations: A
strategic human resource management perspective. Routledge.
Witcher, B. J. and Chau, V.S., 2012. Varieties of capitalism and strategic management:
Managing performance in multinationals after the global financial crisis. British Journal
of Management. 23. pp.S58-S73.
Online
Meaning of strategic finance, 2018. [Online]. Available through
<https://www.managementstudyguide.com/strategic-finance.htm>.
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