Beyond the Horizon
Kerry Group Annual Report 2020
Kerry Group is the world's leading
Taste & Nutrition Company,
serving the food, beverage and
pharmaceutical industries, and
is a leader in its consumer foods
categories in the chilled cabinet.
STRATEGIC
REPORT
DIRECTORS’
REPORT
85 Board of Directors
88 Report of the Directors
Governance Report
94 Corporate Governance Report
107 Audit Committee Report
113 Governance, Nomination
and Sustainability
Committee Report
119 Remuneration Committee Report
3 Our Performance in 2020
4 Our Purpose and Vision
6
Kerry Group at a Glance
8 Chairman’s Statement
10 Chief Executive Officer’s Review
14 Our People
20 Our Business Model
22 Our Technologies
24 Our Markets
26 Strategy & Financial Targets
29 Strategic Advantage
30 Key Performance Indicators
32 Financial Review
40 Business Review: Taste & Nutrition
44 Business Review: Consumer Foods
46 Sustainability Review
71 Risk Management Report
FINANCIAL
STATEMENTS
150 Independent Auditors’ Report
158 Financial Statements
166 Notes to the Financial Statements
SUPPLEMENTARY
INFORMATION
231 Financial Definitions
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
Group Revenue
Group Revenue
Business Volumes
Business Volumes
Kerry Group Annual Report 2020
3
2020
Our Performance in 2020
€7.0 billion
€7.0 billion
2020
2020
2020
(2.9%)
(2.9%)
€7.2 billion
€7.2 billion
Group Revenue
2019
Group Revenue
2019
In a unique year that saw the entire globe impacted, the resilience of our business was
highlighted in our performance. Our culture and our Purpose, Inspiring Food, Nourishing
2020
Life was demonstrated through the actions of our people, and we emphasised our role as
Group Revenue
our customers’ most valued partner, creating a world of sustainable nutrition.
2019
2019
Group Revenue
Trading Profit
Trading Profit
Group Revenue
2020
2020
2019
2019
Business Volumes
Group Trading Margin
Group Trading Margin
Business Volumes
2020
2020
(2.9%)
2020
Business Volumes
2020
Business Volumes
2020
Group Revenue
Business Volumes
2019
Business Volumes
2019
€7.0 billion
€7.0 billion
€7.0 billion
€7.0 billion
€7.2 billion
€7.2 billion
(2.9%)
(2.9%)
(2.9%)
2.8%
2.8%
-1.0
-1.0
-0.5
-2.5
-0.5
-2.0
-2.5
-2.0
-3.0
-1.5
-3.0
-1.5
0.0
0.0
0.0
0.0
2.8%
2.8%
3.0
3.0
-3.0
-3.0
-2.5
-2.5
-2.0
-2.0
-1.5
-1.5
-1.0
-1.0
-0.5
-0.5
3.0
3.0
FINANCIAL PERFORMANCE MEASURES
2019
2019
2020
2020
2020
2020
Group Revenue
Group Revenue
Group Revenue
2019
Trading Profit
Trading Profit
2019
2019
2019
€7.2 billion
€7.2 billion
€7.0 billion
€7.0 billion
€7.2 billion
€903 million
€903 million
€7.2 billion
€797 million
€797 million
2019
2020
2020
Business Volumes
2019
2020
2020
Business Volumes
Business Volumes1
2019
Group Trading Margin
Group Trading Margin
2019
2019
2019
(2.9%)
-1.0
-1.0
-3.0
-2.5
-1.5
-2.0
-2.0
-2.5
-1.5
-0.5
-3.0
-0.5
(2.9%)
2.8%
2.8%
11.5%
11.5%
12.5%
12.5%
2.8%
2.8%
0.0
0.0
0.0
0.0
2020
2020
2020
Trading Profit
2019
2020
Trading Profit
2019
€7.0 billion
€7.0 billion
2020
2020
-3.0
0
0
-3.0
-2.5
-2.0
-1.5
(2.9%)
(2.9%)
-1.0
-0.5
-2.5
-2.0
-1.5
-1.0
-0.5
3
6
9
12
3
6
9
12
€797 million
€797 million
€7.2 billion
€7.2 billion
2020
Group Trading Margin
2019
2020
Group Trading Margin
2019
0.0
0.0
11.5%
11.5%
2.8%
2.8%
3.0
3.0
15
3.0
15
3.0
Net Cash from Operating Activities
2019
2019
Net Cash from Operating Activities
Trading Profit
Trading Profit
Trading Profit
2020
2020
€797 million
€797 million
€903 million
€903 million
2019
Free Cash Flow¹ (cash conversion percentage)
Group Trading Margin
2020
2019
Free Cash Flow¹ (cash conversion percentage)
Group Trading Margin
Group Trading Margin¹
2020
11.5%
11.5%
-1.0
-1.0
-0.5
-2.5
-2.0
-1.5
-3.0
-0.5
-2.0
-3.0
-2.5
-1.5
3.0
3.0
12.5%
12.5%
0
0
3
3
6
6
9
9
12
12
15
15
2020
2019
2020
€797 million
Trading Profit
Net Cash from Operating Activities
2019
2020
2019
2020
€797 million
Trading Profit
Net Cash from Operating Activities
2019
2019
€672 million
€672 million
€903 million
€903 million
€903 million
€903 million
€764 million
€764 million
2019
2020
€797 million
2020
€797 million
2020
2020
€672 million
Net Cash from Operating Activities
Net Cash from Operating Activities
Net Cash from Operating Activities
2019
2019
Net Cash from Operating Activities
Basic EPS
2020
Basic EPS
Net Cash from Operating Activities
2020
€672 million
2019
2019
€672 million
€672 million
€903 million
€903 million
€764 million
€764 million
2019
2020
2020
Net Cash from Operating Activities
2019
€672 million
2020
2020
Net Cash from Operating Activities
€764 million
313.0 cent
313.0 cent
€672 million
€764 million
2019
Basic EPS
Basic EPS
2019
2019
2019
Basic EPS
2020
2020
2020
2020
Basic EPS
Basic EPS
2019
2019
2019
2019
Basic EPS
Basic EPS
2020
2020
Total Dividend Per Share
Total Dividend Per Share
Total Dividend Per Share
2019
2020
Basic EPS
2020
2019
Total Dividend Per Share
2019
2020
2019
Total Dividend Per Share
2019
2020
2019
2020
Basic EPS
2020
€764 million
320.4 cent
320.4 cent
€764 million
€672 million
€672 million
313.0 cent
313.0 cent
€764 million
€764 million
320.4 cent
320.4 cent
313.0 cent
313.0 cent
320.4 cent
320.4 cent
313.0 cent
313.0 cent
86.5 cent
86.5 cent
320.4 cent
320.4 cent
+10.1%
78.6 cent
78.6 cent
+12.0%
313.0 cent
313.0 cent
2019
2020
Total Dividend Per Share
2019
2020
Total Dividend Per Share
NON-FINANCIAL PERFORMANCE MEASURES
2019
Consumers Reached with
Total Dividend Per Share
Total Dividend Per Share
2020
2020
Positive and Balanced Nutrition²
86.5 cent
86.5 cent
86.5 cent
78.6 cent
78.6 cent
2019
320.4 cent
320.4 cent
86.5 cent
78.6 cent
78.6 cent
86.5 cent
86.5 cent
78.6 cent
78.6 cent
2019
2019
1.0 billion
2020
2020
Total Dividend Per Share
Total Dividend Per Share
2019
2019
2020
2020
2019
2019
2020
2020
2019
2019
2020
2020
(100bps)
Group Trading Margin
Group Trading Margin
Free Cash Flow¹ (cash conversion percentage)
Free Cash Flow¹ (cash conversion percentage)
2019
2019
2019
+30bps
2019
11.5%
11.5%
€515 million
€515 million
12.5%
12.5%
€412 million
€412 million
12.5%
12.5%
15
12
12
15
6
3
0
9
6
3
0
9
3
0
0
3
0
6
0
100
200
400
300
300
200
100
€412 million
2020
2020
Free Cash Flow¹ (cash conversion percentage)
2019
2019
Constant Currency Adjusted EPS
Free Cash Flow¹ (cash conversion percentage)
€412 million
2020
2020
2020
Free Cash Flow¹ (cash conversion percentage)
Free Cash Flow¹ (cash conversion percentage)
12.5%
12.5%
2019
€515 million
€515 million
2019
Constant Currency Adjusted EPS
Free Cash Flow¹ (cash conversion percentage)
2020
€412 million
€412 million
11.5%
11.5%
67%
600
400
500
500
600
15
12
15
12
15
12
12
15
9
3
9
0
6
6
9
0
9
6
3
0
0
100
100
200
200
300
300
400
400
500
500
600
600
2019
2020
2020
Free Cash Flow¹ (cash conversion percentage)
Constant Currency Adjusted EPS
2019
2019
2019
2020
2020
Free Cash Flow¹ (cash conversion percentage)
Constant Currency Adjusted EPS
2019
Constant Currency Adjusted EPS¹
2019
€412 million
€412 million
€515 million
€515 million
€515 million
€515 million
345.4 cent
345.4 cent
393.7 cent
393.7 cent
74%
600
400
300
200
300
400
100
200
100
500
500
600
0
0
2020
2020
0
0
0
0
50
100
50
100
100
200
€412 million
€412 million
400
300
150
200
250
250
200
150
100
200
300
400
300
300
500
350
500
350
400
600
400
600
2020
Constant Currency Adjusted EPS
2019
2020
Constant Currency Adjusted EPS
2019
345.4 cent
345.4 cent
€515 million
€515 million
(9.4%)
393.7 cent
393.7 cent
0
0
0
0
50
50
500
300
400
100
200
100
200
300
400
100
150
100
150
2019
2019
Constant Currency Adjusted EPS
Constant Currency Adjusted EPS
2020
345.4 cent
2020
345.4 cent
Return on Average Capital Employed
Return on Average Capital Employed
Return on Average Capital Employed¹
393.7 cent
2019
2020
Constant Currency Adjusted EPS
2020
2019
2020
Constant Currency Adjusted EPS
2020
2019
Return on Average Capital Employed
2019
2020
2019
Return on Average Capital Employed
2019
345.4 cent
2020
345.4 cent
345.4 cent
345.4 cent
9.8%
9.8%
393.7 cent
350
200
100
250
150
200
250
250
200
100
150
200
250
100
150
200
250
300
350
300
300
300
300
350
500
50
50
50
0
0
0
350
393.7 cent
11.8%
11.8%
393.7 cent
350
400
+8.3%
600
600
400
400
400
400
0
50
100
150
200
250
300
350
400
0
0
393.7 cent
2019
2020
9.8%
Return on Average Capital Employed
2019
2020
Return on Average Capital Employed
393.7 cent
9.8%
10
10
2
4
6
8
6
4
8
2
0
0
2019
2019
Carbon Reduction²
Return on Average Capital Employed
9.8%
2020
Return on Average Capital Employed
2020
9.8%
200
150
100
250
150
200
250
100
300
300
50
50
11.8%
11.8%
350
350
12
12
400
400
0
0
2
2
4
4
6
6
8
8
10
10
12
12
2019
2019
17% absolute reduction
2020
2020
9.8%
Return on Average Capital Employed
Return on Average Capital Employed
9.8%
11.8%
11.8%
2019
2019
0
2
0
2
4
86.5 cent
86.5 cent
TOTAL SHAREHOLDER RETURN
2020
2020
0
2
0
2
4
78.6 cent
78.6 cent
+7.4% (2019: +29.3%)
2019
2019
0
2
4
0
2
4
4
4
6
6
6
6
6
6
8
8
9.8%
9.8%
8
8
8
8
10
10
11.8%
11.8%
12
12
10
12
10
12
11.8%
11.8%
10
12
10
12
1
2
See Key Performance Indicators section pages 30-31 and the Supplementary Information section page 231 for definitions, calculations and
reconciliations of Alternative Performance Measures
See Sustainability section pages 46-70 for further information on non-financial metrics
4
Kerry Group Annual Report 2020
STRATEGIC REPORT
Our Purpose and Vision
Inspiring Food, Nourishing Life
Over one billion people around the
world enjoy food and beverages
containing Kerry’s taste and nutrition
solutions, allowing us to make a lasting
difference as we dedicate ourselves to
making the world of food and beverage
better for everyone.
Our Purpose, Inspiring Food, Nourishing Life, is the
reason we come to work every day and key to why our
customers choose to partner with us. It is engrained in
our organisation, and coupled with our Values, enables
us to make the right decisions, to take ownership, and
to help drive the business forward. We inspire food and
nourish life through our people, our products, and our
commitment to protecting the planet.
Inspiring Food is about innovation. It is
about co-creating better tasting, better
performing and better-for-you consumer
led solutions for the food and beverage
industry with our customers and partners.
Nourishing Life is about sustainability for
people, society and the planet. It’s about
the wellbeing of our employees as well as
the safety and quality of our products that
provide balanced nutrition solutions to the
lives of over one billion people around the
world, without compromising our planet’s
finite resources.
Read More
Sustainability Review
Pages 46-70
Kerry Group Annual Report 2020
5
Our Values
Our Vision
Courage
We’re brave, we speak up and we inspire
each other to get the best results.
Ownership
We’re accountable and we care about
the business as if it were our own.
Inclusiveness
We’re welcoming, we are authentic
and we see strength in diversity.
Open-mindedness
We’re curious, we innovate
and we believe in possibility.
Enterprising Spirit
We’re bold, we think big picture,
we add value and we grow.
Our Vision is to be our customers’
most valued partner, creating a
world of sustainable nutrition.
Achieving sustainable nutrition for two billion
people by 2030 is an ambitious target, and to mark
our commitment to this, our Beyond the Horizon
sustainability strategy outlines how we are rising to the
challenge, feeding a diverse and growing population,
with affordable, sustainable solutions that delight and
nourish people worldwide.
Future Focused
In 2020, uniting under one purpose and one vision,
we launched our refreshed brand identity, symbolising
the importance of our from-food-for-food heritage,
while bringing together all divisions of our business
under a unique marque representing one Kerry – a
future focused and truly international organisation,
with sustainability at its core. Simplifying our corporate
identity plays an important role in making it easier for
employees and customers to understand who we are,
what we stand for and where we are going. Importantly,
this is not a new direction for Kerry, and our strategy
remains firm. From Kerry’s earliest beginnings, we
have been at the forefront of innovation, research and
sustainability, continuously adapting while staying
true to our roots. This refreshed brand, guided by our
Purpose, reflecting our Vision, and underpinned by
our Values, positions Kerry for the future, enabling our
people and our customers to stay ahead.
6
Kerry Group at a Glance
We are the world’s leading taste and nutrition
company, providing sustainable nutrition solutions
for the food, beverage and pharmaceutical industries.
Our Business
Taste & Nutrition
Consumer Foods
82%
€7.0bn
Revenue
18%
89%
€797m
Trading Profit
11%
26,000+
Employees
149
Manufacturing locations
across 31 countries
18,000+
Products, with >80% providing
positive and balanced nutrition
1,000+
R&D Scientists
AA
MSCI ESG Rating
>1 billion
Consumers reached with
Kerry products
Global Headquarters
Global and Regional
Technology &
Innovation Centres
Manufacturing Plants
Sales Offices
Note
Ireland & UK: 34 manufacturing plants, 4 sales offices
Where We Operate
Global Headquarters
Global and Regional
Technology &
Innovation Centres
Manufacturing Plants
Sales Offices
Note
Ireland & UK: 34 manufacturing plants, 4 sales offices
Kerry Group Annual Report 2020STRATEGIC REPORT 7
Strategic Developments in 2020
Strategic development of Rome, Georgia facility
Opening of new centre in Shanghai, China
Taste & Nutrition
Kerry is the global leader in the development of taste and
nutrition solutions for the food, beverage and pharmaceutical
markets. Our broad technology foundation, customer-centric
business model, and industry-leading integrated solutions
capability mean Kerry is the co-creation partner of choice.
We aim to be our customers’ most valued partner by delivering
food and beverage products that meet their consumers’
individual taste, nutrition and wellness preferences, while
enhancing their lives and contributing to a more sustainable
world. Customers including global, regional and local
manufacturers, retailers and foodservice providers all continue
to re-evaluate the recipes, processes and the ingredients they
use in the development of their products. We use our broad
range of taste, nutrition and functional ingredient technologies,
combined with industry-leading solutions capability to create
innovative new products with our customers across all food and
beverage end use markets.
We inspire food and nourish life through the passion,
commitment and work of our global team of expert food
scientists, chefs, baristas, brewers, mixologists, bakers and
nutritionists. We know that success requires the ability to
stay ahead of ever-changing consumer demand.
€5.7bn
Revenue by
Region
€5.7bn
Revenue by
End Use Market
(EUM)
54% Americas
24% Europe
22% APMEA
70% Food
25% Beverage
5% Pharma
Acquisition of Tecnispice, Guatemala
Consumer Foods
Kerry’s Consumer Foods division is a leader in its categories in the chilled cabinet,
primarily in the UK and Irish markets.
We have many strong and well-loved brands including Dairygold, Richmond, Fridge
Raiders, Cheestrings and Denny. These brands can be found across our retail
partners in supermarkets, service stations, convenience stores and entertainment
venues the length and breadth of the UK and Ireland. In addition to these brands,
Kerry's Consumer Foods division also manufactures customer branded products,
which can be found in leading supermarket chains.
Kerry Group Annual Report 2020 8
Chairman's Statement
Kerry’s response to
COVID-19 has been
truly inspirational
and testament to
the strength of its
purpose, values
and culture.
Philip Toomey
Chairman
Overview
This year has seen exceptional
challenges with COVID-19
significantly affecting the daily
lives of people all around the
world. The individual and collective
responses of people, communities
and businesses have been
remarkable in the face of such
adversity. Kerry’s own response
to the pandemic has been truly
inspirational and testament to the
strength of its purpose, values
and culture. The Board received
regular updates throughout the
year from Executive Management
on how COVID-19 was impacting on
the Group’s employees, strategic
priorities, operations and financial
performance.
The Group’s actions through this
period focused on three main
priorities:
• Protecting the health and
wellbeing of employees with
measures including remote
working, segregation and
zoning, increased sanitisation
and screening;
• Supporting our customers and
ensuring continuity of supply
with supply chains challenged,
Kerry helped ensure food
products continued to reach
consumers; and
• Supporting our local
communities in a multitude
of ways from donating PPE,
sanitiser and food, to pledging
26,000 volunteer days and
€1 million through the
MyCommunity Initiative.
The pandemic has led to significant
disruption for virtually every global
business. While Kerry’s performance
in the foodservice channel was most
impacted, the Group demonstrated
its resilience by delivering overall
revenue of €7.0 billion, trading profit
of €797m and free cash flow of
€412m in 2020.
Strategic Update
Good progress was made on the
strategic front, with the acquisitions
of Tecnispice, S.A. in Guatemala,
Bio-K Plus International Inc. in
Canada and Jining Nature Group
in China completed during the
year for a total consideration of
€280m. These acquisitions further
enhance Kerry’s integrated solutions
capability, while also expanding
the Group’s footprint and leading
position in developing markets.
The Board is confident that Kerry’s
strategic priorities for growth will
continue to be the key drivers of
organic growth and acquisition
investment in the future.
Sustainability
In October 2020, Kerry launched
its 2030 sustainability strategy
Beyond the Horizon along with a
refreshed brand identity, reflecting
the evolution of the business,
as Kerry continues to meet the
changing needs of both customers
and consumers. Beyond the Horizon
will see Kerry work with customers
to promote healthier and more
sustainable diets, aiming to reach
over two billion people by 2030.
The range of ambitious science
based targets announced will
address key impacts across the
areas of nutrition and health,
emissions, energy, circular
economy, raw materials and
social impact. The combination
of achieving these targets in
conjunction with Kerry’s leading
innovation with its customers will
mean a better impact for people,
society and the planet. Details of the
Group’s sustainability strategy are
outlined in the Sustainability Review
on pages 46-70.
Corporate Governance
The Board is firmly committed to
maintaining the highest standards
of corporate governance in line with
best practice.
Kerry Group Annual Report 2020STRATEGIC REPORT 9
Shareholder Analysis
26% Retail
12% Kerry Co-operative
62% Institutions
19% North America
15% UK
22% Continental Europe
4% Rest of World
2% Ireland
Prospects
The Board remains confident that
the Group’s business model and
strategies will continue to deliver
shareholder value and benefit our
other stakeholders in the years
to come. Kerry will continue to
pursue organic and acquisitive
growth opportunities and the
Group’s balance sheet is well placed
to support our objectives. While
recognising that the COVID-19
pandemic will continue to impact
all businesses in 2021, we welcome
the greater clarity from the recent
Brexit trade deal and look forward
to another successful year. The
view of management regarding
the business outlook for 2021 is
presented in the Chief Executive
Officer’s Review.
COVID-19 has made the task of
leadership significantly more
challenging. On behalf of the
Board, I would like to sincerely
thank Edmond and the Executive
Management team for their
exceptional leadership and
thank everyone throughout the
organisation for their hard work
and commitment during this
most challenging of years.
The response of our people
during the COVID-19 pandemic
demonstrated how our purpose
is fully embedded in how we do
business and will underpin and
sustain the Group’s evolution in
the years ahead.
People and Engagement
Central to Kerry’s continued success
is the hard work and commitment
of all our employees. The Board
is proud of the response of our
employees to the challenges faced
during the COVID-19 pandemic.
The creativity and resilience
demonstrated, in adapting to
the challenging and changing
conditions, combined with
continuity of supply and innovation,
is the single largest contributor
to Kerry successfully navigating
the challenges associated with
the pandemic.
The Board also recognises
the importance of employee
engagement to the success of
the Group and is continuously
developing its engagement
activities. During 2020, Mr. Tom
Moran, the designated workforce
engagement Director, undertook
a detailed programme of activities
where he had the opportunity to
visit sites, engage with a range of
employees, participate in employee
events and obtain a first-hand view
of how Kerry responded to the
COVID-19 pandemic. While some
events were completed in person
in quarter one, all activities from
March onwards were held virtually.
Details of employee engagement
activities during the year, including
the work undertaken by the
designated workforce engagement
Director, are outlined in the
Corporate Governance Report
on pages 94-106.
Dividend
The Board recommends a final
dividend of 60.6 cent per share (an
increase of 10.0% on the 2019 final
dividend) payable on 14 May 2021
to shareholders registered on the
record date 16 April 2021.
Together with the interim dividend
of 25.9 cent per share, this brings
the total dividend for the year to 86.5
cent, an increase of 10.1% on 2019.
Philip Toomey
Chairman
15 February 2021
During the year, the Remuneration
Committee undertook a review
of the Executive Directors’
Remuneration Policy as part of
the three-year review cycle. The
updated Remuneration Policy has
incorporated structural changes in
line with best market practice and
will be put to an advisory vote at
the 2021 AGM.
During 2020, the Board expanded
the role of the Nomination
Committee to provide guidance and
oversight of the implementation of
the Group’s sustainability strategy.
The Nomination Committee
was renamed the Governance,
Nomination and Sustainability
Committee and its Terms of
Reference were updated to reflect
its additional responsibilities.
Board Changes
James C. Kenny retired from the
Board following the Company’s
Annual General Meeting on 30
April 2020. On behalf of the Board,
I would like to thank James for his
contribution and service to the
organisation.
I am delighted to welcome Emer
Gilvarry and Jinlong Wang who
joined the Board as non-Executive
Directors on 1 November 2020 and 5
January 2021 respectively. Emer is a
highly experienced professional who
brings legal, business and corporate
governance expertise to the Board.
Jinlong is an experienced leader with
over 30 years’ experience in global
business development, consumer
branding and general management.
His in-depth understanding of
Asian markets, coupled with his
extensive knowledge of the Food &
Beverage industry, brings a key set
of skills to the Board. I look forward
to both of them making significant
contributions to the Board in the
years ahead.
Purpose and Values
Our Purpose, Inspiring Food,
Nourishing Life, and our Values of
Courage, Ownership, Inclusiveness,
Open-mindedness and Enterprising
Spirit are core elements of The Kerry
Way framework. During 2020,
the Board continued to ensure
that management promote our
purpose and values as a guide to
our employees in the way we
do business.
Kerry Group Annual Report 2020 10
STRATEGIC REPORT
Chief Executive Officer’s Review
The strength and
ingenuity of our people,
combined with the
proactive nature of our
business model have
been key drivers of
our recovery, and I am
immensely proud of
Kerry’s response to
the pandemic.
Edmond Scanlon
Chief Executive Officer
This year has been truly
unprecedented due to the
COVID‐19 pandemic, and I
am extremely grateful for the
tremendous efforts of our
people throughout the year in
supporting our customers and
local communities, aligned to
our Purpose, Inspiring Food,
Nourishing Life.
At the beginning of the year we
closely monitored developments
in China, and the decisive action
we took was crucial in ensuring
the safety of our people and their
families. In January, we set up
our global COVID-19 Taskforce,
a critical step in ensuring we were
proactive in addressing the various
challenges posed by the pandemic
as it spread globally.
Read More
Our Markets
Pages 24-25
Taste & Nutrition
Business Review
Pages 40-43
Consumer Foods
Business Review
Pages 44-45
Across the business, our people
faced these challenges with strength
and ingenuity. Their adaptability was
tested, as work practices changed
almost overnight. Their courage
was vital in ensuring that Kerry
played an important role through
this period of crisis in our industry
and within our communities. The
strength of our global supply chain
was instrumental in ensuring food
and beverage products continued to
reach consumers. The enterprising
spirit of our teams in supporting our
customers was displayed in a variety
of ways. This included sharing
our COVID-19 safety playbook
with customers to ensure their
operations were not compromised,
supplying PPE and sanitiser,
providing insights on developments
in product categories, and adapting
the innovation process for virtual
collaboration with many products
launched at record speed. These
examples highlight the resilience
and proactive nature of Kerry’s
business model, as we continue to
strive to be our customers’ most
valued partner.
In addition to these efforts, we
supported our local communities
throughout, by leading support
initiatives with vulnerable groups,
volunteering, and making donations
of food, PPE, and sanitiser to local
frontline staff.
I am immensely proud of Kerry’s
response to the pandemic and would
like to thank everyone for their
extraordinary efforts throughout.
Market
This year has seen major changes
in the daily lives of consumers
across the globe, with purchasing
and consumption behaviours
significantly disrupted, leading to a
much more dynamic marketplace.
At-home consumption has been
elevated, as consumers adapted to
changes in daily routines and work
practices. The foodservice channel
has been significantly impacted
due to restrictions on operations
and consumer mobility, leading to
increased demand for online and
delivery. Our foodservice business
was most impacted in the second
quarter, as many of our customers
were closed for extended periods,
with performance significantly
improving through the year as they
adapted their offerings to cater for
the changing marketplace.
The COVID-19 pandemic has served
to accelerate the key trends that
were on the rise at the beginning
of the year, with increased
demand for health and immunity
enhancement, plant protein
options, and products addressing
a diverse range of sustainability
Kerry Group Annual Report 2020 11
In the year, net capital expenditure
amounted to €311m (2019: €315m)
and research and development
expenditure was €282m (2019:
€291m). We continued to invest
under our strategic priorities for
growth and allocated resources
to key growth areas that have
accelerated through COVID-19,
in particular the areas of health
and wellness, plant protein and
natural preservation.
Results
Group revenue of €7 billion reflected
a reported decrease of 4.0%, with
an overall volume reduction of
2.9% in the year. This performance
reflected a strong recovery since
April with a return to volume growth
of 2.2% in the fourth quarter. The
Group reported trading profit of
€797.2m (2019: €902.7m). Group
trading margin decreased to 11.5%
as a result of significant operating
deleverage and COVID‐related costs
partially offset by cost mitigation
actions, with significant recovery in
business margins across the second
half of the year.
criteria. Customers are increasingly
focusing on sustainability as an
enabler of growth, leading to
significant opportunity for Kerry
and our differentiated portfolio of
sustainable nutrition solutions. As
customers adapt to this dynamic
operating environment, product
portfolios and menu offerings
continue to be evaluated, with new
product development strategies
focused on these rapidly changing
consumer demands. These
dynamics are leading to significant
challenges and opportunities across
the industry.
Strategic Developments
We made good progress across a
number of strategic fronts in the
year despite the challenges posed
by COVID-19. We moved into our
new Technology & Innovation
Centre in Shanghai earlier in the
year, while continuing to make good
progress in expanding our capacity
and deploying our technologies in
the APMEA region. We commenced
the strategic development of our
Georgia, US operation, which is
an important step in creating a
state-of-the-art facility to meet
the increasing demand for
integrated solutions across a
variety of protein applications.
We enhanced our proactive nutrition
capabilities through the acquisition
of Bio-K Plus International Inc., a
leading biotechnology company,
with a number of probiotics
in beverage and supplement
applications in Canada. We also
enhanced our local taste capabilities
in APMEA and LATAM through
the acquisitions of Jining Nature
Group in China and Tecnispice, S.A.
in Guatemala, both of which are
leaders in savoury taste in their
respective markets. We made good
progress in enhancing our portfolio
of food protection solutions, with
the 2019 acquisitions of Biosecur
and Isoage complementing our
industry-leading capability and
enhancing our ability to further
extend the shelf life of products
through our range of natural
sustainable solutions.
Following the successful completion
of our Towards 2020 programme,
we refreshed our sustainability
strategy to reflect the changing
marketplace and the increased
demand for sustainable food and
beverage products. Our goal of
reaching over two billion people
with sustainable nutrition solutions
by 2030, combined with our range of
science based targets demonstrate
how sustainable innovation and
co-creation will be central to Kerry’s
growth strategy in the coming
decade and beyond.
Kerry Group Annual Report 2020 12
Kerry Group Annual Report 2020STRATEGIC REPORT Business Performance
Taste & Nutrition had a reported
revenue decrease of 4.4%, reflecting
a volume decrease of 3.0%. Good
volume growth of 3.8% in the retail
channel was more than offset by
the volume reduction of 19.0% in
the foodservice channel, where
restrictions on movement were
introduced and customers were
closed for extended periods of time.
Our performance in the foodservice
channel significantly improved
through the year, recovering from
April when the impact was most
pronounced. This was led by North
America, where operators adapted
quickly to changes in regulations,
followed by a similar recovery in
Europe and APMEA over the course
of the year.
In the retail channel, our
performance in the Americas was
strong, led by Beverage, Dairy
and Meals. Europe delivered good
growth in Beverage, Snacks and
Meat, while APMEA continued to
progress through the year and
achieved excellent growth in Snacks
and Dairy.
Read More
Taste & Nutrition
Business Review
Pages 40-43
Consumer Foods
Business Review
Pages 44-45
Strong growth achieved
in Nutrition & Wellness
in particular through
proactive health and
immunity-enhancing
solutions.
Consumer Foods had a reported
revenue decrease of 2.1%, reflecting
a volume decrease of 2.6%, as
underlying volume growth of 2.2%
driven by good growth in snacking
and strong performances across our
plant-based ranges was more than
offset by the impact of the ready
meals contract exit in the prior year.
Future Prospects
The scale and pace of change
seen over the last 12 months has
led to customers fundamentally
reassessing their portfolios, ways
of working and business models.
This has created an environment
where customers are more open
to change and are looking for
partners to help them pivot at
pace, to address both short term
challenges and opportunities, while
also allowing them to target more
meaningful, purposeful, step change
innovations as they look out into the
future. Sustainability, localisation,
speed to market and innovation
process agility have been elevated
in importance as customers strive to
win market share.
13
Against this backdrop, Kerry’s
proactive approach and co-creation
business model is ideally placed to
support customers through these
changing market dynamics.
Looking to the year ahead, within
Taste & Nutrition, we see strong
growth prospects in the retail
channel, with continued recovery in
foodservice, underpinned by a very
good innovation pipeline and strong
customer engagement.
Our Consumer Foods business has
a good growth outlook supported
by continued innovation and the
strength of our brands.
We will continue to invest for growth
and enablement of our business
model, while continuing to pursue
M&A opportunities aligned to our
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 dynamic environment.
Edmond Scanlon
Chief Executive Officer
15 February 2021
Plant-based offerings
continue to deliver
excellent growth and
business development,
with the strength of our
Radicle™ portfolio a key
strategic advantage
for Kerry with our
customers
Kerry Group Annual Report 2020 14
Our People
Inspired by
Purpose
Our Culture:
Building a Sustainable Future
At Kerry, our purpose-led strategy is brought to
life through our people. We leverage our diverse,
entrepreneurial and results-focused culture, talent
and expertise to enhance the lives of others, accessing
our industry-leading taste and nutrition capabilities to
develop sustainable food and beverage solutions that
offer new growth opportunities for our customers.
Around the world, our 26,000+ people represent 121
nationalities, working across 160+ locations globally,
and spanning 31 countries. Staying true to our purpose
has never been more important than during 2020;
our people have demonstrated extraordinary levels of
agility, compassion and resilience through challenging
circumstances to do the right thing by each other, for
our customers, our shareholders, our communities and
our planet.
The strength and ingenuity of our
people, combined with the proactive
nature of our business model have
been key drivers of our recovery, and
we are immensely proud of Kerry’s
response to the pandemic.
Read More
Sustainability Review
Pages 46-70
Kerry Group Annual Report 2020STRATEGIC REPORT We leverage our diverse, entrepreneurial
and results-focused culture, talent and
expertise to enhance the lives of others.
We strive for excellence in the delivery of our core
business capabilities and differentiate ourselves as
an organisation through our people. We think and act
with a Safety First, Quality Always mindset and focus
on enabling our people to make it easier and more
valuable for our customers to do business with Kerry.
We hold ourselves to the highest standards of business
and ethical behaviour in everything we do (for details
of our Code of Conduct and approach to Safety in the
Workplace please see Sustainability Review on page 58).
Empowering and enabling our people is fundamental
to our groupwide approach to people leadership. We
strive to build an inclusive workplace where all our
people are inspired to learn together to grow our
business and fulfil their potential; winning for our
customers and for Kerry. Our leaders are committed to
fostering a great place to work, where our people are
engaged in meaningful work that is connected to our
purpose and can contribute fully to our shared success.
Our Purpose, Inspiring Food, Nourishing Life
underpins our culture. It is reflected in our values
and our people practices – from who and how we
attract talent, to recognising inclusive behaviours
and rewarding performance, to how we develop our
people, and how we play our role in society, supporting
the local communities in which we live and work
through volunteering and other charitable initiatives.
26,000+
People
121 31
Nationalities
Countries
Read More
Our Purpose and Vision
Pages 4-5
15
Our Values:
Nourishing our Culture
Our Values of Courage, Ownership,
Inclusiveness, Open-mindedness and
Enterprising Spirit guide us as we live
our Purpose. They describe our culture
and serve as our behavioural compass,
keeping us on the right path toward our
purposeful destination.
Courage
Ownership
Inclusiveness
Open-mindedness
Enterprising Spirit
Refreshed in 2019, they unite us across
cultures and geographies and help us to
earn the trust and respect of our people,
our customers and communities, having
been further embedded into our everyday
activities during 2020.
This year our people have truly felt the
power and importance of our values
in guiding our decisions and actions in
unprecedented circumstances; from our
unyielding focus on employee safety,
health and wellbeing as we continued to
fulfil our critical role in the global food
supply chain throughout 2020; to how
teams across the organisation were
empowered to make the right decisions at
pace in a volatile environment to support
and meet rapidly changing consumer
and customer needs; to how we pivoted
our global learning and development
support for our people in a new and virtual
world; and to our unfailing commitment
to our local communities through our
MyCommunity global volunteering and
charity funding initiative.
Our purpose and values-led culture is core
to why our people want to grow, perform
and make a positive difference in Kerry,
and enables us to attract and retain the
best talent in our industry. Our people are
passionate about what we do, and about
their role in driving sustainable growth
and performance. They go the extra mile
because they care deeply about Inspiring
Food and Nourishing Life.
Kerry Group Annual Report 2020
16
Enhancing our Employee Experience:
Winning and Growing Together
The engagement of our people is a key priority and
a key lead indicator of our future sustainable growth
and performance. We invest in continually building
the engagement capabilities of our people leaders as
champions of a healthy listening culture focused on
continuous improvement, and every year we pulse-check
on the progress we are making, where and how we can
continue to improve. This year, we were delighted that
86% of our people participated in our third groupwide
engagement survey to identify areas of strength and
areas for continuous improvement within our business,
an increase of 1% on 2019. Our unwavering focus on
our customers and our Safety First, Quality Always
mindset remains a clear area of strength for Kerry and
we saw a significant uplift in our global engagement
priorities for improvement: Leadership, Simplification
and Career development.
Our three global engagement priorities remain a focus
for 2021, along with continued enhancement of our
approach to Reward and Recognition. We will continue
to monitor our progress through ongoing dialogue with
our leadership teams, our people and through targeted
pulse surveys during 2021.
Finally, in 2019 the Board appointed Mr. Tom Moran,
non-Executive Board Director, as our designated
workforce engagement Director to ensure the Board
adequately take into consideration the interests and
views of our people in their decision making. Despite
the challenges that COVID-19 presented, Mr. Moran
was able to follow an active and participative employee
engagement plan with a cross-section of employees
from across the Group throughout 2020, reporting
back to the Board and other executives on his
observations and recommendations.
Throughout 2020 we continued to focus on these three priorities as follows:
Leadership
Simplification
Career Development
Our focus has been on improving
how our leaders engage and
collaborate in a consistent way,
how we lead and role model by
living our values consistently
every day. Since the 2019
survey, we have ensured that
all people leaders have an
annual ‘people leadership’ goal
in their objectives, accounting
for at least 15% of their overall
performance assessment. From
our 2020 survey, we have seen an
improvement in feedback that our
leaders are taking the necessary
actions to position the company
for long-term success, providing
a clear vision of what Kerry is
trying to achieve, and generating
excitement about the future of
the business.
Many of our people have
shared what they are doing
to make things easier for
our employees and for our
customers to do business with
us. From putting in place a
portal for collaboration with
our customers, to establishing
a regulatory self-service
documentation platform, to
improving our standard product
portfolio and sample turnaround
time – these examples show
the progress we are making
to simplify our business and
continue to transform for the
future. Our employees believe
our organisational structures
are helping us to achieve our
goals and feel that they have
appropriate influence in decision
making, contributing their ideas
to help shape our plans and
achieve our vision.
We aspire to be the first choice
for the best talent – where
everyone can fulfil their
potential and have interesting
and varied careers. Through
our Management Effectiveness
programme, we have a global
standard for consistent team
leadership, creating a better
employee experience. This
includes the expectation that
all employees have meaningful
one-to-one conversations about
their performance and career
potential. To date over 1,700
people leaders have participated
in this programme. We have
seen a significant improvement
in our employees’ belief that we
are developing a workforce that
adapts well to change and that
we are actively supporting the
learning and development of
our employees.
Read More
Corporate Governance Report
Pages 94-106
Kerry Group Annual Report 2020STRATEGIC REPORT
17
Diversity, Inclusion and Belonging:
Fostering an Inclusive Workplace
We are keen to leverage our position and reputation in
the industry to be a champion for positive change. In
2020 we demonstrated our commitment to promoting a
diverse and inclusive workplace through fully embedding
our Diversity, Inclusion and Belonging strategy within
our sustainability strategy for 2030 – Beyond the Horizon.
As a global business, we appreciate and value the
dynamic mix of people who bring new perspectives,
experiences and thought leadership to enable our
organisation to continuously grow and innovate
for our customers. Our ambition is to build a highly
inclusive workplace where everyone can be at their
best, contribute to our success and excel personally and
professionally. We will monitor our progress against this
ambition through a newly established Inclusion Index, as
part of our Employee Engagement Survey.
This relies on our leaders behaving inclusively, ensuring
all voices are heard and that individual opinions and
perspectives are visibly valued. During 2020, we sought
to support our leaders in becoming more aware of their
own potential biases and preferences, in actively seeking
out and considering different views and perspectives to
inform better decision making, inspiring improvements
in individual and organisational performance. We will
further build on this programme in 2021.
Whilst limited opportunities existed to bring our people
together this year, we continued to rally our people
behind a series of International Diversity Days such
as International Day of Women and Girls in Science,
International Women’s Day and Pride. Our local
Diversity, Inclusion and Belonging Committees are now
firmly established in key locations, and have continued
to flourish this year, actively educating and raising
awareness of global and local issues, inspiring our
people to come together to celebrate and promote this
important agenda within our business.
Our ambition is to build a highly
inclusive workplace where everyone
can be at their best, contribute to
our success and excel personally
and professionally.
Externally, we continue to strengthen our strategic
partnerships within Ireland and globally. This includes
our partnership with the Women Foodservice Forum
in North America, our membership of the Irish and
United Kingdom Chapters of the 30% club, the Agri-Food
Diversity & Inclusion Forum led by Bord Bia in Ireland
and our membership of the Valuable 500 in the United
Kingdom. We are challenging ourselves to do more
to pathway employment opportunities for individuals
with intellectual disabilities within our business and
continue to nourish their potential through our renewed
sponsorship of Special Olympics, with whom we have
been partnering since 2018 across Ireland, Great Britain,
Poland and more recently Germany, who will host the
Special Olympics World Summer Games in 2023.
Finally, we are making progress on our journey to
increase representation of women and improve
cultural diversity within our senior leadership teams,
improving on key measures agreed with our executives
in 2019, endorsed by our Board. This will ensure our
leadership teams and internal talent pools better
reflect the broader mix of capabilities we have within
our organisation. Our aim is to further strengthen
our approach in 2021 through broader diversity goals
incorporated within our sustainability strategy for 2030.
Read More
Sustainability Review
Pages 46-70
Kerry Group Annual Report 2020 18
Strengthening our Leadership and
Talent Pipeline: Building for the Future
Talent is a key enabler of our growth ambition. At Kerry,
we seek to partner with our talent, helping our people
to fulfil their career aspirations whilst ensuring we have
a ready supply of qualified expert and leadership talent
to meet the current and future needs of the business.
As part of this process, we upskilled our people leaders,
to give them the confidence and capabilities to engage
in more meaningful career development conversations
with their teams and provided comprehensive access
to leadership and career development resources in one
place, to enable all our people to grow both personally
and professionally with Kerry.
In 2019 we refreshed our approach to Succession
Planning and revised our Kerry Leadership
Competencies, ensuring expectations of leaders in
Kerry are fully aligned to our growth ambition; in
the firm belief that the strength of our leadership
capability is a significant lead indicator of our future
business performance. In 2020 we further embedded
Kerry Leadership Competencies into our core people
processes including external recruitment and internal
promotion processes to promote more informed and
objective talent decisions.
Despite a challenging year, we have maintained a focus
on strengthening the quality of our leadership team,
making several key appointments as well as continuing
to invest in building future leaders. Activities to
accelerate succession readiness of identified talent
have included participation in externally benchmarked
assessments and internally led 360 feedback tools to
better target leadership development plans, which
have included individual coaching, mentoring and
collective participation in certified business school
programmes.
In addition, this year we encouraged all our people to
take greater ownership of their careers by enhancing
our talent management systems to make it easier to
capture skills and experiences to improve alignment
with opportunities for continued progression within
our business.
While opportunities to offer international developmental
assignments were limited due to global travel
restrictions, we successfully supported over 150 strategic
moves and relocations this year. Our dedicated Global
Mobility team assisted through changing regulations and
travel restrictions to enable our people take up business
critical and key leadership roles to support our core
business priorities, contributing their expertise to deliver
on commitments made to customers, to our newly
acquired businesses and teams globally, to our people
and our communities.
Kerry’s early careers programme is a core component
of our strategy to strengthen our talent pipeline,
providing opportunities for interns and graduates to
develop skills and experience across a wide range of
core disciplines, enabling longer-term sustainable
leadership for the organisation.
In 2020 we consolidated our Graduate Programmes
globally to create one unified approach. We updated
our assessment processes to a fully virtual solution and
are currently re-imagining developmental activities for
our 2021 intake, ensuring Kerry remains competitive in
today’s graduate marketplace and is focused on building
future ready leaders.
Kerry Group Annual Report 2020STRATEGIC REPORT 19
At Kerry, we believe Total Reward is
about more than just pay and financial
rewards. It encompasses career
development, personal growth and
access to worldwide opportunities
in an inclusive culture where all our
people can flourish.
We are committed to gender pay equality and continue
to proactively monitor the pay of male and female
colleagues engaging in similar roles to ensure it is
comparable. We appoint and promote based on merit
and will continue to encourage the career development
of all our people, paying attention to our promotion and
recruitment practices with regards to gender, to support
greater representation of women at all levels.
The Remuneration Committee has been kept updated
on matters arising from the Total Reward review and
subsequent implementation of initial recommendations
in 2020.
Rewarding and Recognising our People
In 2020 we began to implement initial recommendations
from our Total Reward review completed in 2019.
Our aim is to ensure that our reward programmes
are positioned as one of the key levers of business
performance, are appropriately aligned with the
external market, and are delivered in a way which makes
them more easily understood and appreciated by our
people. This will continue to be a key focus for 2021 in
response to feedback from our 2020 Annual Employee
Engagement survey.
At Kerry, we believe Total Reward is about more than
just pay and financial rewards. It encompasses career
development, personal growth and access to worldwide
opportunities in an inclusive culture where all our
people can flourish. It supports us in being the first
choice for the best talent by providing fair, competitive
offerings which our employees' value and which drive
an ownership mindset to achieve Kerry’s success. Our
programmes are designed to recognise and reward
high performance while nurturing a healthy, diverse
workforce by offering choice and flexibility, supporting
our people and their families through different life
and career stages. Our Wellbeing framework – focused
on the pillars of Nutritional, Physical, Emotional and
Financial health, provides access to several tools and
resources, such as our global employee assistance
programme, and this Wellbeing approach continued to
play a critical role in our response to the emerging needs
of our people during 2020.
Kerry Group Annual Report 2020 20
How our Integrated
Business Model creates
Sustainable Value
Our Purpose, strategy and
industry-leading business model
are central to our circular approach
to creating sustainable value for
all stakeholders.
Inspiring Food, Nourishing Life
Our
Purpose
Guided by
Our Purp ose
Value
Created
E
v
G
o
e
l
v
i
n
n
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r
a
ti
n
g
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g
r
r
y’s
l
V
alu
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hip
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a
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Our Resources
e
s
s
b
y
M
o
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l
Employees: 26,000+ employees and 121 different nationalities
Customers: Revenue of €7.0bn across 150+ countries
Consumers: 1 billion+ consumers reached
Suppliers: >10,000 suppliers
Shareholders: 30,000 shareholders
Community and Government: Operations in 31 countries
Value Created
Employees: Payroll of €1.4bn
Customers: 18,000+ products
Consumers: >80% of products contributing positive and
balanced nutrition for over one billion consumers
Suppliers: Raw materials of €3.7bn
Shareholders: TSR of 16% CAGR since 1986
Community and Government: Donated equivalent of
>1 million meals in the UK in 2020
D
e liv e re d through
u r Strategies
O
Our
Strategy
Strategic Priorities
Read More
Our Purpose and Vision
Pages 4-5
Strategic Priorities
Pages 26-27
Authentic
Taste
Nutrition,
Wellness &
Functionality
Developing
Markets
Foodservice
Consumer
Foods
New Occasions
New Channels
New Customers
A.
FOUNDATIONAL
TECHNOLOGIES
Authentic
Taste
+
Nutrition,
Wellness &
Functionality
Business Model
B.
INTEGRATED VALUE CREATION
CUSTOMERS
C.
Global
Regional
Local
CHANNELS
CPGs
Retailers
Foodservice
Taste and
Nutrition
Solutions
Our
Business
Model
End Use Markets
Food
Beverage
Pharma
Meat
Dairy
Meals
Snacks
Bakery & Confectionery
Cereal & Sweet
D.
PEOPLE
+
CULTURE
SUSTAINABILITY
+
Kerry Group Annual Report 2020STRATEGIC REPORT
Guided by
Our Purp ose
Value
Created
Our
Purpose
O
u
r B
E
n
a
b
l
e
d
u
sin
e
s
s
b
y
M
o
d
e
l
Our
Business
Model
e
v
G
o
e
l
v
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r
a
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K
ti
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d
e
rs
hip
e liv e re d through
u r Strategies
O
D
Our
Strategy
Strategic Priorities
Authentic
Taste
Nutrition,
Wellness &
Functionality
Developing
Markets
Foodservice
Consumer
Foods
New Occasions
New Channels
New Customers
21
Kerry's unique business model is the industry
reference and customer preference.
Business Model
A.
FOUNDATIONAL
TECHNOLOGIES
B.
C.
INTEGRATED VALUE CREATION ENGINE
CUSTOMERS
Authentic
Taste
+
Nutrition,
Wellness &
Functionality
Taste and
Nutrition
Solutions
Global
Regional
Local
CHANNELS
CPGs
Retailers
Foodservice
End Use Markets
Food
Beverage
Pharma
Meat
Dairy
Meals
Snacks
Bakery & Confectionery
Cereal & Sweet
D.
PEOPLE
+
CULTURE
+
SUSTAINABILITY
A. Diverse Technology Portfolio
See pages 22-23.
B. Unique Integrated Value Creation Engine
This is where Kerry excels by deploying our global infrastructure across
the entire product development cycle from ideation right through to
product launch.
The three cogs of the engine comprise Culinary & Insights, which includes
over 100 culinary experts and baristas in conjunction with our leading market
insights teams, who work with customers on product discovery, ideation and
concept creation phases; the Development & Applications teams, which
include over 200 scientists who use Kerry’s sensory, analytical and regulatory
expertise to ensure every product meets consumer preferences; and Product
Process Technologies, where our extensive understanding and process
engineering expertise across 25 different process technology platforms,
combined with Kerry’s unique ability to develop finished consumer products
distinguish us in the industry.
Kerry is the leading provider of integrated solutions, leveraging these
interconnected capabilities to drive value for customers. Therefore, if a
customer wants to bring a new product to market quickly or move into an
adjacent category across the food, beverage and pharma landscape, Kerry
is the co-creation partner of choice.
C. Unparalleled Customer and Channel Access
Kerry delivers customer solutions across a broad set of routes to market in
both the retail and foodservice channels. Its diversified range of customers
extend from global to regional and local leaders.
D. People, Culture and Sustainability
Kerry’s business model is powered by our people, underpinned by our
culture, with sustainability at the heart of everything we do.
Read More
Our People
Pages 14-19
Sustainability Review
Pages 46-70
Kerry Group Annual Report 2020
22
Our Technologies
1,000+
Scientists
22
Core
Technologies
25
Process
Technology
Platforms
33
End use market Development
and Application Centres
across the globe
Our Technology Strategy –
Breadth | Depth | Integration
Our technology strategy is built on three
principles: breadth of technology capability,
depth and expertise within each of these
technologies, and critically the integration of
these technology capabilities to deliver unique
and value-added solutions for our customers.
Our Leading Technology Offering
Kerry has built a leading technology offering over the
past 30 years through a combination of investment
in R&D, people, infrastructure and acquiring new
technologies. We have over 1,000 scientists across a
multitude of disciplines globally spanning food science,
biochemistry, flavour science, engineering, to name a
few. This extensive scientific expertise drives our 22 core
technologies. It leverages our 25 process technology
platforms and is brought to life for our customers
through our 33 end use market development and
application centres across the globe. We seamlessly
integrate culinary food craft with deep fundamental
science to understand and solve our customers' needs.
Kerry Group Annual Report 2020STRATEGIC REPORT
23
Our broad range of Core Technologies across Taste and
Nutrition are enabled through our Process Technologies,
embedded in our Integrated Technologies and help us to
create unique Integrated Solutions for our customers across
our Food, Beverage and Pharma end use markets.
Texturants
Proteins
Modulation
Probiotics &
Bioactives
Broad Range of
Core Technologies
Across
Taste and Nutrition
Lipids
Enzymes
Bio-
preservation
Natural
Extracts
Dairy
Flavours
Sweet
Flavours
Thermal
Processing
Agglomeration
Encapsulation
I N T E GRATED PR
O
Extrusion
Reaction &
Cooking
Methods
E
T
S
A
T
Distillation
C
E
S
S
T
E
C
Spray
Drying
Enabled through our
Process
Technologies
H
N
O
L
O
G
Y
Forming,
Robing &
Enrobing
Baking
Emulsifiers
Pyrolysis
BIOS C I E N C
E
Ultrafiltration
Savoury
Flavours
Pharma
Fermentation
Enzymolysis
& Hydrolysis
Beverage
Taste
Food Nutrition
& Functionality
Meat
Taste
Embedded in our
Integrated
Technologies
Meat Nutrition
& Functionality
Food
Taste
Beverage Nutrition
& Functionality
Integrated
Solutions
How Our Technology
Portfolio is Deployed
We have industry-leading
capabilities across a broad range of
Core Foundational Technologies
spanning the areas of Taste, Nutrition
& Functionality. These include taste
technologies such as flavours, natural
extracts and texturants, combined
with nutrition and functionality
technologies including enzymes,
probiotics and bio-preservation.
Our technology portfolio is further
enhanced by a global network of
suppliers and partners.
We combine this individual
technology expertise with the
broadest Process Technology
footprint in our industry ranging
from pyrolysis to extrusion
to fermentation.
By combining and leveraging
our foundational technologies
and our extensive process
technologies capabilities we
create Integrated Technologies,
that are end-use market specific.
Kerry is the global leader in Taste &
Nutrition Integrated Technologies.
All of these capabilities are
leveraged by our Application
teams and chefs to create unique
Integrated Solutions for our
customers that are defined and
aligned to consumer needs and
bespoke customer requirements.
This is at the core of our unique
and leading taste and nutrition
positioning. It is where we excel
as the co-creation partner for our
customers. It is the culmination of
decades of research, development
and application expertise and
investment in our broad technology
platforms. It is an example of the
value-add staircase we've built. And
it's why we are the industry leader
in integrated solutions.
Unique
Proposition
Taste
Nutrition
Kerry Group Annual Report 2020
24
Our Markets
Expanding exponentially with each decade
– driven by the rise of the ‘&’ consumer.
KEY CONSUMER INFLUENCES
F&B CONSUMER EXPECTATIONS
CUSTOMER & INDUSTRY IMPACT
TV & news
outlets are
authority on
social norms
Convenient,
value-driven
family meals
&
Taste ‘or’ nutrition
Governments
step up guidance
on nutrition
recommendations
3x meals per day
balanced nutrition
&
Convenient, value-
driven family meals
&
Global tastes
The internet and
search capability a
catalyst for changing
behaviours
More focus on reducing
fat, salt & sugar
&
On-the-go
&
Convenient, value priced
family meals
&
Indulgent taste
Social media outlets
begin to foster a
start-up business
culture
On-the-go
&
More low and
reduced options
&
Local or organic
&
Single serving,
smaller portions
&
Culinary inspired taste
KERRY REVENUE
<€1bn
1980
1990
€3bn
2000
€4bn
2005
Big brands dominated the landscape
More focus on brand marketing
Lower level of innovation
Start-up culture less prevalent
Increase in smaller
brands entering
market
Nature of innovation
more incremental
S
N
O
I
T
A
T
C
E
P
X
E
&
S
R
E
V
I
R
D
R
E
M
U
S
N
O
C
T
C
A
P
M
I
Y
R
T
S
U
D
N
I
&
R
E
M
O
T
S
U
C
Where the consumer is at the centre
of everything we do
Kerry is a consumer-led organisation. Our business
model, structures and strategies continue to evolve,
centred around a deep understanding of diverse local
consumer preferences across the globe. Kerry’s sales
and commercial structures are managed primarily
through the lens of its food, beverage and pharma
end use markets, through which we sell 18,000+
products that support customers as they seek to
innovate to win in today’s food, beverage and
pharma marketplace.
The Evolution of our Marketplace
The consumer landscape has significantly
evolved over the past 40 years, with the
last five years seeing a profound change
led by millennials and younger consumers.
This has meant an increased appetite for
new experiences, a greater awareness of
how food and beverages are made, their
ingredients, and what the companies that
produce them stand for.
Kerry Group Annual Report 2020STRATEGIC REPORT
50% of the world
population is
online; rise of
influencers
Balanced nutrition;
high protein,
low sugar
&
Free-from
&
Clean label/trusted
ingredients
&
Locally sourced
&
Premium quality,
value prices
&
Sustainable brands
& options
&
New world tastes
Digital-centricity
enhanced by
global health
crises
Plant-based
&
Sustainability/
Purpose
&
Cleaner labels –
trusted and reduced
number of ingredients
&
Personalised nutrition/
functional food
&
Digital/out-of-home/
delivered
&
Locally sourced
&
Authentic and safe
&
Taste without compromise
Millennials
come of age
amidst a
recession
Rise of
premium and
value options
&
Local or
organic
&
Single serving,
smaller portions
&
Greater
awareness of
sustainability
&
Premium taste
25
Better for All
The
&
Consumer
Global
Functional
Omni-channel
Sustainable
Plant-based
Nutrition
Taste
€5bn
2010
€6bn
2015
€7bn
2020
Tomorrow
Cost optimisation
prioritised to compete
with private label
Marketing investment
to promote brands
Emerging brands
gaining market share
Larger players began
challenging existing
business models
Nutritional optimisation
required to maintain
market share
Greater urgency to
remove 'no-no’s’ from label
declarations
Stiff competition for
first-to-market status with
functional innovation
Increased importance
of long-term, strategic
supplier partners
Outsourced and
integrated innovation
processes
The ‘&’ Consumer
The Impact on our Industry
The ‘&’ consumer has now become the primary
influencer of food and beverage purchasing decisions
within households across the globe. Brands today must
make great tasting products that nourish consumers,
while enhancing their lives and regenerating the planet.
Innovation needs to be purposeful and meet the ever-
increasing demands of consumers.
All of these changes are reshaping the industry,
challenging long established business models and
redefining traditional ways of working. This is
creating significant opportunity, as customers
continue to look for partners that provide an
enhanced innovation service. This is leading to
significant market opportunity and a potential
future market far in excess of the current estimated
market size of c. €75 billion.
Kerry Group Annual Report 2020 26
Strategy &
Financial Targets
Strategic Priorities for Growth
The Group has clear strategic priorities for organic
and acquisitive growth which are the main drivers
of our medium term organic growth targets and
focus areas for capital allocation.
These are complemented by our margin expansion
objectives and underpinned by a returns discipline, with
sustainability a key consideration for all strategic decisions.
Strategic
Priorities
For Growth
Overview
Taste & Nutrition
Taste & Nutrition
Consumer Foods
Authentic Taste
Kerry’s Unique
Proposition
Nutrition, Wellness
& Functionality
Developing Markets
Foodservice
Our Authentic Taste
platform is founded
on a from-food-for-food
heritage and philosophy,
with a broad range of
foundational technology
capabilities including Sweet,
Savoury and Dairy Flavours,
Texturants, Taste Modulation
and Natural Extracts
amongst others.
Kerry has an extensive portfolio
of technologies across both
Taste and Nutrition. It has
developed its unique ability
to deploy these technologies
together to enhance the taste
and improve the nutrition and
functionality of products, which
has been integral to Kerry
leading the industry shift
towards delivering customer
specific integrated solutions.
Our Nutrition, Wellness &
Functionality platform delivers
benefits such as natural
preservation, immunity support,
digestive health, sustainable
efficiencies, fortification and
cleaner labels. These benefits
are achieved by leveraging this
broad foundational technology
platform which includes Proteins,
Probiotics and Bioactives, Lipids,
Enzymes, Bio-preservation and
Pharma amongst others.
Kerry’s local knowledge and focus,
combined with its global expertise
Kerry has an unrivalled position
as a partner to the foodservice
A leader in its categories in the
chilled cabinet primarily in Ireland
and capabilities have been key to its
channel. The breadth of our offering
and the UK.
excellent track record of growth in
developing markets.
Kerry’s target is to continue to achieve
volume growth in developing markets
of 10%+ per annum on average.
and depth of capabilities means Kerry
is the leading partner for foodservice
operators, as it provides menu
innovation and new platforms,
themed and seasonal offerings and
nutrition-led innovation.
Kerry’s target is to achieve volume
growth in Foodservice of 7% per
annum on average.
We will continue to drive growth
and outperform our markets in our
core business by responding to key
consumer trends in meat, meals
and dairy, while also leveraging this
core expertise in developing and
expanding adjacent categories.
Progress
in 2020/
Strategy
in Action
Winning Innovations in 2020
Radicle Plant-based
Teriyaki Sandwich
Immunity Enhancing
Powdered Beverage
Clean label
Charcuterie
In Europe, we created an
innovative plant-based
chicken-alternative for a key
foodservice customer using
our Plenti™ protein and our
taste technologies.
In North America, we developed
an immunity enhancing powdered
beverage for a leading functional
beverage brand customer to meet
the exceptional consumer demand
for health and wellness products.
In Europe, we partnered with a
key customer to launch a range
of new clean label meat snacks.
Our CleanSmoke™ enabled the
customer to communicate better
for the consumer and better for the
environment messaging on-pack.
• Plenti™ protein
• Wellmune immunity enhancing
• Consistent great tasting
• Authentic Savoury™ natural
flavours
beta glucan
• Natural flavour
traditional flavour
• Removal of harmful chemicals
• Savarome™ yeast extract
• 7% less carbon
• 84% less carbon
• 85% reduction in emissions
• Significant customer
• 88% less water usage
• +6g fibre per 100g
downstream carbon reduction
due to lower transport costs
Kerry Group Annual Report 2020STRATEGIC REPORT
Strategic
Priorities
For Growth
Overview
Progress
in 2020/
Strategy
in Action
27
The Taste & Nutrition division’s leading strategic
priorities for growth include Authentic Taste and
Nutrition, Wellness & Functionality. These are
intrinsically intertwined, as Kerry’s philosophy and
ways of working focus on delivering great tasting
products that enhance nutrition, wellness and
functionality properties, that are better for the planet
and help our customers meet their sustainability goals.
The Group also continues to advance our leading
positions in Developing Markets and the
Foodservice channel.
The Consumer Foods division is a leader in its
categories in the chilled cabinet and is focused on best
positioning its offering in the changing marketplace to
drive further growth.
Taste & Nutrition
Taste & Nutrition
Consumer Foods
Authentic Taste
Kerry’s Unique
Proposition
Nutrition, Wellness
& Functionality
Developing Markets
Foodservice
Core
New Occasions
New Channels
New Customers
Adjacencies
Our Authentic Taste
platform is founded
on a from-food-for-food
heritage and philosophy,
with a broad range of
foundational technology
capabilities including Sweet,
Savoury and Dairy Flavours,
and Natural Extracts
amongst others.
Kerry has an extensive portfolio
Our Nutrition, Wellness &
of technologies across both
Taste and Nutrition. It has
developed its unique ability
to deploy these technologies
together to enhance the taste
and improve the nutrition and
functionality of products, which
leading the industry shift
towards delivering customer
specific integrated solutions.
Functionality platform delivers
benefits such as natural
preservation, immunity support,
digestive health, sustainable
efficiencies, fortification and
cleaner labels. These benefits
are achieved by leveraging this
broad foundational technology
platform which includes Proteins,
Probiotics and Bioactives, Lipids,
Enzymes, Bio-preservation and
Pharma amongst others.
Texturants, Taste Modulation
has been integral to Kerry
Kerry’s local knowledge and focus,
combined with its global expertise
and capabilities have been key to its
excellent track record of growth in
developing markets.
Kerry’s target is to continue to achieve
volume growth in developing markets
of 10%+ per annum on average.
Kerry’s new Technology &
Innovation Centre in Shanghai
Kerry has an unrivalled position
as a partner to the foodservice
channel. The breadth of our offering
and depth of capabilities means Kerry
is the leading partner for foodservice
operators, as it provides menu
innovation and new platforms,
themed and seasonal offerings and
nutrition-led innovation.
Kerry’s target is to achieve volume
growth in Foodservice of 7% per
annum on average.
A leader in its categories in the
chilled cabinet primarily in Ireland
and the UK.
We will continue to drive growth
and outperform our markets in our
core business by responding to key
consumer trends in meat, meals
and dairy, while also leveraging this
core expertise in developing and
expanding adjacent categories.
• Performance across Kerry’s
developing markets was
impacted due to COVID-19
with overall volumes down
1.2% in the year, but Kerry
achieved a strong recovery
through the year and
returned to growth in the
last quarter – led by China
and Brazil.
• Completed strategic
acquisitions of Jining Nature
Group and Tecnispice, S.A.
which enhance Kerry’s
presence and capabilities in
China and LATAM.
• Strategic expansion of our
facilities in China and the
Middle East.
• Performance in the channel
• Delivered good underlying
volume growth of 2.2% with a
very strong finish to the year.
• Achieved strong growth in
snacking, particularly through
Cheestrings and Fridge Raiders
ranges.
• Strong performance and
development of plant-based
ranges led by the Richmond
brand.
was significantly disrupted
by restrictions due to the
pandemic. Many of Kerry’s
customers saw their
operations closed or at a
reduced capacity for extended
periods. Our performance
recovered through the year
as restrictions on mobility
reduced, however overall
volumes were down 19.0% in
the year.
• Achieved strong growth and
business development with
customers improving their
food delivery proposition.
• Successful launch of a
number of products including
Kerry’s proactive nutrition
technologies.
Kerry Group Annual Report 2020
28
Strategy & Financial Targets
Strategic Priorities for Margin Expansion
Operating
Leverage
Portfolio
Evolution
KerryExcel
Savings
KerryExcel
Investment
Optimise leverage
Differentiate
Drive efficiency
Re-invest to grow
Leverage 1 Kerry platform
New foundational technologies
Manufacturing excellence
Fragmentation response
Leverage routes to market
New markets
Supply chain excellence
Localisation of footprint
Leverage customer centres
New channels/geographies
Commercial excellence
Increased RD&A
Leverage footprint
Manage churn with agility
Service excellence
KerryConnect/Business Services
Medium Term Financial Targets
The medium term financial targets are based on a combination of growth and return.
Our overall target of 10%+ average constant currency adjusted EPS growth represents a balance of volume growth
and margin expansion, supported by the reinvestment of cash in our strategic priorities. The metrics of return on
average capital employed and cash conversion represent a balanced assessment of performance over time.
These return metrics ensure that there is an appropriate balance between growth and return. We believe that the
delivery of these financial targets should underpin a Total Shareholder Return outperformance relative to our peers.
Strategic Medium Term Financial Targets
GROWTH
RETURN
Volume
Growth1
3-5%
T&N 4-6% Foods 2-3%
Margin
Expansion
+30bps
Investments
for Growth
Constant Currency
Adjusted EPS
Growth2
+10%
ROACE2
12%+
Cash
Conversion3
>80%
Dividend
Growth
10%+
Total Shareholder
Return
Outperformance
Note 1: Volume growth targets assume 2% above market growth rates.
Note 2: Adjusted EPS growth and ROACE are calculated before brand related intangible asset amortisation and non-trading items (net of related tax).
Note 3: Cash conversion is free cash flow expressed as a percentage of adjusted earnings after tax.
Full definitions can be found on pages 231-234.
Kerry Group Annual Report 2020STRATEGIC REPORT Kerry Group Annual Report 2020
29
Our Strategic
Advantage
We are market leaders with a strong track record of proven success and
significant growth potential. Our leading business model is powered by
our people and our leading technology capability, underpinned by our
culture, with sustainability at the heart of everything we do.
MARKET
LEADERSHIP
Global leader across Taste
and Nutrition
Global leader in developing
markets with strong track
record of growth
Global leader in Taste &
Nutrition solutions for both
Meat and Meat Alternative
markets
Global leader in Clean Label
solutions
In 5 of the top 10 blockbuster
drugs
Leader in our chilled foods
categories in UK and Ireland
PROVEN SUCCESS
GROWTH POTENTIAL
9% CAGR for revenue
Industry-leading business model
13% CAGR for trading profit
12% CAGR for adjusted EPS
16% CAGR on share price
17% CAGR on dividend per share
25% absolute carbon reduction
(2010-2020)
CAGR = Compound Annual Growth
Rate since 1986
Unique integrated Taste &
Nutrition solution capability to
meet evolving market needs
Winning across all customer
segments and channels
Further strong growth potential
in developing markets
Extensive global footprint
platform to meet local needs
Proven consolidator
PEOPLE
TECHNOLOGY
LEADERSHIP
SUSTAINABLE
Proven leadership and
management capability
Purpose-driven inclusive culture
Investment in future focused
leadership, professional and
technical capabilities
Opportunities for personal
growth and career fulfilment
Globally diverse, mobile and
engaged workforce
Reward and recognition focus
Leading technology portfolio
with global leadership in
integrated technologies
Industry-leading application
and culinary expertise for
solutions delivery
Unparalleled breadth of
integrated manufacturing
process capabilities
Industry-leading infrastructure
of global and local technology
and application centres
Deep research and innovation
programme that leverages
global network of research and
technology partners
Core to our purpose, vision and
business model
Leading portfolio of positive and
balanced nutrition solutions
Innovation strategies focused on
the industry’s biggest challenges
Consistent delivery against
sustainability targets
Milestones linked to
performance management
2020
2020
9.8%
9.8%
9.8%
2020
2020
2020
412
67%
412
412
67%
67%
2020
2020
2020
29%
7%
29%
29%
7%
7%
2019
2019
11.8%
11.8%
11.8%
2019
2019
2019
515
74%
515
515
74%
74%
2019
2019
2019
20%
29%
20%
20%
29%
29%
2018
2018
12.0%
12.0%
12.0%
2018
2018
2018
447
72%
447
447
72%
72%
2018
(7%)
2018
2018
(7%)
(7%)
(7%)
(7%)
(7%)
30
Key
Performance
Indicators
The metrics outlined below are the
important measurement indicators of
Group performance in meeting our
objectives. The Group’s financial objective
is to maximise shareholder return by
delivering on our targets which are a
combination of growth and return metrics.
The Group also has a range of
non-financial metrics that are used to
measure performance with customers,
suppliers, community, environmental
targets and employee engagement. The
non-financial metrics shown below are further
complemented in the Sustainability section.
FINANCIAL PERFORMANCE INDICATORS
GROWTH
Metric
Volume Growth
Trading Margin Expansion
(2.9%)
(100bps)
Constant Currency
Adjusted EPS Growth
(9.4%)
Performance
2020
(2.9%)
2020
2020
(2.9%)
(2.9%)
2020
2020
2020
11.5%
(100bps)
11.5%
11.5%
(100bps)
(100bps)
2020
2020
2020
345.4
(9.4%)
345.4
345.4
(9.4%)
(9.4%)
2020
2019
2019
2019
2.8%
2.8%
2.8%
2019
2019
2019
12.5%
+30bps
12.5%
12.5%
+30bps
+30bps
2019
2019
2019
8.3%
8.3%
8.3%
2019
2018
2018
2018
3.5%
3.5%
3.5%
2018
2018
2018
12.2%
0bps
12.2%
12.2%
0bps
0bps
2018
2018
2018
8.6%
Commentary
Group volumes decreased by 2.9%
overall in the year, due to the
significant impact of COVID-19
on the foodservice channel.
Group trading margins decreased
by 100bps in the year, primarily due
to significant operating deleverage
and costs associated with COVID-19.
Raw Data
Raw Data
Raw Data
Constant currency adjusted EPS
decreased by 9.4% in the year.
Strategic
Importance/
Link To
Remuneration
-3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
Volume growth is an important metric
as it is seen as the key driver of organic
top-line business improvement. It is
a metric in the short term incentive
plan and is a key driver of adjusted
EPS growth, which is a metric for the
long-term incentive plan.
-3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
-3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
0
Trading margin expansion is a key
measure of profitability. It is a metric
in the short term incentive plan
and is a key driver of adjusted EPS
growth, which is a metric for the
long-term incentive plan.
6
12
9
15
12
15
12
15
0
3
6
9
0
3
3
6
9
Constant currency EPS growth is
a key performance metric as it
encompasses the components
of growth that are important to
the Group’s stakeholders. It is
a performance metric for the
long-term incentive plan.
0
150
100
100
150
250
100
200
250
300
350
150
200
200
400
50
50
50
0
0
250
8.6%
8.6%
2018
ROACE for the year was 9.8%, which
Cash Conversion for the year was
TSR for the year was 7.4%, as markets
reflected the significant impact from
67%, which reflected a working capital
and share prices were impacted as
COVID-19 on business performance.
investment with additional inventory
COVID-19 spread globally and impacted
to ensure continuity of supply through
all businesses, but recovered through
COVID-19 and to support the rollout of
the year as performances improved.
KerryConnect in North America.
Compound TSR over the past three years
amounted to 29.1%.
ROACE is a key measure of the return
Cash conversion is an important metric
TSR is an important indicator of how
the Group achieves on its investment in
as it measures how much of the Group’s
successful the Group has been in terms of
capital expenditure projects, acquisitions
adjusted earnings is converted into cash.
shareholder value creation. Relative TSR
and other strategic investments. It is a
100
100
100
200
300
0
0
0
400
200
200
It is a performance metric for the short
300
400
500
600
300
400
500
600
500
600
-10
-10
-10
10
15
20
-5
-5
-5
0
0
5
0
5
5
25
10
10
30
15
15
is a performance metric for the long-term
30
25
25
30
20
20
performance metric for the long-term
term incentive plan.
incentive plan.
300
300
350
350
400
400
0
2
4
0
0
6
2
2
8
4
4
10
6
6
12
8
8
10
10
12
12
incentive plan.
NON-FINANCIAL PERFORMANCE INDICATORS
Metric
Performance
Commentary
Consumers Reached
(1.0 Billion Consumers)
Understanding that nutrition plays a critical part in the broader sustainable development agenda, Kerry has
an ambitious target of reaching two billion people with sustainable nutrition solutions by 2030. This target
encompasses both financial and non-financial metrics, as key to increasing Kerry's reach will be achieving
business growth objectives, while creating a positive impact through the achievement of our sustainability
commitments. Kerry will deliver on this target by further enhancing and expanding our solutions portfolio
across the nutrition spectrum, as we respond to evolving market demands.
Strategic
Importance/
Link To
Remuneration
As the leader in Taste and Nutrition, we can play a pivotal role in supporting the transition to healthier
more sustainable diets. As awareness continues to grow of the link between diet and health, consumers are
increasingly looking for products that are good for them and the world around them. As customers seek to
respond, Kerry is ideally placed to support them in the development of products that deliver more sustainable
nutrition. The achievement of this target is fully integrated with our broader strategic objectives and central
to our Vision to be our customers' most valued partner, creating a world of sustainable nutrition. It is one of
the performance metrics that measures the Group’s performance compared to its 2030 sustainability strategy
targets. This will be incorporated in the sustainability metric in the 2021 long-term incentive plan.
Further definitions, calculations and detail for these are set out above and within the Sustainability section on pages 46-70.
The Group has set a Science Based Target for carbon reduction
In line with target 12.3 of the UN Sustainable Development Goals,
that reflects global efforts to limit warming to well below 2
we aim to halve food waste across our operations by 2030. In
degrees Celsius. In 2020, we achieved a 17% reduction in
2020, we made strong progress towards this goal achieving a 10%
absolute Scope 1 & 2 emissions versus our base year, driven
reduction across our sites versus our base year. Our approach
primarily by an ongoing focus on carbon efficiency and increasing
focuses on a number of different interventions at site level
the share of electricity we procure from renewable sources.
including the recovery and redistribution of products through
charitable partners, further optimising our production processes
and a programme of employee engagement and training.
The impact of climate change is increasingly clear with growing
A crucial intervention for sustainable food production is reducing
awareness of the implications for people, the environment
the current level of food waste, estimated to be up to a third of
and the economy. At Kerry, we understand the need to act
all calories produced. This significant environmental, social and
now in support of a global shift towards decarbonisation,
economic impact provides an opportunity for organisations to
helping to mitigate the worst effects of climate change and
capture additional value while acting to reduce environmental
building resilience across our value chain. We are committed to
impacts. At Kerry, we are committed to halving food waste across
addressing our carbon footprint and achieving net zero emissions
our operations and supporting our customers in reducing their
before 2050. It is one of the performance metrics that measures
food waste through the use of sustainable solutions, particularly
the Group’s performance compared to its 2030 sustainability
our preservation technologies. It is one of the performance metrics
strategy targets. This will be incorporated in the sustainability
that measures the Group’s performance compared to its 2030
metric in the 2021 long-term incentive plan.
sustainability strategy targets. This will be incorporated in the
sustainability metric in the 2021 long-term incentive plan.
Kerry Group Annual Report 2020STRATEGIC REPORT 31
Business strategy is set by the Board of Directors
and all Kerry employees work towards achieving
these goals.
Performance evaluation takes account of all key
performance indicators. Remuneration is directly
linked with performance versus targets.
Drivers of Shareholder Return
Volume
Growth
Margin
Expansion
Growth
EPS
Return
Return
ROACE
Cash
Conversion
Share
Price
Dividend
Total
Shareholder
Return
Underpinned by Sustainability metrics
Return on Average Capital
Employed (ROACE)
9.8%
Cash Conversion
Total Shareholder Return (TSR)
67%
7.4%
RETURN
2020
2020
(2.9%)
2020
(2.9%)
(2.9%)
2020
2020
2020
11.5%
(100bps)
11.5%
11.5%
(100bps)
(100bps)
2020
2020
2020
345.4
(9.4%)
345.4
345.4
(9.4%)
(9.4%)
2020
2020
2020
9.8%
9.8%
9.8%
2020
2020
2020
412
67%
412
412
67%
67%
2020
2020
2020
29%
7%
29%
29%
7%
7%
2019
2019
2019
2.8%
2.8%
2.8%
2019
2019
2019
12.5%
12.5%
+30bps
12.5%
+30bps
+30bps
2019
2019
2019
8.3%
8.3%
8.3%
2019
2019
2019
11.8%
11.8%
11.8%
2019
2019
2019
515
74%
515
515
74%
74%
2019
2019
2019
20%
29%
20%
20%
29%
29%
2018
2018
2018
3.5%
3.5%
3.5%
2018
2018
2018
12.2%
12.2%
0bps
12.2%
0bps
0bps
2018
2018
2018
8.6%
8.6%
8.6%
2018
2018
2018
12.0%
12.0%
12.0%
2018
2018
2018
447
72%
447
447
72%
72%
2018
(7%)
2018
2018
(7%)
(7%)
(7%)
(7%)
(7%)
Commentary
Group volumes decreased by 2.9%
Group trading margins decreased
Constant currency adjusted EPS
by 100bps in the year, primarily due
decreased by 9.4% in the year.
overall in the year, due to the
significant impact of COVID-19
on the foodservice channel.
Raw Data
Raw Data
Raw Data
to significant operating deleverage
and costs associated with COVID-19.
ROACE for the year was 9.8%, which
reflected the significant impact from
COVID-19 on business performance.
Cash Conversion for the year was
67%, which reflected a working capital
investment with additional inventory
to ensure continuity of supply through
COVID-19 and to support the rollout of
KerryConnect in North America.
TSR for the year was 7.4%, as markets
and share prices were impacted as
COVID-19 spread globally and impacted
all businesses, but recovered through
the year as performances improved.
Compound TSR over the past three years
amounted to 29.1%.
150
150
300
200
200
350
250
250
400
300
300
350
350
400
400
ROACE is a key measure of the return
the Group achieves on its investment in
capital expenditure projects, acquisitions
and other strategic investments. It is a
performance metric for the long-term
incentive plan.
10
6
10
8
12
10
12
0
4
2
6
4
8
0
2
0
2
4
6
8
12
Cash conversion is an important metric
as it measures how much of the Group’s
adjusted earnings is converted into cash.
It is a performance metric for the short
term incentive plan.
100
200
300
400
500
100
200
300
400
500
600
100
200
300
400
500
0
0
0
600
600
TSR is an important indicator of how
successful the Group has been in terms of
shareholder value creation. Relative TSR
is a performance metric for the long-term
incentive plan.
0
-10
15
5
10
0
-10
-10
15
20
25
20
25
30
20
25
30
10
10
15
30
-5
-5
-5
0
5
5
These are non-IFRS measures or Alternative Performance Measures. Definitions, calculations and reconciliations for these are set out above and
within the Supplementary Information section - Financial Definitions on pages 231-234.
Annual Carbon Reduction
(17%)
Reduction in Food Waste
(10%)
2050
Target of 33% reduction in Scope 1 & 2 carbon
emissions by 2030
Target of 33% reduction in Scope 1 & 2 carbon
emissions by 2030
2050
2050
Target of achieving 50% reduction in food
Target of 33% reduction in Scope 1 & 2 carbon
waste by 2030
emissions by 2030
Target of achieving 50% reduction in food
Target of 33% reduction in Scope 1 & 2 carbon
waste by 2030
emissions by 2030
2050
Commentary
Understanding that nutrition plays a critical part in the broader sustainable development agenda, Kerry has
an ambitious target of reaching two billion people with sustainable nutrition solutions by 2030. This target
encompasses both financial and non-financial metrics, as key to increasing Kerry's reach will be achieving
business growth objectives, while creating a positive impact through the achievement of our sustainability
commitments. Kerry will deliver on this target by further enhancing and expanding our solutions portfolio
across the nutrition spectrum, as we respond to evolving market demands.
2020
2020
17%
17%
2020
2020
10%
10%
The Group has set a Science Based Target for carbon reduction
that reflects global efforts to limit warming to well below 2
degrees Celsius. In 2020, we achieved a 17% reduction in
absolute Scope 1 & 2 emissions versus our base year, driven
primarily by an ongoing focus on carbon efficiency and increasing
the share of electricity we procure from renewable sources.
In line with target 12.3 of the UN Sustainable Development Goals,
we aim to halve food waste across our operations by 2030. In
2020, we made strong progress towards this goal achieving a 10%
reduction across our sites versus our base year. Our approach
focuses on a number of different interventions at site level
including the recovery and redistribution of products through
charitable partners, further optimising our production processes
and a programme of employee engagement and training.
Metric
Performance
Metric
Performance
Strategic
Importance/
Link To
Remuneration
Volume growth is an important metric
Trading margin expansion is a key
Constant currency EPS growth is
as it is seen as the key driver of organic
measure of profitability. It is a metric
a key performance metric as it
top-line business improvement. It is
in the short term incentive plan
encompasses the components
a metric in the short term incentive
-3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
-3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
-3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
and is a key driver of adjusted EPS
of growth that are important to
0
3
0
0
6
3
3
9
6
6
12
9
9
15
12
12
15
15
plan and is a key driver of adjusted
growth, which is a metric for the
EPS growth, which is a metric for the
long-term incentive plan.
long-term incentive plan.
the Group’s stakeholders. It is
a performance metric for the
long-term incentive plan.
0
50
100
0
0
150
50
50
200
100
100
250
Strategic
Importance/
Link To
Remuneration
As the leader in Taste and Nutrition, we can play a pivotal role in supporting the transition to healthier
more sustainable diets. As awareness continues to grow of the link between diet and health, consumers are
increasingly looking for products that are good for them and the world around them. As customers seek to
respond, Kerry is ideally placed to support them in the development of products that deliver more sustainable
nutrition. The achievement of this target is fully integrated with our broader strategic objectives and central
to our Vision to be our customers' most valued partner, creating a world of sustainable nutrition. It is one of
the performance metrics that measures the Group’s performance compared to its 2030 sustainability strategy
targets. This will be incorporated in the sustainability metric in the 2021 long-term incentive plan.
0
5
35
10
0
15
5
10
20
15
25
20
30
25
35
30
The impact of climate change is increasingly clear with growing
awareness of the implications for people, the environment
and the economy. At Kerry, we understand the need to act
now in support of a global shift towards decarbonisation,
helping to mitigate the worst effects of climate change and
building resilience across our value chain. We are committed to
addressing our carbon footprint and achieving net zero emissions
before 2050. It is one of the performance metrics that measures
the Group’s performance compared to its 2030 sustainability
strategy targets. This will be incorporated in the sustainability
metric in the 2021 long-term incentive plan.
50
0
0
10
20
10
40
30
50
40
30
20
A crucial intervention for sustainable food production is reducing
the current level of food waste, estimated to be up to a third of
all calories produced. This significant environmental, social and
economic impact provides an opportunity for organisations to
capture additional value while acting to reduce environmental
impacts. At Kerry, we are committed to halving food waste across
our operations and supporting our customers in reducing their
food waste through the use of sustainable solutions, particularly
our preservation technologies. It is one of the performance metrics
that measures the Group’s performance compared to its 2030
sustainability strategy targets. This will be incorporated in the
sustainability metric in the 2021 long-term incentive plan.
Kerry Group Annual Report 2020
32
Financial Review
In an unprecedented
year, we delivered a
resilient performance,
with a strong recovery
in business volumes
and profit margin.
Marguerite Larkin
Chief Financial Officer
Key Financial Indicators
In a year that was significantly
impacted by COVID-19, the Group
delivered revenue of €7 billion, trading
profit of €797m and free cash flow
of €412m. We have made a strong
recovery with business volumes
returning to growth in the fourth
quarter and trading profit margin
recovering. The strength of this
recovery, agility of our business model
and resilience of our business gives me
confidence that we will continue our
strong track record of creating value
for all our stakeholders.
The Financial Review provides an
overview of the Group’s financial
performance for the year ended 31
December 2020 and the Group’s
financial position at that date.
The Key Financial Performance
Indicators outlined below are used
to track business and operational
performance and help the Group
drive value creation. The Group has a
strong track record and a disciplined
financial approach of targeting
continued growth while meeting
return on investment objectives. This
combination of growth and return
help ensure the Group’s financial
objective of maximising shareholder
return is achieved.
(2.9%)
(2.9%)
Group
2020
2020
2020
(2.9%)
Volume Growth
2019
2019
2019
2.8%
2.8%
2.8%
2020
2020
Group
2020
Trading Margin
2019
2019
2019
11.5%
11.5%
11.5%
12.5%
12.5%
12.5%
2020
2020
2020
Adjusted EPS Growth
(9.4%)
(9.4%)
in Constant Currency
8.3%
8.3%
(9.4%)
2019
2019
2019
8.3%
Growth
Return
2020
2020
2020
(2.9%)
(2.9%)
(2.9%)
2019
2019
2019
2.8%
2.8%
2.8%
2020
2020
2020
2019
2019
2019
11.5%
11.5%
11.5%
2020
2020
2020
-10
-10
(9.4%)
(9.4%)
(9.4%)
-2
0
-4
-4
-6
-4
-2
-2
0
2
-8
-10
-8
-6
-6
-8
12.5%
12.5%
12.5%
2019
2019
2019
2
0
4
4
2
6
6
4
8
8
6
10
8
10
10
8.3%
8.3%
8.3%
ROACE
2020
2020
2020
2019
2019
2019
Cash Conversion
Dividend
9.8%
9.8%
9.8%
2020
2020
2020
€412m
€412m
€412m
67%
67%
67%
2020
2020
2020
86.5 cent
86.5 cent
86.5 cent
11.8%
11.8%
11.8%
2019
2019
2019
€515m
€515m
€515m
74%
74%
74%
2019
2019
2019
78.6 cent
78.6 cent
78.6 cent
-10
-10
-8
-8
-10
-6
-6
-8
-4
-4
-6
-2
-2
-4
0
0
-2
2
2
0
4
4
2
6
6
4
8
8
6
10
10
8
10
2020
2020
Further detail is set out within the Key Performance Indicators section on pages 30-31 and within the Supplementary Information
2019
2019
section – Financial Definitions on pages 231-234.
€412m
€412m
€515m
€515m
11.8%
11.8%
€412m
€515m
11.8%
9.8%
9.8%
2020
2020
2019
2019
2020
2020
2019
2019
67%
67%
74%
74%
9.8%
2019
2020
2019
2020
2020
2019
67%
74%
10
12
60
70
10
20
70
80
50
60
20
30
30
40
40
50
80
50
8
10
70
12
12
10
20
40
10
60
80
40
20
30
40
20
20
0
10
40
0
2
4
6
2
4
6
8
0
8
6
0
2
4
0
0
0
0
0
78.6 cent
78.6 cent
78.6 cent
86.5 cent
86.5 cent
86.5 cent
60
60
80
80
60
80
100
100
0
0
2
0
2
4
2
4
6
4
6
8
6
8
10
8
10
12
10
12
12
0
0
10
0
10
20
20
10
30
30
20
40
40
30
50
50
40
60
60
50
70
70
60
80
80
70
80
0
0
20
20
0
20
40
40
40
60
60
60
80
80
100
100
80
100
100
Kerry Group Annual Report 2020FINANCIAL REVIEW Analysis of Results
Revenue
Trading profit
Trading margin
Computer software amortisation
Finance costs (net)
Adjusted earnings before taxation
Income taxes (excluding non-trading items)
33
%
change
2020
€’m
2019
€’m
(4.0%)
6,953.4
7,241.3
(11.7%)
797.2
11.5%
(28.4)
(72.4)
696.4
(85.1)
611.3
(41.7)
(15.5)
554.1
EPS
cent
313.0
23.6
8.8
902.7
12.5%
(26.5)
(81.6)
794.6
(98.6)
696.0
(37.8)
(91.7)
566.5
EPS
cent
320.4
21.4
51.9
Adjusted earnings after taxation
(12.2%)
Brand related intangible asset amortisation
Non-trading items (net of related tax)
Profit after taxation
Basic EPS
(2.3%)
Brand related intangible asset amortisation
Non-trading items (net of related tax)
Adjusted* EPS
(12.3%)
345.4
393.7
Impact of retranslating prior year adjusted earnings per share at
current year average exchange rates
–
Adjusted* EPS in constant currency
(9.4%)
345.4
(12.3)
381.4
*
Before brand related intangible asset amortisation and non-trading items (net of related tax).
Revenue
Group revenue was €7.0 billion (2019: €7.2 billion) reflecting a reported decrease of 4.0%. This comprised a volume
decrease of 2.9% primarily due to the impact of COVID-19, positive pricing of 0.3%, an adverse transaction currency
impact of 0.1%, an adverse translation currency impact of 2.3% and contribution from business acquisitions of 1.0%.
2019: Group reported revenue +9.6%, volume growth +2.8%, pricing flat, translation currency +2.1%, contribution from
business acquisitions of +4.7%.
Taste & Nutrition revenue was €5.8 billion (2019: €6.0 billion) reflecting a reported revenue decrease of 4.4%. This
comprised a volume decrease of 3.0% due to the impact of COVID-19, positive pricing of 0.1%, an adverse transaction
currency impact of 0.1%, an adverse translation currency impact of 2.6% and contribution from business acquisitions
of 1.2%.
2019: Taste & Nutrition reported revenue +12.5%, volume growth +4.0%, pricing increase +0.1%, translation currency +2.6%,
acquisitions +5.8%.
Consumer Foods revenue was €1.28 billion (2019: €1.31 billion) reflecting a reported revenue decrease of 2.1%. This
comprised a volume decrease of 2.6%, positive pricing of 1.2% and an adverse translation currency impact of 0.7%.
Excluding the impact of the ready meals contract exit, volume would have increased by 2.2%.
2019: Consumer Foods reported revenue (2.4%), volume reduction (2.2%), pricing (0.5%), translation currency +0.3%.
Kerry Group Annual Report 2020
34
Trading Profit & Margin
Group reported trading profit of €797.2m (2019: €902.7m) and a trading margin of 11.5%, a decrease of 100bps,
primarily reflecting significant operating deleverage from lower volumes in Taste & Nutrition and COVID‐related costs
partially offset by cost mitigation actions.
Taste & Nutrition had a trading margin of 14.2%, a decrease of 110bps reflecting significant operating deleverage
and COVID‐related costs partially offset by cost mitigation actions.
Consumer Foods had a trading margin of 7.8%, an increase of 20bps, reflecting efficiencies delivered from the 2019
Realignment Programme and cost mitigation actions partially offset by net COVID‐related costs and negative net
pricing in a challenging market.
The trading profit reflects an EBITDA of €1.0 billion (2019: €1.1 billion) and an EBITDA margin of 14.4% (2019: 15.1%).
A comprehensive analysis of the revenue and trading performance of the Taste & Nutrition and Consumer Foods
divisions is included in the Business Reviews on pages 40-45.
Computer Software Amortisation
Computer software amortisation increased by €1.9m to €28.4m (2019: €26.5m) reflecting the ongoing progression
of the KerryConnect Programme including costs associated with the rollout across our sites in North America. The
capitalised element of the cost of this project is being amortised over a seven year period.
Brand Related Intangible Asset Amortisation
Brand related intangible asset amortisation increased to €41.7m (2019: €37.8m) which is reflective of recent
acquisition activity.
Finance Costs (net)
Finance costs (net) for the year decreased by €9.2m to €72.4m (2019: €81.6m) primarily due to lower interest rates.
The Group’s average interest rate for the year was 3.0% (2019: 3.7%).
Taxation
The tax charge for the year before non-trading items was €85.1m (2019: €98.6m) representing an effective tax rate of
13.0% (2019: 13.0%) and is reflective of the geographical mix of earnings.
Acquisitions
During the year, the Group completed three acquisitions for a total consideration of €280.0m. These acquisitions
were aligned to the Group’s strategic priorities for growth; enhancing both the Group’s taste and nutrition
technologies, expanding its presence in developing markets and in the foodservice channel.
Non-Trading Items
During the year, the Group incurred a non-trading item charge of €15.5m (2019: €91.7m) net of tax. The charge in the
year primarily related to costs associated with the integration of business acquisitions.
Adjusted EPS in Constant Currency
Adjusted EPS in constant currency decreased by 9.4% to 345.4 cent (2019: +8.3%) due to the impact of COVID‐19 on
business performance.
Basic EPS
Basic EPS decreased by 2.3% to 313.0 cent (2019: 320.4 cent). Basic EPS is calculated after accounting for brand
related intangible asset amortisation of 23.6 cent (2019: 21.4 cent) and a non-trading item charge of 8.8 cent net of
related tax (2019: 51.9 cent).
Return on Average Capital Employed
ROACE in the year was 9.8% (2019: 11.8%) reflecting the impact of COVID‐19 on current year profits.
Kerry Group Annual Report 2020FINANCIAL REVIEW Exchange Rates
Group results are impacted by year-on-year fluctuations in exchange rates 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 year end.
35
Australian Dollar
Brazilian Real
British Pound Sterling
Chinese Yuan Renminbi
Malaysian Ringgit
Mexican Peso
Russian Ruble
South African Rand
US Dollar
Dividends
Average Rates Closing Rates
2020
1.66
5.75
0.89
7.86
4.77
2019
1.61
4.44
0.88
7.73
4.65
2020
1.59
6.38
0.90
8.03
4.92
2019
1.60
4.53
0.85
7.82
4.60
24.34
21.59
24.46
21.19
81.16
72.28
90.68
69.34
18.62
16.20
18.02
15.77
1.13
1.12
1.23
1.12
During the year, the Group paid an interim dividend of 25.9 cent per A ordinary share, which was an increase of
10.2%. The Board has proposed a final dividend of 60.6 cent per A ordinary share, payable on 14 May 2021 to
shareholders registered on the record date of 16 April 2021. When combined with the interim dividend, the total
dividend for the year amounts to 86.5 cent per share (2019: 78.6 cent per share), which is an increase of 10.1% over
last year’s dividend. The Group’s aim is to have double digit dividend growth each year. Over 34 years as a listed
company, the Group has grown its dividend at a compound rate of 16.5%.
Balance Sheet
A summary balance sheet as at 31 December is provided below:
Property, plant & equipment
Intangible assets
Other non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Property, Plant & Equipment
2020
€’m
2019
€’m
1,990.6
2,062.9
4,687.1
4,589.7
170.6
179.5
2,594.8
2,672.2
9,443.1
9,504.3
1,696.3
2,014.0
3,091.3
2,928.1
4,787.6
4,942.1
4,655.5
4,562.2
4,655.5
4,562.2
Property, plant and equipment decreased by €72.3m to €1,990.6m (2019: €2,062.9m) primarily due to the
depreciation charge and the impact of foreign exchange translation partially offset by additions made in the period.
Net capital expenditure in the year (including computer software) amounted to €310.7m (2019: €315.3m). The level of
capital investment supports the Group’s growth initiatives and included 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.
Kerry Group Annual Report 2020 36
Intangible Assets & Acquisitions
Intangible assets increased by €97.4m to €4,687.1m (2019: €4,589.7m) due to the acquisitions made in the year
partially offset by amortisation charge and the impact of foreign exchange translation.
Current Assets
Current assets decreased by €77.4m to €2,594.8m (2019: €2,672.2m) due to decreased inventory and trade and
other receivables.
Retirement Benefits
At the balance sheet date, the total net deficit for all defined benefit schemes (after deferred tax) was €43.6m
(2019: €8.6m). The increase in the net deficit was driven primarily by lower discount rates which increased schemes’
liabilities, partially offset by strong returns on schemes’ assets. The net deficit expressed as a percentage of market
capitalisation at 31 December 2020 was 0.2% (2019: 0.04%).
Shareholders’ Equity
Shareholders’ equity increased by €93.3m to €4,655.5m (2019: €4,562.2m), resulting from profits generated during
the year, offset in part by dividends.
A full reconciliation of shareholders’ equity is disclosed in the Consolidated Statement of Changes in Equity on
page 162.
Capital Structure
The Group finances its operations through a combination of equity and borrowing facilities, including bank
borrowings and senior notes from capital markets.
The financing structure of the Group is managed in order to optimise shareholder value while allowing the Group to
take advantage of opportunities that might arise to grow the business. The Group targets acquisition and investment
opportunities that are value enhancing and the Group’s policy is to fund these transactions from cash flow or
borrowings while maintaining its investment grade debt status.
This is managed by setting Net debt to EBITDA targets while allowing flexibility to accommodate significant
acquisition opportunities. Any expected variation from these targets should be reversible between 18 and 24 months;
otherwise consideration would be given to issuing additional equity in the Group.
Free Cash Flow
In 2020, the Group achieved free cash flow of €412.0m (2019: €514.6m).
Free Cash Flow
Trading profit
Depreciation (net)
Movement in average working capital
Pension contributions paid less pension expense
Cash flow from operations
Finance costs paid (net)
Income taxes paid
Purchase of non-current assets
Free cash flow
Cash conversion¹
1
Cash conversion is free cash flow expressed as a percentage of adjusted earnings after taxation.
2020
€’m
797.2
200.7
(102.5)
(23.4)
872.0
(74.6)
(74.7)
2019
€’m
902.7
191.4
(89.5)
(26.7)
977.9
(80.8)
(67.2)
(310.7)
(315.3)
412.0
67%
514.6
74%
Kerry Group Annual Report 2020FINANCIAL REVIEW
37
Total Net Debt
Total net debt at the end of the year was €1,945.1m (2019: €1,972.2m). Lease liabilities are included in total net debt
for 2020 and 2019. The increase during the year is analysed in the table below:
Movement in Total Net Debt
Free cash flow
2020
€’m
412.0
2019
€’m
514.6
Acquisitions (net of disposals) including payments relating to previous acquisitions
(258.6)
(568.0)
Disposal of financial asset investments
Difference between average working capital and year end working capital
Non-trading items
Dividends paid
Shares issued during the financial year
Exchange translation adjustment
Increase in net debt resulting from cash flows
Fair value movement on interest rate swaps
Exchange translation adjustment on net debt
Increase in net debt in the year
Net debt at beginning of year
Net debt at the end of year – pre lease liabilities
Lease liabilities
Total net debt* at the end of year
5.3
(6.2)
(39.7)
-
25.6
(89.1)
(143.1)
(128.3)
-
(4.6)
0.1
(2.5)
(34.9)
(247.6)
7.6
26.5
(0.8)
12.5
(4.2)
(239.3)
(1,862.8)
(1,623.5)
(1,863.6)
(1,862.8)
(81.5)
(109.4)
(1,945.1)
(1,972.2)
* Prior year has been re-presented to include lease liabilities in total net debt.
The exchange translation adjustment of €26.5m results primarily from borrowings denominated in US dollar
translated at a year end rate of $1.23 versus a rate of $1.12 in 2019.
Maturity Profile of Total Net Debt
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Total net debt at end of year
Weighted average maturity (years)
Credit Facilities
2020
€’m
533.3
(104.9)
2019
€’m
374.9
(25.6)
(1,626.3)
(765.4)
(747.2)
(1,556.1)
(1,945.1)
(1,972.2)
5.2
5.9
Undrawn committed facilities at the end of the year were €1,100m (2019: €1,100m) while undrawn standby facilities
were €320.0m (2019: €330.0m).
In early 2020, the Group repaid US$208m of maturing private placement notes. During the second quarter of 2020,
the Group completed a €200m tap issuance onto its 2025 Senior Notes and exercised the first of the two ‘plus one
year’ extension options on the revolving credit facility to further extend the maturity date of this facility to June 2025.
Full details of the Group’s financial liabilities, cash at bank and in hand and credit facilities are disclosed in notes 22
and 23 to the Consolidated Financial Statements. Of the cash at bank and in hand at year end, €75m was on short
term deposit under a Sustainable Deposits programme.
Kerry Group Annual Report 2020
38
Key Financial Ratios
The Group’s balance sheet is in a strong position with a Net debt to EBITDA* ratio of 1.9 times. At this ratio the
Group has significant liquidity headroom to support future growth plans. The Group’s debt is not subject to financial
covenants, other than €163.0m of US$ Private Placements. Group Treasury monitors compliance with all financial
covenants and at 31 December the key ratios are as follows:
Net debt: EBITDA*
EBITDA: Net interest*
Covenant
Maximum 3.5
Minimum 4.0
2020
Times
1.9
13.8
2019
Times
1.8
13.2
Net Debt: EBITDA*
EBITDA: Net Interest*
3.5x
3.5x
3.0x
3.0x
2.5x
2.5x
2.0x
2.0x
1.5x
1.5x
1.0x
1.0x
19.0x
19.0x
17.0x
17.0x
15.0x
15.0x
13.0x
13.0x
11.0x
11.0x
9.0x
9.0x
7.0x
7.0x
5.0x
5.0x
2016
2016
2017
2017
2018
2018
2019
2019
2020
2020
2016
2016
2017
2017
2018
2018
2019
2019
2020
2020
*
Calculated in accordance with lenders' facility agreements which take account of adjustments as outlined on page 233.
Share Price and Market Capitalisation
The Company’s shares traded in the range €91.95 to €125.60 during the year. The share price at 31 December 2020
was €118.50 (2019: €111.10) giving a market capitalisation of €20.9 billion (2019: €19.6 billion). Total Shareholder
Return for 2020 was 7.4% (2019: 29.3%).
Financial Risk Management
Within the Group risk management framework as described in the Risk Management Report on page 72, the Group
has a Financial Risk Management Programme, which is approved by the Board of Directors and is subject to regular
monitoring by the Finance Committee and Group Internal Audit. The Group does not engage in speculative trading.
Further details relating to the Group’s financial and compliance risks and their associated mitigation processes are
discussed in the Risk Management Report on pages 71-83 and in note 23 to the Consolidated Financial Statements.
Summary and Financial Outlook
The Group delivered a resilient performance in 2020, generating revenue of €7.0 billion, trading profit of €797m
and free cash flow of €412m through an unprecedented year which saw significant impact from COVID-19. At year
end the balance sheet is in a good position and with a Net debt: EBITDA ratio of 1.9 times, the Group has significant
headroom to support the future growth plans of the organisation.
The Group will continue to invest for growth aligned to the changing market landscape and pursue M&A
opportunities aligned to our strategic growth priorities.
Kerry Group Annual Report 2020FINANCIAL REVIEW 39
10 Year Earnings History
A strong history of positive results
Revenue
Trading profit
2011
€'m
**2012
€'m
2013
€'m
2014
€'m
2015
€'m
2016
€'m
2017
€'m
2018
€'m
2019
€'m
2020
€'m
5,302.2 5,848.3 5,836.7 5,756.6 6,104.9 6,130.6 6,407.9 6,607.6 7,241.3 6,953.4
500.5
559.0
611.4
636.4
700.1
749.6
781.3
805.6
902.7
797.2
Computer software amortisation
(5.4)
(8.7)
(11.5)
(13.6)
(18.7)
(23.4)
(24.3)
(25.0)
(26.5)
(28.4)
Finance costs (net)
(46.0)
(62.1)
(67.6)
(52.9)
(69.3)
(70.4)
(65.6)
(67.0)
(81.6)
(72.4)
Adjusted earnings before taxation*
449.1
488.2
532.3
569.9
612.1
655.8
691.4
713.6
794.6
696.4
Income taxes (excluding non-trading items)
(74.6)
(77.3)
(79.1)
(79.6)
(81.1)
(86.7)
(89.5)
(89.2)
(98.6)
(85.1)
Adjusted earnings after taxation*
374.5
410.9
453.2
490.3
531.0
569.1
601.9
624.4
696.0
611.3
Brand related intangible asset amortisation
(13.9)
(14.7)
(16.6)
(14.4)
(18.7)
(23.0)
(23.6)
(28.8)
(37.8)
(41.7)
Non-trading items (net of related tax)
0.1 (135.5)
(352.2)
4.0
13.1
(13.0)
10.2
(55.1)
(91.7)
(15.5)
Profit after taxation attributable
to owners of the parent
360.7
260.7
84.4
479.9
525.4
533.1
588.5
540.5
566.5
554.1
Adjusted EPS (cent)*
213.4
234.0
257.9
278.9
301.9
323.4
341.2
353.4
393.7
345.4
* Adjusted EPS, adjusted earnings before taxation and adjusted earnings after taxation are calculated before brand related intangible asset
amortisation and non-trading items (net of related tax) and are considered more reflective of the Group's underlying trading performance.
Adjusted EPS performance on a constant currency basis is disclosed on page 232.
**
2012 was restated in line with IAS 19 (2011) 'Employee Benefits' which was adopted as required by IFRS in 2013. All other years are presented
as reported.
Kerry Group Annual Report 2020
40
Kerry Group Annual Report 2020
Business Review
Taste & Nutrition
STRATEGIC REPORT Kerry Group Annual Report 2020
41
Kerry is the world’s leading taste
and nutrition company, providing
sustainable nutrition solutions
for the food, beverage and
pharmaceutical industries. Our
broad technology foundation,
customer-centric business model,
and industry-leading integrated
solutions capability make Kerry the
co-creation partner of choice.
Overall volume reduction of 3.0%,
with a return to growth of 0.7% in Q4
Retail channel delivered strong growth of 3.8%,
led by Beverage and Pharma EUMs, with Food
EUM performance driven by Snacks and Meals
Foodservice channel volumes declined 19.0%
with continued recovery through H2 (Q3: -14.9%
| Q4: -8.0%)
Trading margin decrease in the year
principally driven by operating deleverage
and net COVID‐related costs, with continued
recovery in H2 aligned to the improvement in
business volumes
Revenue
2020
€5,753m (volume -3.0%)
Trading Margin
2020
14.2% (-110bps)
Read More
Our Business Model
Pages 20-21
Our Technologies
Pages 22-23
Taste & Nutrition reported revenue was €5.8 billion,
reflecting a reported decrease of 4.4%, primarily
due to lower volumes and adverse translation
currency, partially offset by contribution from
business acquisitions. Taste & Nutrition began the
year strongly before the global spread of COVID‐19.
While performance was most impacted in the second
quarter, business volumes recovered well since then
and returned to growth in the fourth quarter. We
saw a significant change in the nature of innovation
through the year, as product ideation, collaboration
and co-creation was adapted to cater for virtual
engagement through this period. Kerry’s nutrition
and wellness technology portfolio had a very good
performance within the retail channel through
customised solutions incorporating our broad protein
portfolio, fermented ingredients, probiotics and
immunity enhancing technologies.
Business volumes in the foodservice channel declined
19.0% in the year, with many out‐of‐home food and
beverage outlets closed for an extended period of
time. This impact was the primary driver of overall
performance in developing markets, where business
volumes declined by 1.2%.
In the year, we completed a number of key strategic
acquisitions. These included Bio-K Plus International
Inc., a leading biotechnology company with a
number of probiotics in beverage and supplement
applications in Canada, and we acquired Jining Nature
Group in China and Tecnispice, S.A. in Guatemala,
both of which are local leaders in savoury taste in
their respective markets within APMEA and LATAM.
42
Kerry Group Annual Report 2020
AMERICAS
Americas Region
Overall volume reduction of 2.5%, with a
return to growth of 0.5% in Q4
Retail channel delivered strong growth led
by the Beverage EUM and Meals and Snacks
within the Food EUM
Foodservice performance recovered well
across H2
Kerry’s immunity enhancing
technologies, broad protein
portfolio and natural
extracts were deployed in a
number of nutritional, low/
no alcohol and plant‐based
beverage launches.
Revenue in the region was €3.1 billion, reflecting a
reported decrease of 3.5%, with lower business volumes
of 2.5%, positive pricing of 0.1%, an adverse translation
currency impact of 3.0% and contribution from business
acquisitions of 1.9%.
The retail channel in North America achieved strong
growth in the year. This was led by an excellent
performance across the Beverage EUM, where Kerry’s
immunity enhancing technologies, broad protein
portfolio and natural extracts were deployed in a
number of nutritional, low/no alcohol and plant‐based
beverage launches. Within the Food EUM, Meals
achieved very strong growth through clean label
innovations incorporating Kerry’s natural stocks and
broths, with a number of plant-based launches also
supporting growth. Overall Meat performance was
impacted in the year by customer product availability
on retail shelves, while Snacks performed well through
more at-home consumption and increased demand for
healthier options.
The foodservice channel in North America was
impacted considerably in the second quarter, however
performance has seen a significant improvement since
then, led by quick service restaurant chains, while dine-
in restaurants and independent operators were more
challenged. This improvement in performance has
been supported by health and wellness innovations and
limited time offerings.
In LATAM, the foodservice channel was impacted later in
the year, but recovered well through the fourth quarter.
Brazil returned to growth led by beverage and ice‐cream,
while market conditions in Mexico and CACAR remained
more challenged.
Pharma achieved very strong growth globally, with cell
nutrition performing well and immunity enhancing
technologies delivering excellent growth in the year.
Kerry Group Annual Report 2020
43
EUROPE
APMEA
Europe Region
APMEA Region
Overall volume reduction of 5.0%, with
Overall volume reduction of 1.9%,
business volumes of -0.4% in Q4 reflecting
further recovery
Retail channel delivered good growth in
Beverage EUM and Snacks and Meat within
the Food EUM
Foodservice continued to recover but was
impacted by restrictions late in the year
with growth of 2.8% in Q4
Retail channel performed well with strong
growth in H2 within the Food EUM through
Snacks and Dairy
Foodservice continued strong recovery
through Q4
Revenue in the region was €1.4 billion, reflecting a
reported decrease of 5.6%, with lower business volumes
of 5.0%, an adverse transaction currency impact of 0.1%,
an adverse translation currency impact of 0.9% and
contribution from business acquisitions of 0.4%.
Revenue in the region was €1.2 billion, reflecting a
reported decrease of 5.2%, with lower business volumes
of 1.9%, an adverse transaction currency impact of 0.2%,
an adverse translation currency impact of 3.5% and
contribution from business acquisitions of 0.4%.
This was the most impacted region from COVID-
related restrictions in the foodservice channel in the
second quarter, but has recovered well since then
with customers reopening and operating at varying
capacities through the second half of the year. Kerry’s
improvement in the foodservice channel was supported
by a number of launches incorporating the Radicle™
portfolio of plant-based technologies.
The retail channel performed well, with Beverage
achieving good growth in nutritional and low/no alcohol
beverage categories. Within the Food EUM, Snacks
had strong growth through clean-label and healthier
innovations in savoury applications with a number of
large customers. Dairy performance was impacted
by product repositioning in the category and supply/
demand dynamics in global dairy markets. Meat
performed well in the year, driven by strong growth and
business development in plant‐based alternatives, as
ranges continued to expand within the category. Russia
and Eastern Europe delivered a very good performance
in the year, led by Snacks and Meat within the Food EUM.
Overall performance in the region further improved
in the fourth quarter, having returned to growth in
the previous quarter. This growth was led by China
and the Middle East, while there remained variations
in performance across the region aligned to local
conditions. The foodservice channel continued to
recover through the year as restrictions on mobility
eased. The retail channel performed well, led by the
Food EUM of Snacks, where we saw a lot of innovation
in the category across the region. Demand increased for
indulgent offerings as consumers spent more time at
home, while healthier snacks with nutritional claims also
had a strong performance in the year, benefitting from
increasing emphasis on ingredient label declarations for
children in China. Meals was more challenged, as many
consumers opted for more traditional food offerings
during the initial period where restrictions were in
place. Dairy had strong growth from increased demand
with regional leaders for Kerry’s clean label solutions,
with Meat also performing well, particularly in the
Middle East.
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 the new Technology & Innovation Centre
in Shanghai.
44
Business Review
Consumer Foods
Kerry Foods is an industry-leading
manufacturer of chilled food
products primarily to the Irish and
UK markets.
Read More
Our Markets
Pages 24-25
Volume performance reflected underlying
growth of 2.2%, more than offset by the ready
meals contract exit impact
Volume growth of 8.8% in Q4 represented
strong performances across the portfolio and
some stocking benefits
Pricing of +1.2% reflective of increases in input
costs and market pricing
Trading margin +20bps as efficiencies partially
offset by COVID‐19 impacts and pricing
Kerry Group Annual Report 2020STRATEGIC REPORT Consumer Foods
Revenue
2020
€1,279m (volume -2.6%1)
Trading Margin
2020
7.8% (+20bps)
¹ volume growth of 2.2% excluding contract exit
45
The market saw major variations in category
performances through the year, as consumers’
purchasing and consumption behaviours changed
significantly as a result of COVID-19. Shopping habits
became more functional and impulse purchases have
reduced. At-home snacking increased, as out-of-
home occasions have been curtailed by restrictions on
movement. Many retailers scaled back category product
listings and their freshly prepared over‐the‐counter
operations. Large traditional retailers have benefitted
through the year, with increased average basket sizes
and reduced promotional activity, while demand for
online and delivery has increased dramatically.
Consumer Foods reported revenue was €1.3 billion,
reflecting a reported decrease of 2.1%, as lower volumes
due to the previously reported ready meals contract exit
and adverse foreign currency movements were partially
offset by increased pricing.
The Richmond sausage range achieved very good
growth in the year, with strong growth across Kerry’s
branded meat-free ranges driving further market share
gains. The Denny brand performed well, while overall
meat sales were impacted by reduced retailer deli
counter operations. Spreadable butter and Dairygold
performed well due to increased at-home consumption.
Chilled meals was impacted by reduced consumer
impulse purchases, while frozen meals benefitted
from increased retailer stocking in the fourth quarter.
Plant-based meals had strong growth across both
chilled and frozen ranges through the year, with a
number of successful launches supporting performance.
The snacking range and home delivery meals business
achieved very strong growth in the year. This was led
by Fridge Raiders, which benefitted from increased
at-home snacking consumption. The Strings & Things
range, led by Cheestrings also delivered strong growth
with a number of innovations, while Oakhouse Foods
home delivery meals had exceptionally strong growth
in the year.
Kerry Group Annual Report 2020 46
Sustainability Review
Beyond the Horizon
1billion+
We currently reach over one billion
consumers with positive and
balanced nutrition solutions.
At Kerry, our ambition is to reach over
two billion people with sustainable
nutrition solutions by 2030. In 2020,
we launched our Beyond the Horizon
strategy, setting out how we will achieve
this, through our industry leading
portfolio, innovation expertise and
expanded sustainability commitments,
co-creating products that are better for
people, society and the planet.
With a heritage rooted in sustainable development,
we are proud of our achievements to date and the
continued decoupling of our growth from environmental
impacts. We currently reach over one billion consumers
with taste and nutrition solutions that improve the food
and beverages people love. However, we recognise the
very significant environmental and social challenges
facing our industry. Given our scale, reach and our
ability to impact on consumer health and wellbeing, we
are committed to the transformation of the food system,
creating a future where healthier, more nutritious food
is produced in a way that respects both people and the
planet, enabling all people and communities around the
world to access and consume healthier, sustainable and
great tasting products.
Read More
Our Purpose and Vision
Pages 4-5
Find our Beyond the Horizon
strategy at www.kerry.com/
sustainability
Our Vision is to be our customers’
most valued partner, creating a
world of sustainable nutrition.
Kerry Group Annual Report 2020STRATEGIC REPORT 47
Meeting the Global Challenge
In 2015, world leaders agreed to a UN roadmap for more
sustainable global development by 2030. Through a set
of seventeen Sustainable Development Goals (SDGs) and
associated targets, they adopted a pathway to address
poverty, protect the planet and improve the lives and
prospects for all. As we enter 2021, the achievement
of these goals is in doubt without an accelerated and
concerted effort by all parts of society to deliver on
the SDGs.
At Kerry, we look beyond the horizon to a future of
sustainable nutrition; one that provides positive and
balanced nutrition to consumers globally and where
consumers are offered sustainable choices that
involve no compromise on taste or quality; a future
where farmers are supported to produce in harmony
with nature, employing practices that help protect
biodiversity, store carbon and regenerate soils; a future
where all companies produce and consume while
respecting the principles of the circular economy.
The food system has a critical role to play in the
achievement of these goals. According to the World
Health Organisation, good nutrition is central to the
achievement of twelve of the seventeen SDGs. However,
today we know that more than two billion people
globally are overweight or obese while almost 700
million go hungry every day. Food production is also
responsible for a significant share of greenhouse gas
emissions and global resource use and yet it is estimated
that a third of all calories produced are not consumed
due to food loss and waste.
At Kerry, we look beyond the horizon
to a future of sustainable nutrition; one
that provides positive and balanced
nutrition to consumers globally.
As we pursue this vision, we will continue to contribute
to the achievement of the UN Sustainable Development
Goals. While all seventeen goals are critically important,
Kerry’s global results, commitments and innovations
mean that we are best placed to make the most
significant contribution to the targets associated
with goals 2, 3, and 12.
Zero Hunger
We can play a key role in helping people
access sufficient amounts of the right
nutrition while working with producers
to sustainably intensify production and
improve livelihoods
Good Health
& Well-being
We work with customers
to support good health
and wellbeing and
reduce mortality through
creating products that
help improve diets
Responsible
Consumption
and Production
We seek to use natural
resources responsibly
and through our
innovation and
technology portfolio, we
enable our customers to
consume and produce
more sustainably
Kerry Group Annual Report 2020 48
About this Review
[GRI 102: General Disclosures 2016, 102-50, 102-51, 102-52,
102-53]
Kerry reports its sustainability performance annually and
our previous sustainability review was published as part
of our 2019 Annual Report in March 2020. To help guide
our reporting, the material in this report references the
Global Reporting Initiative’s (GRI) framework and within
this review we identify where specific standards are GRI-
referenced. All data relates to the full year 2020 unless
otherwise stated. For environmental metrics, the impact
of recent acquisitions is excluded from our performance
and we use a 2017 baseline for our targets.
Our 2017 baseline was chosen as it provided the most
recent full year of data when the target setting process
commenced. The Greenhouse Gas (GHG), waste and
water performance data presented in this report is
independently assured by Jacobs UK Ltd to AA1000
Assurance Standard. The full assurance statement can
be found on kerrygroup.com/sustainability. For
comments or questions regarding this sustainability
review, please contact corpaffairs@kerry.com.
Engaging with Our Stakeholders
[GRI 102: General Disclosures 2016, 102-40, 102-42, 102-43]
The nature of the challenges facing our industry and
the required pace of change means that we must build
a shared understanding and a common path forward.
Kerry is committed to ongoing and constructive
engagement with our stakeholders through structured
two-way dialogue and analysis to ensure we incorporate
their views into our business activities.
Through stakeholder analysis, we clearly identify those
groups we impact on as well as those groups that can
influence and impact on Kerry. We engage these key
stakeholders through a variety of channels, many
of which are tailored for specific stakeholder groups.
These include one-to-one interactions, engagement
with representative bodies and relevant multi-
stakeholder platforms to clearly identify potentially
impactful issues and groups.
Among our key stakeholders are employees, customers,
consumers, shareholders, suppliers, communities and
government. We understand that among and within
these groups, there can be different and sometimes
conflicting views. As part of our engagement, we seek
to balance these competing interests and respond
in a way that maximises the value for all those
connected with the organisation. For more detail on key
issues raised by stakeholders, see pages 98-101.
Stakeholder Groups
Shareholders
Edmond Scanlon, Chief Executive Officer Kerry Group, presenting at
the 2020 Global Food Safety Initiative Conference.
Kerry Group Annual Report 2020STRATEGIC REPORT Sustainable
Nutrition
Defining our Material Topics
[GRI 102: General Disclosures 2016, 102-46, 102-47]
Better for
People
Our material topics are defined through a structured
process that assesses issues, risks and potential
outcomes, and considers their importance in influencing
the decision making of key stakeholders as well as their
importance to Kerry’s business performance and wider
social, environmental and economic impacts.
Better for
Planet
Better for
Society
Since 2018, in consultation with external parties, we
completed a comprehensive materiality assessment and
a portfolio evaluation as critical inputs and a guide for
the development of our Beyond the Horizon strategy, with
its better for people, better for society and better for the
planet commitments and goals.
Beyond the Horizon
Better for
Planet
Better for
Society
Better for
People
Sustainable
Nutrition
Better for
People
Better for
Society
49
Sustainable
Nutrition
Better for
People
Better for
Society
Better for
Planet
Sustainable
Nutrition
We review and identify topics through our continuous
stakeholder engagement to update our materiality
assessment on an ongoing basis. Most notably in
2020, there has been a very significant focus on
employee and consumer health and wellbeing while
areas such as climate, human rights and biodiversity
continue to gain momentum.
Better for
Planet
We have outlined below how each relevant material
aspect fits within our Beyond the Horizon strategy. Topics
of growth, geo-political risk and regulation go beyond
this review and are dealt with across other sections of
this report. All of these topics are reviewed as part of
the broader risk assessment process, and further details
on the Group’s principal risks is outlined in the Risk
Management Report on pages 71-83.
Material Topics
Climate Change
Energy
Circular Economy
Responsible Sourcing
Water Stewardship
Biodiversity
Ethics & Human Rights
Trust & Transparency
Diversity & Inclusion
Innovation & Product Development
Employee Health & Wellbeing
Labour Relations
Talent Management
Animal Welfare
Community Development
Product Safety & Quality
Taste, Nutrition & Health
Consumer Preferences
Our ability to provide positive and
balanced nutrition solutions that
help maintain good health and
which are created in a way that
does not compromise the ability
of future generations to meet
their nutritional needs
Sustainable
Nutrition
Better for
Planet
Better for
People
Sustainable
Nutrition
Better for
Society
Kerry Group Annual Report 2020
50
Ensuring Effective Governance
[GRI 102: General Disclosures 2016, 102-18]
Following the launch of the sustainability strategy,
Beyond the Horizon, in 2020, the governance structures
on sustainability were strengthened. The Governance,
Nomination and Sustainability Committee of the Board
will now have responsibility for guidance and oversight
of the implementation of the Group’s sustainability
strategy and will be supported in this work by the
Global Sustainability Council. In addition, sustainability
metrics will form part of the long-term incentive plan
for executive directors and senior executives from 2021,
as outlined in the Directors' Remuneration Report on
page 136.
The Sustainability Council, chaired by the Chief
Executive Officer, comprises the Executive team and
functional leaders from across the Group. It meets
quarterly to review and monitor the effectiveness
of the Group’s strategy and to discuss ongoing
performance versus goals.
In 2020, a key focus for the Sustainability Council
has been the completion and launch of the Beyond
the Horizon strategy and the further integration of
sustainability as part of Kerry’s day-to-day operations.
To support the strategic steering and management of
the Sustainability Council, a number of cross-functional
councils have also been established based on key
themes covering material topics. These councils are
responsible for designing and executing projects and
activities, developing and establishing best practices
involving all functions and businesses and measuring
performance. For more, see our Corporate Governance
Report on page 94 and Governance, Nomination and
Sustainability Committee Report on page 113.
Sustainability Governance
External Recognition
At Kerry, we are proud to have our sustainability efforts
acknowledged via credible independent assessment.
FTSE4GOOD: Kerry is a constituent of the FTSE4GOOD,
which measures the performance of companies
demonstrating strong Environmental, Social and
Governance (ESG) practices.
MSCI: Kerry has maintained an MSCI ESG Rating of
AA for its performance on Environmental, Social and
Governance (ESG) issues since 2017.
ECOVADIS: A Gold rating through the EcoVadis
sustainability assessment places Kerry in the top 2%
of companies assessed by EcoVadis in our sector.
Origin Green: Kerry was named a Gold member of
Origin Green, a status awarded to Irish companies
demonstrating an exceptional annual performance
on their sustainability targets based on the assessment
by an independent verification authority.
Shareholders
Audit Committee
Board of Directors
Governance, Nomination
and Sustainability
Committee
Executive Management
Remuneration Committee
Finance
Committee
Risk Oversight
Committee
Sustainability
Council
Kerry Group Annual Report 2020 51
Non-Financial Reporting Statement
We comply with regulations on non-financial reporting and provide information on required topics
across this report. Relevant information on each topic can be found below. In addition, non-financial
risks are evaluated as part of the broader enterprise risk management framework and more detail
can be found in our Risk Management Report on pages 71 to 83.
Reporting Requirements
Our Policies
Environmental Matters
Environmental Policy
Social and Employee Matters
Health & Safety Policy; Group Code of Conduct;
Diversity, Inclusion & Belonging Policy;
Employee Concerns Disclosure Policy
Page Reference
Page 62
Pages 57-59
Respect for Human Rights
Human Rights Policy
Page 57
Anti-Bribery and Corruption
Anti-Bribery Policy; Group Code of Conduct
Pages 57-58
Business Model
Non-Financial KPIs
Pages 20-21
Pages 30-31 and 53-68
Kerry Group Annual Report 2020 52
Better
for
People
For many people, getting the right nutritional balance is a challenge.
According to the World Bank, malnutrition is one of the world’s most serious
yet least-addressed challenges. The burden of malnutrition occurs when the
right foods are not available, affordable, convenient, or they involve some
compromise on taste, or other important characteristics, making them less
desirable or accessible for consumers. The result is poor quality diets that
prevent people reaching their potential or lead to obesity or the onset of
illnesses such as heart disease and diabetes.
As the leader in Taste
and Nutrition, our goal
is to provide sustainable
nutrition solutions for over
two billion people by 2030.
Consumers are increasingly conscious of the link between diet and health
and as outlined on page 25, the '&’ consumer is seeking out products and
brands that meet multiple requirements including their desire to make a
positive impact on their health and the world around them. As food and
beverage manufacturers seek to respond to these changing consumer
preferences, demand for partners who can support them in creating
products that deliver more sustainable nutrition is growing.
At Kerry, we are ideally
placed to help improve the
accessibility and availability
of healthy foods for all.
Kerry Group Annual Report 2020STRATEGIC REPORT Enhancing Nutrition for Consumers
We define sustainable nutrition as the ability to provide
positive and balanced nutrition solutions that help
maintain good health and are created in a way that does
not compromise the ability of future generations to meet
their nutritional needs.
At Kerry, we are ideally placed to help improve the
accessibility and availability of healthy foods for all,
helping our customers overcome the challenges they
face. Through our unique capabilities and solutions
portfolio, we co-create products that deliver better
nutrition for consumers with no compromise on taste.
Our application expertise and delivery systems allow
us to bring tasty, convenient and familiar food to the
consumer, increasing the availability of nutritious
options with positive health benefits.
To highlight the role of Kerry as a sustainable nutrition
partner for the industry, we have profiled the nutritional
contribution of our ingredients portfolio. In the absence
of an existing measurement framework to evaluate
ingredients, our scientific experts developed a rigorous
methodology based on the independent and externally
validated UK nutrient profiling model. It allows us to
assess and classify the nutritional contribution of each
solution to a final consumer product. We have used very
stringent criteria and do not allow for any offsetting in
order to provide an objective and transparent result.
Our assessment shows that more than 80% of our
Taste & Nutrition portfolio is already delivering
positive or balanced nutrition solutions for over one
billion consumers today. Over the next ten years, we
will increase the impact from our portfolio, through
innovation and partnerships, creating sustainable
solutions that will reach more than two billion people.
Given the strength of our portfolio and its potential for
positive impact, we aim to bring these solutions to as
many consumers as possible, helping us to fulfil our
Purpose of Inspiring Food, Nourishing Life.
In 2020, we continued to expand our impact and despite
the challenging context, we increased our reach with
positive and balanced nutrition solutions by more than
thirty million to over one billion people. This growth was
driven by the increase in positive nutrition solutions
within our portfolio and our geographical expansion in
developing regions.
>80%
Of our Taste & Nutrition
portfolio is already delivering
positive or balanced nutrition
solutions for over one billion
consumers today.
53
OUR COMMITMENTS IN ACTION
Integrated Solutions
Radicle™ by Kerry is a unique portfolio of plant-
based ingredients and solutions that can help
customers create and deliver sustainable products
which are nutritionally optimised. With the ability to
reduce saturated fat by up to 87% versus meat, our
technology also helps customers to create low carbon
products with cleaner labels, authentic taste and
appealing texture.
Consumer Brands
Within our Consumer Foods division, we are also
focused on helping consumers access better nutrition,
as we work towards the achievement of category
specific targets for salt, sugar and calorie reduction.
Over the last five years, we have made continuous
progress on nutritional improvement across our
brands and in 2020, we relaunched our Dairygold
spread with 27% less salt and converted the product
packaging to make it 100% recyclable.
OUR REACH
By 2030, our ambition is to reach over two billion
people with positive and balanced nutrition solutions.
Our approach to calculating this reach was developed
in partnership with independent third parties and
combines the outputs from our industry leading
nutritional assessment with external market data and
Kerry’s business insight. We use a bottom up model
taking information by country and end use market
and eliminate potential double counting through the
application of accepted statistical methods.
Kerry Group Annual Report 2020 54
Kerry Health and
Nutrition Institute™
Kerry Health and Nutrition Institute:
Science for Healthier Food
The Kerry Health and Nutrition Institute
(KHNI) was established to share Kerry’s
scientific expertise and to advance awareness
of the science of healthier food. Supported by
an independent Scientific Advisory Council,
KHNI is enabling those within the sector to
acquire new knowledge from our scientists,
academics and other experts, as they explore
challenges in the food and beverage industry.
This digital hub of scientific know how
provides in-depth articles, webinars and
white papers, written for those working in
the food industry, by experts within the food
industry. To date, KHNI has published more
than 225 in-depth articles, 18 white papers
and led 13 industry webinars that have
attracted thousands of viewers from over
50 countries and over 250 of the world’s
largest CPG companies, academia and
public health institutions.
In 2020, the focus of these webinars
was increasingly aligned with our vision,
with content focused on challenges and
opportunities within plant protein, food
waste and fermented food science.
For information see khni.kerry.com.
225+
Published in-depth articles
Enabling the Transition to Healthier,
More Sustainable Diets
We understand that not all products contribute to
providing positive nutrition as consumers will continue
to seek out permissible indulgence as part of a healthy
lifestyle. We work with customers and products that
span the entire nutritional spectrum and our goal is to
support our partners on their nutrition and broader
sustainability journey, helping them to positively impact
their product portfolio and create products that are
better for consumers.
Taste remains the key driver of consumer purchase
behaviour and we know that creating nutritious products
that do not satisfy consumer desires for great taste, will
not win in the marketplace. Kerry’s business model and
positioning at the intersection of taste and nutrition
provide us with the unique ability to deliver tailored
customer-specific solutions. This capability, together
with our reach and broad portfolio of foundational
technologies is what will allow us to make impactful
change at scale.
Our Sustainable Solutions
Our natural Tastesense™ taste modulator reduces
sugar to improve nutrition while also delivering
lower greenhouse gas and water impacts. Our
customers leverage Tastesense™ to reduce up to
30% of sugar in their finished products without
sacrificing taste. Furthermore, this technology
can reduce embedded CO2 emissions and water
use in the final product. For more see kerry.com/
sustainability/solutions.
At Kerry we are shaping a more
sustainable future for food and
beverage through innovation.
Leading with Innovation for
Sustainable Future Outcomes
The changes required within our food system will only
be achieved through new approaches and at Kerry we
are shaping a more sustainable future for food and
beverage through innovation. We create solutions
that are healthier and more sustainable by design
and continue to integrate sustainability criteria in our
product development process.
Already home to the industry’s leading portfolio
of integrated taste and nutrition technologies, our
innovation programme brings together Kerry’s
unrivalled global capabilities to create solutions that
meet consumer needs and preferences. Uniquely,
almost 90% of our portfolio is naturally derived and
we maintain a focus on developing solutions that are
from-food-for-food. In 2020, we invested a further
€282m in research, development and application
to ensure we remain at the forefront of sustainable
nutrition. For more see Our Markets pages 24-25.
Our approach is reinforced by the growing interest
among our customers for new concepts that deliver
on consumer demand for healthier products with
lower environmental impacts. In 2020, we were
proud to join the Sodexo Future Food Collective, an
initiative that brings together experts from the food
industry around a range of topics including health
and wellness, plant-based innovation and more. The
platform also leverages the strengths of the Food for
Climate League, a non-profit organisation dedicated
to making sustainable eating more accessible.
90%
Of our portfolio is naturally derived
and we maintain a focus on developing
solutions that are from-food-for-food.
€282m
Invested in research, development and
application to ensure we remain at the
forefront of sustainable nutrition.
55
Prioritising Quality and Food Safety
Safety First, Quality Always is our company-wide
commitment to ensuring the safety of our people and
our products. We deliver the highest quality products,
following rigorous food safety and quality end-to-end
procedures from farm to fork. We incorporate robust
preventative controls, sanitation, microbiological
monitoring programmes, crisis management,
continuous improvement through horizon scanning and
embedding food safety best practices. Our governance,
policies and due diligence programmes, are verified
and refined in line with evolving customer requirements
and Global Food Safety Initiative (GFSI) standards
and we continue to participate in peer reviews and
benchmarking with customers and industry leading
organisations such as SSAFE.
We partner with suppliers operating in nearly 60
countries and mandate strict compliance with the quality
and food safety requirements laid out in the Group’s
Supplier Requirements Manual. Our Supply Quality
team risk assess all direct suppliers and in 2020, had
engagement with 1,600 suppliers across all regions to
identify impacts from COVID-19 and potential supply
chain disruptions, conducting 820 physical audits, while
maintaining the highest levels of health & safety for our
colleagues.
Across all our operations, we have designed and
implemented a Global Quality Management System and
all our sites are certified to the GFSI standard for food
safety. Our dedicated quality teams also partner with
our RD&A teams in ensuring quality and food safety are
key considerations throughout the development and
production process.
Product Labelling
As a predominantly B2B business, most of our marketing
and communication is not directed to consumers,
however, our customers rely on timely and accurate
information around the handling and use of our
products for the creation of safe products for their
consumers. Clear labelling and dedicated marketing
and customer care teams provide required product
information, while specialist regulatory colleagues act as
an expert resource supporting our customers on product
specifications, claims and relevant regulations across
different global markets.
Within our Consumer Foods division, all advertising and
brand positioning conform to national advertising codes
of practice and we are conscious of the potential impact
of marketing to children and young people. We provide
on-pack nutritional labelling and additional information
services e.g. brand websites, to help consumers make
informed choices. The Group has established best
practice guidelines for nutritional labelling across our
portfolio, in line with Food Information to Consumers
legislation, and support the voluntary addition of
front-of-pack ‘Reference Intake’ information to aid
consumer choice.
Kerry Group Annual Report 2020 56
Better
for
Society
Improving nutrition and
health supports a broad
social agenda, helping to
deliver on many of the
UN SDGs.
Improving nutrition and health supports a broad social agenda, helping to
deliver on many of the UN SDGs. While our critical impact areas are goals
2, 3 and 12, we know that how we produce our products can support
many more of the seventeen goals. Against a backdrop of rising economic
inequality and deepening social tension, we aim to contribute to a society
that is fair and just and where everyone has an equal opportunity to
participate. While we recognise that this is an area where governments must
lead, we believe that our industry can play a key role in promoting human
rights, supporting education and training and creating more resilient and
inclusive communities.
At Kerry, we demonstrate this first and foremost through how we operate.
Doing business with integrity is a fundamental priority and the foundation of
our long-term success. We are committed to living our values and enhancing
the lives of all those with whom we engage, including our employees, across
our broader value chain and within the communities around us.
We aim to
contribute to a
society that is fair
and just and where
everyone has an
equal opportunity
to participate.
Kerry Group Annual Report 2020STRATEGIC REPORT 57
We conduct our business guided
by our purpose and underpinned
by our values.
Upholding Labour and Human Rights
[GRI 407: Freedom of Association and Collective Bargaining 2016;
GRI 408: Child Labour 2016; GRI 409: Forced or Compulsory
Labour 2016; GRI 412: Human Rights Assessment 2016, 412-1]
Doing the Right Thing
[GRI 102: General Disclosures 2016, 102-16, 102-17]
Business results must always be achieved ethically and
legally. We conduct our business guided by our purpose
and underpinned by our values, and the Group’s
comprehensive Code of Conduct clearly defines the
standards and expectations for all Kerry colleagues.
It sets out how we respect each other, live our values,
protect our assets and obey the law. The policies behind
the code provide clear guidance for our daily interactions
and are reviewed annually. The ongoing responsibility
for their implementation rests with the Executive team,
supported by relevant functions including HR, Legal and
Internal Audit.
The Code of Conduct is available in multiple languages
and applied to all aspects of business across the Group.
All colleagues are required to familiarise themselves
with this code on joining Kerry and we mandate ongoing
training thereafter through our Learning Academy, on at
least a bi-annual basis. 85% of all eligible colleagues had
achieved Code of Conduct certification by year end 2020.
Where employees have concerns about business
conduct, the Group provides clear guidance on
reporting. The Employee Concerns Disclosure Policy
details the appropriate means of reporting alleged
misconduct. It encourages employees to speak up if
they believe something is not right and is clear about
the protection afforded to whistleblowers. To facilitate
anyone who wishes to express a concern, the Group
operates an ethics hotline, through which employees
and third parties can report an issue anonymously
(www.kerrygroup.ethicspoint.com).
In 2020, we continued to monitor and investigate all
reported issues via this ‘Express a Concern’ facility. In
the period there were approximately 0.3 cases reported
per 100 employees (which includes a small number of
reports from external parties) with 84% of concerns
reported relating to internal HR matters. The Board
continues to review the effective operation of this facility
and the related reports on an ongoing basis. Further
details are outlined under ‘Whistleblowing Arrangement’
in the Corporate Governance Report on page 102.
We also seek to extend our values on ethical business
practice to those with whom we do business and our
requirements are reflected in our Supplier Code
of Conduct.
Read More
Corporate Governance Report
Pages 94-106
Our Purpose and Vision
Pages 4-5
We are fully committed to upholding internationally
recognised human rights. Kerry’s Global Human
Rights Policy reflects this commitment and is guided
by the Universal Declaration on Human Rights and
the International Labour Organisation’s Fundamental
Principles and Rights at Work. The policy outlines
our commitment to respect the rights and dignity
of all people, complying with all applicable laws and
regulations and conducting ongoing human rights
due diligence to assess and mitigate potential human
rights infringements.
Kerry’s Code of Conduct and Human Rights Policy
applies to all employees and sets out our expectations
for business and supply chain partners to conduct their
business in a way that upholds our standards.
In 2020, we established a dedicated cross-functional
team on human rights. Reporting to the Chief Human
Resources Officer, its objective is to further integrate
the Group’s commitments across our operations and
supply chain. We also published a detailed Human
Rights Statement outlining our approach and identified
a number of salient human rights issues including
forced labour, child labour, discrimination and freedom
of association. We have dedicated policies and due
diligence processes in each of these areas across all
our operations and protections mandated within our
Supplier Code of Conduct for workers within our
supply chain.
All sites are registered with the Supplier Ethical Data
Exchange (SEDEX) and through this platform we
complete a detailed assessment aligned with the key
issues outlined above. In addition, we continue to
pursue independent SEDEX Members Ethical Trade Audit
(SMETA) or equivalent audit protocols across our sites.
Across our supply chain, our Supplier Code of Conduct
is explicit in demanding that those who seek to
do business with the Group uphold the same high
standards and it expressly forbids the use of child,
forced or involuntary labour of any type. Our responsible
sourcing team provides training to all our buyers
globally on risks relevant to their categories and on new
requirements for suppliers to address these. We have
also provided our buyers with access to tools that help
them understand and assess key risks associated with
the commodities they source.
We use SEDEX to assist us in monitoring compliance
across our supply chain and for global contracts, over
92% of vendors are registered with this platform. We
recognise that human rights infringements can occur at
any point in the value chain and achieving visibility across
a broad global supply base is a challenge. We take a
risk-based approach to supplier assessment, focusing on
commodities and/or geographies where there is a greater
likelihood of non-compliance with our standards. To
enhance and expand our due diligence process, we began
to revise our assessment criteria, bringing additional
suppliers within scope for assessment in 2020. This work
is ongoing and we expect to complete it in 2021.
Kerry Group Annual Report 2020 58
For those vendors identified as high risk, we mandate
SEDEX membership to support our assessment. Under
our Supplier Code of Conduct, Kerry reserves the right
to conduct independent audits to confirm compliance
with our requirements. In 2020, 68% of our high-risk
suppliers were registered with SEDEX and 36% of these
had independent SMETA audits in place.
We are designing and adapting
our processes for greater safety,
with implementation led
by the Global Health, Safety
and Environmental (HSE) team.
Our Health & Safety Policy and management system
establish standard requirements and define consistent
ways of working across our businesses. These standards
are non-negotiable and apply to everyone working
at Kerry. We are clear on responsibilities and senior
level accountability, as well as responsibilities for
all colleagues to work safely and challenge any
unsafe behaviour.
Through promoting and monitoring continuous
improvement, we are designing and adapting our
processes for greater safety, with implementation led by
the Global Health, Safety and Environmental (HSE) team.
These specialist colleagues provide advice and guidance
to managers and employees across our sites, focusing
on employee engagement and behaviour based safety
programmes to realise our goal of Safety First,
Quality Always.
Kerry also continues to develop its proactive safety
programmes, creating channels for employees to
speak up and act immediately once they identify safety
hazards or potential improvements. In 2020, we placed
an emphasis on serious incidents through deployment
of a targeted training and awareness programme and
are pleased to see further positive momentum in our
health & safety performance. A focus was also placed
on root cause analysis and investigations of all types of
injuries and near misses ensuring that best practices
and corrective actions are implemented throughout all
Kerry locations globally. While we recognise that there is
no acceptable level of accident or injury, we are pleased
to report that there were no fatalities and we recorded
a 5% reduction in total incidents versus the previous
twelve months.
For more details on how we work on human rights and
labour issues at farm level, see our responsible sourcing
section on page 69.
Fighting Bribery and Corruption
[GRI 205: Anti-corruption 2016, 205-1a; GRI 415: Public Policy
2016, 415-1]
As part of the Group Code of Conduct, Kerry’s
Anti-Bribery Policy describes our zero-tolerance
approach and provides guidance to all employees
regarding potential situations involving bribery.
Kerry does not provide financial support for political
parties and our policies and procedures on fraud,
anti-money-laundering, fair competition and engaging
with Government officials, all support Kerry’s efforts
to ensure that corrupt practices do not form part of
our business relationships. We also convey our
requirements on this issue to our suppliers through
the Group’s Supplier Code of Conduct.
We have tailored communications and learning
programmes on this issue which form part of
mandatory training requirements for all colleagues
globally. Internally, we ask questions on bribery and
corruption of each business unit as part of the ongoing
assessments undertaken by the Group’s Internal Audit
Team. Assessment on areas aligned with our Code of
Conduct, including ethical business practice, form part
of the SEDEX questionnaires across all sites.
Ensuring Workplace Health & Safety
[GRI 403: Occupational Health & Safety 2018, 403-1b, 403-2a,
403-5]
The health & safety of employees, contractors,
customers and other visitors across all locations is
of paramount importance to the Group and Kerry’s
priority in the face of COVID-19 remains the safety and
wellbeing of our employees and other stakeholders in
difficult circumstances.
Safety excellence is the responsibility of all individuals
throughout the organisation. From our CEO to frontline
employees, we all contribute to building and sustaining
an organisational culture that prioritises safety.
Kerry Group Annual Report 2020STRATEGIC REPORT 59
Promoting Diversity,
Inclusion & Belonging
We understand that diversity is good for business
performance and is extremely important to both
our internal and external stakeholders. We want our
workforce to reflect the society in which we operate
and to offer opportunities for all colleagues without
discrimination. As a result, diversity, inclusion and
belonging is embedded within our core values,
making it central to how we operate our business.
Our Group diversity, inclusion and belonging and
non-discrimination policies document this approach
and help to clarify expectations for all colleagues.
We are continuously striving for a more inclusive
workplace and as part of our Beyond the Horizon strategy,
we have developed a metric for inclusion that will help us
measure our improvement. Derived from our employee
engagement survey, this ‘Inclusion Index’ will be directly
related to our employee experience and will provide an
informed view on our progress over time. We believe
this structured approach will accelerate our journey
to fostering the healthiest and most inclusive culture,
one that is aligned with our Kerry Way framework and
supports our ambition to be first choice for the best
talent. We will establish a baseline for this new metric
from our 2021 engagement survey and will provide
detail on progress in future reports. As part of our
ongoing work on inclusion, we also continue to increase
the representation of women in senior leadership roles
across the Group. In 2020, this increased from 25% to
28%, putting us in a strong position to deliver on our
target of 35% by 2025. For more detail see Our People
on page 17 and the Governance, Nomination and
Sustainability committee report on pages 115-116.
Our goal is to create an exciting
environment for employees to help
them realise their career ambitions
and create a pipeline of industry
experts and future leaders for
sustained success.
Fostering Talent
At Kerry, we recognise that in order to achieve our
business goals, we must continuously invest in our
people through a structured approach to talent
management. Our goal is to create an exciting
environment for employees to help them realise their
career ambitions and create a pipeline of industry
experts and future leaders for sustained success.
The MySuccess platform provides a mechanism for
our people and managers to discuss performance,
development needs and career progression with
ongoing feedback and coaching, as well as formal year
end reviews. Training or development needs identified
as a result of this two-way process are supported
through the Kerry Learning Academy, which facilitates
the provision of tailored and more general learning
solutions across the organisation. These solutions
include a blend of classroom, virtual and interactive
content that provides instruction, develops skills,
stimulates discussion and encourages collaboration.
From structured graduate training through to leadership
development or technical and functional programmes,
our people have invested in their development through
the completion of over 247,500 courses during 2020.
For more on Talent and the employee experience,
see pages 16-19 of Our People.
Diversity, Inclusion and Belonging is
embedded within our core values.
247,500
Our people have invested in their
development through the completion
of over 247,500 courses during 2020.
60
Photo: WFP/
Daniel Boone Rodriguez
Nourishing Communities
[GRI 413: Local Communities 2016, 413-1]
Building on our long history of local
community support, we engage through
employee volunteering programmes
and with partners in emerging countries
where Kerry does not have a presence
to reach and impact directly.
In 2020, global communities were severely tested by the
COVID-19 pandemic and this mobilised actions by our
employees to support both individuals and community
groups in need. In support of these efforts, Kerry
launched a global MyCommunity programme, mobilising
our resources and expertise while facilitating employees
to volunteer with locally-led community initiatives which
directly supported food, nutrition and health needs.
The response from our colleagues has been
inspirational and around the world, Kerry employees
have volunteered their time and talents to support and
nourish their communities. Together we have supported,
participated and contributed to over 110 initiatives,
from local food relief, to deliveries of food to vulnerable
groups, providing Personal Protective Equipment (PPE)
for frontline workers and producing hand sanitiser.
To date almost three quarters of the €1 million pledged
to the programme has been deployed in support of
local communities.
MyCommunity
Improving Nutrition within Communities
We continue to work with community partners on
redistribution of food to those in need. In 2020,
Kerry Foods donated the equivalent of over 1 million
meals to FareShare from 14 manufacturing sites
across the UK.
Protecting Health During COVID-19
At our Barueri site in Campinas, employees stepped
up during the COVID-19 crisis to produce alcohol
for use as sanitiser by a local hospital, serving more
than two thousand people daily.
Alongside this work we have continued to partner with
world leading organisations such as Special Olympics,
UN World Food Programme (WFP), and Concern
Worldwide, helping them to tackle exclusion, poverty,
hunger and malnutrition in some of the world’s poorest
regions. Through these programmes we seek to make
a lasting impact on individuals and communities most
in need.
supported by
Creating Sustainable Futures with
World Food Programme (WFP)
In 2020, we were delighted to see the World
Food Programme’s work recognised with the
award of the Nobel Peace Prize for its efforts
to combat hunger. Since 2017, we have been
partnering with WFP on Project Leche in
Honduras, leveraging Kerry’s dairy heritage and
nutritional capabilities to assist smallholder
farmers with milk production, ensuring more
sustainable dairy products are included in WFP’s
Homegrown School Meals programme.
Our 2020 impact report highlights some key
community achievements that Project Leche
helped contribute to:
• Milk production levels doubled on
project farms
• 7,600 children in 178 schools benefitted
from nutritionally enhanced meals
•
Improvement in physical growth and a
reduction in child stunting of 18.5%
• Lower rates of wasting among schoolchildren
down from 8.1% to 1.5%, with no children
presenting severe wasting by end of project.
To build on the positive outcomes of this
programme, in 2020 we extended our
partnership with WFP and commenced
a new project in Burundi.
The goal of this joint programme, Project Amata
(which means ‘milk’ in Kirundi), is to contribute
to the improvement of food security and
nutrition through strengthening of the milk
value chain across the Gitega province and
beyond in Burundi.
7,600
Children in 178 schools
benefitted from nutritionally
enhanced meals
x2Milk production
levels doubled
on project farms
Kerry Group Annual Report 2020 Photo: Apsatou Bagaya/Concern Worldwide
61
supported by
Fighting Malnutrition with
Concern Worldwide
For the last 3 years, Kerry, in partnership with
Concern Worldwide, has been working to improve
nutrition and food security for local communities
in Niger as part of the RAIN (Realigning Agriculture
to Improve Nutrition) programme. RAIN is a
multi-disciplinary programme that aims to identify
sustainable, scalable and replicable solutions for
prevention of malnutrition. Through the RAIN
programme, we continue to generate significant
improvements across a number of key areas,
including:
• Training farmers on conservation agriculture
• Development of wells and kitchen gardens
to increase vegetable production
• Creation of savings and loans groups to
build resilience and
• Screening of over 500 children for malnutrition.
6,539 Athletes supported to train
and compete in the 2022
Special Olympics events
supported by
Encouraging Inclusiveness
with Special Olympics
Our ongoing work with Special Olympics empowers
individuals with intellectual disabilities by helping
to nourish their potential. Kerry proudly partnered
as an Official Sponsor of Special Olympics in 2018,
with the aim of working together to create more
inclusive communities and empower individuals
with intellectual disabilities. In 2020, we renewed
our partnership, with a focus on the Special
Olympics National Programmes in Ireland, Great
Britain, Poland and Germany. Our support extends
beyond the sports field via the Special Olympics
Athlete Leadership programme, which champions
the potential of people with intellectual disabilities.
Since our initial partnership, Kerry is proud to
have worked with Special Olympics to create
positive outcomes, including:
• Supporting 6,539 athletes to train and
compete in the 2022 Special Olympics events
• Helping Special Olympics Athlete Leaders with
skill development, empowerment and athlete
advocacy
• Creating a sustainable pathway to
employment for people with intellectual
disabilities within Kerry
• Encouraging and supporting Kerry
employees who actively volunteer and
fundraise for Special Olympics.
62
Kerry Group Annual Report 2020
STRATEGIC REPORT
Better
for the
Planet
Through the Beyond
the Horizon strategy,
we are building on our
achievements to date
to address the key
environmental impact
areas across our business
and value chains.
The current model of food production results in
substantial environmental impacts, contributing more
than a quarter of global emissions, using over 70% of
freshwater withdrawals and driving further deforestation
and biodiversity loss. We know too that food and
packaging waste is having an impact on the environment
around us as plastic finds its way into waterways and
oceans, impacting on water quality and marine life.
As the industry’s innovation partner of choice, we will
also continue working with our suppliers and customers,
amplifying our impact across our operations and supply
chains, sourcing more sustainable raw materials and
ingredients and creating more sustainable solutions,
allowing our customers to reduce their footprint and
in turn create products that provide more sustainable
nutrition to consumers.
Through the Beyond the Horizon strategy, we are
building on our achievements to date to address the
key environmental impact areas across our business
and value chains. The Group’s Environmental Policy
outlines Kerry’s commitment to carrying out activities
in a responsible manner, complying with all applicable
legislation, implementing good environmental practice
and continuously improving our performance. To achieve
these aims, we have set environmental targets across
our facilities, and dedicated site colleagues, working
with global specialists to identify and implement
improvement projects across all regions. In some target
areas we will accelerate progress more quickly while
other improvements will come through multi-year
capital investment. We continue to pursue independent
certification of best practice under ISO 14001 and key
energy users are accredited under ISO 50001. Kerry
also has a comprehensive environmental monitoring
and reporting framework in place across all sites and
performance is reviewed by our operations teams and
the Global Sustainability Council on an ongoing basis.
Taking Action on Climate Change
[GRI 305: Emissions 2016, 305-1, 305-2, 305-4]
With increasing focus on the impacts of climate change,
there is an accelerating emphasis on a global transition
to a low-carbon economy. In 2020, we saw further
evidence of this momentum, including increasingly
ambitious national and corporate commitments. At
Kerry, we generate greenhouse gas (GHG) emissions
directly through the operation of our facilities (Scope
1), indirectly through the energy we purchase (Scope
2) and other activities such as the production of
our raw materials by our suppliers (Scope 3). These
emissions contribute to global climate change and the
associated impacts on the environment and society. We
understand that climate change presents both risks and
opportunities for our business and we are progressively
integrating the recommendations of the Taskforce on
Climate related Financial Disclosures (TCFD) in both our
climate strategy and our reporting.
Summary Approach to Aligning with TCFD Guidance
Kerry Group Annual Report 2020
63
Governance
The Group’s Sustainability Council is the key governance body, defining Kerry’s strategy on climate change and its integration within broader
strategic decision making (page 50). As a supporting structure to the Council, there is a dedicated work stream on climate, led by the Chief
Operating Officer where performance and programmes for achievement of our climate goals are kept under ongoing review. Our carbon
performance is also reported internally to the Executive team alongside financial metrics and the climate data in this review is verified and
assured by an independent third party. For more details, see page 48.
Strategy
Our climate strategy is focused on mitigating risks for our business and strengthening our resilience to climate-related impacts. Over the
last decade, we have made significant progress reducing our Scope 1 and 2 emissions. We achieved this through a sustained focus on
more carbon efficient production, investing in energy efficiency and switching to lower-carbon fuels. We will continue with these targeted
programmes, together with broader communication and engagement plans to drive further action on this key theme and looking for
innovation that can support a step change in our Scope 1. On Scope 2, we have made a commitment to switch to 100% renewable electricity
across our entire operations by 2025.
To tackle our Scope 3 emissions, we will work with our suppliers to lower the carbon footprint of the raw materials we use. As we source
thousands of raw materials globally, we do not underestimate the challenge associated with achieving this target. However, we have
experience of working with suppliers on climate mitigation. As an example, we will introduce an innovative rewards programme for milk
suppliers in 2021 to incentivise further emissions reduction at farm level.
At product level, we have undertaken an assessment of our portfolio to understand its contribution to our overall footprint and accelerate
our response to market risks and opportunities. We continue to grow the revenue contribution of lower carbon products, particularly plant
protein. Kerry can play a critical role as an enabler of sustainable nutrition for consumers and we continue to integrate sustainability criteria,
including climate considerations, within our innovation and product development process. Across our business, we already have a range
of technologies that can deliver significant carbon reductions for our customers, including CleanSmoke™, Tastesense™ and our leading
portfolio of natural preservation technologies.
Climate Related Risks and Opportunities
The assessment of climate related risk is fully integrated into Kerry’s enterprise risk management (ERM) framework and processes, which
identify, assess, monitor and report on our organisation’s risks (page 71). Potentially significant physical and transition climate-related risks
and opportunities are outlined below and these will be further tested through scenario analysis.
Risk Description
Potential Impact
Mitigation
Physical risks resulting
from climate change can
be event driven (acute) or
longer-term shifts (chronic)
in climate patterns.
Extreme weather events have the potential to impact
on sites of production and/or on processing and
distribution infrastructure.
Changing climate and levels of precipitation have the
potential to directly impact production through access to
adequate supplies of fresh water and indirectly through the
availability and quality of key raw materials.
Business continuity and crisis management
plans across our operations help to ensure
we manage acute physical risks. We monitor
chronic water risk as outlined on page 68
and procurement teams continuously assess
any potential impacts on price, quality and
availability of our raw materials.
Transitioning to a
lower-carbon economy
may involve policy, legal,
technology, and market
changes to address
mitigation and adaptation
requirements related to
climate change. While the
extent and speed of these
changes are uncertain,
these areas may entail the
following potential risks
for Kerry.
As governments seek to fulfil commitments made under
the Paris Accord, there is a likelihood of increased carbon
pricing mechanisms or policy instruments with potential to
add additional cost for inputs such as energy.
As customers and consumers seek out more sustainable
products, there is potential for the advent of disruptive
technologies that provide lower carbon alternatives,
particularly in the area of protein.
Amid growing demand for sustainable consumer
products, customers are making increasingly ambitious
commitments and favouring those partners who can
support them with their transition.
As awareness grows about the need for urgent action,
failure to address and adapt to climate change poses a
significant brand and reputational risk for all organisations.
We are committed to ambitious carbon
reduction targets that align with the Paris
Climate Accord and to achieving net zero
emissions from our operations before
2050. Progress towards these goals will
be achieved through a range of measures,
outlined in the strategy above, that will
help us to navigate these transitional
risks. However, the potential impact is
contingent on the speed at which these
risks materialise. We see further momentum
behind the shift to a lower carbon economy
as global awareness and impacts continue
to increase. In response, we are aggressively
pursuing our carbon targets over the next
five years.
Opportunity Description
Potential Impact
Leverage
We identify and capture
opportunities presented
by climate change and the
transition to a lower carbon
economy, both within our
operations and across our
broader value chain. We see
particular opportunity in
supporting our customers
as they seek to adapt their
products and processes
in response to climate
related risks.
Metrics and Targets
Through a focus on greater resource efficiency, energy
management and waste reduction, we see potential to
lower input costs while delivering on our carbon targets.
With greater uncertainty around the future of fossil fuels
and continued investment growth across renewables,
shifting towards cleaner energy sources offers the potential
for cost savings over the longer-term.
We see significant opportunity in leveraging both our
portfolio and our innovation expertise across multiple end
use markets, to support customers in the development
of products and processes that meet evolving consumer
demand and help manage their own transition risks.
With a range of solutions that already offer
lower carbon outcomes for customers
and consumers, we are well placed to take
advantage of emerging opportunities from
the transition to a lower carbon economy.
Faced with the dual challenge of increasing
food production while lowering global
emissions, innovation will be central to
our industry’s response. As the innovation
partner of choice to the world’s leading food
and beverage companies, we are ideally
positioned to support our industry partners
as they seek solutions to meet this challenge.
We fully support the objectives of the Paris Accord and in 2020, our carbon target was approved by the Science Based Target initiative,
confirming that it aligns with the objective of limiting average global temperature increases to well below two degrees Celsius. We have
also declared our commitment to achieving net-zero emissions before 2050. Outlined as follows are details of these targets and Kerry’s
performance to date.
17%
Reduction in absolute Scope 1 and 2
emissions versus our 2017 base year.
Scope 3
As part of our science based target, we are committed to
a 30% reduction in Scope 3 emissions intensity by 2030.
Our Scope 3 emissions make up approximately 90%
of our total footprint and as part of our science based
target, we are committed to working with our partners
to help address these. We have been calculating our
Scope 3 emissions for more than five years and in many
areas have programmes in place which are designed to
reduce these, in areas such as business travel, employee
commuting and with our suppliers.
With the development and publication of our Scope 3
target, we have begun to engage a greater proportion of
our supply base to increase our impact. We understand
that this will be challenging given our diverse vendor
base and we are particularly focused on how we can
collaborate with others on programmes designed to
tackle emissions associated with agricultural production
(for more see our approach on responsible sourcing
on page 69). In 2020, we have been interacting with
customers, suppliers and expert third parties on existing
best practice, as we build our approach to engagement,
programme development and reporting.
Adapting to Climate Change
The continuing trend of hotter, more extreme
summers brought about by climate change is
resulting in challenging growing conditions and
reduced crop yields. For brewers this means
higher input prices, as well as inferior quality
grains for brewing and distilling. At Kerry, we
have the technical expertise and portfolio of
brewing ingredients and process aids to help
brewers navigate these challenges and incorporate
alternative raw materials and local grains while
also delivering energy, carbon and water savings
throughout the brewing process.
For more, see kerry.com/beverage
64
Scope 1 & 2
By 2030, we aim to reduce our absolute carbon
emissions from our operations by 33%. In 2020, we
continued to make good progress on carbon reduction,
driven primarily by our increasing use of renewable
electricity. In the period, our absolute emissions have
been reduced by 17% versus our 2017 base year, putting
us in a strong position to deliver on our 2030 target.
2020
Carbon Performance
Carbon Intensity
2019
100
150
200
250
300
2020
2019
KgCO2e/tonne
Baseline
100
150
200
250
300
KgCO2e/tonne
Baseline
100
150
200
250
300
000's Tonnes CO2e
2020
100
150
200
250
300
2019
2020
100
300
500
700
900
Scope 1
Scope 2
Baseline
2019
Notes:
1. Our measurement and target performance of Scope 1
100
300
and 2 emissions is from manufacturing facilities under our
operational control accounting for 98% of Kerry’s Scope 1
and 2 emissions.
Scope 2
Scope 1
Baseline
700
500
2. We measure and report our performance in accordance
with the GHG Protocol and emissions factors include
UK Government GHG Conversion Factors for Company
Reporting.
700
300
100
500
3. Our Scope 2 emissions are calculated using the
market-based method.
4. Kerry’s actual performance has been adjusted to reflect
100
like-for-like performance compared to our baseline year. We
use the NOVEM Methodology for carbon reporting to adjust
our baseline target reduction number in order to account
for changes to product mix that have had a material effect
on carbon intensity.
700
300
500
5. Our carbon intensity is a relative measure of tonnes of CO2
equivalents (CO2e) divided by tonnes of finished product.
900
900
900
Kerry Group Annual Report 2020STRATEGIC REPORT 65
We have committed to
converting our electricity
use to renewable sources
by 2025.
Energy
[GRI 302: Energy 2016, 302-1, 302-3]
Energy is a key contributor to our operational emissions
(Scope 1 & 2) and our approach to energy is a critical
element within our overall carbon reduction strategy.
As part of our Beyond the Horizon strategy, we have
committed to converting our electricity use to renewable
sources by 2025. In 2020, we made a strong start with
22% of our total needs met from renewables by year
end. This has had an immediate impact on our footprint
and puts us on track to achieve our target of 100%
renewable electricity by 2025.
In 2020, Kerry was proud to become a member
of the RE100 initiative. Led by the Climate Group
and in partnership with CDP (formerly the Carbon
Disclosure Project), this global initiative brings
together the world's most influential businesses
committed to 100% renewable electricity.
Across our sites, we are focused on ways to improve energy efficiency including the adoption of the ISO 50001
energy management system by key sites. We also employ energy auditing across our facilities to help identify
areas for action and focus our investment on projects that support our overall sustainable business objectives.
Energy Consumption (MWh)
2020
2019
2017
Direct Fuel Consumption (non-renewable)
2,241,963
2,308,088
2,241,906
Direct Fuel Consumption (renewable)
Electricity Consumption (non-renewable)
Electricity Consumption (renewable)
Heating
Total Energy Consumed
Energy Intensity1
183,680
635,108
177,410
53,486
168,949
102,396
816,853
858,193
–
–
57,932
45,996
3,291,647
3,351,822
3,248,491
0.953
0.940
0.965
1
Energy intensity is relative measure using total energy consumed divided by tonnes of finished product.
66
Adopting a More Circular Approach
[GRI 306: Waste 2020, 306-1, 306-2a]
As the volume of waste materials accumulating in
landfills and the wider natural environment increases,
we are exploring ways to recover more surplus materials
for re-use in our business and elsewhere. Significant
waste impacts can occur at each stage of the value
chain, from the production of agricultural raw
materials, to their processing and the finished food
and beverage products.
To address these impacts, our industry needs to
transition away from the traditional linear model
of take-make-dispose to a more circular approach
where resources are kept in productive use for
longer. Under the Beyond the Horizon strategy, we
have placed our focus on the most material waste
aspects within our operations, food waste and plastic
packaging, while continuing to retain a focus on our
overall waste intensity.
92%
Of our waste volumes were diverted
from landfill in 2020.
Halving Food Loss and Waste
As the world struggles to feed 10 billion people
sustainably by 2050, estimated annual food loss and
waste is projected to reach more than 2 billion tonnes
by 20301. According to the Food and Agriculture
Organisation (FAO) of the UN, one third of all food
produced is lost or wasted, representing valuable
resources and calories that ultimately do not provide
any nutritional benefit. In addition to the economic loss,
the contribution to environmental impact is significant,
as evidenced by the associated GHG footprint, which
represents 8% of total global emissions.
Diverted Waste
Landfill
2020 Waste Recovery
8%
92%
2020 Waste by Destination
4%
8%
4%
8%
8%
92%
Landfill
Landfill
Diverted Waste
Recycling/Recovery
To tackle this issue, we have been working to reduce
food waste from our operations as part of our
broader efforts on waste. In 2020, we announced our
commitment to halving food loss and waste across our
operations by 2030. Given the diverse nature of our
portfolio, the achievement of this goal involves working
across sites to understand the key drivers of food waste
locally and implementing the most appropriate actions
to deliver on our targets. In 2020, we have performed
well versus our goal with a 10% reduction versus our
baseline. This has been driven by a focus primarily on
food waste reduction and diversion strategies across
sites. For example, in a pilot initiative across sites in the
UK, teams have been engaging with customers to look
at how working collaboratively on order fulfilment can
meet their needs and prevent the creation of excess
product that could end up as waste. Customer feedback
from this initiative has been extremely positive and
has supported our sites towards achievement of their
targets. This approach will be expanded upon in 2021.
Incineration
(energy recovery)
88%
4%
8%
88%
Recycling/Recovery
Landfill
Incineration
(energy recovery)
92%
88%
10% achieved
Recycling/Recovery
Landfill
Incineration
(energy recovery)
2020 Food Waste Reduction
Landfill volumes include waste sent for
incineration without energy recovery.
10% achieved
50%
Target
We aim to achieve zero waste to landfill, diverting
resources and keeping materials in use for longer. In
keeping with our unique from-food-for-food heritage
and our commitment to creating natural solutions,
more than 99% of the by-product we generate is non-
hazardous and can be put to other productive uses in
support of a more circular bioeconomy. In 2020, 92% of
our waste volumes were diverted from landfill and we
continue to implement programmes that will support us
to realise our target.
50%
Target
1
www.bcg.com/publications/2018/tackling-1.6-billion-
ton-food-loss-and-waste-crisis
10% achieved
50%
Target
8%
Diverted Waste
Landfill
Kerry Group Annual Report 2020STRATEGIC REPORT
Supporting Our Customers
While tackling food waste across our operations is vitally
important, there are substantial opportunities for Kerry
to impact on the food waste elsewhere in the value
chain, particularly downstream. In developed markets,
the proportion of total food lost or wasted at the
consumer level can be more than 60%. As consumers
increasingly demand natural, clean label products that
do not contain artificial preservatives, manufacturers are
challenged to meet these evolving consumer demands,
while maintaining or improving shelf life. With the
industry’s largest portfolio of clean label preservation
technologies, Kerry is ideally placed to support our
customers in meeting these requirements. For more on
how we are helping customers reduce food waste see
kerry.com/insights.
Tackling Plastic Waste
Of the 78 million tonnes of plastic produced annually,
more than 70% ends up in landfill or finds its way into
the natural environment, including our waterways
and oceans2.
At Kerry, we fully support efforts to promote a more
circular approach to plastics and we have committed to
making all our plastic packaging reusable, recyclable or
compostable by 2025.
Since 2018, our Consumer Foods division has been
leading our efforts to meet growing customer,
consumer and regulatory demand for more sustainable
packaging alternatives. This is a priority focus area,
as the packaging we use has a critical contribution
in maintaining product integrity and safety and in
minimising food waste. As we innovate, we are finding
new ways to overcome both the food safety and
the environmental challenges. We have made very
significant progress against our goals and today 85%
of the packaging we use across our branded and
private label consumer products is recyclable. We
continue to look at ways to address the remaining
volumes, with plans already in place for how we can
tackle some of the more challenging plastic materials
and packaging formats.
85%
Of the packaging we use across our
branded and private label consumer
products is recyclable.
67
We have committed to making all
our plastic packaging reusable,
recyclable or compostable by 2025.
Innovating with New Packaging Formats
In addition to product packaging we are also
examining other areas where more sustainable
materials can be introduced across our business.
In 2020, we introduced our sustainable sample box
packaging to replace polystyrene boxes. These
new boxes contain 100% FSC certified, recycled
cardboard and the insulation is made using natural
sheep’s wool.
Within our B2B operations, much of the plastic
packaging we use is sent to organisations who, like
Kerry, have strong waste management programmes
in place and commitments in respect of environmental
management. However, we recognise that we can
support their ambitions on waste reduction and plastic
through our choice of packaging materials. We use
sustainable packaging where possible, favouring
reusable, returnable, or certified paper-based material.
We aim to meet our 2025 commitments for all plastic
packaging to be reusable, recyclable or compostable and
to reduce our use of virgin plastic across the Group by
25% over the same period.
Protecting Water Resources
[GRI 303: Water and Effluents 2018, 303-3a]
The fundamental importance of water means that
access is internationally recognised as a basic human
right, however, water availability is becoming less
secure and predictable. More than two billion people
live in countries experiencing high water stress and this
situation will likely worsen as demand and the effects
of climate change intensify3. Higher temperatures and
more extreme weather conditions will affect availability
and distribution, increasing scarcity in some regions
while causing flooding in others.
At Kerry, water is vital to our operations, the production
of our raw materials, and in some instances, the use of
our products. Given the growing demand for fresh water,
it is essential that we act to protect water sources and
ensure equitable access to this resource for all users.
Kerry’s approach to water stewardship continues to
evolve and building on our progress to date, we aim
to improve water efficiency across our operations by
a further 15% by 2025, while ensuring we protect
water quality and broader access for communities
where we operate.
2
3
www.ellenmacarthurfoundation.org/explore/plastics-and-the-circular-economy
www.unwater.org/water-facts/climate-change/
Kerry Group Annual Report 2020 2020
2019
4
5
6
7
m3/tonne
2017 Baseline
4
5
6
7
31%
40%
21,095
Total Water
Withdrawals
29%
2020 Discharge by Destination
Surface Water
Ground Water
Municipal Water
51%
48%
7
Surface Water
Sea Water
Municipal Treatment
1%
While the importance of water in our operations is clear,
it is also vital for the production of our raw materials. As
we have expanded our responsible sourcing goals (see
page 69), we have assessed priority categories against
a range of criteria, including water risk. As we work to
achieve our goals, we will partner with suppliers on key
aspects, including water, for relevant categories within
our supply chain. In some instances, this will focus on
areas of water scarcity while in others the focus may be
on quality and access.
7
Protecting Water Quality
In Ireland, Kerry is engaging with its milk suppliers
to help contribute towards improvements in water
quality and to enhance habitats surrounding water
courses. Our dedicated resources on water work
directly with farmers, helping them to implement
farm management practices and to assess
infrastructure investments which will ensure water
courses and aquatic environments are protected
from potential sources of pollution. This includes the
trialing of innovative new technology that provides
real time data and creation of new decision support
tools to assist with better and more timely decision
making on farms.
Reducing Water Consumption
for Customers
Kerry’s CleanSmoke™ technology removes many
of the harmful substances derived through
conventional smoking. As well as these health
benefits, the process is more efficient and consistent,
resulting in significantly lower carbon emissions and
lower water consumption. In fact, CleanSmoke™ can
help processors reduce their water consumption by
up to 88% versus conventional smoking methods.
2020
2019
4
4
68
The overall volume of water we use has remained
largely stable over recent years, as we continue to grow
our business. Our progress on water efficiency in 2020
has been impacted by lower product volumes due to
COVID-19, however, we achieved a 5% improvement
versus our base year and remain well placed for the
achievement of our 2025 reduction target.
6
5
2017 Baseline
Water Risk
We continue to view our water footprint within the
m3/tonne
broader context of global water risk. Given the uneven
distribution of water resources, some of our locations
are potentially more vulnerable to physical water risk.
Using the World Resources Institute’s Aqueduct Tool, we
identified 8 priority sites where we continue to monitor
our footprint closely. In 2020, efficiency across these
sites continued to significantly exceed that for the Group
and is 28% lower versus our base year. However, we
did see a marginal increase versus 2019, as a result
of COVID-19.
As part of our Beyond the Horizon strategy, we have
commenced a revised water risk assessment across all
sites, looking at water consumption and related risks
more broadly and we expect to update our priority sites
in 2021, as a result of this review.
5
6
2020 Water Withdrawal by Source (Megalitres)
31%
40%
21,095
Total Water
Withdrawals
29%
Water Intensity
Surface Water
Ground Water
Municipal Water
2020
2019
51%
48%
Surface Water
Sea Water
4
5
6
7
Municipal Treatment
m3/tonne
2017 Baseline
1%
Notes:
Our target for water is a relative measure of metres cubed (m3) divided
by tonnes of finished product produced.
Our data reflects water use across our manufacturing facilities and is
a like for like performance versus our base year.
4
We also understand that water discharges from our sites
can have an impact on local water quality and make
every effort to ensure we protect local water sources.
We track and monitor compliance with relevant water
standards on an ongoing basis.
31%
7
6
5
40%
21,095
Total Water
Withdrawals
29%
Surface Water
Ground Water
Municipal Water
51%
48%
Surface Water
Sea Water
Municipal Treatment
1%
Kerry Group Annual Report 2020STRATEGIC REPORT Sourcing Responsibly
[GRI 308: Supplier Environmental Assessment, 308-2c]
Although the environmental impact from conventional
agriculture is well understood, it plays a vital social and
economic role and is essential for food security and
biodiversity. Increasing evidence also suggests that the
adoption of more regenerative agriculture practices
can and must play an important role in the fight against
climate change and in contributing to more resilient
rural communities.
As one of the most powerful tools to end extreme
poverty, agricultural development is also central
to ensuring we can meet the UN SDGs and feed a
population of almost 10 billion people by 20504.
69
2-0868-18-100-00
to drive more sustainable practices right back to farm
level, ensuring that 100% of our priority raw materials
are responsibly sourced by 2030. In partnership with our
suppliers, we will work to ensure decent livelihoods for
farmers, promote practices that protect and regenerate
vital ecosystems, and protect the rights of workers
and communities throughout our value chain. We will
use a combination of certification and verification and
where these mechanisms do not support the best path
forward, we will work more directly with supply partners
and expert third parties, including through direct
engagement and programmes at farm level.
At Kerry, we know that the production of some of our
raw materials can present social and environmental
challenges. Addressing these challenges can prove
difficult within a complex global supply chain and as part
of our vision to create a world of sustainable nutrition,
we are engaging with our direct and indirect suppliers
We map our priority supply chains and engage with our
suppliers and other key stakeholders, both individually
and as part of broader multi-stakeholder platforms, to
better understand common challenges associated with
specific commodities and/or geographies and how we
can work together to effectively address these.
Details of our priority commodities, key challenges and our approach to address these are outlined below.
Key hotspots addressed
within our responsible
sourcing programme
AW Animal Welfare & Antibiotic Use
B
CC
Biodiversity
Climate Change
D
H
W
Deforestation
WC Working Conditions
Human Rights
Water
Priority Raw Materials
Category
Our Approach
Coffee Ingredients
CC D H W
Cocoa Ingredients
CC D H W
Dairy Ingredients
AW CC D W
Working with suppliers, we will ensure that all coffee and cocoa ingredients purchased by Kerry address key
challenges, utilising certification standards that achieve a rating of silver or equivalent under SAI platform’s Farm
Sustainability Assessment (FSA).
We source dairy ingredients right across the globe. Where we have a direct link with farmers in Ireland, we
mandate certification for all suppliers covering critical areas within our milk pool. We are also members of the
Sustainable Dairy Partnership, which seeks to drive global progress on the industry’s most material themes by
engaging key stakeholders in the sector.
Egg
AW
While this represents a very small part of our overall procurement spend, we are committed to sourcing from
suppliers who ensure good animal welfare practices and will move towards cage free and/or free range eggs by
2030, implementing this on a regional basis.
Herbs & Spices
B H WC
We source only from processors chosen for their consistent high quality and proximity to local farming
communities. Working collaboratively with industry partners through the Sustainable Spices Initiative (SSI) our goal
is to further scale sustainability practices at farm level.
Meat
AW CC D
Palm Oil
B CC D H WC
Paper Packaging
B CC D H
Soy Ingredients
B CC D H
Vanilla
H WC
Our most significant meat categories are chicken and pork for use within our Consumer Foods business. For these
categories we are focused on the contribution of feed production to deforestation and ensuring good animal
welfare practices.
We support the sustainable production of palm oil and are committed to the principles laid out by the Roundtable
on Sustainable Palm Oil (RSPO). We continue to increase our volumes of physically certified palm oil and provide
direct support for smallholders through improvement programmes at farm level via Project Ilham in Malaysia.
We ensure our paper packaging is sourced from suppliers that are committed to the use of raw materials obtained
from responsible sources through the use of recognised certification standards (FSC, PEFC, SFI) and/or the use of
recycled materials.
We are committed to no deforestation across relevant value chains, including soy, by 2025 and to support the
achievement of this goal we will require certification for all volumes originating from high risk areas.
Since 2014, Kerry has been partnering to build a more sustainable vanilla supply chain in Madagascar. Through the
‘Tsara Kalitao’ Project, we are focused on improving production practices and farm incomes, empowering women
and providing better access to education.
4
www.worldbank.org/en/topic/agriculture/overview
Kerry Group Annual Report 2020 70
Origin Green Gold Membership
In 2020, Bord Bia (the Irish Food Board) introduced a tiered membership for
its Origin Green programme, making it easier to identify members who are
performing at a high level or excelling in their sustainability performance. At
Kerry, we are proud to be among the first gold members of the programme.
Key among our Origin Green initiatives is the work we do at farm level to ensure
certification of all our milk volumes under the Sustainable Dairy Assurance
Scheme and the carbon footprinting of all our supplying farms.
Protecting Biodiversity
Kerry has potential to impact on biodiversity directly
through its operations and indirectly via the raw
materials we source. Our most significant impacts are
those that are linked to our supply chain and these
are incorporated within our approach to our priority
categories outlined above. Importantly, we have a no
deforestation commitment across targeted supply
chains which represent a high risk of deforestation and
include Meat, Dairy, Soybean, Palm Oil, and Paper. We
are a member of several multi-stakeholder initiatives
focused on this area including RSPO, the UK Roundtable
on Responsible Soy, Tropical Forest Alliance (TFA) 2020
and others.
Moving Forward
In what has been a challenging year, we are proud
of our continued progress in the area of sustainability.
The launch of our Beyond the Horizon strategy comes
amid a new awareness of how global risks can impact
on all aspects of business and wider society. It is a
timely statement on our commitment to creating a more
sustainable future for all, one that builds on our past
success and leverages our core strengths to truly deliver
on our purpose. It represents our increased ambition
and reflects the urgent need for action to address very
significant long-term challenges, while highlighting
the critical role that Kerry will play in meeting these
challenges as we continue to inspire food and
nourish life.
Our commitment to creating a more
sustainable future for all builds on our
past success and leverages our core
strengths to truly deliver on our purpose.
71
Risk Management Report
Effective risk management supports the
delivery of our strategic objectives and the
sustainable growth of our business.
Risk Management
Approach and Governance
Effective risk management supports
the delivery of our strategic
objectives and the sustainable
growth of our business. We regularly
face business uncertainties and it is
through a structured approach to
risk management that we are able
to mitigate and manage these risks
and embrace opportunities as they
arise. This has been particularly
evident this year as we navigated
our way through the challenges
presented by the COVID-19 pandemic.
The diversified nature of our
operations and geographical
footprint, together with our broad
portfolio of products, customers
and suppliers are important factors
in mitigating the risk of a material
threat to the Group’s sustainable
growth and long-term shareholder
value. However, as with any
business, risks and uncertainties are
inherent in our business activities
and may have a significant financial,
operational or reputational impact.
The Board has overall responsibility
for determining the nature and
extent of the principal risks the
Group is willing to take in order to
achieve its strategic objectives. On
an annual basis, the Board agrees
the principal and emerging risks
facing the Group and a robust
risk management governance
framework is in place which enables
the Group to effectively prioritise
and manage risk to within our risk
appetite levels. The Board carries
out a review of the effectiveness of
the Group’s risk management and
internal control systems at least
annually.
The Group’s risk management
governance framework has been
designed using a three lines of
defence (3LOD) model which has
been implemented to ensure there
is clear ownership and delegation of
responsibility for the management
and oversight of risk to support the
appropriate flow of information
throughout the Group.
An overview of the Group’s
risk management governance
framework along with the key
responsibilities within it is outlined
in the diagram on page 72.
Kerry Group Annual Report 2020 72
Our Risk Management Governance Framework
Board of Directors
The Board have overall responsibility to ensure appropriate risk management and internal control systems, designed to identify, manage and mitigate
risks which may impact the achievement of the Group’s objectives are in place. The Board also ensure an appropriate risk appetite has been set and
consider how the Group’s longer-term viability may be impacted by the crystallisation of one or more of these risks.
Responsibility has been delegated by the Board to provide structured and systematic oversight of the Group’s risk management and internal control
systems. They review and monitor the effectiveness of the Group’s risk management and internal control systems throughout the year. The Chairman
reports to the Board on its activities regarding audit matters and risk management. See pages 107-112 for description of the risk management activities
conducted by the Audit Committee in 2020.
Audit Committee
Risk Oversight Committee (ROC)
The ROC supports the Audit Committee in the risk management process through ongoing monitoring and evaluation of the risk environment and
the controls in place to manage those risks, in addition to the consideration of emerging risks which may impact the Group in the future. The ROC is
comprised of senior leadership, and is chaired by the CFO, who maintain the Group risk register and provide regular updates on changes in the principal
or emerging risks to the Audit Committee and the Board.
Executive management are responsible for the effective operation of internal controls designed to manage and mitigate the principal risks and
uncertainties. The 3LOD model ensures accountability for risk management is embedded into processes and procedures. Key management committees
support risk management including the Group Finance Committee, the ICT Security Steering Committee, the Sustainability Council, and the Quality, Safety,
Health & Environmental Leadership Team.
Executive Management
1st LINE OF DEFENCE:
Operational Management are responsible
for risk identification, managing the internal
control environment and monitoring changes
in the risk profile of Kerry.
2nd LINE OF DEFENCE:
Group functional teams ensure first line is
operating as designed, manage performance
reviews, internal control verifications, facilitate
risk assessments. Includes Quality, Health
& Safety, Information & Cyber Security,
Legal and Financial Control functions.
3rd LINE OF DEFENCE:
Group Internal Audit function with
other external assurance providers perform
reviews which give independent assurance
over the operation of the internal control
framework, risk management systems and
governance processes.
Enterprise Risk Management Process
Our risk assessment process incorporates a groupwide
top down and bottom up evaluation to determine the
likelihood of occurrence and potential impact of risks on
the Group at a residual level. Input is obtained from senior
business and functional management through a series of
workshops, one-to-one interviews and surveys which are
consolidated to produce the Group Risk Register. Our risk
universe forms the basis of conversations and additional
new and emerging risks are added, as appropriate, when
identified. A standard risk scoring methodology has been
devised to provide context and ensure consistency in
reporting and evaluation of risks.
The output from this process is consolidated to determine
the principal risks and uncertainties for the Group.
Executive Management and the ROC review and validate
these risks providing further input where necessary before
submission to the Audit Committee and Board for final
consideration and approval.
During the year we continued to improve our risk
management processes initiating a programme of work
to enhance our approach to defining risk appetite.
Identify
& Assess
Risk
Appetite
Monitor
& Report
Manage /
Mitigate
Kerry Group Annual Report 2020STRATEGIC REPORT We engaged with Executive Management, the ROC, the
Audit Committee and external subject matter experts to
develop a methodology which encompassed a five-point
scale ranging from ‘Risk Averse’ to ‘Risk Seeking’. Each of
our principal risks was assigned a score on this scale in
addition to the articulation of a risk appetite statement.
The Audit Committee and Board approved the risk
appetite for each of our principal risks and in 2021 we
plan to further enhance this reporting. For risks which
may negatively impact our brand or reputation such as
food safety and employee health & safety the Group
is risk averse, but is more risk seeking and willing to
pursue potential opportunities in relation to risks
which will contribute towards our growth goals such
as developing market expansion, acquisitions or
capital investments.
Each principal risk is assigned an executive owner
who is responsible for ensuring mitigating actions are
sufficient to bring risks to within the agreed appetite
and the 3LOD model ensures that these mitigations and
internal controls are embedded and operate effectively
throughout the organisation.
The annual Board and the Audit Committee agendas
include a series of updates from risk owners in relation
to the Group’s principal risks. These updates include
the history of the risk to date, key mitigating actions
and controls, an outline of the residual risk and any
future actions planned to address control weaknesses.
During 2020, the Board and Audit Committee received
updates relating to Business Acquisition and Divestiture,
Taxation, Intellectual Property Management, Information
Security and Cybercrime, Food Safety & Quality and
Health & Safety risks as well as regular updates on Brexit
and COVID-19.
The Audit Committee receive regular updates on risk
management and internal control effectiveness from
the Head of Internal Audit (HIA) along with agreed
mitigating actions to resolve any weaknesses identified.
The Audit Committee also received a report from the
HIA and management following a review of the Group’s
second line of defence structures. This report identified
some opportunities to strengthen the Group’s risk
management governance framework and work on these
opportunities was initiated in 2020 and will continue to
be a focus for the Group in 2021.
The Audit Committee and Board formally approved the
principal risks and risk appetite and have confirmed
in the Corporate Governance Report on page 106
that a robust assessment of the Group’s principal and
emerging risks was completed including those risks that
could threaten the business model, future performance,
solvency or liquidity of the Group.
73
Principal Risks and Uncertainties
The table on pages 76-82 describes the principal risks
and uncertainties, which the Board have determined
could impact the achievement of strategic objectives
and have been identified through the risk assessment
process, as well as the mitigating actions in place and an
update on any change in the profile of each risk during
the year. Additionally, each risk has been linked to the
Group’s strategies for growth and margin expansion as
outlined in the Strategic Report on pages 26-28.
This table presents the Board’s view of the Group’s
principal risks and uncertainties and is not an exhaustive
list of all the risks which may impact the Group. There
are additional risks which are not yet considered
material, or which are not yet known to the Board,
which could become significant in the future. Likewise,
some of the current risks may reduce in importance as
management actions are implemented or changes in the
operating environment occur. The Board will continue
to monitor risk in the context of growth through
geographic expansion and ongoing acquisitions, as well
as other changes in the external environment, which
may create future risks.
Changes to Our Principal Risks
The Group operates in a dynamic environment and
during the risk assessment process the Board consider
if there are new risks which have the potential to disrupt,
or if there are risks that no longer materially impact our
ability to achieve our strategic objectives. The Board
acknowledges that risks do not exist in isolation and that
the crystallisation of one risk may have an intensification
effect on other potential risks, significantly impacting
the Group.
During 2020, the significant disruption caused by the
COVID-19 pandemic increased the potential impact
of many risks, including health & safety, ICT and
cybersecurity, margin management and particularly
our supply chain operations. As a result, Operational and
Supply Chain Continuity risk has been included as
a principal risk, recognising the importance of
maintaining consistent and high quality supply and
service to our customers.
Given the increasing focus on the impacts of social
responsibility and climate change combined with the
accelerating emphasis on a global transition to a low-
carbon economy, sustainability/environmental risk,
which was previously an emerging risk, has now been
deemed a principal risk.
During 2020, significant work was completed to ensure
the Group was prepared for the new trading relationship
between the EU and the UK. Following the conclusion of
the EU-UK Trade and Co-operation Agreement, Brexit is
no longer considered as a standalone principal risk for
the Group and any ongoing issues with regard to the
movement of goods are considered as part of either
Geopolitical/Developing Markets risk or Operational and
Supply Chain Continuity risk.
Kerry Group Annual Report 2020 74
The KerryConnect project, to roll out a common
ICT solution and standard ways of working groupwide,
has now been deployed to 84% of our manufacturing
locations globally and remains on target to be
substantially complete by the end of 2021. On the
basis of this, it is no longer considered a principal
risk for the Group. However, given the materiality of
the sites within the 2021 deployment schedule, the
existing project governance frameworks and processes
will be maintained until the project is fully complete.
Emerging Risks
We define emerging risks as those that do not currently
have a significant impact on the achievement of strategic
objectives but may have a disruptive impact in the
future. Emerging risks are considered as part of the risk
assessment process and are identified through
horizon scanning, continual dialogue with the business
and keeping abreast of market and industry changes.
Following the annual risk assessment a number of risks
are being monitored which could potentially impact the
Group in the future, including: changes to the working
model as result of the COVID-19 pandemic, ensuring
a diverse and inclusive workforce, keeping pace with
digital advancements and disruption to availability of
water in water-stressed areas.
Management of Climate Related Risks
With our global presence and leadership position within
the food and beverage industry, we are very aware of
the increased global focus on the impacts of climate
change and the accelerating emphasis being placed
on transitioning to a low-carbon economy. We are very
clear on the risks and opportunities presented by climate
change and take a proactive approach to understanding
the implications across our entire business portfolio.
The potential risk presented by climate change is
recognised within our risk universe and was considered
as part of our risk assessment process. The Board,
in conjunction with the Governance, Nomination
and Sustainability Committee, has oversight of our
sustainability strategy, including our response to climate
related risks, while Kerry’s Sustainability Council is
responsible for the ongoing achievement of specific
climate related goals. Our climate strategy is focused
on mitigating climate risks for our business and
strengthening our resilience to climate related impacts.
During 2020, the Board supported and approved the
Group’s sustainability strategy, Beyond the Horizon,
with climate related commitments to achieve net zero
emissions across our operations before 2050 and a
Science Based Target for carbon that includes a 33%
reduction in absolute greenhouse gas emissions from
our operations (Scope 1 and 2) by 2030.
Read More
Find our Beyond the Horizon
strategy at www.kerry.com/
sustainability
We acknowledge and support the objectives of the Task
Force for Climate Related Financial Disclosure (TCFD)
and are committed to aligning our reporting with its
recommendations. For more see our Sustainability
Review on pages 46-70 where key climate related risks
and opportunities are discussed in more detail.
Our Response to COVID-19
The COVID-19 pandemic presented significant
challenges for our business and has impacted our
performance. We do not consider COVID-19 as just one
individual risk but rather the amplifying effect it has had
on a number of the Group’s principal risks as well as
highlighting the interdependencies that exist between
many risks. Since February 2020, when the potential
impact of the pandemic became apparent, the Board
and Audit Committee have provided critical support and
guidance to Executive Management.
At an early stage, the Group’s crisis management
protocols were invoked, and a Global COVID-19 Taskforce
comprising of senior functional leadership and led by
the Global Chief Operating Officer was established. This
team was supported by local management teams in
each of our regions. These teams led the overall Group
response and through informed and timely decision
making ensured that we were proactive in addressing
the challenges which were presented. Learnings were
shared across all regions and best in class protocols
were implemented groupwide to ensure a consistent
and robust control environment remained intact.
The Chief Financial Officer led the Group’s response
to minimise the financial impact of lower volumes
and higher costs as well as overseeing initiatives to
further strengthen the liquidity position of the Group.
Where required, additional mitigating actions were
implemented to manage increased risk in other areas,
including appropriate measures to ensure the protection
of employees and increased cybersecurity awareness
campaigns to respond to the heightened threats.
At an early stage, the Group’s
crisis management protocols were
invoked, and a Global COVID-19
Taskforce comprising of senior
functional leadership and led by
the Global Chief Operating Officer
was established.
Kerry Group Annual Report 2020STRATEGIC REPORT 75
We have managed, and continue to manage, our
response to COVID-19, according to three priorities. We
have prioritised protecting the safety and wellbeing of
our people at all times, along with ensuring continuity
of service to our customers and supporting the
communities in which we operate.
Our People: safeguarding their safety and wellbeing
Kerry implemented best in class safety protocols to
ensure the health and wellbeing of our people has been
prioritised at all times including segregation and zoning,
use of appropriate personal protective equipment,
increased sanitisation measures and employee and
visitor screening. Where possible remote working
was encouraged, and the rollout of new software was
fast-tracked to enhance collaboration and connectivity.
Regular, consistent and transparent communication
helped to minimise uncertainty and kept our people
informed and supported. As well as the global employee
assistance programme, wellbeing toolkits and additional
training were made available to support employees
through these challenging times. A full review of sick
pay schemes was undertaken to ensure there was no
unnecessary impact on our employees as a result of
COVID-19 related absences.
We have prioritised protecting
the safety and wellbeing of our
people at all times, along with
ensuring continuity of service to
our customers and supporting the
communities in which we operate.
Our Customers: ensuring continuity of supply
and innovation
The Group has remained focused on ensuring continuity
of supply for its customers as well as supporting and
partnering with them as they navigate the disruption
caused by the crisis. Our manufacturing and supply
chain teams have responded with agility to dramatic
shifts in demand patterns. In response to the changes
in the marketplace, we collaborated with customers
sharing expertise and insights on emerging consumer
trends. To maintain customer engagement and
collaboration on innovation projects, technology was
leveraged to conduct commercial meetings and virtual
product trials.
Our Community: supporting our local communities
When global supply was impacted, we shifted
production to making hand sanitiser in a number
of our facilities. Additionally, we donated and continue
to donate PPE and sanitiser to front-line staff through
our MyCommunity initiative and pledged 26,000
volunteer days and a €1 million fund to support local
community initiatives.
As the Group navigates the ongoing challenges of
the disruptive environment caused by the COVID-19
pandemic, prioritising the health and wellbeing of our
people will continue to remain our number one priority.
The agility and adaptability of our people supported by
a dedicated management team allows us to continue
delivering innovative solutions, sustaining global food
supply chains and being our customers co-creation
partner of choice.
Kerry Group Annual Report 2020 2020 Annual Report
Risk Icons
76
2020 Annual Report
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2019 Annual Report
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2019 Annual Report
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2019 Annual Report
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Risk is unchanged
2019 Annual Report
2020 Annual Report
Link to Strategic Priorities for Growth as per the Strategic Report and Risk Trend
Risk Icons
Risk Icons
2019 Annual Report
Risk Icons
2020 Annual Report
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2020 Annual Report
Risk Icons
Risk has decreased
Risk has decreased
Risk has decreased
Risk has increased
Risk has increased
Risk has increased
Risk is unchanged
Risk is unchanged
2019 Annual Report
Risk Icons
Taste & Nutrition
Strategic Growth Priorities
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
Margin Expansion
Drivers
Consumer Foods
Strategic Growth Priorities
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
Margin Expansion
Drivers
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
Margin Expansion
Drivers
Margin
Expansion Drivers
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk has increased
Risk has decreased
Risk
Description & Impact
Mitigation
Developments in 2020
2020 Annual Report
Risk Icons
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
Portfolio
Management
Strategic Risk
Margin Expansion
Drivers
2020 Annual Report
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Trend
Risk Icons
Risk Icons
Risk Icons
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk is unchanged
Risk is unchanged
Link to Strategic
Priorities
Risk has decreased
Risk has increased
Risk has increased
Risk has increased
Margin Expansion
Drivers
Consumer Foods
Strategic Growth
Priorities
Risk has decreased
Risk has decreased
Taste & Nutrition
Strategic Growth
Priorities
Taste & Nutrition
Strategic Growth
Priorities
Taste & Nutrition
Taste & Nutrition
Strategic Growth
Strategic Growth
Priorities
Priorities
Consumer Foods
Strategic Growth
Priorities
Consumer Foods
Consumer Foods
Strategic Growth
Strategic Growth
Priorities
Priorities
Margin Expansion
Margin Expansion
Margin Expansion
Drivers
Drivers
Drivers
2019 Annual Report
2019 Annual Report
Risk Icons
Risk Icons
2019 Annual Report
Risk Icons
Margin Expansion
Drivers
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
The Group’s overall
growth and profitability
2019 Annual Report
is determined by the
Risk Icons
effectiveness of its
commercial operating
model and management
of its portfolio across
technologies, end use
markets, geographies
and channels. If the
Group makes suboptimal
investment decisions
(capex, RD&A, M&A etc.)
which are not aligned with
the Group's long-term
strategic objectives, then
opportunities for growth
and margin may not be
maximised.
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
The Group’s strategy and
business plans are designed
to ensure that resources are
prioritised towards those
technologies and markets
having the greatest long-term
potential for the Group.
Post implementation reviews
are undertaken for all major
investment projects to
measure returns and inform
future investment decisions.
Our integrated business
model is differentiated in the
marketplace through its ability
to provide integrated solutions
underpinned by its portfolio of
foundational technologies.
Dramatic shifts in demand
and consumption patterns
as a result of the COVID-19
pandemic had the potential
to impact the Group’s
ability to plan and manage
it’s portfolio.
Investment in research and
development, consumer
insight and innovation enable
the Group to stay ahead of
ever-changing consumer
preferences and provides
foresight into future consumer
demands and market and
competitor intelligence.
Geopolitical/
Developing
Markets
2020 Annual Report
Risk Icons
Strategic Risk
Trend
2020 Annual Report
2020 Annual Report
2020 Annual Report
Risk Icons
Risk Icons
Risk Icons
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk is unchanged
Taste & Nutrition
Strategic Growth
Risk is unchanged
PrioritiesLink to Strategic
Priorities
Consumer Foods
Strategic Growth
Risk has increased
Risk has increased
Priorities
Risk has decreased
Risk has increased
Margin Expansion
Drivers
Risk has decreased
Risk has decreased
Taste & Nutrition
Strategic Growth
Priorities
Taste & Nutrition
Taste & Nutrition
Strategic Growth
Strategic Growth
Priorities
Priorities
Consumer Foods
Strategic Growth
Priorities
Consumer Foods
Consumer Foods
Strategic Growth
Strategic Growth
Priorities
Priorities
Margin Expansion
Margin Expansion
Margin Expansion
Drivers
Drivers
Drivers
The Group is exposed
to macro-economic and
political risk resulting from
our global footprint and our
acquisitive growth strategy.
Central and local legal,
regulatory and compliance
teams ensure adherence to
applicable laws and regulations.
2019 Annual Report
Risk Icons
2019 Annual Report
Risk Icons
The Group operates in a
number of countries where
2019 Annual Report
2019 Annual Report
the legal and regulatory
Risk Icons
Risk Icons
environment is complex,
currencies are volatile and
trade policies and sanctions
are subject to regular
change. Security threats
have also increased in
certain regions which may
threaten the security of our
employees or our ability
to operate.
Failure to monitor and
respond to change and
volatility across the
Group’s markets may
have a potential impact
on the future growth and
profitability of the Group.
Local management engage
with local authorities and
regulatory organisations.
Rigorous due diligence is
undertaken when entering
or commencing business
activities in new markets.
The Group’s portfolio is
sufficiently diversified to
mitigate exposure to
localised risk.
Group hedging is utilised
to manage currency
transaction exposures.
Security situations are
continually monitored
in conjunction with an
external partner.
Margin Expansion
Drivers
Agile responses which were
implemented to meet COVID-19
driven changes in demand
patterns resulted in adapting
our offerings across channels
and categories.
Continued progress was
made in developing the
Group’s industry-leading taste
and nutrition technology
portfolio including enhancing
our local taste, proactive
nutrition and food
protection capabilities.
The Group continued to evolve
and strengthen its operating
model to ensure that it
remains both fit for purpose
to deliver on its strategic plan
and responsive to changing
marketplace dynamics
and opportunities.
Our capital investment strategy
continued to focus on our
strategic priorities for growth
and was flexed to key growth
areas which were accelerated
as a result of COVID-19.
The Group has invested
in enhanced supply chain
technology solutions to
support EU-UK trade in the
post Brexit environment.
The Brexit Steering Committee
met regularly throughout
2020 to consider and plan for
all scenarios that could arise
as part of the EU-UK trade
negotiations and were satisfied
that the Group was well placed
to deal with the final outcome
of the negotiations.
The Group continued to invest
in its talent pipeline to ensure
that the appropriate skills
and expertise are available
to support its growth in
developing markets.
Kerry Group Annual Report 2020STRATEGIC REPORT
77
Risk
Description & Impact
Mitigation
Developments in 2020
Mergers and acquisitions
continue to be a core
element of the Group’s
growth and portfolio
management strategy
which presents risks
2019 Annual Report
around due diligence,
Risk Icons
execution and integration
of businesses.
2019 Annual Report
2019 Annual Report
Risk Icons
Risk Icons
2019 Annual Report
Risk Icons
A robust process is in place to
manage potential transactions
from identification and
evaluation to integration and
post-acquisition review. All
transactions are fully reviewed
and approved by the Board.
An updated playbook was
rolled out during 2020 to
streamline and enhance the
planning and execution of the
integration process.
Integration specialists
supported the onboarding
of new acquisitions.
An experienced, dedicated
Mergers and Acquisitions
(M&A) team are in place who
follow a strong governance
process throughout all stages
of a transaction.
A failure to successfully
identify, execute or
properly integrate
acquisitions or execute
divestments in a timely
and effective manner
could impact profitability
and impede the strategic
development of the Group.
Business
Acquisition
and Divestiture
2020 Annual Report
Risk Icons
Strategic Risk
2020 Annual Report
2020 Annual Report
2020 Annual Report
Trend
Risk Icons
Risk Icons
Risk Icons
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk is unchanged
Risk is unchanged
Link to Strategic
Priorities
Risk has decreased
Risk has increased
Risk has increased
Risk has increased
Consumer Foods
Strategic Growth
Priorities
Taste & Nutrition
Strategic Growth
Priorities
Margin Expansion
Drivers
Risk has decreased
Risk has decreased
Taste & Nutrition
Strategic Growth
Priorities
Taste & Nutrition
Taste & Nutrition
Strategic Growth
Strategic Growth
Priorities
Priorities
Consumer Foods
Strategic Growth
Priorities
Consumer Foods
Consumer Foods
Strategic Growth
Strategic Growth
Priorities
Priorities
Margin Expansion
Margin Expansion
Margin Expansion
Drivers
Drivers
Drivers
Sustainability/
Environmental
Risk
Strategic Risk
2020 Annual Report
Risk Icons
2020 Annual Report
2020 Annual Report
2020 Annual Report
Trend
Risk Icons
Risk Icons
Risk Icons
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk is unchanged
Risk is unchanged
Link to Strategic
Priorities
Risk has decreased
Risk has increased
Risk has increased
Risk has increased
Margin Expansion
Drivers
Consumer Foods
Strategic Growth
Priorities
Risk has decreased
Risk has decreased
Taste & Nutrition
Strategic Growth
Priorities
2019 Annual Report
Risk Icons
Ever-increasing global
environmental and social
challenges are recognised
by both the Group and it’s
stakeholders (customers,
employees, shareholders).
A failure to respond to
these challenges in a
responsible manner, or
an environmental, social
or governance (ESG) event,
could have a significant
financial and/or reputational
impact on the Group.
2019 Annual Report
2019 Annual Report
Risk Icons
Risk Icons
2019 Annual Report
Risk Icons
Taste & Nutrition
Strategic Growth
Priorities
Taste & Nutrition
Taste & Nutrition
Strategic Growth
Strategic Growth
Priorities
Priorities
Consumer Foods
Strategic Growth
Priorities
Consumer Foods
Consumer Foods
Strategic Growth
Strategic Growth
Priorities
Priorities
Margin Expansion
Margin Expansion
Margin Expansion
Drivers
Drivers
Drivers
Sustainability concerns
held by stakeholders have
been amplified by the
COVID-19 pandemic.
Due diligence activities
are supported by external
specialists when necessary.
Procedures are in place to
ensure key acquired talent is
retained and developed and
support is provided to facilitate
an efficient integration process.
Commitments to operating
sustainably are core to
our business strategy and
embedded in our purpose,
values and culture.
With Board oversight, a
refreshed sustainability
strategy, Beyond the Horizon was
launched, with targets tackling
areas of material importance.
Approval of the Group’s carbon
target by the Science Based
Target Initiative.
Share of electricity from
renewables increased to 22%.
Commenced revised water
risk assessment across our
operations.
The role of the Governance,
Nomination and Sustainability
Committee was expanded to
provide guidance and oversight
on the implementation of the
Group’s sustainability strategy.
The Group’s Sustainability
Council, led by the Group
CEO, ensures that ESG risks
are fully integrated across
our operations and broader
value chain.
Cross-functional teams and
programmes established to
address key themes including
climate change, human rights
and responsible sourcing.
Comprehensive monitoring
and reporting systems in place
across the organisation that
allows us to track and report
progress against our targets.
Ongoing assessment and
engagement with suppliers
of priority raw materials.
Kerry Group Annual Report 2020
78
Risk
Description & Impact
Mitigation
Developments in 2020
2019 Annual Report
Risk Icons
The ability to attract,
develop, engage and retain
appropriately qualified
talent with the necessary
capabilities and skillsets
2019 Annual Report
is critical if the Group is to
Risk Icons
continue to compete and
grow effectively.
2019 Annual Report
Risk Icons
An objective recruitment
and selection process is in
place along with effective
employment policies
and systems.
Talent
Management
2020 Annual Report
Risk Icons
Operational Risk
2020 Annual Report
2020 Annual Report
Trend
Risk Icons
Risk Icons
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk is unchanged
Link to Strategic
Priorities
Risk has increased
Risk has increased
Consumer Foods
Strategic Growth
Priorities
Taste & Nutrition
Strategic Growth
Priorities
Margin Expansion
Drivers
Risk has decreased
Risk has decreased
Taste & Nutrition
Taste & Nutrition
Strategic Growth
Strategic Growth
Priorities
Priorities
Consumer Foods
Consumer Foods
Strategic Growth
Strategic Growth
Priorities
Priorities
Margin Expansion
Margin Expansion
Drivers
Drivers
A failure to ensure that a
strong senior leadership
talent pipeline is in place
may impact the Group’s
ability to achieve its
strategic growth priorities.
COVID-19 has presented
additional challenges in
recruiting and onboarding
key talent and engaging
a more dispersed global
workforce.
The Group completed its leader-
led engagement programme to
embed its purpose and values
to all employees (commenced
in 2019).
The Group conducted its
third groupwide employee
engagement survey, the results
of which were reviewed by
Executive Management and the
Board to agree global priorities
for 2021.
The Board reviewed outputs
from a revised approach to
executive succession planning
implemented in 2019, including
the embedding of Kerry
Leadership Competencies into
all successor assessment and
development processes.
A refreshed risk mitigation
plan for leadership continuity
for key executive roles and
strengthening succession
bench strength was reviewed
and approved by the
Governance, Nomination and
Sustainability Committee.
In response to the COVID-19
pandemic the Group
strengthened its employee
engagement communication
programme. In addition,
increased focus was placed
on leadership development
training to support the
management of virtual teams
and leading with purpose
through challenging times.
Virtual onboarding guidance
was developed, including role
specific training and team
introductions, to ensure a
smooth onboarding of
new employees.
Talent management is a
regular agenda item at
Group Executive, Governance,
Nomination and Sustainability
Committee and Board
meetings.
A groupwide consistent
approach is in place
to identify, assess and
accelerate talent readiness
in order to meet succession
planning requirements.
Remuneration policies
have clear links to strategic
growth priorities and high-
performance criteria including
a balance of short and
longer-term incentives.
Formal graduate, executive
education and mentoring
programmes are in place and
regularly refreshed to ensure
the Group is developing the
skills and capabilities that will
enable future growth.
Kerry’s priority, in the face
of COVID-19 is the health,
safety and wellbeing of
our employees. Remote
working was encouraged
for a significant number of
employees and where this
was not possible, appropriate
safety protocols were
implemented e.g. zoning,
provision of protective
equipment, increased
sanitisation and
screening measures.
Kerry Group Annual Report 2020STRATEGIC REPORT
Risk
Description & Impact
Mitigation
Developments in 2020
79
Food Safety,
Quality &
Regulations
2020 Annual Report
Risk Icons
Operational Risk
2020 Annual Report
2020 Annual Report
2020 Annual Report
Trend
Risk Icons
Risk Icons
Risk Icons
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk is unchanged
Risk is unchanged
Link to Strategic
Priorities
Risk has decreased
Risk has increased
Risk has increased
Risk has increased
Consumer Foods
Strategic Growth
Priorities
Taste & Nutrition
Strategic Growth
Priorities
Margin Expansion
Drivers
Risk has decreased
Risk has decreased
Taste & Nutrition
Strategic Growth
Priorities
Taste & Nutrition
Taste & Nutrition
Strategic Growth
Strategic Growth
Priorities
Priorities
Consumer Foods
Strategic Growth
Priorities
Consumer Foods
Consumer Foods
Strategic Growth
Strategic Growth
Priorities
Priorities
2019 Annual Report
Risk Icons
Adherence to stringent
food safety and product
controls is critical to ensure
the safety and integrity of
raw materials and products
throughout the Group’s
2019 Annual Report
2019 Annual Report
supply chain. Kerry must
Risk Icons
Risk Icons
also ensure compliance with
continuously evolving legal
and regulatory obligations
in the areas of food safety,
quality, labelling and
the environment.
2019 Annual Report
Risk Icons
Industry-leading food safety
and traceability processes
and procedures are in place
across all manufacturing sites,
which are regularly monitored
by dedicated, qualified
compliance teams.
Regular audits of
manufacturing sites against
recognised global food safety
standards are conducted by
internal teams, customers and
other independent agencies.
Margin Expansion
Margin Expansion
Margin Expansion
Drivers
Drivers
Drivers
Any failure in the Group's
food safety protocols; raw
materials accidentally or
maliciously contaminated
throughout the supply
chain process; or a
breakdown in quality
control systems may
result in contamination
of products leading to
a breach of food safety
legislation, a product
recall or increased levels
of customer complaints
which could have an
adverse financial and/or
reputational impact.
Stringent controls operate
across our supply chain
including audits and approval
of suppliers supported by
rigorous quality checking of all
high-risk ingredients.
The regulatory function closely
monitors and engages with
external industry organisations
on horizon scanning for
emerging regulatory changes
or issues.
Health & Safety
2020 Annual Report
Risk Icons
Operational Risk
2020 Annual Report
2020 Annual Report
Trend
Risk Icons
Risk Icons
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk is unchanged
Link to Strategic
Priorities
Risk has increased
Risk has increased
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
Margin Expansion
Drivers
Risk has decreased
Risk has decreased
Taste & Nutrition
Taste & Nutrition
Strategic Growth
Strategic Growth
Priorities
Priorities
Consumer Foods
Consumer Foods
Strategic Growth
Strategic Growth
Priorities
Priorities
Margin Expansion
Margin Expansion
Drivers
Drivers
2019 Annual Report
Risk Icons
The health & safety
of employees, sub-
contractors, customers
and other visitors is of
2019 Annual Report
paramount importance to
Risk Icons
the Group. The safety and
wellbeing of employees is
a priority of the Group’s
COVID-19 response.
2019 Annual Report
Risk Icons
Senior leadership supported
by health & safety managers
are responsible for embedding
the Safety First, Quality Always
culture and enforcing health
& safety standards across
the Group underpinned by a
robust governance framework.
The Group is subject to
local safety regulations
in multiple jurisdictions
with which compliance
is paramount.
A significant safety
incident could expose
the Group to legal liability,
and/or significant costs
and damage the Group’s
reputation.
Group health & safety policies
have been implemented at
every site.
All employees are required
to complete formal health &
safety training (relevant to
their role) at regular intervals.
Root cause analysis and
investigation is conducted to
identify and remediate causes
of serious incidents.
Regular health & safety audits
and reviews are conducted.
KPIs are reported against
industry standards globally.
The Group continued to embed
and strengthen it’s culture of
Safety First, Quality Always.
Global deployment of a new
Quality enterprise software
system to enable the capture
and trending of real time quality
data across our manufacturing
footprint.
Changes within the quality
organisation structure supporting
improved governance and talent
development were implemented.
External food safety consultants
were engaged to provide expert
advice in relation to disease
control and preventative
measures in response to the
COVID-19 pandemic.
The cultural programme has
been strengthened through
training and proactive
safety initiatives.
Improvements were
implemented to streamline
the recording of key health
and safety metrics.
Further improvements have
been made to our safety
programmes.
Changes within the health
& safety organisation
structure supporting
improved governance and
talent development were
implemented.
In response to COVID-19
appropriate measures were
implemented to protect the
safety and wellbeing of our
people. These measures
included remote working
where possible, segregation
and zoning, use of appropriate
personal protective equipment
and increased sanitisation
and employee and visitor
screening procedures.
Kerry Group Annual Report 2020
80
Risk
Description & Impact
Mitigation
Developments in 2020
2020 Annual Report
Risk Icons
Margin
Management
Operational Risk
2020 Annual Report
Risk Icons
Trend
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk has increased
Taste & Nutrition
Strategic Growth
Priorities
Risk has decreased
Link to Strategic
Priorities
Margin Expansion
Drivers
Consumer Foods
Strategic Growth
Priorities
The Group’s cost base and
margin may be impacted by
2019 Annual Report
fluctuations in commodities,
Risk Icons
freight, energy, labour
and other input costs.
2019 Annual Report
Risk Icons
These fluctuations may be
influenced by global supply
and demand, weather
events, political decisions
or changes in regulations.
Additionally, COVID-19 has
resulted in increased costs
for the business.
A strong commercial focus
on procurement, pricing and
cost improvement initiatives
is maintained along with
ongoing monitoring of
pricing performance.
The commercial implications of
commodity price movements
are continuously assessed
and, where appropriate, are
reflected in the pricing of
our products.
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
Margin Expansion
Drivers
Failure to pass on cost
increases to customers may
impact the Group’s margins.
Risk management processes
have been implemented which,
in certain cases, include taking
purchasing cover on a back
to back basis. In addition,
exchange rate hedging is
implemented where necessary.
Contractual mechanisms
exist with many customers to
pass-through fluctuations in
commodity prices.
Information
Security
& Cybercrime
Operational Risk
2020 Annual Report
Risk Icons
2020 Annual Report
Risk Icons
Trend
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk has increased
Taste & Nutrition
Strategic Growth
Priorities
Risk has decreased
Link to Strategic
Priorities
Margin Expansion
Drivers
Consumer Foods
Strategic Growth
Priorities
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
Margin Expansion
Drivers
A robust ICT infrastructure
is critical to the operation
of our principal business
processes.
2019 Annual Report
Risk Icons
2019 Annual Report
Risk Icons
There is a constant threat of
significant and sophisticated
cyber-attacks including
phishing, ransomware,
malware and social
engineering. The COVID-19
pandemic has further
increased the likelihood and
intensity of these attacks.
A specialist ICT Security team
is in place who operate a
comprehensive series of ICT
security controls which are
aligned to a globally recognised
information security control
framework.
The Board receive a formal
cyber security update from
the Chief Information Security
Officer on an annual basis in
addition to other updates
as required.
The ICT Security team
continuously monitor
developments in cyber
security threats, engaging
with third party specialists as
appropriate and implement
effective responses.
A comprehensive information
security training program is in
place, supported by continuing
awareness campaigns to keep
employees abreast of new
threats such as phishing
and malware.
The Group continued to
invest substantial resources
in upgrading talent, systems
and processes across its global
commercial and procurement
organisation. These
investments enable the Group
to keep pace with the ongoing
challenges and complexities of
the global marketplace.
Through the COVID-19
pandemic, the Group has
remained focused on continuity
of the food supply chain with
all manufacturing and RD&A
facilities remaining open. The
Group also endeavoured to
minimise the financial impact
on employees with only a
small percentage impacted by
temporary layoffs/furloughs
or redundancies. This did
result in additional costs for
the Group and as a result cost
management measures were
critical and a programme of
mitigating actions was deployed
e.g. a focus on non-essential
and discretionary spend and
targeted cost management
initiatives in impacted
business areas.
During 2020, a cyber security
assessment was conducted
by an external party against
the National Institute of
Standards and Technology (NIST)
framework. This noted strong
progress from the previous
review as well as identifying
areas for future focus.
Additional investment in
cybersecurity training and
awareness in response to
remote working arrangements
due to the COVID-19 pandemic.
Data loss prevention controls
were further strengthened
through the deployment of
additional software solutions.
Deployment of incremental
controls in network access,
email protection and endpoint
monitoring.
A programme of work was
initiated to strengthen the
security of operational
technology at our
manufacturing locations.
Kerry Group Annual Report 2020STRATEGIC REPORT
Risk
Description & Impact
Mitigation
Developments in 2020
81
Information
Security
& Cybercrime
(continued)
Operational Risk
2020 Annual Report
Risk Icons
2020 Annual Report
Risk Icons
Trend
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk has increased
Taste & Nutrition
Strategic Growth
Priorities
Risk has decreased
Link to Strategic
Priorities
Margin Expansion
Drivers
Consumer Foods
Strategic Growth
Priorities
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
Margin Expansion
Drivers
Operational
and Supply
Chain
Continuity
2020 Annual Report
Risk Icons
Operational Risk
2020 Annual Report
2020 Annual Report
2020 Annual Report
Trend
Risk Icons
Risk Icons
Risk Icons
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk is unchanged
Risk is unchanged
Link to Strategic
Priorities
Risk has decreased
Risk has increased
Risk has increased
Risk has increased
Margin Expansion
Drivers
Consumer Foods
Strategic Growth
Priorities
Risk has decreased
Risk has decreased
Taste & Nutrition
Strategic Growth
Priorities
Taste & Nutrition
Strategic Growth
Priorities
Taste & Nutrition
Taste & Nutrition
Strategic Growth
Strategic Growth
Priorities
Priorities
Consumer Foods
Strategic Growth
Priorities
Consumer Foods
Consumer Foods
Strategic Growth
Strategic Growth
Priorities
Priorities
Margin Expansion
Margin Expansion
Margin Expansion
Drivers
Drivers
Drivers
Taxation
2020 Annual Report
Financial and
Risk Icons
Compliance Risk
2020 Annual Report
Risk Icons
Trend
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk has increased
Risk has decreased
Link to Strategic
Priorities
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
Margin Expansion
Drivers
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
Margin Expansion
Drivers
A successful cyber-attack,
internal breach or other
systems failure could
result in business
interruption, loss of
2019 Annual Report
Risk Icons
confidential personal
or business data or an
2019 Annual Report
inability to process financial
Risk Icons
transactions. This could
result in a significant
customer, financial,
reputational and/or
regulatory impact for
the Group.
Policies are in place for the
protection of information
and the appropriate use of
IT systems and applications
by employees, including
access governance.
Business continuity,
disaster recovery and crisis
management plans are in place
and are regularly tested.
A data protection governance
structure for the Group is in
place led by an experienced
Data Protection Officer.
Regular audits are conducted
both by ICT auditors within
the Internal Audit function
and by independent external
specialists to assess the
strength of the Group’s cyber
security practices.
The Group’s manufacturing
operations and global
supply chain network is
potentially exposed to
2019 Annual Report
adverse events such as
Risk Icons
physical disruption, trade
restrictions, extreme
weather events and key
2019 Annual Report
Risk Icons
supplier or sourcing issues
which could impact on its
ability to receive materials,
manufacture product and/
or deliver orders timely to
its customers.
2019 Annual Report
2019 Annual Report
Risk Icons
Risk Icons
Crisis management and
Business continuity plans
(BCPs) have been designed and
are in place to ensure supply
chains and operations can be
maintained should a disruptive
event occur.
Qualified, experienced teams
are employed to deliver
consistent, timely and quality
products to our customers.
A preventative maintenance
programme is in place
to minimise unplanned
manufacturing downtime.
Supplier relationships
are maintained to ensure
consistent delivery of high-
quality raw materials.
Experienced customer service
teams enable a responsive and
agile operation.
COVID-19 presented a
significant challenge to
ensuring continuity of
the Group’s operations,
including absenteeism,
responding to uncertain
demand patterns, delays
in the movement of
goods and implementing
protocols to ensure a safe
working environment.
Given the Group’s global
network, it is exposed to
an increasingly complex
and evolving international
tax environment.
2019 Annual Report
Risk Icons
The Group’s tax liability or
reporting requirements
may be impacted by local
or international legislative
changes, evolving legal
interpretations, tax audits
and transfer pricing
judgements.
2019 Annual Report
Risk Icons
A team of dedicated tax
experts responsible for
ensuring compliance with
all taxation matters globally
are employed. A programme
of continuous professional
development ensures that the
team is up to date on evolving
tax law changes.
External taxation advisors are
used where appropriate.
There were no material
information security breaches
noted during the year.
An ongoing programme is in
place to embed resilience and
improve the effectiveness of our
operational processes.
A project to review and
standardise BCPs has
commenced groupwide.
In response to the COVID-19
pandemic, best practice safety
playbooks were developed
to support our sites in
implementing response
measures such as segregation
and zoning, use of PPE and
sanitisation.
Significant cross functional
collaboration was required
to optimise decision making
with regard to maintaining
continuity of supply and
managing purchasing contracts
in situations where demand
was impacted due to the
COVID-19 pandemic.
The Group continued to
monitor developments in
international tax legislation,
while maintaining a consistent
focus on ensuring compliance
with new legislative
requirements.
Kerry Group Annual Report 2020
82
Risk
Description & Impact
Mitigation
Developments in 2020
Taxation
(continued)
2020 Annual Report
Risk Icons
Financial and
Compliance Risk
2020 Annual Report
Risk Icons
Trend
Changes in the international
tax environment and
associated local tax
legislation may expose the
2019 Annual Report
Risk Icons
Group to adverse
tax consequences.
Tax authorities are constructively
engaged with across the
jurisdictions in which the Group
operates.
2019 Annual Report
Risk Icons
The Audit Committee receives
updates from management in
relation to the status of ongoing
tax authority reviews and matters
such as changes in tax laws.
Risk is unchanged
Risk has increased
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
Risk is unchanged
Risk has increased
Risk has decreased
Risk has decreased
Link to Strategic
Priorities
Taste & Nutrition
Strategic Growth
Priorities
Margin Expansion
Drivers
Consumer Foods
Strategic Growth
Priorities
Margin Expansion
Drivers
Intellectual
Property
Management
2020 Annual Report
Risk Icons
Operational Risk
2020 Annual Report
2020 Annual Report
Trend
Risk Icons
Risk Icons
Risk is unchanged
Risk has increased
Risk has decreased
Risk is unchanged
Risk is unchanged
Link to Strategic
Priorities
Risk has increased
Risk has increased
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
Margin Expansion
Drivers
Risk has decreased
Risk has decreased
Taste & Nutrition
Taste & Nutrition
Strategic Growth
Strategic Growth
Priorities
Priorities
Consumer Foods
Consumer Foods
Strategic Growth
Strategic Growth
Priorities
Priorities
Margin Expansion
Margin Expansion
Drivers
Drivers
The Group’s unique mix of
Intellectual Property (IP)
is created by combining
carefully managed material
sourcing, recipe formulation
and process technology
expertise. The protection
of IP is critical given that
it is a key component of
the Group’s value creation
model and supports its
unique and differentiated
position in the marketplace.
If IP owned by the Group is
not adequately protected
it may result in the loss
of commercially sensitive
and/or Kerry proprietary
information which may
have an adverse impact on
revenue and profitability.
A global centre of expertise exists
to provide legal and technical
support in the area of IP protection.
2019 Annual Report
Risk Icons
2019 Annual Report
Risk Icons
2019 Annual Report
Risk Icons
Potential IP is reviewed
formally at an early stage
in the innovation process to
determine the most appropriate
protection strategy.
Policies, procedures and training
programmes are in place to
provide guidance in relation to
the capture, exploitation and
protection of IP.
ICT controls ensure that IP held
within systems is adequately
protected to prevent the
unauthorised download of
sensitive data.
Non-disclosure agreements with
third parties and IP protection
clauses are a standard element of
both commercial and employment
contracts.
The external environment is
monitored for potential IP
infringement and appropriate
action is taken when issues are
identified.
Treasury
2020 Annual Report
Financial and
Risk Icons
Compliance Risk
2020 Annual Report
Risk Icons
Trend
The international nature
of the Group’s operations
means that it has
transactions and activities
across many jurisdictions
which expose it to liquidity,
foreign exchange, interest
rate and counterparty risks.
2019 Annual Report
Risk Icons
Risk is unchanged
Risk has increased
Risk is unchanged
Risk has increased
Risk has decreased
Risk has decreased
Link to Strategic
Priorities
Consumer Foods
Strategic Growth
Priorities
Taste & Nutrition
Strategic Growth
Priorities
Margin Expansion
Drivers
Failure to manage these
risks could negatively
impact on the financial
performance of the Group.
Taste & Nutrition
Strategic Growth
Priorities
Consumer Foods
Strategic Growth
Priorities
Margin Expansion
Drivers
A Group Finance Committee
monitors treasury risk on an
ongoing basis.
2019 Annual Report
Risk Icons
Significant cash and debt
resources with relatively long-term
maturities are in place to ensure
the Group’s liquidity requirements
are met and maintained.
The Treasury function actively
manages all treasury risks
through cashflow forecasts,
foreign currency exposure
netting and hedging as well
as monitoring and meeting
funding requirements
across its jurisdictions and
management of interest rate
and counterparty risk.
The Group continued to
proactively engage with relevant
tax authorities to progress any
open matters.
Management reviews were
conducted to ensure key systems
and data access are limited to
appropriate employees.
IP protection practices were
continually reviewed and updated.
An IP awareness campaign was
rolled out.
Physical security controls at key
strategic locations continued to
be strengthened.
The Group further strengthened
its liquidity position by exercising
a one year extension option on
its Revolving Credit Facility and
executing a €200m tap on its 2025
Euro Senior Note.
A full review under stressed
scenarios was conducted to
evaluate the potential impact of
COVID-19 on the Group’s liquidity
and this review concluded that no
further actions were required at
this time.
Continuous monitoring of
exposure to individual banks and
the tightening of counterparty
limits where appropriate.
Kerry Group Annual Report 2020STRATEGIC REPORT
GOING CONCERN AND VIABILITY ASSESSMENT
The Board, taking into consideration the Group’s principal risks and uncertainties, including emerging risks, assessed
the going concern and long-term viability of the Group in line with the requirements of the 2018 UK Corporate
Governance Code and the Irish Annex. Its conclusions on these assessments are outlined below.
83
Assessment of Viability
Although the Group’s strategic planning cycle covers a
period of five years, the Board considers that three years
is the most appropriate period to assess the longer-term
viability of the Group as current capital expenditure plans,
commercial arrangements and financial projections are
considered to be more reliable and robust over this period.
The Board has considered how the occurrence of one or
more of the Group’s principal risks and uncertainties could
materially impact the Group’s business model, future
performance, solvency or liquidity by assessing the impact
of these risks in severe but plausible scenarios.
While each of the principal risks and uncertainties could
have an impact on the Group’s performance, a significant
food quality failure, an acquisition not delivering expected
returns or a failure to achieve targeted revenue or margins
were considered most likely to threaten the Group’s
long-term viability. In addition, the projected prolonged
impact of the COVID-19 pandemic was considered as a
risk for the Group.
Three scenarios were stress tested both individually and
in combination to assess their potential impact on the
Group’s solvency, liquidity and cash flow. The projected
impact of COVID-19 was considered both in the base case
and in the stressed scenarios. This analysis indicated that,
notwithstanding the current global pandemic, significant
liquidity headroom existed in all scenarios tested. In
addition, the Board considers that the diverse nature of
the Group’s geographies, markets, customer base, and
product portfolio provide significant mitigation against
the impact of a serious business interruption.
Viability Statement
Based on their assessment of prospects and viability,
the Directors have concluded that they have a reasonable
expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over
the three year period of the assessment.
Going Concern
The Consolidated Financial Statements have been
prepared on the going concern basis of accounting.
The Directors 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 COVID-19 pandemic,
as described in the Business Reviews on pages 40-45.
The Group’s 2021 budget was reviewed and approved
at the December Board meeting. The Directors have
also examined the financial position of the Group,
including cash flows, liquidity position, borrowing
facilities, financial instruments and financial risk
management, as described on pages 32-39 and
additionally as described in note 23 to the financial
statements. 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 the 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.
As a result of this review, the Directors report that they
have satisfied themselves and consider it appropriate
that the Group and the Company is a going concern,
having adequate resources to continue in operational
existence for the foreseeable future and have not
identified any material uncertainties that cast a
significant doubt on the Group’s and the Company’s
ability to continue as a going concern over a period
of at least 12 months.
Viability Assessment
Assessment of Prospects
In line with Provision 31 of the 2018 UK Corporate
Governance Code, the Directors have carried out a
rigorous review of the prospects of the Group over the
medium term. In assessing the prospects of the Group
and its ability to meet its liabilities as they fall due, the
Board has taken account of the Group’s medium term
strategic planning cycle, capital investment plans, the
business model, its diverse portfolio and the innovation
pipeline. The Directors have also considered the Group’s
strong cash generation and debt maturity profile in
addition to the principal risks and uncertainties detailed
on pages 73-82. This included a consideration of the
COVID-19 pandemic and the range of outcomes that the
pandemic could have on the prospects of the Group. The
financial position of the Group, its cash flows, liquidity
position and borrowing facilities are outlined in the
financial review on pages 32-39.
Kerry Group Annual Report 2020 84
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Kerry Group Annual Report 2020STRATEGIC REPORT
85
Board of Directors
Chairman & Executive Directors
Mr. Philip Toomey (67)
Mr. Edmond Scanlon (47)
Ms. Marguerite Larkin (49)
Mr. Gerry Behan (56)
Executive Director
Chief Executive Officer
Executive Director
Chief Financial Officer
Edmond is a highly
experienced leader in the
global food and beverage
industry having spent almost
20 years in senior roles
across the Group. Edmond
brings a strategic mindset
to drive Group performance
and growth as well as
significant financial and
operational expertise.
Edmond joined Kerry’s
graduate programme
in Ireland in 1996. Over
his career he has held
leadership roles in the
Group’s Flavours and
Applied Health and Nutrition
businesses as well as
heading up the Group’s
activities in China and the
Asia Pacific region.
Edmond was appointed
Executive Director and Group
Chief Executive Officer in
October 2017.
Appointed: 1 October 2017
Marguerite brings extensive
financial knowledge and risk
management expertise as well
as being a highly experienced
business leader.
Marguerite has over 25 years
international experience
having served as lead client
partner at Deloitte Ireland for
a number of multinationals
operating in a broad range
of industries including food
and beverage, pharma and
technology.
During her career with
Deloitte, Marguerite served
as a senior partner and held
a number of leadership roles
within Deloitte Ireland.
Marguerite is a Fellow of
Chartered Accountants
Ireland and holds a Bachelor
of Commerce degree and
Masters in Accountancy.
Marguerite was appointed
Executive Director and Group
Chief Financial Officer in
September 2018.
Appointed: 30 September 2018
Executive Director
President and CEO
Kerry Taste & Nutrition
Gerry has over 30 years'
experience in the Group and
has extensive knowledge
of the global food and
beverage industry.
He has a wealth of business
leadership experience,
financial and operational
expertise and brings a
strategic mindset in the
advancement of Kerry’s
leading taste and nutrition
capabilities and unique
positioning.
Gerry joined Kerry’s
graduate programme in
1986 and has held a number
of senior financial and
business management roles,
primarily in the Americas
region, including regional
Chief Operating Officer and
regional Chief Executive
Officer.
He was appointed President
and Chief Executive Officer
of Kerry’s Global Taste &
Nutrition business in 2011.
Gerry has served as an
Executive Director on the
Board for 13 years.
Appointed: 13 May 2008
Chairman of the Board
Philip has extensive business
leadership and international
experience following an
executive career in the
financial services industry
practice at Accenture.
Philip brings financial and
operational expertise as well
as significant board level
experience.
Philip was formerly Global
Chief Operating Officer for
the financial services industry
practice at Accenture and also
a member of the Accenture
Global Leadership Council.
He is a Fellow of Chartered
Accountants Ireland.
Philip was appointed
Chairman of the Board in
May 2018 and has served as a
Director for nine years. He is
Chairman of the Governance,
Nomination and Sustainability
Committee having previously
served as Senior Independent
Director and Chairman of the
Audit Committee.
Appointed: 20 February 2012 and as
Chairman 3 May 2018
Committee Membership
N
Committee Membership Key
A Audit Committee
N
Governance, Nomination and
Sustainability Committee
R Remuneration Committee
Indicates Committee Chair
Kerry Group Annual Report 2020
86
Board of
Directors
Non-Executive
Directors
Committee Membership Key
A Audit Committee
N
Governance, Nomination and
Sustainability Committee
R Remuneration Committee
Indicates Committee Chair
Dr. Hugh Brady (61)
Independent Non-Executive Director
Mr. Gerard Culligan (46)
Independent Non-Executive Director
Gerard has considerable knowledge of the
food industry, in particular the dairy and
agribusiness sectors, as well as many years
business management experience. He brings
insights to the Board that are reflective of the
Group’s heritage and the dairy community that
he represents.
Gerard operates his own business in the
agribusiness sector and is a director and
co-owner of two private companies in the
marine industry.
Appointed: 1 June 2017
Hugh’s biomedical research and academic
background brings an invaluable perspective
to the Board particularly in the areas of health
and wellbeing. He also brings a broad range of
international and leadership experience.
Hugh is currently President and Vice Chancellor
of the University of Bristol in the UK, a position
he has held since 2015.
Hugh had a successful career as a physician and
biomedical research scientist in the US where
he served on the faculty of Harvard Medical
School for almost a decade prior to returning
to his alma mater as Professor of Medicine and
Therapeutics in University College Dublin (UCD).
He was previously President of UCD from 2004
to 2013.
He is a non-Executive Director on the Board
of ICON plc where he also serves on the Audit
Committee.
Hugh joined both the Audit and Governance,
Nomination and Sustainability Committees
in 2015.
Appointed: 24 February 2014
Committee Membership A N
Dr. Karin Dorrepaal (59)
Independent Non-Executive Director
Karin is an experienced business leader who
also brings extensive pharmaceutical market
knowledge. She has wide ranging experience
as a non-Executive Director on an international
basis.
During her career she was an Executive
Director on the Board of Schering AG in Berlin
with responsibility for the Diagnostic Imaging
business as well as worldwide manufacturing
and procurement and was a partner at the
NY and Amsterdam office of an international
consultancy firm (formerly known as Booz
Allen & Hamilton) where she specialised in the
pharmaceutical industry.
Karin holds a Ph.D. and an MBA.
She is currently a non-Executive Director on
the Boards of Gerresheimer AG, Paion AG (vice
Chairperson) and Almirall S.A. Karin is also a
director of a number of private companies.
Karin joined the Remuneration Committee
in January 2015 and the Governance,
Nomination and Sustainability Committee
in December 2015.
Appointed: 1 January 2015
Committee Membership R N
Ms. Joan Garahy (58)
Senior Independent Non-Executive Director
Joan has significant financial services and
investment experience having spent over 31
years advising on and managing investment
funds. Joan is also an experienced non-
Executive Director and has particular expertise
in financial and remuneration matters.
Joan’s executive career included roles as a
personal financial planner, equity analyst,
fund manager and head of research and she
held leadership roles in the investment and
pensions industry including with ClearView
Investments & Pensions, the National Treasury
Management Agency (Ireland), Hibernian
Investment Managers and Goodbody
Stockbrokers.
Joan is currently non-Executive Director at
ICON plc and Irish Residential Properties REIT
plc. She is also a director of IPB Insurance CLG
and a number of private companies.
In February 2012, Joan was appointed
Chairperson of the Remuneration Committee
and joined the Audit Committee on the same
date. She was appointed Senior Independent
Director on 3 May 2018.
Appointed: 11 January 2012 and as Senior
Independent Director 3 May 2018.
Committee Membership R A
Kerry Group Annual Report 2020DIRECTORS‘ REPORT
87
Ms. Emer Gilvarry (63)
Independent Non-Executive Director
Mr. Tom Moran (65)
Independent Non-Executive Director
Mr. Con Murphy (56)
Independent Non-Executive Director
Con has a deep knowledge of the food
industry, in particular the dairy and
agribusiness sectors. He brings insights to
the Board that are reflective of the Group’s
heritage and the dairy community that he
represents.
Con operates his own business in the
agribusiness sector and is a member of
the Board of a small private company. He
was previously the Chairman of the Irish
Montbeliarde Cattle Society.
Appointed: 1 June 2017
Emer is a highly experienced professional who
brings legal, business and corporate governance
expertise to the Board.
Emer is a former senior partner of law firm
Mason Hayes and Curran where she served as
Head of the Litigation group from 2001 to 2008,
Managing Partner from 2008 to 2014 and Chair
from 2014 to 2017.
Emer is currently the Senior Independent
Director at Greencoat Renewables plc. She is also
a director of a number of private companies.
She previously served as a non-Executive
Director of Aer Lingus plc from 2014 to 2015 and
as a Council Member of The Economic and Social
Research Institute from 2014 to 2020.
Emer joined the Audit Committee in
November 2020.
Appointed: 1 November 2020
Committee Membership A
Tom is an experienced leader who brings
extensive knowledge of the food and agriculture
industries combined with a broad range of
international diplomacy skills. He is also a
member of a number of boards and committees.
Tom had a long and distinguished career
within the Irish Public Sector where he served
as Secretary General of the Irish Department
of Agriculture, Food and the Marine and also
held a number of international policy and
international trade negotiation leadership roles.
Tom is currently a Board member of An Bord
Bia, the Irish Food Board, and chairs its Dairy
Subsidiary Board, a member of the Irish
Government AgriFood 2030 Strategy Group
and Vice Chair of the Origin Green Global
Sustainability Council. He is also Chairman of
the Irish Government Public Appointments
Service. Tom is a registered Chartered Director.
Tom joined the Remuneration Committee
in February 2016 and the Governance,
Nomination and Sustainability Committee in
November 2020. He also served as a member
of the Audit Committee from December
2015 to November 2020. Tom is currently the
designated workforce engagement Director.
Appointed: 29 September 2015
Committee Membership R N
Read More
Audit
Committee Report
Pages 107-112
Governance,
Nomination and
Sustainability
Committee Report
Pages 113-118
Remuneration
Committee Report
Pages 119-149
Mr. Christopher Rogers (60)
Independent Non-Executive Director
Mr. Jinlong Wang (63)
Independent Non-Executive Director
Christopher is an experienced non-Executive
Director with a broad business leadership
background who also brings extensive
knowledge of the foodservice industry together
with financial and risk management expertise.
He was formerly an Executive Director of
Whitbread plc for 11 years, serving as Finance
Director for 7 years and then as Global
Managing Director of Costa Coffee.
Christopher is currently non-Executive Director
at Travis Perkins plc, Vivo Energy plc and
Sanderson Design Group plc.
Christopher is a Fellow of Chartered
Accountants England and Wales. He is also a
visiting Fellow at Durham University (UK).
He was appointed Chairman of the Audit
Committee with effect from 8 May 2018
and joined the Remuneration Committee in
April 2020.
Appointed: 8 May 2018
Committee Membership A R
Jinlong is an experienced leader with more
than 30 years’ experience in global business
development, consumer branding and general
management. His in-depth understanding
of Asian markets, coupled with his extensive
knowledge of the Food & Beverage industry,
brings a key set of skills to the Board.
He was formerly President of Starbucks Coffee
Asia Pacific having served as Chairman and
President of Starbucks China. He also served as
Operating Partner of Hony Capital Limited and
as Group Chairman and Chief Executive Officer
of PizzaExpress.
He is currently a non-Executive Director on
the Boards of Sonova Holdings AG and Swire
Properties Limited.
Jinlong holds a Bachelor’s degree in
international economics and trade from the
University of International Economics and
Trade in Beijing and a Juris Doctor degree from
Columbia University School of Law.
Appointed: 5 January 2021
Kerry Group Annual Report 2020 88
Report of the Directors
Directors and
Other Information
Directors
Philip Toomey, Chairman
Edmond Scanlon, Chief Executive Officer*
Marguerite Larkin, Chief Financial Officer*
Gerry Behan, President & CEO Kerry Taste & Nutrition*
Hugh Brady
Gerard Culligan
Karin Dorrepaal
Joan Garahy
Emer Gilvarry
Tom Moran
Con Murphy
Christopher Rogers
Jinlong Wang
*Executive Director
Secretary and Registered Office
Ronan Deasy
Kerry Group plc
Prince’s Street
Tralee
Co. Kerry
V92 EH11
Ireland
Registrar and Share Transfer Office
Ronan Deasy
Registrar’s Department
Kerry Group plc
Prince’s Street
Tralee
Co. Kerry
V92 EH11
Ireland
Website
www.kerrygroup.com
Kerry Group Annual Report 2020DIRECTORS‘ REPORT
89
Principal Risks and Uncertainties
In accordance with Section 327(1)(b) of the Companies
Act 2014, Regulation 5(4)(c)(ii) of the Transparency
(Directive 2004/109/EC) Regulations 2007 and the
Transparency Rules of the Central Bank of Ireland,
a description of the principal risks and uncertainties
facing the Group are outlined in the Risk Management
Report on pages 73-82.
Research and Development
The Group is fully committed to ongoing technological
innovation in all sectors of its business, providing
integrated customer focused product development and
support by leveraging our global technology capabilities
and expertise. To facilitate this, the Group has invested
in highly focused research, development and application
centres of excellence with a strategically located
Global Technology & Innovation Centre, based in Naas,
Ireland which is supported by Regional Development
& Application Centres and a global knowledge
management infrastructure. Expenditure on research
and development applications and technical support
amounted to €281.9m in 2020 (2019: €291.4m).
Sustainability
In October 2020, the Group announced its 2030
sustainability strategy Beyond the Horizon, which
underpins Kerry’s future growth as it continues to
partner with its customers across the globe to create a
world of sustainable nutrition. Beyond the Horizon will
see Kerry work with customers to promote healthier and
more sustainable diets aiming to reach over two billion
people by 2030.
The strategy also includes ambitions to deliver for
people, society and the planet with targets across
material topics including climate change, circular
economy and responsible sourcing.
Details regarding the Group’s sustainability strategy,
targets, performance, policies and programmes are
outlined in the Sustainability Review on pages 46-70.
Share Capital
Details of the share capital are shown in note 26 of the
financial statements. The authorised share capital of
the Company is €35,000,000 divided into 280,000,000 A
ordinary shares of 12.5 cent each, of which 176,700,036
shares were in issue at 31 December 2020.
The A ordinary shares rank equally in all respects.
There are no limitations on the holding of securities
in the Company.
The Directors submit their Annual Report together with
the audited Consolidated Financial Statements for the
year ended 31 December 2020.
Principal Activities
Kerry is the world’s leading taste and nutrition company,
providing sustainable nutrition solutions for the food,
beverage and pharmaceutical industries and a leader in
our consumer foods categories in the chilled cabinet.
Listed on the Euronext Dublin and London Stock
Exchanges, Kerry has an international presence with 149
manufacturing facilities across the world.
Results and Review of the Business
The Directors are pleased to report, that in a year which
was significantly impacted by COVID-19, the Group
delivered a resilient performance with revenue of €7.0bn
(2019: €7.2bn), trading profit of €797m (2019: €903m),
profit before tax and non-trading items of €655m
(2019: €757m) and shareholders’ funds of €4.7bn (2019:
€4.6bn). Constant currency adjusted earnings per share
(EPS), which is before brand related intangible asset
amortisation and non-trading items (net of related
tax), decreased by 9.4% to 345.4 cent (2019 currency
adjusted: 381.4 cent). Basic EPS of 313.0 cent decreased
by 2.3%. Trading margin for the year decreased by
100bps to 11.5% (2019: 12.5%). The Group achieved a
free cash flow of €412m (2019: €515m). Further details
of the results for the year are set out in the Consolidated
Income Statement and in the related notes forming part
of the Consolidated Financial Statements. The Group’s
financial key performance indicators are discussed on
pages 30-31.
The Chairman’s Statement, the Chief Executive Officer’s
Review, the Business Reviews and the Financial Review,
which are included in the Strategic Report on pages
8-45, report on the performance of the Group’s business,
including acquisitions during the year and on future
developments.
Dividends
On 15 February 2021, the Directors recommended a
final dividend totaling 60.6 cent per share in respect of
the year ended 31 December 2020 (see note 10 to the
financial statements). This final dividend per share is an
increase of 10.0% over the final 2019 dividend per share
paid on 15 May 2020. This dividend is in addition to the
interim dividend paid to shareholders on 13 November
2020, which amounted to 25.9 cent per share.
The payment date for the final dividend is 14 May
2021 to shareholders registered on the record date
16 April 2021.
Events After the Balance Sheet Date
Other than the proposed final dividend, there have
been no other significant events, outside the ordinary
course of business, affecting the Group since 31
December 2020.
Kerry Group Annual Report 2020 90
There are no restrictions on the transfer of fully paid
shares in the Company, but the Directors have the
power to refuse the transfer of shares that are not
fully paid. There are no deadlines for exercising voting
rights other than proxy votes, which must be received
by the Company at least 48 hours before the time of the
meeting at which a vote will take place. There are no
restrictions on voting rights except:
– where the holder or holders of shares have failed to
pay any call or instalment in the manner and at the
time appointed for payment; or
– the failure of any shareholder to comply with the terms
of Article 14 of the Company’s Articles of Association
(disclosure of beneficial interest).
The Company is not aware of any agreements between
shareholders which may result in restrictions on the
transfer of securities or on voting rights.
The Directors have the authority to issue new shares
in the Company up to a maximum of 20 million new A
ordinary shares. This authority will expire on the earlier
of the conclusion of the 2021 Annual General Meeting
(AGM) and close of business on 29 July 2021 and it is
intended to seek shareholder approval to renew the
authority at the AGM to be held on 29 April 2021.
Shareholders approved the authority for the Directors
to allot shares for cash on a non-pro rata basis up to a
maximum of 8,826,991 shares at the AGM held on 30
April 2020, representing 5% of the A Ordinary Shares in
issue on 1 March 2020. Shareholders also approved an
authority to allot a further 8,826,991 A Ordinary Shares
(5%) for cash on a non pro rata basis provided the
additional authority will only be used for the purpose of
an acquisition or specified capital investment announced
contemporaneously with the issue or which has taken
place in the preceding six month period and is disclosed
with the announcement of the issue. Neither authorities
have been exercised and will expire on the earlier of the
conclusion of the 2021 AGM and close of business on
29 July 2021. It is intended to seek shareholder approval
for their renewal at the 2021 AGM. During 2020, 185,094
shares were allotted pursuant to the Company’s Short
and Long-Term Incentive Plans as a result of shares
which vested and options which were exercised. Further
details are shown in note 26 to the financial statements.
The Company may purchase its own shares in
accordance with the Companies Act 2014 and the
Company’s Articles of Association. At the 2020 AGM,
shareholders passed a resolution authorising the
Company to purchase up to 5% of its own issued
share capital, but the authority was not exercised. This
authority is due to expire on the earlier of the conclusion
of the 2021 AGM and close of business on 29 July 2021
and it is intended to seek shareholder approval for its
renewal at the 2021 AGM.
Substantial Interests
The Directors have been notified of the following
shareholdings of 3% or more in the issued share capital
of the Company:
Shareholder
Number Held
%
Kerry Co-operative
Creameries Limited (KCC)
Blackrock Investment
Management
21,343,456
12.1%
8,801,272
5.0%
Apart from the aforementioned, the Company has not
been notified of any interest of 3% or more in the issued
share capital of the Company.
Directors
The Board, at the date of this report, consists of a
Chairman, three Executive and nine independent Non-
Executive Directors. The names and biographical details
of the Directors are set out on pages 85-87. Following
the individual performance evaluation of all Directors,
as outlined in the Corporate Governance Report on page
105, the Board recommends the election and re-election
of all Directors seeking election and re-election.
The Directors’ and Company Secretary’s interests in
shares and debentures are included in the Remuneration
Report on page 145.
Board and Committee Changes
Mr. James C. Kenny retired from the Board following
the conclusion of the AGM on 30 April 2020.
Mr. Christopher Rogers was appointed to the
Remuneration Committee on 30 April 2020.
Mr. Tom Moran stepped down from the Audit
Committee on 1 November 2020 and was appointed
to the Governance, Nomination and Sustainability
Committee on the same date.
Ms. Emer Gilvarry was appointed to the Board on
1 November 2020 and was appointed to the Audit
Committee on the same date.
Mr. Jinlong Wang was appointed to the Board on
5 January 2021.
Ms. Joan Garahy will retire as Senior Independent non-
Executive Director and from the Board at the conclusion
of the AGM to be held on 29 April 2021 and will not seek
re-election.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT The Articles of Association empower the Board to
appoint Directors, but also require such Directors
to retire and submit themselves for re-election at
the next AGM following their appointment. For the
purposes of the European Communities (Takeover Bids
(Directive 2004/25/EC)) Regulations 2006 specific rules
regarding the appointment and re-election of Directors
are referred to in the Governance, Nomination and
Sustainability Committee Report.
Corporate Governance
The Corporate Governance Report on pages 94-106 sets
out the Company’s application of the principles, and
compliance with the Provisions of the 2018 UK Corporate
Governance Code and Irish Annex (the Code).
Non-Financial Information
Pursuant to the European Union (Disclosure of Non-
Financial and Diversity Information by certain large
undertakings and groups) Regulations 2017, the Group
is required to report on certain non-financial information
to provide an understanding of its development,
performance, position and the impact of its activities,
relating to, at least, environmental matters, social
matters, employee matters, respect for human rights
and bribery and corruption. Information on these
matters can be found in the following sections of the
Annual Report, which are deemed to form part of this
Report: Sustainability Review on pages 46-70, Our
Business Model on pages 20-21, the Risk Management
Report on pages 71-83. Information on diversity
can be found in the Governance, Nomination and
Sustainability Committee Report on pages 113-118 and
the Sustainability Review on page 59.
Going Concern and Long-Term
Viability Statements
The going concern and longer-term viability statements
in the Risk Management Report on page 83 set out the
Company’s basis for the adoption of the going concern
basis of accounting in preparing the Consolidated
Financial Statements and the basis for the Directors’
conclusion that they have a reasonable expectation that
the Group will be able to continue in operation and meet
its liabilities as they fall due over the next three years.
Directors’ Responsibility Statement
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable laws and regulations.
91
Irish company law requires the Directors to prepare
financial statements for each financial year, which give
a true and fair view of the assets, liabilities and financial
position of the Company and the Group, and of the
profit or loss of the Group for that period. Under that
law the Directors have elected to prepare group financial
statements in accordance with International Financial
Reporting Standards (‘IFRSs’) and IFRSs as adopted by
the European Union and Article 4 of the IAS Regulation
and have also chosen to prepare the parent company
financial statements under IFRSs and IFRSs as adopted
by the European Union. In preparing the financial
statements, the Directors are required to:
– select suitable accounting policies and then apply
them consistently;
– make judgements and estimates that are reasonable
and prudent;
– state that the financial statements comply with IFRS
and IFRSs as adopted by the European Union; and
– prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group will continue in business.
The Directors are responsible for ensuring that the
Company keeps adequate accounting records which
correctly explain and record the transactions of the
Company, enabling at any time the assets, liabilities,
financial position and profit or loss of the Company
to be determined with reasonable accuracy and
ensuring that the financial statements are prepared
in accordance with IFRSs and IFRSs as adopted by the
European Union, comply with the Companies Act 2014
and as regards to the Group financial statements,
Article 4 of the IAS Regulation and enable the financial
statements to be audited.
The Directors are also responsible for safeguarding the
assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and
other irregularities. The Directors are responsible for
the maintenance and integrity of the corporate and
financial information included on the Group’s website
www.kerrygroup.com. Irish legislation governing the
preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
In accordance with the Transparency (Directive
2004/109/EC) Regulations 2007 and the Transparency
Rules of the Central Bank of Ireland, the Directors are
required to include a management report containing
a fair review of the business and a description of the
principal risks and uncertainties facing the Group.
The Directors are also required by applicable law and
the Listing Rules issued by Euronext Dublin and the
UK Listing Authority to prepare a Directors’ Report
and reports relating to Directors’ remuneration and
corporate governance.
Kerry Group Annual Report 2020 92
Each of the Directors, whose names and functions are
listed on page 88, confirms that, to the best of their
knowledge and belief:
– the Consolidated Financial Statements for the year
ended 31 December 2020 have been prepared in
accordance with IFRSs and IFRSs as adopted by the
European Union and give a true and fair view of the
assets, liabilities, and financial position of the Group
and the undertakings included in the consolidation,
taken as a whole, as at that date and its profit for the
year then ended;
– the Company financial statements, prepared in
accordance with IFRSs and IFRSs as adopted by the
European Union and as applied in accordance with the
Companies Act 2014, give a true and fair view of the
assets, liabilities and financial position of the Company
as at 31 December 2020;
– the Financial and Business Reviews on pages 32-
45 include a fair review of the development and
performance of the business for the year ended 31
December 2020 and the position of the Company and
the Group at the year end;
– the Risk Management Report provides a description of
the principal risks and uncertainties which may impact
the future performance of the Company and the
Group at the year end; and
– the Annual Report and Consolidated Financial
Statements, taken as a whole, provides the
information necessary for shareholders to assess the
Company’s and Group’s position and performance,
business model and strategy and is fair, balanced and
understandable.
Directors’ Compliance Policy Statement
It is the policy of the Company to comply with its
relevant obligations (as defined in the Companies
Act 2014). The Directors have drawn up a compliance
policy statement (as defined in section 225(3)(a) of the
Companies Act 2014) and arrangements and structures
are in place that are, in the Directors’ opinion, designed
to secure material compliance with the Company’s
relevant obligations. The Directors confirm that these
arrangements and structures were reviewed during
the financial year. As required by Section 225(2) of the
Companies Act 2014, the Directors acknowledge that
they are responsible for the Company’s compliance
with the relevant obligations. In discharging their
responsibilities under Section 225, the Directors relied
on the advice both of persons employed by the Company
and of third parties who the Directors believe have
the requisite knowledge and experience to advise the
Company on compliance with its relevant obligations.
Accounting Records
To ensure that proper accounting records are kept
for the Company in accordance with section 281 to
285 of the Companies Act 2014, the Directors employ
appropriately qualified accounting personnel and
maintain appropriate accounting policies and systems.
The accounting records of the Company are maintained
at the Company’s registered office.
Accountability and External Audit
A statement relating to the Directors’ responsibilities in
respect of the preparation of the financial statements is
set out on pages 91-92 with the responsibilities of the
Company’s external Auditors outlined on page 156.
The Consolidated Financial Statements on pages 158-230
have been audited by PricewaterhouseCoopers (PwC),
Chartered Accountants.
The external Auditors, PwC who were appointed in
March 2016, will continue in office in accordance
with Section 383(2) of the Companies Act 2014. A
resolution authorising the Directors to determine
their remuneration will be proposed at the Annual
General Meeting.
Disclosure of Information to the
External Auditors
Each of the Directors, who were members of the Board
at the date of approval of this Report of the Directors,
confirms that:
– so far as they are aware there is no relevant audit
information of which the Company’s external auditors
are unaware; and
– they have taken all the steps that they ought to have
taken as a Director in order to make themselves aware
of any relevant audit information and to establish that
the Company’s external auditors are aware of that
information.
Memorandum and Articles of Association
The Company’s Memorandum and Articles of Association
set out the objects and powers of the Company. The
Articles of Association of the Company may only be
amended by way of special resolution approved by
shareholders in a general meeting.
A copy of the Articles of Association can be obtained
from the Company’s website www.kerrygroup.com.
Change of Control Provisions
The Group’s revolving credit facility includes a ‘Change
of Control’ provision which requires the Group to notify
the lending institutions of a change of control event
occurring. Each lender has the option to withdraw their
facilities in the event of a change of control occurring
unless they agree otherwise in writing.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT 93
Certain public senior notes issued by the Group contain
a provision that requires the Group to make an offer
to repurchase the notes in the event that a change of
control occurs which leads to a downgrading of the
rating assigned to the notes below investment grade.
Other than the ‘Change of Control’ provisions in those
arrangements, the Group is not a party to any other
significant agreements which contain such a provision.
Political Donations
During the year, the Company made no political
contributions which require disclosure under the
Electoral Act, 1997.
Group Entities
The principal subsidiaries and associated undertakings
are listed in note 35 to the financial statements.
Financial Instruments
The financial risk management objectives and policies,
along with a description of the use of financial
instruments are set out in note 23 to the financial
statements.
Information Required to be Disclosed by
Listing Rule 6.1.77, Republic of Ireland
Listing Authority
For the purposes of Listing Rule 6.1.77, the information
required to be disclosed can be found in the following
locations:
Section Topic
Location
(1)
(2)
(3)
(4)
Interest capitalised
Statement of
accounting policies
Publication of unaudited
financial information
Supplementary
information
Details of small related
party transactions
Note 32 to the
financial statements
Details of long-term
incentive schemes
Remuneration
Committee Report
(5) – (14) Section 5 - 14 of Listing
Not applicable
Rule 6.1.77
Cross References
All information cross referenced in this report forms part
of the Report of the Directors.
Signed on behalf of the Board:
Philip Toomey
Chairman
15 February 2021
Edmond Scanlon
Chief Executive Officer
15 February 2021
Kerry Group Annual Report 2020
94
GOVERNANCE REPORT
Corporate Governance Report
The Board sets the tone and
shared values for the way in which
the Group operates and recognises
the importance of culture to the
success of the business model.
During 2020, the Board continued
to assess and monitor the Group’s
culture to ensure that it is aligned
with the Group’s strategy and values
and is adequately embedded across
the Group.
As a Board, we recognise the
benefits of understanding the
views of all our stakeholders and
we ensure that their interests are
regarded in Board discussions and
in our decision making. Details of
stakeholder engagement activities
during the year, including the
work of the designated workforce
engagement Director, are outlined
on pages 98-101.
The Board, in conjunction with
the Governance, Nomination and
Sustainability Committee, ensures
that there are robust plans in place
to facilitate Board, executive and
senior management succession.
During 2020, the Board undertook
a formal process to recruit two new
non-Executive Directors both of
whom bring skills and experience
that will strengthen the Board.
Details of the non-Executive Director
and Committee changes that
occurred during the year, are set
out in the Governance, Nomination
and Sustainability Committee Report
on page 116.
I will have served nine years as a
Director, including less than three
years as Chairman, on 19 February
2021. The Governance, Nomination
and Sustainability Committee is
aware of the Provisions of the
Code in respect of Chairman
tenure and is undertaking a formal
succession process which is being
led by Ms. Joan Garahy as Senior
Independent Director. The Board
has recommended that I continue as
Chairman until the AGM in 2022, to
allow appropriate time to identify a
successor and to enable an orderly
succession to the role.
The Board recognises its role in
providing guidance and strategic
oversight to the Group in
implementing its 2030 sustainability
strategy, Beyond the Horizon which
was officially launched in October
2020. Following the launch, the
Board expanded the role of the
Nomination Committee to reflect
its additional responsibilities of
sustainability oversight and approved
updated Terms of Reference. The
Nomination Committee was renamed
the Governance, Nomination and
Sustainability Committee.
Diversity at Board level has been
a focus for the Governance,
Nomination and Sustainability
Committee for a number of years
and also continues to be a key factor
when considering Board refreshment.
During 2020, the Governance,
Nomination and Sustainability
Committee also monitored the
progress made against the diversity
targets at senior management level
to ensure the appropriate level of
skills and diversity exists to support
the delivery of the Group’s strategy
and financial targets. Improving and
monitoring diversity beyond gender
and below Board level will continue
to be a key area of focus for the
Board and the Executive
Management in 2021.
Each year the Board undertakes a
formal evaluation of its effectiveness
and that of its Committees. In
2020, this was an internal self-
assessment which was conducted
by the Chairman and the Senior
Independent Director. The
evaluation concluded that the Board
and its Committees are performing
effectively. Details of the process
and the resulting actions from this
review are outlined on page 105.
Details of the Group’s activities
and the operations of the Board,
contained in the following report,
outline the manner in which the
Group has achieved compliance
with the Code through the activities
and operations of the Board and its
Committees during the year.
Philip Toomey
Chairman of the Board
Philip Toomey
Chairman of the Board
Dear Shareholder,
I am pleased to present
the Kerry Group Corporate
Governance Report for the
year ended 31 December 2020.
The Corporate Governance Report
describes how we apply the main
Principles of good governance as
set out in the 2018 UK Corporate
Governance Code and the Irish
Annex (the Code). On behalf of the
Board I can confirm that for the
year under review the Group has
complied with all relevant Provisions
of the Code other than certain
remuneration related Provisions
which required structural changes
to the existing Remuneration
Policy. The required changes have
been incorporated into a new
Remuneration Policy that will be put
to an advisory vote at the 2021 AGM.
Further details are outlined in the
Remuneration Committee Report on
pages 120-122.
Following the declaration of the
COVID-19 pandemic, additional
Board meetings were held, as the
Board focused on the impact of the
pandemic and oversaw the Group’s
response by providing critical
guidance and support to Executive
Management. Physical Board
meetings became impossible due
to the imposition of COVID-19
related restrictions with all Board
meetings held via video conference
from April onwards.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT 95
Board Leadership and Company Purpose
Kerry Group Governance Framework
Kerry Group has a clear Governance Framework with defined responsibilities and accountabilities as outlined
in the diagram below. This Governance Framework is designed to safeguard long-term shareholder value and
ensure that the Group contributes to wider society.
Shareholders
Board of Directors
Executive Management
Audit
Committee
(page 107)
Governance, Nomination
and Sustainability
Committee
(page 113)
Remuneration
Committee
(page 119)
Finance
Committee
(page 38)
Risk Oversight
Committee
(page 72)
Sustainability
Council
(page 50)
Board Role and Operations
The Board currently comprises of 13 members, a
non-Executive Chairman, Chief Executive Officer, Chief
Financial Officer, one other Executive Director, and nine
non-Executive Directors.
The Directors are of the opinion that the composition
of the Board provides the extensive relevant business
experience needed to oversee the effective operation
of the Group’s activities and that the individual
Directors bring a diverse range of skills, knowledge and
experience, including financial as well as industry and
international experience, necessary to provide effective
governance and oversight of the Group.
The Board’s role is to promote the long-term
sustainable success of the Company generating
value for all its stakeholders, including shareholders,
employees, customers, suppliers and the communities
in which it operates, while developing and monitoring
strategy, and managing the risks that face the
organisation. It is also responsible for embedding
the purpose, instilling the appropriate values and
behaviours, together with monitoring and assessing
culture throughout the organisation.
The Board oversaw the Group’s response to COVID-19
providing critical guidance and support to Executive
Management. A COVID-19 Taskforce comprising of key
executives, supported by local management teams,
co-ordinated the Group’s response and were
responsible for approving and directing the actions
required to help mitigate the many challenges
presented by the pandemic. The Board was provided
with regular updates on progress, in relation to the
health & safety of employees, support for customers
and communities, continuity of supply both from
suppliers and to customers, and the Group’s financial
and operational performance.
Details of the COVID-19 Taskforce and the Group’s
response to the risks posed by the pandemic are outlined
in the Risk Management Report on pages 74-75.
The Board has a formal schedule of matters specifically
reserved to it for decision as noted below and has
delegated other responsibilities to management for day-
to-day operations within the context of the Kerry Group
Governance Framework as outlined above.
Schedule of Matters Reserved for the Board
– appointments to the Board;
– ensuring compliance with corporate governance, legal,
statutory and regulatory requirements;
– approval of the overall Group strategic and operating plans;
– monitoring and reviewing risk management and internal
control systems;
– monitoring and assessing culture;
– reviewing and assessing the adequacy of the Group’s
whistleblowing arrangements;
– approval of acquisitions and divestitures;
– approval of significant capital expenditure;
– approval of Treasury policy including changes to the
Group’s capital structure;
– approval of dividend policy and dividends;
– approval of annual budgets;
– approval of preliminary results, interim management
statements and interim financial statements;
– assessment of the long-term viability of the Group and the
going concern assumption; and
– the preparation of, and confirmation that, the annual
report and financial statements present a fair, balanced
and understandable assessment of the Company’s
position, performance and prospects.
Kerry Group Annual Report 2020 96
Information Flow
The Chairman ensures that all Directors have full and
timely access to such information as they require to
discharge their responsibilities fully and effectively.
Board papers are issued to each Director at least one
week in advance of Board meetings and include the
meeting agenda, minutes of the previous Board meeting
and all papers relevant to the agenda. The Chairman, in
conjunction with the Company Secretary, has primary
responsibility for setting the agenda for each meeting.
All Directors continually receive comprehensive reports
and documentation on all matters for which they have
responsibility to allow them to fully complete their duties
as a Director. All Directors participate in discussing
strategy, trading updates, financial performance,
significant risks and operational activities in addition to
the Group’s purpose, vision, values and culture. Board
meetings are of sufficient duration to ensure that all
agenda items and any other material non-agenda items
that may arise are adequately addressed. In addition
to formal meetings, the Chairman and Chief Executive
Officer maintain regular contact with all Directors. The
Chairman holds informal meetings or calls with non-
Executive Directors without the Executive Directors to
discuss issues affecting the Group.
During the year, the Board also reviewed the business
model and how it is executed. The Board is satisfied
that the business model is both sustainable in the
long-term and optimally structured to enable delivery
of the Group’s strategy. Details of the Group’s strategy
are outlined in Strategy and Financial Targets on
pages 26-28.
Purpose, Values and Culture
As the world leader in taste and nutrition, our Purpose
Inspiring Food, Nourishing Life was approved by the
Board in 2019.
The Group’s purpose is guided by the Group’s new Vision
to be our customers’ most valued partner, creating a
world of sustainable nutrition. The Board is satisfied that
the strategies for the Taste & Nutrition and Consumer
Foods businesses are aligned to the Group’s Purpose
which is guided by our Values of Courage, Ownership,
Inclusiveness, Open-mindedness and Enterprising Spirit.
The Board is also led by the Group’s Purpose during its
discussions and when making decisions on the matters
that are reserved for its consideration. Further details
of the Group’s purpose and values are outlined on
pages 4-5.
All directors have access to the advice and services of
the Company Secretary, who is responsible for advising
the Board on all governance matters. In accordance with
an agreed procedure, in the furtherance of their duties,
each Director has the authority to engage independent
professional advice at the Company’s expense.
The Group’s culture is based on a common understanding
of our values, underpinned by our practices of Safety First,
Quality Always and a robust risk management framework
consisting of policies and procedures, including a Code
of Conduct which defines business conduct standards for
anyone working for, or on behalf of the Group.
Strategy
During 2020, as part of the annual strategy review, the
Board received and considered presentations from
Executive Directors on progress to date implementing
the strategies for volume growth, margin expansion and
return on investment that underpin the Group’s five year
plan and its associated financial targets.
The Board approved the Group’s sustainability strategy
Beyond the Horizon in October 2020 which underpins
the Group’s growth strategy. Presentations were also
received from the Company’s advisors on matters
such as the mergers and acquisitions landscape, the
‘New Normal‘ post COVID-19, corporate defence and
shareholder activism throughout the year. Through
these reviews and ongoing discussions on strategy the
Board is confident that Kerry’s strategic priorities for
growth will continue to be the key drivers of organic
growth and acquisition investment in the future.
The Board ensures that the decisions it makes are
aligned with the achievement of the Group’s strategy
and are made in the long-term interest of the Group
and its stakeholders. This is particularly the case when
deciding how to prioritise the allocation of resources
(human and financial capital) across competing research
and development activities, acquisition opportunities
and major capital expenditure projects.
The Board recognises the importance of its role in
setting the tone of Kerry’s culture and embedding
it throughout the Group. In addition to the Board,
the executives have responsibility to ensure that
the policies and behaviours set at Board level are
effectively communicated and implemented throughout
the Group. The Kerry Way framework articulates the
Group’s purpose and values and the MyKerry intranet
site provides a platform for employees to access the
Group’s policies.
The Board monitors and assesses the culture of the
Group through a number of mechanisms including
compliance with Group policies, internal audit, formal
and informal channels for employees to raise concerns
including the Leader Pulse Check, OurVoice employee
engagement survey and the Group’s whistleblowing
arrangement and feedback from the designated
workforce engagement Director. If the Board is
concerned or dissatisfied with any behaviors or actions,
it seeks assurance from the executives that corrective
action is being taken.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT 97
Governance and Stakeholders
– received regular reports from the Chairman of the
Governance, Nomination and Sustainability Committee
on its activities;
– approved the appointment of Ms. Emer Gilvarry and
Mr. Jinlong Wang as non-Executive Directors and
changes to the composition of Board Committees;
– conducted an internally facilitated Board evaluation
and considered its outcome;
– considered compliance with the 2018 UK Corporate
Governance Code;
– approved the Board Diversity Policy;
– confirmed that appropriate arrangements and
structures are in place to ensure material compliance
with the relevant obligations under Section 225 of the
Companies Act 2014;
– confirmed that appropriate structures are in place
for the proportionate and independent investigation
and follow-up of matters raised through the Group’s
whistleblowing arrangements;
– approved the Shareholder Circular relating to
CSD Migration and the associated changes to the
Company’s Articles of Association; and
– received updates on a range of corporate governance
and regulatory matters from external advisors.
People and Culture
– received regular reports from the Chairperson of the
Remuneration Committee on its activities;
– approved the changes to the new Remuneration Policy
to be put to an advisory vote at the 2021 AGM;
– reviewed the results of the OurVoice employee
engagement survey and the Leader Pulse Checks
conducted in 2020;
– received and considered reports from the designated
workforce engagement Director on his activities
during the year. Details are outlined in Governance in
Action on page 101;
– received and considered presentations from the Chief
Executive Officer and the Chief Human Resources
Officer on talent and succession planning;
– attended the Kerry Global Leadership Forum along
with 400 senior managers; and
– monitored and assessed the culture of the Group to
ensure it promotes integrity and openness, values
diversity and is responsive to the views of shareholders
and wider stakeholders.
Board Activities
The Board’s activities during the year included the items
set out below:
Strategy
– reviewed the Group’s strategic priorities for growth
and business model in light of COVID-19;
– reviewed and approved the Group’s strategy relating to
mergers and acquisitions;
– approved the Group’s new vision statement;
– approved the Group’s refreshed corporate brand
identity; and
– approved the Group’s 2030 sustainability strategy
Beyond the Horizon.
Operational/Commercial
– received regular updates from Executive Directors on
how COVID-19 was impacting the Group’s operations
with a particular focus on employee health & safety;
– approved individual acquisitions and considered the
learnings from completed acquisitions; and
– approved significant capital expenditure projects.
Financial
– received reports from the Chief Financial Officer
at each meeting in respect of the Group’s financial
performance including how it was impacted by
COVID-19;
– received regular reports from the Chief Financial
Officer on Investor Relations activities;
– considered the Group’s financial position and liquidity
headroom in light of the COVID-19 pandemic;
– approved the Group’s Preliminary Results, Annual
Report and Accounts, Interim Financial Statements
and Interim Management Statements;
– approved the payment of an interim dividend and
recommended the payment of a final dividend;
– approved the going concern basis of accounting
and the long-term viability statement taking into
consideration the impact of COVID-19;
– considered and agreed the treasury policy and
approved significant treasury activities during the
year including the issuance of €200m of new senior
notes; and
– approved the Group Budget for the 2021 financial
year.
Internal Controls and Risk Management
– received regular reports from the Chairman of the
Audit Committee on its oversight of internal controls,
risks and risk management;
– received regular reports from business and functional
leaders on the Group’s key risks; and
– confirmed the effectiveness of the internal control and
risk management framework.
Kerry Group Annual Report 2020 98
Stakeholder Engagement
While the Board’s primary duty is to act in a way that promotes the long-term success of the Company for the benefit
of the shareholders, the Directors also acknowledge the need to have regard to the interests of all other stakeholders
in their discussions and decision making. Engagement with stakeholders enables better informed decision making,
thereby increasing the likelihood of long-term successful outcomes. Similarly, the Board also recognises the need to
maintain a reputation for high standards of business conduct in its actions and decisions. Following the declaration
of the COVID-19 pandemic by the World Health Organisation in early 2020, balancing the needs and expectations
of our stakeholders has never been more important and challenging. Details of our stakeholder engagement are
set out below:
Shareholders Our Engagement
Shareholders
Government
Employees
The Board ensures it has an effective channel of communication with existing and potential
shareholders. The Investor Relations team and Executive Management maintain ongoing
engagement with the investment community, through a variety of different mediums including
investor meetings and conferences, investor events, ongoing investor calls and correspondence.
During 2020, meetings were held with over 800 investors and Kerry’s management teams
participated at 21 investor conferences. Kerry met investors in eight different cities and then
engaged virtually from April onwards following the imposition of COVID-19 related restrictions.
In addition, a significant amount of published material including results releases, presentations,
share price information and news releases are accessible to all shareholders on the Group’s website
www.kerrygroup.com.
Shareholder presentations are made at the time of release of the Group’s full year and half year
results and interim management statements, following which the Chief Executive Officer and Chief
Financial Officer provide the Board with an update on feedback received. Regular updates are
provided by the Chief Financial Officer to the Board on matters raised by shareholders and analysts
as well as updates on the composition of the Group’s share register.
The Company’s Annual General Meeting (AGM) provides an opportunity for the Directors to deliver
presentations and to answer questions of shareholders, both institutional and private. Whilst this
was not possible in 2020 due to COVID-19 related restrictions, all shareholders were able to exercise
their right to vote through the appointment of a proxy. Shareholders were also invited to join and
listen to the business of the meeting via webcast which was accessed through the Company’s
website. The Company also provided a facility for shareholders to submit questions by email or by
post in advance of the AGM.
Community
Material Matters
Matters of importance to shareholders included the impact of COVID-19 on the Group’s
performance and outlook. Other matters included strategic positioning, competitive landscape,
mergers and acquisitions and Kerry’s sustainability strategy.
Customers
and
Consumers
Our Response
When necessary, the Board and Committee Chairs engage with shareholders on specific topics and
where relevant provide feedback to the Directors. During the year, the Remuneration Committee
Chairperson consulted with a number of large institutional shareholders on the proposed changes
to the Remuneration Policy.
All the Committee Chairs attend the AGM in person. While this was not possible in 2020 due to
COVID-19 related restrictions, all Committee Chairs were available throughout the year to engage
with shareholders.
Government
Employees
Our Engagement
The Group undertakes regular two-way engagement activities with our 26,000+ employees including
employee briefings and virtual Town Halls led by business leadership teams, and through the
OurVoice employee engagement survey followed by team feedback sessions. During October 2020,
86% of employees participated in the OurVoice employee engagement survey. Interim Leader Pulse
Checks were also conducted in March and July with senior management. The leader led Kerry Way
workshops, to embed the Group’s purpose and refreshed values, which commenced in 2019 were
completed in early 2020. Following the declaration of the COVID-19 pandemic, the Group established
and maintained a dedicated information portal for all employees on the MyKerry intranet. The Chief
Executive Officer, Executive Management and business leaders held virtual briefings and updates with
their respective teams as the situation continued to evolve during the year.
Customers and
Consumers
Community
Suppliers
Shareholders
Employees
Government
Employees
Community
Customers
and
Consumers
Suppliers
Shareholders
Suppliers
Shareholders
Kerry Group Annual Report 2020DIRECTORS‘ REPORT Government
Employees
Community
Customers
and
Consumers
99
Suppliers
Shareholders
Employees
(continued)
Government
Employees
Government
Employees
Community
Community
Customers
and
Consumers
Government
Our Engagement (continued)
The designated workforce engagement Director Mr. Tom Moran engaged directly with business
leadership teams and employees during 2020, initially in person, with subsequent activities moving
to a virtual setting from March 2020 onwards. Details of the activities of the designated workforce
engagement Director are outlined on page 101.
Employees
Board members, through their attendance at the Kerry Global Leadership Forum, held in October
2020, were provided with an opportunity to listen to over 400 senior managers across the
Customers and
organisation, where they discussed matters such as our refreshed brand identity and vision,
Consumers
the 2030 sustainability strategy, leadership competencies, culture and values.
Community
Customers
and
Consumers
Material Matters
Our annual employee engagement survey reinforced our core strengths in the areas of health &
safety, employee wellbeing and customer focus. Areas identified for continued focus during 2021
include the role of senior leaders, simplification of organisational structures and investment in
career development opportunities for all employees.
Suppliers
Shareholders
Suppliers
Shareholders
Government
Employees
Customers &
Consumers
Community
Customers
and
Consumers
Suppliers
Shareholders
Suppliers
Shareholders
Our Response
The Board provided feedback on the global priorities and plans to address the matters raised by
employees as part of the OurVoice employee engagement survey and the Leader Pulse Checks. The
Board also received updates from the Chief Executive Officer on the action plans to safeguard the
safety and wellbeing of employees during the COVID-19 pandemic.
Employees
Government
Details of employee engagement activities are outlined in Our People on pages 14-19 and the
Sustainability Review on pages 46-70. The Group’s response to employees during the COVID-19
pandemic is outlined above and in the Sustainability Review on page 58.
Our Engagement
Kerry operates a proven customer-centric business model that enables us to work side by side
with customers as their co-creation partner. The Group interacts with customers on a daily basis at
multiple levels from dedicated relationship and account managers to tailored innovation forums.
Customers and
Consumers
Community
In response to the COVID-19 pandemic, the Group supported its customers by ensuring continuity
of supply and helping them to innovate their product portfolios to meet changing consumer needs
and preferences and the evolving operating environment. The Group engaged with its customers
by introducing new innovative processes for virtual collaboration and via its dedicated COVID-19
web page. The Group also shared its COVID-19 safety playbook with customers to ensure their
operations were not compromised.
Suppliers
Shareholders
During 2020, the Group conducted a global customer satisfaction survey with its major customers
and continued to engage with customers on the Group’s sustainability strategy.
Feedback from customer engagement activities was discussed at each Board meeting as part of
the business updates provided by the Executive Directors. The Board also considers customer
engagement matters as part of the overall Group sustainability strategy.
Material Matters
Matters of importance included the impact of the COVID-19 pandemic on, the end-to-end supply
chain, changing consumer needs and preferences and the customers’ ability to operate.
Our customers are also responding to the acceleration of key trends in the food and beverage
industry, with increased demand for health and immunity enhancement, plant protein options, and
products addressing a diverse range of sustainability criteria.
Our Response
The Board approves the Group’s significant investment in Research & Development activities and
together with management ensures that this resource is focused on those projects that can best
meet customers’ needs and thereby enable the Group to achieve its strategic objectives in relation
to revenue growth, margin expansion, return on investment and enabling food production in a
more environmentally sustainable manner. During 2020, the Board approved investments in areas
such as developing immunity enhancing products, expanding the Group’s Radicle™ portfolio of
plant-based food ingredient solutions and developing innovative food delivery solutions. The Board
also approved a number of acquisitions during the year which complement the Group’s capabilities
in areas such as proactive nutrition, taste and food protection solutions to meet the changing needs
of customers and consumers. Further details are outlined in Our Business Model on pages 20-21,
Strategy and Financial Targets on pages 26-28 and the Sustainability Review on pages 52-55.
As Kerry continues to meet the changing needs of both customers and consumers, the Board
approved the 2030 sustainability strategy Beyond the Horizon along with a refreshed brand identity,
reflecting the evolution of the business. This underpins Kerry’s growth strategy as it continues to
partner with its customers to create a world of sustainable nutrition.
Kerry Group Annual Report 2020 Government
Employees
Community
Customers
and
Consumers
Suppliers
Shareholders
Government
Employees
100
Community
Government
Employees
Community
Customers and
Consumers
Suppliers
Government
Customers
and
Consumers
Employees
Our Engagement
Kerry engages with suppliers on a daily basis to manage ongoing operational activities through a
dedicated procurement function. In addition, the Group has identified key suppliers with whom we
have more strategic relationships.
Shareholders
Suppliers
Suppliers
Community
Shareholders
Customers
and
Consumers
Material Matters
Matters of importance to our suppliers include service levels, cost reduction programmes,
availability of supply and responsible sourcing. During 2020, availability of supply during the
COVID-19 pandemic impacted all suppliers. Also, the impact of Brexit on availability and cost of
supply received particular attention in our Consumer Foods division.
Suppliers
Shareholders
Our Response
Through the Group’s Sustainability Programme, the Board ensures that the organisation works
with suppliers who provide raw materials to the required safety and quality standards, produced
on a sustainable basis and with the proper regard for the fair treatment of workers across the
supply chain.
Government
Employees
The Board ensured that as part of the Group’s Brexit planning, contingency supply arrangements
were put in place to limit any potential disruption in production. Similarly, the Board ensured that
effective supply arrangements were put in place as part of the Group’s response to COVID-19.
Government
Employees
Further details are outlined in the Sustainability Review on pages 55-58.
Community
Community
Our Engagement
Kerry engages with community representative bodies, charities and leading non-governmental
organisations in all regions in which it operates. The Group directly supports a range of community
projects and encourages employees to participate in local initiatives through paid volunteer hours.
Community
Customers and
Consumers
The Board considers our local community engagements as part of the overall Group sustainability
strategy.
Customers
and
Consumers
Material Matters
Shareholders
Matters of importance include the impact of COVID-19 on the wider society, employment and local
economic development, and access to nutrition and sustainable food production.
Suppliers
Suppliers
Shareholders
Our Response
As a leader in the food and beverage industry, the Group continued to fulfill its role during the
pandemic, ensuring a safe and consistent food supply despite the challenges faced by the industry.
In addition, the Board approved the Group’s MyCommunity initiative as part of its response to
the COVID-19 pandemic. This initiative includes the provision of financial support, pledging of
26,000 employee volunteer days to assist community programmes, the supply of PPE to frontline
workers, the production and donation of hand sanitiser and the delivery of food to vulnerable
groups in society.
Details of the Group’s MyCommunity initiative and other community activities are outlined in
the Sustainability Review on pages 60-61.
MyCommunity
Kerry Group Annual Report 2020DIRECTORS‘ REPORT Consideration of Stakeholder Views in the Decision Making Process
By understanding the matters of importance to our stakeholders, the Board can consider their needs and concerns in
its decision making. The Board ensures that material decisions, which could impact on stakeholder groups, are taken
with due regard to their interests.
101
GOVERNANCE IN ACTION:
Designated Workforce Engagement Director – Activities and Feedback in 2020
A plan for 2020 was developed by the Group Human Resources Team, in conjunction with the designated
workforce engagement Director Mr. Tom Moran, to ensure he had the opportunity to engage with or
visit each of the Group’s regions, meet with a range of employees in their day to day settings and attend
a variety of employee events. While some in person events were completed in the first quarter of 2020,
due to the COVID-19 pandemic, the plan was revised and moved to a totally virtual plan from March 2020
onwards. Details of the employee engagement activities undertaken by Mr. Tom Moran during 2020 are
outlined below.
– visit to Kerry Foods manufacturing site in Coleraine, Northern Ireland;
– participation in our International Women’s Day event in Naas, Ireland;
– participation in groupwide webinars hosted by the Chief Executive Officer;
– participation in leadership team meetings in Europe and Russia and LATAM regions;
– attendance at the virtual Kerry Global Leadership Forum. Further details are outlined on page 99;
– attendance at a global Town Hall event hosted by the Research, Development and Application team,
for over 1,000 employees globally;
– 1:1 briefings with key leaders showcasing career development, diversity, inclusion and belonging and
community activities across the Group;
– ongoing updates with key representatives from the Group Human Resources team to provide a first-hand
view of Kerry’s response to the COVID-19 pandemic, including measures taken to prioritise the health,
safety and wellbeing of all employees whether working at home or continuing to work onsite and the
preparations for their future return to the workplace; and
– ongoing updates on the results from the Leader Pulse Checks and the OurVoice employee engagement
survey activities.
The global priorities for employee engagement during 2020 were as follows:
– integrating employee engagement as a key organisational measure to drive sustainable and successful
business improvement activities;
– maintaining a continued focus on employee engagement activities during the COVID-19 pandemic
and providing additional support to senior management in leading teams through uncertain times,
managing a more dispersed workforce and dealing with prolonged disruption to day to day working
practices;
– providing the right level of organisational support, to prioritise employees’ safety, health and wellbeing
needs, to partner effectively with customers, and to help our communities during the COVID-19
pandemic; and
– actively fostering diversity, inclusion and belonging in the workplace to ensure all employees felt valued,
stayed connected, received relevant and timely updates as matters evolved and were able to connect
their own roles and contribute fully to meaningful work aligned to our purpose.
Mr. Tom Moran held regular meetings with the Chief Human Resources Officer and the Group Human
Resources Team to provide his feedback from the engagement activities. He also presented regular
reports to the Board on the activities undertaken and shared his feedback and findings where applicable.
Mr. Tom Moran is satisfied that the employee engagement process is being successfully operated within
the Group and, despite the pandemic constraints, has been very productive. He, and the officers leading
the process, have kept the Board informed on its progress and on the views of the workforce.
Kerry Group Annual Report 2020
102
Annual General Meeting
All Directors attend the AGM and are available to meet
with shareholders and answer questions as required.
Notice of the AGM, proxy statement and the Annual
Report and financial statements are sent to shareholders
at least 20 working days before the meeting. A separate
resolution is proposed at the AGM on each substantially
separate issue including a particular resolution relating
to the adoption of the Directors’ and Auditors’ reports
and the financial statements. Details of the proxy votes
for and against each resolution, together with details
of votes withheld are announced after the result of the
votes by hand. These details are published on the Group’s
website following the conclusion of the AGM. At the AGM
held on 30 April 2020, there were no material votes cast
against any resolutions.
Whistleblowing Arrangement
The Group’s whistleblowing arrangement includes an
externally facilitated multi-lingual hotline ‘Express a
Concern’ through which all employees and third parties
can raise concerns in confidence about possible wrong
doings in financial reporting and other matters, 24 hours
a day by phone or online.
All whistleblowing incidents are reviewed by the Head
of Internal Audit and formally investigated by the
relevant functional heads depending on the nature of
the concern raised.
In 2020, the Audit Committee reviewed the whistleblowing
incidents and outcomes and provided updates to the
Board which enabled the Board to assess the adequacy
of the whistleblowing arrangements and to review the
reports arising from its operation. The Board is satisfied
that the Group’s whistleblowing arrangements are
operating effectively.
Division of Responsibilities
Chairman and Chief Executive Officer
The roles of the Chairman and Chief Executive Officer
are separate and the division of duties between them is
formally established, set out in writing and agreed by the
Board. The Chairman is responsible for leadership of the
Board and ensuring its effectiveness in all respects. The
Executive Directors, led by the Chief Executive Officer, are
responsible for the management of the Group’s business
and the implementation of Group strategy and policy.
Company Secretary
Each Director has access to the advice and services of
the Company Secretary, whose responsibilities include
ensuring that Board procedures are followed, assisting
the Chairman in relation to corporate governance
matters, ensuring the Company complies with its legal
and regulatory obligations and facilitating appropriate
quality information flows between the business and
the Board.
Senior Independent Director
The principal role of the Senior Independent Director
(SID) is to provide a sounding board for the Chairman
and to act as an intermediary for other Directors as
required. The SID is responsible for the appraisal of the
Chairman’s performance throughout the year. The SID is
also responsible for leading a formal succession process
for the role of Chairman. The SID is available to meet
shareholders upon request, in particular if they have
concerns that cannot be resolved through the Chairman
or the Chief Executive Officer.
Non-Executive Directors
The non-Executive Directors’ main responsibilities are to
review the performance of management and the Group’s
financial information, assist in strategy development, and
ensure that appropriate and effective systems of internal
control and risk management are in place. The non-
Executive Directors review the relationship with external
auditors through the Audit Committee and monitor
the remuneration structures and policy through the
Remuneration Committee.
The non-Executive Directors provide a valuable breadth
of experience and independent judgement to Board
discussions.
Commitments
Under the terms of their appointment all Directors
agreed to the time commitment schedule which requires
them to allocate sufficient time to discharge their
responsibilities effectively. This matter is considered
by the Governance, Nomination and Sustainability
Committee on an ongoing basis in accordance with its
Terms of Reference.
All Directors must seek prior approval of the Board
in advance of undertaking any additional external
appointments. Before approving any additional external
appointment, the Board considers the time commitment
required for the role. Each proposed external
appointment is reviewed independently.
Independence
The Board, as a whole, has assessed the non-Executive
Directors’ independence and confirmed that, in its
opinion, all non-Executive Directors are independent in
accordance with the Code. The Board notes that Dr. Hugh
Brady and Ms. Joan Garahy serve on the Board of ICON
plc. The Board is satisfied that they are able to apply
objective and independent judgement to act in the best
interest of the Company.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT 103
Meetings and Attendance
The Board meets sufficiently regularly to ensure that
all its duties are discharged effectively. All Directors are
expected to prepare for and attend meetings of the
Board, the Committees of which they are members
and the AGM. In the event that a Board member
cannot attend or participate in the meeting, the
Director may discuss and share opinions on agenda
items with the Chairman, Chief Executive Officer,
Senior Independent Director or Company Secretary
in advance of the meeting.
During the year, additional Board meetings were
convened to discuss the Group’s response to the
COVID-19 pandemic and to consider strategic acquisition
opportunities. As a result, a total of 14 meetings were
held in 2020, with all meetings held virtually from April
onwards due to the imposition of COVID-19 related
restrictions and to ensure that the health & safety of
our Board and colleagues was protected. Individual
attendance at the Board and Committee meetings is set
out in the table below.
Conflicts of Interest
Under the terms of their appointment all Directors have
continuing obligations to update the Chairman as soon
as they become aware of a situation that could give rise
to a conflict or a potential conflict of interest.
Board Committees
The Board has three Committees, the Audit Committee,
the Governance, Nomination and Sustainability
Committee and the Remuneration Committee, which
support the operation of the Board through their focus
on specific areas of governance.
Each Committee is governed by its Terms of Reference,
available from the Group’s website www.kerrygroup.com
or upon request, which sets out how it should operate
including its role, membership, authority and duties.
Reports on the activities of the individual Committees
are presented to the Board by the respective
Committee Chairs.
Further details on the duties, operation and activities of
all Board Committees can be found in their respective
reports on pages 107-149 and these reports form part of
the Governance Report.
Directors
Board
Audit
Committee
Governance, Nomination and
Sustainability Committee
Remuneration
Committee
Philip Toomey
Edmond Scanlon*
Marguerite Larkin*
Gerry Behan*
Hugh Brady
Gerard Culligan
Karin Dorrepaal
Joan Garahy
Emer Gilvarry**
James C. Kenny***
Tom Moran****
Con Murphy
Christopher Rogers*****
14/14
14/14
14/14
14/14
14/14
12/14
14/14
14/14
2/2
6/6
14/14
13/14
14/14
–
–
–
–
6/6
–
–
6/6
2/2
–
4/4
–
6/6
6/6
–
–
–
6/6
–
6/6
–
–
2/2
1/1
–
–
–
–
–
–
–
–
6/6
6/6
–
3/3
6/6
–
3/3
*
**
Executive Directors
Ms. Emer Gilvarry was appointed to the Board on 1 November 2020 and was appointed to the Audit
Committee on the same date.
*** Mr. James C. Kenny retired from the Board following the conclusion of the AGM on 30 April 2020.
**** Mr. Tom Moran stepped down from the Audit Committee on 1 November 2020 and was appointed to the
Governance, Nomination and Sustainability Committee on the same date.
***** Mr. Christopher Rogers was appointed to the Remuneration Committee on 30 April 2020.
Attendance statistics represent: Total number of meetings attended by the Director/Total number of meetings held
during the year which they were eligible to attend.
Kerry Group Annual Report 2020 104
Composition, Succession and Evaluation
Board Induction and Development
On appointment to the Board, each new non-Executive Director undergoes a full formal induction programme. This
induction includes an overview of their duties and responsibilities as a Director, presentations on the Group’s operations
and results, meetings with Executive Management and an outline of the principal risks and uncertainties facing the
Group. Details of the induction programme undertaken by Ms. Emer Gilvarry are outlined in the Governance in
Action below.
GOVERNANCE IN ACTION:
New Director Induction
New non-Executive Director Ms. Emer Gilvarry was appointed to the Board on 1 November 2020.
Overview
The Chairman, supported by the Company Secretary, is responsible for ensuring that new Directors have an
appropriate induction on joining the Board. Each Director undergoes a full formal induction programme which
is tailored to meet their individual requirements.
The purpose of the induction programme is to enable Directors to gain a full understanding of the Group,
governance related matters and directors’ duties and responsibilities.
Induction Activities
– provision of a detailed information pack including key corporate governance policies, board papers, financial
and strategic documents and information on directors’ duties and responsibilities;
– meetings with the Executive Directors;
– meetings with the Chairman, the Senior Independent Director and Remuneration Committee Chairperson,
and the Audit Committee Chairman;
– meetings with functional leaders on matters such as board and corporate governance, internal audit,
strategy, investor relations, human resources and sustainability;
– meetings with business leaders of the Taste & Nutrition and the Consumer Foods businesses to obtain an
overview of each business; and
– meetings with external Auditors and other advisors.
Future Induction Plans
– site visits to see first-hand the Group’s operations while engaging with employees and senior management.
Timing of these visits has yet to be agreed due to the ongoing COVID-19 pandemic.
Mr. Jinlong Wang who was appointed to the Board with effect from 5 January 2021, will complete a full formal
induction programme tailored to his requirements over the coming months.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT Throughout the year, the Board as a whole engages
in development through a series of consultations with
subject matter experts on a range of topics including
corporate governance and strategy. Presentations
are also made by Executive Directors and senior
management on various topics throughout the year in
relation to their areas of responsibility.
On an annual basis, an ‘off-site‘ Board meeting is
scheduled at a Group location and is combined with a
comprehensive schedule of activities over a week long
period, to allow non-Executive Directors further develop
their understanding of the Group’s activities and meet
with local senior management and emerging talent. Due
to the COVID-19 pandemic, the Board visit scheduled for
June 2020 was cancelled.
The Board along with 400 senior managers attended
a virtual three day Kerry Global Leadership Forum in
October 2020 at which the Group’s new vision statement,
brand identity and sustainability strategy were unveiled.
It also provided the Board with an opportunity to listen
to and obtain feedback from senior management
across the Group on subject matters such as leadership
competencies, culture and values.
As part of their personal development plans,
individual non-Executive Directors were also afforded
the opportunity to visit a number of the Group’s
international facilities and operations. In 2020, Mr. Tom
Moran, in his role as designated workforce engagement
Director, visited two sites in Ireland: Kerry Foods in
Coleraine and the Global Technology & Innovation
Centre in Naas. Due to the COVID-19 pandemic, all
other non-Executive Directors’ international site visits
were cancelled.
Individual Board members training requirements are
reviewed with the Chairman and Company Secretary and
training is provided to address these needs.
Board Performance Evaluation
In accordance with provisions of the Code, a
performance evaluation of the Board is carried out
annually and facilitated externally every third year.
In 2020, the Board conducted an internal self-evaluation
of the performance of the Board, Board Committees,
the Chairman and individual Directors against a set
of pre-defined key criteria. The review was led by the
Chairman of the Board and the Senior Independent
Director and was facilitated by the Company Secretary.
The review was undertaken using Thinking Board,
Independent Audit Limited’s governance self-assessment
process. Independent Audit Limited, based in the UK, is
recognised as a leading firm of board reviewers, and has
no other connections to the Group.
105
Topics covered during the Board Performance Evaluation
included Board composition and succession planning,
board meetings and papers, strategy and business
model, mergers and acquisitions, risk management and
the response to COVID-19.
The Chairman appraised the performance of each
of the non-Executive Directors by meeting each
Director individually. The key areas reviewed were
independence, contribution and attendance at Board
meetings, interaction with Executive Directors, the
Company Secretary and senior management, ability to
communicate issues of importance and concern, their
knowledge and effectiveness at meetings and the overall
time and commitment to their role on the Board.
In addition, the Senior Independent Director formally
appraised the performance of the Chairman. This
appraisal was similar to the non-Executive Director
evaluation process which included feedback from
all Directors on the Chairman’s performance during
the year.
In December 2020, the non-Executive Directors met
without the presence of the Executive Directors and,
led by the Chairman, undertook a formal review of the
performance of the individual Executive Directors.
To conclude on the appraisal of the non-Executive
Directors, the Chairman and the Executive Directors,
results are collated, summarised and presented to
the Board. The appraisal process concluded that
each Director is performing well and is committed
to their role in terms of dedication of time and
attendance at meetings.
At the December Board meeting, the Board considered
the outcomes of the Board evaluation report (including
the Board Committees). Overall, the Board concluded
that no area of significant weakness had been identified
and that it and its committees operated effectively
throughout the period under review. A number of
points for improvement were identified and action plans
established to address them. The actions identified
from the 2020 performance evaluation included
recommendations relating to Board composition and
succession planning, executive succession planning,
structure and content of Board papers and the
appropriate time allocation between strategic priorities
and other matters at Board meetings.
Progress against recommendations from the previous
evaluation were also considered and the Board is
satisfied that improvements have been made which have
enhanced the operation and effectiveness of both the
Board and its Committees.
The Chairman, along with the Company Secretary, will
ensure that areas for improvement identified from the
2020 evaluation report and areas for consideration
arising from the Directors’ appraisal, where identified,
will be considered during 2021.
Kerry Group Annual Report 2020 106
Audit, Risk and Internal Control
Risk Management and Internal Controls
The internal control framework in Kerry Group
encompasses the policies, processes, tasks and
behaviours, which together facilitate the Group’s
effective and efficient operation by enabling it to
respond appropriately to significant business,
operational, financial, compliance and other risks
to achieve its business objectives.
The systems which operate in Kerry Group provide
reasonable, but not absolute, assurance on:
– the safeguarding of assets against unauthorised use
or disposition; and
– the maintenance of proper accounting records and the
reliability of the financial information produced.
The Board has delegated certain duties to the Audit
Committee in relation to the ongoing monitoring and
review of risk management and internal control systems.
The work performed by the Audit Committee is described
in its report on pages 107-112.
Full details of the risk management systems are
described in the Risk Management Report on
pages 71-74.
The principal risks and uncertainties facing the Group,
including those that could threaten the business model,
future performance, solvency or liquidity are described
on pages 73-82. Emerging risks are also identified,
analysed and managed as part of the same process as
the Group’s other principal risks as described on page 74.
The Directors confirm that they have carried out a robust
assessment of these risks and the actions that are in
place to mitigate them.
The Directors confirm that they have also reviewed
the effectiveness of the systems of risk management
and internal control which operated during the period
covered by these financial statements and up to the
date of this report. Based on the review performed, the
Directors concluded that for the year ended 31 December
2020, the Group’s systems of risk management and
internal control were effective. The procedures adopted
comply with the guidance contained in Guidance on Risk
Management, Internal Control and Related Financial
and Business Reporting as published by the Financial
Reporting Council in the UK.
Features of Internal Control in Relation to
the Financial Reporting Process
The main features of the internal control and risk
management systems of the Group in relation to the
financial reporting process include:
– the Board review and approve a detailed annual
budget and monitor performance against the budget
through periodic Board reporting;
– prior to submission to the Board with a
recommendation to approve, the Audit Committee
review the Interim Management Statements, the
Interim and Annual Consolidated Financial Statements
and all formal announcements relating to these
statements;
– adherence to the Group Code of Conduct and Group
policies published on the Group’s intranet ensures
the key controls in the internal control system are
complied with;
– monthly reporting and financial review meetings are
held to review performance at business level ensuring
that significant variances between the budget and
detailed management accounts are investigated and
that remedial action is taken as necessary;
– the Group has a Financial Compliance function to
establish compliance policies and monitor compliance
across the countries in which the Group operates;
– the Group operates an internal control self-assessment
process covering material finance, operational and
compliance controls across the Group;
– a well-resourced and appropriately skilled Finance
function is in place throughout the Group;
– completion of key account reconciliations at reporting
unit and Group level;
– centralised Taxation and Treasury functions and
regional Shared Service Centres established to
facilitate appropriate segregation of duties;
– the Group Finance Committee has responsibility
for raising finance, reviewing foreign currency risk,
making decisions on foreign currency and interest rate
hedging and managing the Group’s relationship with
its finance providers;
– the Board, through the Audit Committee, completes an
annual assessment of risks and controls;
– appropriate ICT security environment; and
– the Internal Audit function continually reviews
the internal controls and systems and makes
recommendations for improvement which are
reported to the Audit Committee.
Fair, Balanced and Understandable
The Directors have concluded that the Annual Report
and Consolidated Financial Statements, taken as a whole,
provides the information necessary for shareholders
to assess the Group’s and Company’s position and
performance, business model and strategy and is fair,
balanced and understandable. This assessment was
completed by the Audit Committee and the activities
undertaken in reaching this conclusion are outlined
on page 109.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT GOVERNANCE REPORT
Audit Committee Report
107
Christopher Rogers
Chairman of the
Audit Committee
Dear Shareholder,
On behalf of the Audit
Committee, I am pleased to
present the report for the year
ended 31 December 2020.
The purpose of the report
is to provide an overview of
how we have carried out our
responsibilities during the year.
The Committee supports the Board
in assessing the principal and
emerging risks facing the Group,
including reviewing the Group’s
risk management and internal
control systems and overseeing the
operation of the Group Internal Audit
function. During 2020 this work was
conducted against the backdrop of
the COVID-19 pandemic and, whilst
recognising the additional pressure
and stress on the management
and employees of the Group, our
focus was on ensuring the ongoing
robustness of the internal control
and risk management systems
and that the Group Internal Audit
function continued to operate
effectively. The work performed
by the Committee in this regard,
encompassing ongoing monitoring
and the review of effectiveness is
detailed on page 110.
The Committee is responsible
for monitoring the integrity of
the Group’s Financial Statements
and any formal announcements
relating to the Group’s financial
performance. We reviewed the
work completed by management
in respect of the Going Concern
and Viability Statements, including
additional analysis to assess the
impact, in the short to medium
term, of the COVID-19 pandemic
and concluded that there was no
threat to the Group’s prospects or
viability. Further details are set out
on page 83. The Committee also
assisted the Board in determining
that the Annual Report and
Consolidated Financial Statements,
when taken as a whole, is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the
Group’s and the Company’s position,
performance, business model and
strategy. The work completed in this
regard is set out on page 109.
The Committee received a detailed
briefing from management
and the external auditor,
PricewaterhouseCoopers (PwC), on
preparations for completing the year
end audit in light of the challenges
posed by the COVID-19 pandemic.
The Committee was reassured
by the actions management and
PwC had taken, which ensured
there was a minimal impact on
the year end audit timetable. The
Committee and the Board would like
to thank the teams for responding
to these challenges in such a
positive manner.
The Committee oversees the
relationship with the external
auditor, including monitoring
all matters associated with their
appointment, remuneration,
performance and independence
and reviewing the scope and results
of the audit and the effectiveness
of the process. Further details with
regard to the Committees work in
this regard are set out on page 111.
As outlined on page 112, the
Committee has considered the
requirements of the Companies Act
2014 in relation to the Directors’
Compliance Statement and is
satisfied that appropriate steps have
been undertaken by the Company to
ensure that it is materially compliant
with its relevant obligations.
The Committee’s key priorities for
the coming year include continued
focus on ensuring recommendations
from Group Internal Audit reviews
are implemented and working with
the Board and Group management
on continuous improvement to risk
and financial management controls
across the Group, in particular
taking account of the Group’s
continuing growth and expanding
geographical footprint.
I trust you will find this report
useful in understanding the
operation and activities of the
Committee during the year and
I welcome any comments from
shareholders on my report.
Christopher Rogers
Chairman of the Audit Committee
Kerry Group Annual Report 2020
108
Roles and Responsibilities
The main roles and responsibilities of the Committee,
which reflect the UK Corporate Governance Code and
the Irish Annex and the Guidance on Audit Committees,
are set out in its written Terms of Reference which are
available from the Group’s website www.kerrygroup.com
or upon request.
The primary responsibilities outlined in the terms of
reference are included in the table below:
Primary responsibilities of the Audit Committee
– monitoring the integrity of the Group’s financial statements,
including reviewing significant financial reporting
judgements contained in them;
– reviewing the Interim Management Statements, the
Interim and Annual Consolidated Financial Statements and
considering the appropriateness of accounting policies and
practices;
– advising the Board on whether it believes there are any
material uncertainties which may impact the Group’s ability
to continue as a going concern or the Group’s long-term
viability;
– advising the Board on whether the Annual Report and
Consolidated Financial Statements, when taken as a whole is
fair, balanced and understandable;
– assisting the Board in its responsibilities in regard to the
assessment of the principal and emerging risks facing the
company, the monitoring of risk management and internal
control systems, including a review of effectiveness;
– reviewing the operation and effectiveness of the Group
Internal Audit function;
– making recommendations to the Board in relation to the
appointment, re-appointment and removal of the Group’s
external auditor as well as monitoring their effectiveness and
independence;
– reviewing, on behalf of the Board, the Group’s whistleblowing
arrangements for its employees and third parties to raise
concerns in confidence about possible wrongdoings in
financial reporting or other matters; and
– advising the Board in relation to compliance with stock
exchange and other legal or regulatory requirements.
competence relevant to the sectors in which the
Group operates. The Company Secretary is the Secretary
of the Committee.
Committee Meetings
Meetings are generally scheduled in line with key
times in the Group’s financial reporting calendar.
The Committee met six times during the year and
attendance at these meetings is outlined on page 103.
Typically, the Chief Executive Officer, the Chief Financial
Officer, the Group Financial Controller, the Company
Secretary and the Head of Internal Audit, as well as
representatives of the external auditor are invited
to attend meetings of the Committee. In addition,
the Chairman of the Board attends meetings at the
invitation of the Committee. When required, other key
executives and senior management are invited to attend
to present and provide deeper insight on various topics
as are required by the Committee to discharge its duties.
The external auditor and the Head of Internal Audit have
direct access to the Committee Chairman at all times
and meet with the Committee, without other Executive
Management being present, on a formal basis at least
annually in order to provide additional opportunity for
open dialogue and feedback.
After each Committee meeting, the Chairman of the
Committee reports to the Board on the key issues which
have been discussed.
Committee Evaluation
As outlined in detail on page 105, an internal evaluation
of Board effectiveness included a review by the
Committee of its own effectiveness. The output was
discussed by the Committee and it was concluded
that the Committee continued to operate effectively
throughout the year as well as identifying ongoing areas
of focus for the 2021 financial year.
Key Activities
Financial Reporting and Significant
Financial Judgements
Committee Membership
The Audit Committee currently comprises four
independent non-Executive Directors; Dr. Hugh Brady,
Ms. Joan Garahy, Ms. Emer Gilvarry and is chaired by Mr.
Christopher Rogers.
The Audit Committee reviewed the Interim Management
Statements, the Interim and Annual Consolidated Financial
Statements and all formal announcements relating to
these statements before submitting them to the Board
of Directors with a recommendation to approve. These
reviews focused on, but were not limited to:
Ms. Emer Gilvarry joined the Committee upon her
appointment to the Board on 1 November 2020
replacing Mr. Tom Moran who stepped down from the
Committee on the same date.
The Board is satisfied that both Mr. Christopher Rogers
and Ms. Joan Garahy meet the specific requirements
for recent and relevant financial experience as set out in
the Code.
The Board is also satisfied that together, the members
of the Committee, as set out in their biographical
details on pages 85-87, bring a broad range of relevant
skills, experience and expertise, from a wide variety
of industries and backgrounds, and as a whole have
– the appropriateness and consistency of accounting
policies and practices;
– the going concern assumption;
– compliance with applicable financial reporting
standards and corporate governance requirements as
well as the clarity and completeness of disclosures;
– the disclosures related to the impact of COVID-19
on both the current and projected performance and
liquidity of the Group; and
– considering the significant areas of complexity,
management judgement and estimation that had
been applied in the preparation of the Consolidated
Financial Statements in accordance with the
accounting policies.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT 109
The Committee has, with the support of PwC as external auditor, reviewed the suitability of the accounting policies
which have been adopted and whether management have made appropriate judgements and disclosures. The
table below sets out the significant matters considered by the Committee in relation to the Consolidated Financial
Statements for the year ended 31 December 2020.
Significant Financial Reporting Judgements
Impairment
of Goodwill
and Indefinite
Life Intangible
Assets
Goodwill and indefinite life intangible assets, as disclosed in note 12 to the Consolidated Financial
Statements, represents the largest number on the Group balance sheet at €3.9 billion. The
Committee considered the process to complete the annual impairment review of the Group’s
goodwill and indefinite life intangible assets and specifically the assumptions used for the future
cash flows, discount rates, terminal values and growth rates. This included consideration of the
impact of COVID-19 on such assessments and a consideration of the sensitivity analysis run
by management. Following discussions with senior management and the external auditor, the
Committee found that the methodology used for the above valuation and annual impairment
review are appropriate and no impairment was identified.
Going Concern
and Viability
Statement
COVID-19 has impacted both the performance and cash flows of the Group and through the year
management have undertaken detailed financial modelling exercises which have considered
the impact on profit, growth, cash and working capital in a number of different scenarios. The
Committee reviewed and challenged management’s assumptions and modelling of projected
cashflows and, in particular those related to the potential impact of COVID-19 on future trading
performance. The Committee also considered the Group’s financing facilities and future funding
plans. Based on this, the Committee confirmed there were no material uncertainties that cast
a significant doubt on the Group or the Company’s ability to continue as a going concern and
therefore the application of the going concern basis for the preparation of the financial statements
continued to be appropriate and recommended the approval of the viability statement.
Business
Combinations
The Group acquired three businesses during the financial year which were accounted for as
business combinations. The Committee reviewed the methodology and assumptions applied in
determining these provisionally estimated fair values and found the methodology and assumptions
to be appropriate following discussion with senior management and the external auditor.
Taxation
Significant judgement and a high degree of estimation is required when arriving at the Group’s
tax charge and liability. The Committee, in conjunction with tax professionals, reviewed and
discussed the basis for the judgments in relation to uncertain tax positions and challenged
management on their assertions and also considered the outcome of the external auditors’ review
of the tax charge and liability. As a result, the Committee believes the impact of uncertain tax
positions has been appropriately reflected in the tax charge and liability.
Fair, Balanced and Understandable
At the request of the Board, the Audit Committee
reviewed the content of the Annual Report and
Consolidated Financial Statements to ensure that it is
fair, balanced and understandable, and provides the
information necessary for shareholders to assess the
Group’s and the Company’s position, performance,
business model and strategy.
In fulfilling this responsibility, the Committee considered
the following:
– the timetable for the co-ordination and preparation
of the Annual Report and Consolidated Financial
Statements, including key milestones as presented at
the December Audit Committee meeting;
– the systematic approach to review and sign-off carried
out by senior management with a focus on consistency
and balance; and
– a detailed report from senior finance management
outlining the process through which they assessed
the narrative and financial sections of the 2020 Annual
Report to ensure that the criteria of fair, balanced and
understandable has been achieved.
Management ensured that the draft Annual Report
and Consolidated Financial Statements were available
to the Audit Committee in sufficient time for review in
advance of the Committee meeting to facilitate adequate
discussion at the meeting.
Having considered the above, in conjunction with the
consistency of the various elements of the reports, the
narrative reporting, the language used and disclosures
in relation to COVID-19, the Committee confirmed to the
Board that the Annual Report and Consolidated Financial
Statements, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group’s and the Company’s
position, performance, business model and strategy.
Internal Control and Risk Management
The Audit Committee supports the Board in its duties
to review and monitor, on an ongoing basis, the
effectiveness of the Group’s risk management and
internal control systems. A detailed overview of the
Group’s risk management framework is set out in the
Risk Management Report on pages 71-74.
Kerry Group Annual Report 2020 110
Throughout the year, the Committee:
– reviewed and approved the assessment of the
principal risks and uncertainties, including emerging
risks, that could impact the achievement of the Group’s
strategic objectives as described on pages 76-82;
– received a presentation from the Head of Internal
Audit on how the COVID-19 pandemic has impacted
the Group’s risk universe and the measures taken by
the Group to mitigate the impact of the crisis. Further
details are set out in the Risk Management Report on
pages 74-75;
– received presentations from the Head of Internal
Audit and management on an internal review of the
Group’s second line of defence structures; a number of
enhancements which were identified were progressed
in 2020 and will remain a focus in 2021;
– reviewed and approved an enhanced framework for
the definition of risk appetite for each of the Group’s
principal risks and recommended the risk appetites as
outlined for approval by the Board;
– received presentations on a selection of principal risks
and discussed with senior management the material
internal controls that exist to mitigate these to levels
within the Group’s risk appetite;
– reviewed quarterly reports from the Head of
Internal Audit based on internal audits completed
outlining non-compliances with Group controls and
managements’ action plans to address them;
– considered reports from the Head of Internal Audit
on fraud investigations or other significant control
matters which occurred during the year and approved
plans to address and remediate the issues identified;
– received updates on the review of financial controls
which concluded that except for a limited number
of changes required as a result of remote working,
primarily in relation to the form of physical evidencing
of approval, the ongoing operation of our financial
controls is substantially unaffected by COVID-19
restrictions;
– received updates from the Group Financial Controller
on any control weaknesses identified through monthly
financial review meetings;
– considered the results of the Kerry Control Reporting
System (the internal control self-assessment review of
material finance, operational and compliance controls)
and concluded that the controls are operating
effectively;
– assessed the Group’s risk management and internal
control framework in line with the FRC Guidance
on Risk Management, Internal Control and Related
Financial and Business Reporting; and
– reviewed the report from the external auditor in
respect of significant financial accounting and
reporting issues, together with significant internal
control weakness observations.
The Audit Committee, having assessed the above
information, is satisfied that the internal control and risk
management framework is operating effectively and has
reported this opinion to the Board.
Internal Audit
The Audit Committee is responsible for monitoring
and reviewing the operation and effectiveness of
the Group Internal Audit function including its focus,
plans, activities and resources. To fulfil these duties
the Committee:
– reviewed and approved the Group Internal Audit
function’s strategy and annual plan, which was
constructed using a risk-based approach;
– approved revisions to the annual plan resulting from
the impact of COVID-19 and the need to adapt to the
changing business environment;
– considered and were satisfied that the competencies,
experience and level of resources within the Internal
Audit team were adequate to achieve the proposed
plan;
– considered the role and effectiveness of Internal Audit
in the overall context of the Group’s risk management
framework and was satisfied that the function has
appropriate standing within the Group;
– received quarterly updates from the Head of Internal
Audit on progress against the agreed plan including
the results of internal audit reports and management’s
actions to remediate issues identified;
– received updates on the nature and extent of non-
audit activity performed by Internal Audit;
– held a meeting with the Head of Internal Audit without
the presence of management;
– ensured that the Head of Internal Audit had regular
meetings with the Chairman of the Audit Committee
and had access to the Chairman of the Board if
required; and
– ensured co-ordination between Group Internal Audit
and the external auditor to maximise the benefits from
clear communication and co-ordinated activities.
In order to comply with the Chartered Institute of
Internal Auditors (CIIA) requirements, an External
Quality Assessment (EQA) by an independent body
is conducted at least every five years to confirm
conformance with the International Professional
Practice Framework (IPPF) of the CIIA. The most recent
EQA was completed in 2017 and the next review will
be completed in 2022. On an annual basis, to ensure
ongoing compliance with the IPPF, the Group Internal
Audit function has an internal Quality Assurance and
Improvement Program (QAIP) in place.
On the basis of the above, the Committee concluded
that for 2020 the Group Internal Audit function
operated effectively and is satisfied that the quality,
experience and expertise of the function is appropriate
for the Group.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT 111
Effectiveness
Post completion of the 2019 audit, in conjunction with
PwC, review meetings were held with senior finance
management across all regions and it was confirmed
by both parties that no issues had arisen during the
audit process.
At the November Audit Committee meeting, PwC
outlined to the Committee in detail the 2020 external
audit plan including process and technology changes
which were implemented to facilitate conducting the
audit remotely. The Committee discussed the significant
audit risks and key audit matters, audit scope and
materiality amongst other matters. The Audit Committee
agreed that the plan and the materiality at which
any misstatements should be reported by PwC to the
Committee was appropriate.
Prior to the finalisation of the 2020 Consolidated
Financial Statements, the Audit Committee received a
detailed presentation and final report from PwC. The
Committee also considered feedback from the lead
partner and senior executives in concluding that PwC
effectively delivered against the objectives of the agreed
audit plan.
In assessing the effectiveness of the external auditor, the
Audit Committee also considered the following:
– the quality of presentations to the Board and Audit
Committee;
– the technical insights provided relevant to the Group;
– key audit findings, including their robustness and
perceptiveness in handling of key accounting and
audit judgements; and
– their demonstration of a clear understanding of the
Group’s business and key risks.
On the basis of the above the Committee is satisfied with
the effectiveness of the external auditors.
Appointment
PwC were appointed as external auditor in March 2016
following a comprehensive tender process which was
overseen by the Audit Committee. On an annual basis,
the Committee reviews the appointment of the external
auditor, taking into account the auditor’s effectiveness
and independence. On that basis, the Committee
recommended to the Board that PwC should continue in
office as the auditor to the Group in respect of the year
ending 31 December 2021.
The Audit Committee approved the remuneration of the
external auditor, details of which are set out in note 3 to
the Consolidated Financial Statements.
External Auditor
On behalf of the Board, the Audit Committee has
primary responsibility for overseeing the relationship
with, and performance of, the external auditor. This
includes making recommendations to the Board on
the appointment, re-appointment and removal of the
external auditor, assessing their independence and
effectiveness and approving the audit fee.
During the year, the Committee met with the external
auditor without management present to discuss any
issues that may have arisen during the audit of the
Group’s Consolidated Financial Statements.
Independence and Provision of Non-Audit Services
The Committee is responsible for ensuring that the
external auditor is independent and for implementing
appropriate safeguards where the external auditor also
provides non-audit services to the Group.
PwC confirmed to the Audit Committee that they are
independent from the Group under the requirements
of the Irish Auditing and Accounting Supervisory
Authority’s Ethical Standards for Auditors. The audit lead
engagement partner for the financial year ended 31
December 2020 is John McDonnell who was appointed
in 2016. In order to ensure continued independence
and objectivity he can only serve as lead engagement
partner for a period of five years. He will therefore be
replaced by Enda McDonagh for the financial year ended
31 December 2021 onwards.
In accordance with the Group’s policy on the hiring of
former employees of the current external auditor, the
Committee reviews and approves any appointment of an
individual, within three years of having previously been
employed by the current external auditor, to a senior
managerial position in the Group.
A formal policy governing the provision of non-
audit services by the external auditor is in place and
is reviewed and approved by the Audit Committee
annually. This policy is in accordance with applicable
laws and takes into account the relevant ethical guidance
for auditors. This policy is designed to safeguard the
objectivity and independence of the external auditor and
to prevent the provision of services which could result
in a potential conflict of auditor independence. The
policy outlines the services which can be provided by the
external auditor, the relevant approval process for these
services, and those services which the external auditor is
prohibited from providing.
In 2020, all non-audit services and fees were approved
by the Audit Committee in line with policy. The
Committee is satisfied that the non-audit fees paid to
PwC, which were minimal, did not compromise their
independence or objectivity. Full details of the fees
paid to the external auditor during the year for non-
audit services are outlined in note 3 to the financial
statements. Having considered all of the above, the
Committee concluded that the Group’s external auditor
is independent.
Kerry Group Annual Report 2020 112
Directors’ Compliance Statement
During the year, the Audit Committee reviewed the
appropriateness of the Directors’ Compliance Policy
Statement and also received a report from senior
management on the review undertaken during
the financial year of the compliance structures and
arrangements in place to ensure the Company’s material
compliance with its relevant obligations. On the basis of
this review, the Committee confirmed to the Board that
in its opinion the Company is in material compliance
with its relevant obligations.
Whistleblowing and Fraud Arrangements
In accordance with the Provisions of the Code,
the responsibility for overseeing whistleblowing is
within the remit of the Board. During 2020, at the
request of the Board, the Committee considered the
Group’s whistleblowing arrangements and assisted
the Board in its assessment of the adequacy of these
arrangements. Details of the Group’s whistleblowing
arrangements are outlined in the Corporate Governance
Report on page 102.
The Committee also considered the Group’s procedures
for fraud prevention and detection to ensure that
these arrangements allow for the proportionate
and independent investigation of such matters and
appropriate follow up action. Following this review, the
Audit Committee confirmed to the Board that it was
satisfied that the Group’s fraud prevention procedures
were adequate.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT GOVERNANCE REPORT
Governance, Nomination and Sustainability Committee Report
113
During the year under review,
the Committee continued to lead
the Board refreshment process
ensuring that the composition
of the Board and its Committees
has the correct balance of skills,
knowledge, experience, diversity
and independence. We engaged
with executive recruitment
consulting firms to conduct a
search for new independent non-
Executive Directors. Potential
non-Executive Directors were
considered by the Committee
and a shortlist was interviewed
after assessing their qualifications
against the above criteria and their
other time commitments. This
culminated in the appointment of
Ms. Emer Gilvarry and Mr. Jinlong
Wang to the Board. Ms. Emer
Gilvarry was appointed to the
Board and the Audit Committee
on 1 November 2020. She is a
highly experienced professional
who brings legal, business and
corporate governance expertise to
the Board. On the recommendation
of the Committee, the Board also
approved the appointment of Mr.
Jinlong Wang as a non-Executive
Director effective on 5 January 2021.
His extensive knowledge of the
Food & Beverage industry coupled
with his in-depth understanding of
Asian markets, brings a key set of
skills and experience to the Board.
The Committee also recommended
changes to the composition of
the Board Committees as outlined
on page 116. The Committee
continues to engage with executive
recruitment consulting firms to
identify an appropriate pipeline
of candidates to join the Board
as independent non-Executive
Directors in the future.
Ms. Joan Garahy will not seek re-
election at the 2021 AGM and will
retire from the Board as Senior
Independent Director and as Chair
of the Remuneration Committee on
29 April 2021 having served nine
years on the Board. She will be
succeeded as Senior Independent
Director by Dr. Hugh Brady and
as Chair of the Remuneration
Committee by Mr. Tom Moran.
I will have served nine years as a
Director, including less than three
years as Chairman, on 19 February
2021. The Committee is aware of the
Provisions of the Code in respect of
Chairman tenure and is undertaking
a formal succession process which
is being led by Ms. Joan Garahy as
Senior Independent Director. The
Committee and the Board have
recommended that I continue as
Chairman until the AGM in 2022, to
allow appropriate time to identify a
successor and to enable an orderly
succession to the role.
The Committee also reviewed senior
management development and
succession plans having regard to
business growth and geographic
expansion and taking account of
diversity goals below Board level.
During 2020, the Committee
reviewed the Company’s corporate
governance policy and processes
and monitored developments in
corporate governance best practice.
An internal review of the
effectiveness of the Board and its
Committees was conducted during
2020 and the outcome of this review
is that the Board and its Committees
consider that they are operating
effectively. Further details are
outlined on page 105.
The Committee’s priorities for 2021
will focus on Board and Committee
refreshment, taking account of all
skill sets required, diversity (beyond
gender) and planned retirements
over the coming years. The
Committee will ensure that senior
management development and
succession planning can support the
delivery of Group strategy and will
also continue to focus on diversity
and inclusion in the wider workforce.
Philip Toomey
Chairman of the Governance,
Nomination and Sustainability
Committee
Philip Toomey
Chairman of the
Governance, Nomination and
Sustainability Committee
Dear Shareholder,
On behalf of the Governance,
Nomination and Sustainability
Committee, I am pleased to
present our report for the year
ended 31 December 2020. This
report sets out the Committee’s
key activities in 2020 as well
as the Committee’s priorities
for 2021.
The Governance, Nomination
and Sustainability Committee is
responsible for evaluating the
structure, size, composition and
successional needs of the Board
and its Committees and making
recommendations on same, with
due regard for Board diversity.
Additionally, the Committee is
responsible for the review of
the results of the annual Board
evaluation process as it relates
to the Board and Committee
performance and composition.
The role of the Committee was
expanded during the year to provide
guidance and oversight on the
implementation of the Group’s
sustainability strategy. The Terms
of Reference were reviewed and
updated accordingly.
Kerry Group Annual Report 2020 114
Roles and Responsibilities
The main roles and responsibilities of the Committee,
which were reviewed and updated during 2020, are set
out in written terms of reference which are available
from the Group’s website www.kerrygroup.com or
upon request.
During 2020, the Committee continued to work with
SpencerStuart and Korn Ferry, executive recruitment
consulting firms, to assist with Board refreshment.
SpencerStuart has no other connections to the Group
and Korn Ferry has no other connections to the
Group other than acting as the advisor to the
Remuneration Committee.
Committee Meetings
The Committee met six times during the year and
attendance at these meetings is outlined on page 103.
Board Refreshment Policy
On an ongoing basis, the Governance, Nomination
and Sustainability Committee reviews and assesses the
structure, size, composition, diversity and overall balance
of the Board and makes recommendations to the Board
with regard to refreshment.
Appointments to the Board are for a three year period,
subject to shareholder approval and annual re-election,
after consideration of annual performance evaluation
and statutory provisions relating to the removal of a
Director. The Board may appoint such Directors for
a further term not exceeding three years and may
consider an additional term if deemed appropriate.
During the year, the Chairman conducted a rigorous
review of all other non-Executive Directors as part of the
Board evaluation process, taking into account the need
for progressive refreshment of the Board. The Board
explains to shareholders, in the papers accompanying
the resolutions to elect and re-elect the non-Executive
Directors, why it believes the individual should be re-
elected based on the results of the formal performance
evaluation. Details of Board refreshment activities during
the year are outlined on pages 117-118.
Nomination Process
There is a formal, rigorous and transparent procedure
in appointing new Directors to the Board. Details of this
process are outlined in the Governance in Action table.
The Committee also makes recommendations to the
Board concerning the re-appointment of any non-
Executive Director at the conclusion of their specified
term and the re-election of all Directors who are the
subject of annual rotation. The terms and conditions of
appointment of non-Executive Directors are set out in
formal letters of appointment, which are available for
inspection at the Company’s registered office during
normal office hours and at the AGM of the Company.
The key responsibilities outlined in the Terms of
Reference are included in the following table:
Primary Responsibilities of the Governance,
Nomination and Sustainability Committee
– evaluating the balance of skills, experience, independence,
knowledge and diversity of the Board to ensure optimum
size and composition;
– ensuring an appropriate nomination process is in place for
Board appointments;
– reviewing a candidate’s other commitments to ensure that
on appointment, a candidate has sufficient time to undertake
the role;
– making recommendations to the Board on the appointment
and re-appointment of both Executive and non-Executive
Directors;
– ensuring a formal induction plan is in place for each new
Director on appointment;
– making recommendations to the Board concerning
membership of Board Committees in consultation with the
Chairs of the Committees;
– ensuring plans and processes are in place for succession
planning for Directors, including the Chairman, Senior
Independent Director, non-Executive Directors and senior
management positions;
– reviewing the Board diversity policy;
– overseeing the conduct of the annual evaluation of the
Board and its Committees;
– monitoring and reviewing developments in law, regulation
and best practice relating to corporate governance and
making recommendations to the Board and Committees
on changes or additional actions as appropriate; and
– providing guidance and oversight on the implementation
of the Group’s sustainability strategy.
Committee Membership
The Governance, Nomination and Sustainability
Committee currently comprises three independent non-
Executive Directors; Dr. Hugh Brady, Dr. Karin Dorrepaal,
Mr. Tom Moran and is chaired by Mr. Philip Toomey.
Mr. James C. Kenny retired from the Board and the
Governance, Nomination and Sustainability Committee
on 30 April 2020. Mr. Tom Moran joined the Governance,
Nomination and Sustainability Committee on 1 November
2020. Biographical details for the members of the
Committee are outlined on pages 85-87.
The quorum for Committee meetings is two and
only Committee members are entitled to attend. The
Governance, Nomination and Sustainability Committee
may extend an invitation to other persons to attend
meetings or to be present for particular agenda items
as required. The Company Secretary acts as Secretary of
the Committee.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT Governance in Action
Non-Executive Director Appointment
Mr. Jinlong Wang was appointed to the Board with effect
from 5 January 2021. The key stages of the nomination
process are outlined below.
1. Assessment
The Committee assessed the skill set,
experience and diversity on the Board, the
requirements to meet the Group’s future
growth plans, together with the planned
retirements from the Board over the
coming years.
2. Requirement
The Committee prepared a detailed role
profile; identifying the need for a new non-
Executive Director with international and
Food & Beverage Industry experience and
the capabilities to align with the Group’s
purpose, value and culture. The Committee
also considered the Board’s commitment to
increase the representation of members with
diverse backgrounds.
3. Search
The Committee instructed SpencerStuart to
conduct a search for appropriate candidates
for appointment to the Board based on the
profile and skillset agreed by the Committee.
4. Screening
The Committee assessed the long list of
candidates identified by SpencerStuart as
having met the criteria.
5. Interview
A shortlist of potential candidates was
interviewed by the Chairman, Committee and
the Chief Executive Officer.
6. Approval
A formal recommendation was made by
the Committee to the Board proposing the
appointment of Mr. Jinlong Wang as a non-
Executive Director. The Board approved the
appointment of Mr. Jinlong Wang noting
that he had a balance of skills, knowledge,
experience and diversity that matched the
requirements set. Appointment terms were
drafted and agreed with him.
115
Succession Planning
The Governance, Nomination and Sustainability
Committee reviews the succession plans for the
Board and its Committees on an ongoing basis to
ensure an orderly refreshment of membership, taking
into account Group strategy, the challenges and
opportunities facing the Group and the skills, knowledge
and experience required.
The Committee also reviews succession plans for senior
management, which form part of the Group’s overall
annual approach to succession planning and agrees
these with the Chief Executive Officer before being
presented to the Board. The succession planning process
includes defining success criteria for prioritised key
roles, identifying and evaluating candidate pools and
aligning successor development activities with individual
and business needs to ensure leadership continuity and
improve the depth of the leadership succession pipeline.
This process is fully documented and monitored
throughout the year in conjunction with the Committee.
Details of succession planning activities during the year
are outlined in Our People on page 18.
Diversity, Inclusion and Belonging Policy
Diversity, Inclusion and Belonging is fully embraced
at Kerry and the Group is committed to having a work
environment that is respectful of everyone. We recognise
the value that different perspectives and cultures bring
to the organisation. Valuing differences creates a work
environment which is positive and productive, where
people can and want to do their best and where each
individual can bring something unique to contribute to
the overall success of Kerry.
The Group’s Diversity, Inclusion and Belonging Policy
is an integral part of the Group’s Code of Conduct
ensuring that diversity and inclusion are embedded
in Kerry Group’s core values. Within this, the Group
seeks to recruit, hire and retain the best talent from a
diverse mix of gender, background, nationality, ethnicity
and other attributes with the skills and experiences
to drive innovative thinking to enable a sustained
competitive advantage.
Kerry Group Annual Report 2020 116
100
80
40
60
80
100
The Board believes in the benefits of having a diverse
Board and the value that it can bring to its effective
operation. In accordance with the Board Diversity Policy,
20
differences in background, gender, skills, experiences,
0
nationality, ethnicity and other attributes are considered
in determining the optimum composition of the Board
with the aim to balance it appropriately. All Board
appointments are made on merit, with due regard
to diversity. The Board currently has a 31% female
representation. In line with its diversity policy, and
recommended best practice, the Board is committed
to maintaining an appropriate gender balance and
has an ambition to increase the representation of
members with diverse backgrounds such as nationality,
ethnicity and other attributes. In reviewing Board
composition and agreeing a job specification for new
non-Executive Director appointments, the Committee
considers the benefits of all aspects of diversity
including, but not limited to, those described above, in
order to complement the range and balance of skills,
knowledge and experience on the Board. As part of the
identification process executive recruitment consultants
Executive
are required to present a list of potential candidates,
24%
who meet the stated specification and requirements
comprising candidates of diverse backgrounds, for
consideration by the Committee.
20
40
60
0
0
5
In 2019, diversity goals were agreed for senior
management succession pools with the Executive
Directors and approved by the Board to improve the
diversity profile of senior leadership teams and ensure
Non-Executive
internal candidate pools better reflect the broader
76%
Female
Female
31%
25%
cultural mix of people within the Group. The Committee
reviews progress against these diversity goals each year,
whilst taking account of business growth and geographic
Male
75%
expansion within the organisation.
Executive
24%
Male
69%
100%
80%
60%
40%
20%
Further details of the Group’s approach to Diversity,
Inclusion and Belonging, including our broader
organisational goals focused on building an inclusive
and diverse workplace are outlined in our Sustainability
Report on page 59 and in Our People on page 17.
Board
2020
0%
Board
2019
100%
20%
40%
60%
80%
Male
72%
Male
75%
Male
69%
Female
25%
Female
25%
Female
28%
Female
31%
Sustainability
The role of the Committee was expanded to provide
guidance and oversight on the implementation of
Male
the Group’s 2030 sustainability strategy Beyond the
75%
Horizon following its launch in October 2020. The
Committee will be supported in this work by the Global
Sustainability Council whose members will be invited to
Committee meetings to share their views on a variety
of sustainability topics and to update the Committee on
the implementation of the sustainability strategy. Details
of the Group’s sustainability performance, policies and
programmes are outlined in the Sustainability Review on
pages 46-70.
Senior
Management
2019
Senior
Management
2020
Board
2019
Board
2020
0%
100
80
60
40
20
0
100
80
60
40
20
0
0
20
10
30
20
40
0
10
30
40
A summary of the Group’s current position relating
to Board and senior management diversity is
provided below:
0
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40
Executive/Non-Executive Directors
Non-Executive
76%
10-15
8%
Non-Executive
76%
0
10-15
10
8%
20
30
6-10
40
30%
Executive
24%
Executive
24%
6-10
3-6
8%
30%
3-6
8%
23%
0-3
8%
23%
23%
0
5
10
15
20
25
30
35
40
0-3
8%
23%
Executive
Directors
Executive
Directors
Non-Executive
Directors
Non-Executive
Directors
Gender Diversity
100%
8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%
8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%
100%
80%
60%
40%
20%
20
0%
10
15
80%
60%
40%
20%
0%
40
Female
31%
Male
69%
25
30
35
Board
2020
Female
31%
Non-Executive
0
Female
76%
25%
10
Female
28%
Female
25%
20
Female
28%
30
10-15
Female
25%
Female
25%
40
8%
Male
69%
Male
75%
Male
75%
Male
72%
Male
6-10
72%
Male
75%
30%
Male
75%
3-6
8%
23%
Board
2020
Board
2019
Board
2019
Senior
Management
2020
8%
Senior
0-3
Management
Senior
2020
Management
2019
Senior
Management
2019
23%
61-67
56-60
40-55
61-67
56-60
40-55
38%
38%
38%
38%
24%
24%
0% 10% 20% 30% 40% 50%
0% 10% 20% 30% 40% 50%
Executive
Directors
Non-Executive
Directors
8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%
8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%8%
Board Tenure (Years)
Board Age Profile
10-15
8%
Female
28%
6-10
Female
25%
30%
3-6
Male
72%
8%
Male
75%
23%
0-3
8%
23%
Senior
Management
2020
Senior
Management
2019
Executive
Directors
Non-Executive
Directors
61-67
56-60
40-55
38%
38%
24%
0% 10% 20% 30% 40% 50%
61-67
Changes to the composition of the Board
and its Committees for the year ended
31 December 2020
Mr. James C. Kenny
56-60
Retired from the Board, the Remuneration Committee
and the Governance, Nomination and Sustainability
Committee on 30 April 2020.
40-55
24%
38%
38%
0% 10% 20% 30% 40% 50%
Mr. Christopher Rogers
Appointed to the Remuneration Committee on
30 April 2020.
Mr. Tom Moran
Stepped down from the Audit Committee and appointed
to the Governance, Nomination and Sustainability
Committee on 1 November 2020.
Ms. Emer Gilvarry
Appointed to the Board and the Audit Committee on
1 November 2020.
Mr. Jinlong Wang
Appointed to the Board with effect from 5 January 2021.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT010203040010203040010203040010203040
117
Key Activities
The key activities of the Committee throughout the year are detailed below:
Subject
Committee Activity
Board Size and
Composition
In 2020, as part of its remit, the Committee considered the size and composition of the
Board. At 31 December 2020, the Board comprised 12 members. The Board size reduced
to 11 following the retirement of Mr. James C. Kenny on 30 April 2020 and increased to 12
following the appointment of Ms. Emer Gilvarry on 1 November 2020.
The Board size increased further to 13 on 5 January 2021 following the appointment
of Mr. Jinlong Wang. The Committee will continue to consider both Board size and
composition during 2021.
Chairman Succession
During 2020, the Committee recommended to the Board that Mr. Philip Toomey continue
as Chairman until the Annual General Meeting in 2022 which was formally approved by
the Board.
The Committee is undertaking a formal succession process which is currently being
led by Ms. Joan Garahy as Senior Independent Director and will be continued by Joan’s
successor as Senior Independent Director on her retirement at the conclusion of the
2021 AGM.
Senior Independent
Director Succession
Ms. Joan Garahy will retire as Senior Independent Director and from the Board at the
conclusion on the AGM to be held on 29 April 2021 having served nine years on the
Board. The Governance, Nomination and Sustainability Committee has completed a
formal process and has recommended to the Board the appointment of Dr. Hugh Brady
as Senior Independent Director at the conclusion of the 2021 AGM.
Board Refreshment
Mr. James C. Kenny retired from the Board on 30 April 2020.
New non-Executive Directors, Ms. Emer Gilvarry and Mr. Jinlong Wang were appointed
to the Board on 1 November 2020 and 5 January 2021 respectively, following searches
conducted by the Committee in conjunction with executive recruitment consulting firms.
The Committee and the Board agreed that Ms. Emer Gilvarry and Mr. Jinlong Wang had a
balance of skills, knowledge, experience and diversity that matched the requirements set.
Committee
Refreshment
Mr. James C. Kenny retired from the Remuneration Committee and the Governance,
Nomination and Sustainability Committee on 30 April 2020.
Mr. Christopher Rogers was appointed to the Remuneration Committee on 30 April
2020; Mr. Tom Moran stepped down from the Audit Committee and was appointed to
the Governance, Nomination and Sustainability Committee on 1 November 2020 and Ms.
Emer Gilvarry was appointed to the Audit Committee on 1 November 2020 on the same
date as her appointment to the Board.
There were no other changes to the composition of the Board Committees during the
year. The Committee will continue to consider Committee refreshment with a particular
focus on the Audit and Remuneration Committees in 2021.
Remuneration
Committee
Chairperson
Ms. Joan Garahy will retire as Chairperson of the Remuneration Committee and from the
Board at the conclusion on the AGM to be held on 29 April 2021 having served nine years
on the Board. The Governance, Nomination and Sustainability Committee has completed
a formal process and has recommended to the Board the appointment of Mr. Tom Moran
as Chairman of the Remuneration Committee at the conclusion of the 2021 AGM.
Kerry Group Annual Report 2020 118
Key Activities (continued)
Subject
Committee Activity
Re-appointment
of non-Executive
Directors
During the year, Ms. Joan Garahy completed eight years as a non-Executive Director
and Dr. Hugh Brady and Dr. Karin Dorrepaal each completed terms of six years as non-
Executive Directors. Following a rigorous review of their skills, knowledge, experience
and independence, the Board on the recommendation of the Committee, agreed that
Dr. Hugh Brady, Dr. Karin Dorrepaal and Ms. Joan Garahy continue to be effective and
independent and make a valuable contribution to the Board, and re-appointed them to
serve additional terms.
During the year, Mr. Gerard Culligan and Mr. Con Murphy each completed a three year
term as non-Executive Directors. After detailed consideration, including a review of
their performance and independence, the Board, upon the recommendation of the
Committee, agreed that they would serve additional terms.
Board and Committees
Effectiveness
Evaluation
As outlined in detail on page 105, an internal evaluation of the Board and its Committees
took place in 2020 in line with the provisions of the 2018 UK Corporate Governance Code
and the Irish Annex.
The Committee considered the outcome of this evaluation and identified the
areas relevant to the Governance, Nomination and Sustainability Committee. Each
recommendation was assessed, and an action plan was developed to address areas for
potential improvement. These recommendations will be reviewed and considered by the
Committee in 2021.
Senior Management
Development and
Succession
During the year, the Committee reviewed senior management development and
succession plans having regard to agreed diversity goals to ensure the appropriate level
of skills and diversity will exist to support the delivery of the Group’s strategy.
Corporate Governance
Review
During 2020, the Committee reviewed the Company’s corporate governance policy in
the context of the 2018 UK Corporate Governance Code and monitored developments in
corporate governance best practice.
Sustainability Strategy Following the launch of the Group’s sustainability strategy Beyond the Horizon in October
2020, the role of the Committee was expanded to provide guidance and oversight on the
implementation of the sustainability strategy.
Terms of Reference
During the year, the Committee reviewed and updated its Terms of Reference. A copy of
these terms is available on the Group website www.kerrygroup.com.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT 119
Against a challenging economic
backdrop, we have worked to
minimise the economic impact
of COVID-19 on our people. We
made a conscious decision in
2020 to retain basic pay for all
salaried employees despite market
movements, and where changing
customer demand has impacted site
manufacturing volumes, we have
utilised all possible levers including
reallocation, shift patterns and leave
management to avoid COVID-19
related redundancies. These efforts
have resulted in approximately 100
COVID-19 related redundancies
globally and very limited use of
temporary layoffs/furloughing. In
achieving the above, Kerry chose not
to benefit from COVID-19 related
government support (including in
respect of employees furloughed) in
any of our key geographies.
The Group delivered for its
shareholders through sustained
dividend payments and share price
performance throughout 2020 and
there was no requirement to raise
share capital.
As a solidarity gesture, in light of the
COVID-19 crisis and those impacted,
the Group’s Executive Directors,
Chairman and non-Executive
Directors volunteered a 25%
reduction in their 2020 basic salary/
fees for a three-month period.
GOVERNANCE REPORT
Remuneration Committee Report
Impact of COVID-19
2020 was no doubt a dynamic
and challenging year, and we
have seen unprecedented variability
and complexity across our industry.
Kerry’s business has been resilient
throughout the global COVID-19
pandemic due to the agility of
our Executive Directors, our
leadership teams and our people
across the world in adapting to
these changing conditions.
From the outset of the pandemic,
we have put the safety and
wellbeing of our people at the
core of our coordinated global
response, ensuring we could safely
fulfil our critical role in the global
food supply chain. Through our
globally coordinated investments
and efforts in 2020, we have kept
all 149 manufacturing and R&D
facilities operational to meet our
customers’ and consumers’ needs,
and have supported and enabled
our customers through insights and
innovation to adapt their offerings
to rapidly changing consumer needs
and behaviours.
The safety and wellbeing of our
people has been at the core of our
coordinated global response, and
we have invested significantly in
COVID-19 specific health & safety
measures across all our operations,
ensuring our site-based operations
and R&D teams can work safely
and securely on-site throughout
the pandemic. We have facilitated
homeworking for all other
employees. We responded swiftly
in early 2020 to adapt our global
people policies to the new realities
presented by COVID-19. Changes we
made include a global self-isolation
pay policy, a global employee
assistance programme, introduction
of agile working principles as well
as a number of wellbeing and
learning initiatives.
Joan Garahy
Chairperson of the
Remuneration Committee
Section A:
Chairperson’s
Annual Statement
Dear Shareholder,
On behalf of the Remuneration
Committee, I am pleased
to present the Directors’
Remuneration Report for the
year ended 31 December 2020
which contains:
– the proposed Directors’
Remuneration Policy, to be
put to an advisory vote at the
2021 AGM; and
– the annual Remuneration
Report, describing how
the new policy will be
implemented in 2021 and
how our existing policy
has been put into practice
during 2020.
Kerry Group Annual Report 2020 120
Remuneration Policy Review
During 2020, consistent with our three-year review cycle,
the Committee completed an extensive review of the
Group’s Directors' Remuneration Policy in conjunction
with our external advisors Korn Ferry. Arising from this
review a new policy will be put to an advisory vote at the
2021 AGM.
Proposed Remuneration Policy
Our current policy was implemented in 2018 and
received a high level of support from shareholders
at the 2018 AGM, with a 97.7% vote in favour. Since
then, in line with our growth strategy, the Group
has increased substantially in size and complexity,
consistently delivering significant and sustained value
to shareholders. As at 31 December 2020 our market
capitalisation was €20.9bn which for context, would have
placed Kerry Group plc within the 30 largest companies
included in the FTSE 100 Index.
Key Developments Since Last Policy Review1
9%
Revenue
increased by 9%
2
27%
Market
capitalisation
increased by 27%2
19
New
manufacturing
plants
24
Acquisitions
completed
+2,050 Employees
29%
TSR growth of
29%
1. Calculated versus 2017, the year the last policy review
was completed
2. Based on share price as at 31 December 2020
The executive team is well established, with the CEO
in position since 2017, CFO since 2018 and CEO T&N
since 2008, and has performed exceptionally well in
leading the growth detailed above. In 2020 the executive
team demonstrated exceptional leadership through
a challenging and unprecedented global pandemic,
delivered sustained shareholder return and robust
recovery from the impact of COVID-19 through the
second half of the year. During the year, we also made
significant progress on our sustainability agenda,
culminating in the launch of our 2030 sustainability
strategy Beyond the Horizon.
This year’s review provided the Committee with the
opportunity to ensure our Directors’ Remuneration
Policy reflects the current size and scale of Kerry,
and that it is appropriately aligned with our strategic
objectives and sustainability ambitions. To inform the
review, the Committee considered evolving shareholder
expectations regarding executive pay, pay practices
in comparable companies, and recent developments
in corporate governance requirements (including the
updates in the 2018 UK Corporate Governance Code
and the EU Shareholders’ Rights Directive, which was
transposed into Irish law during 2020).
Kerry’s Remuneration Principles
Delivery of Group Purpose, Values and Strategy
The Group’s Executive Director short and long-term
remuneration philosophy is to ensure that executive
remuneration is aligned to the Group’s purpose and values,
supports strategy and promotes the long-term success
of the Company.
Creating Sustainable, Long-Term Performance
Remuneration includes performance related elements designed
to align Directors’ interests with those of shareholders and to
promote long-term sustainable growth and performance at the
highest levels in line with the Group’s strategy.
Attract, Motivate and Retain Talent
Market-competitive total remuneration is structured to
attract, motivate and retain individuals of the highest quality
on an international basis.
Shareholder Interests
By incorporating a high proportion of Executive Directors’
potential remuneration to short-term and long-term
performance metrics with robust share ownership requirements,
the Remuneration Committee believes that the interest and risk
appetite of the Executive Directors is properly aligned with the
interests of the shareholders and other stakeholders.
Pay for Performance
The Committee ensures alignment with shareholders’ long-
term interests by aligning remuneration metrics with the
Group’s business model and strategic objectives.
Volume
Growth
Margin
Expansion
Growth
EPS
Return
ROACE
Cash
Conversion
Share
Price
Dividend
Total
Shareholder
Return
Underpinned by Sustainability Measures
Consistent with our approach in previous policy reviews,
the Committee’s pay reference group comprised
nineteen FTSE, seven US and five European peer
companies with comparable market capitalisation, size,
geographical spread and complexity of business.
Following detailed review, the Committee concluded
that the core substance of our existing policy continues
to be aligned with our business strategy and priorities
and this was endorsed by our shareholders during
consultation. As such, whilst there are no substantive
changes proposed to the pay model approved in 2018,
we are proposing a number of policy adjustments with
effect from 2021 that reflect Kerry’s growth in size and
complexity since the last policy review as well as the
evolution of our strategy and shareholder expectations
regarding executive pay.
Full details of the proposed changes to our
Remuneration Policy are provided on pages 126-128,
with the key changes summarised as follows:
– implementing a phased increase to remuneration
quantum through our short-term incentive plan ‘STIP‘
and long-term incentive plan ‘LTIP‘ to take account of
our growth in size and complexity;
Kerry Group Annual Report 2020DIRECTORS‘ REPORT
– toughening the approach to target setting within the
Shareholder Consultation
121
STIP through reducing the target bonus opportunity to
50% of the maximum (from 70%), with no softening of
expected performance levels;
– increasing the proportion of the STIP subject to
strategic objectives from 10% to 20%, to ensure focus
on the achievement of long-term strategic priorities;
– reflecting the launch of our 2030 sustainability strategy
Beyond the Horizon goals, through incorporating
medium-term sustainability targets in our LTIP;
– toughening the total shareholder return target setting
in the LTIP through a reduction of the proportion of
this part of the award that vests (from 30% to 25%) on
meeting the threshold performance level;
– simplification of the vesting schedules that apply to
our LTIP EPS and ROACE performance metrics, with
straight line vesting from threshold to maximum;
– enhancing the long-term focus in our policy through
increased deferral of both STIP and LTIP awards;
– strengthening the recovery and withholding (malus
and clawback) provisions in both the STIP and LTIP
rules along with enhanced Committee discretion;
– implementing higher in-service shareholding
requirements and introducing post-employment
shareholding guidelines to further enhance the long-
term focus in our revised policy; and
– committing to a reduction of incumbent Executive
Director pension contributions to align them with the
contribution rate of Kerry’s Irish general workforce
(10%) with effect from the end of 2022.
The Committee is conscious of the need to apply
restraint in Executive Remuneration at all times but
recognises the particular sensitivity at the current
time. As a result, the Committee is phasing part of
the increases to quantum over two years and has
structured the policy changes detailed above such
that all variable pay is subject to meeting or exceeding
robust performance requirements consistent with our
ambitious growth strategy.
The Committee is satisfied that the new Remuneration
Policy rewards the Executive Directors for their
significant contribution and growth in roles and results
in a total remuneration level consistent with the median
for the pay reference group.
New LTIP and All Employee Share Plan
The Group’s existing LTIP is due to come to the end
of its ten-year life in 2023. To align with the proposed
Directors’ Remuneration Policy, the Remuneration
Committee has also decided to seek shareholder
support at the 2021 AGM for a new LTIP which will
enable the above policy to be implemented throughout
the policy period.
The Committee will also seek shareholder approval for
an All Employee Share Plan which at a later date will
allow for the grant of various share-based awards to all
employees across the Group once implemented. The
Committee wishes to ensure that all Kerry employees
have the ability (subject to local tax and securities laws)
to become shareholders in the Company and benefit
from the future success of the Group.
On behalf of the Remuneration Committee, I had the
opportunity to consult during the year with our major
shareholders, along with shareholder representative
bodies and proxy voting agencies, as we considered
our proposals for the latest Directors’ Remuneration
Policy. I would like to take this opportunity to thank all
those who met with me and for the valuable comments,
perspectives, and specific feedback provided which
have been very helpful and constructive in shaping the
final policy approved by the Committee. Shareholder
feedback informed our decision to implement a phased
approach to remuneration quantum increases within
the context of the current environment driven by the
COVID-19 pandemic. Shareholders’ input and advice also
helped us to finetune the sustainability metrics that will
be included in our new LTIP.
The proposed Directors’ Remuneration Policy will be
put to an advisory vote at the 2021 AGM and I would
be grateful for your support in ensuring we have a
policy that supports achievement of our growth and
sustainability ambitions over the next three years, whilst
meeting the highest standards of corporate governance.
Remuneration Policy Implementation 2021
24
20
16
12
8
4
0
100
90
80
70
60
50
40
30
20
10
0
-10
TSR Growth
100%
EV €’billion
5 Year Growth
€9.6bn/72% Enterprise Growth
€22.9bn
€21.5bn
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
-10%
€17.8bn
€16.9bn
€13.3bn
2016
2017
2018
2019
2020
TSR Growth (%)
Enterprise value (€’billion)
24
20
16
12
8
4
0
Basic Salary
For 2021, no substantive increases are proposed, and
the basic salaries of the Executive Directors will be
increased as normal in line with increases applied to the
general workforce (i.e. a range of 2.5%-3%) in Ireland
and the US respectively.
Pension Alignment
As detailed on page 127 Executive Directors’ pension
contribution rates will be aligned to those of Kerry’s
general workforce in Ireland with effect from 31
December 2022. Existing arrangements will apply
for 2021.
Kerry Group Annual Report 2020 122
2021 Short-Term Incentive Plan
A review of the STIP design and metrics was completed
to ensure that they are aligned to strategy, consistent
with best practice, and that the targets are appropriately
stretching. The 2021 STIP will continue to operate on a
similar basis to 2020 but will be updated to reflect an
increased weighting on the strategic element (from 10%
to 20%) with a proportionate reweighting of the other
metrics which remain unchanged. A proposed increase
to quantum will also be implemented in 2021 with the
CEO’s maximum STIP opportunity increasing to 200% of
basic salary (from 150%) and the CFO’s and CEO Taste
& Nutrition’s maximum STIP opportunity increasing to
175% of basic salary (from 125%). In consideration of the
higher maximum opportunity, as well as wider market
practice, target STIP opportunity for all three Executive
Directors will be reduced from the current 70% of
maximum opportunity to 50% of maximum opportunity
(with no softening of expected performance levels).
In addition, the portion of STIP deferred into shares/
options will be increased to 33% (from 25%).
Full details of all proposed changes in the new STIP
policy are outlined in the Remuneration Policy on
page 127.
2021 Long-Term Incentive Plan
A review of the LTIP design and metrics was also
completed in 2020. Consistent with the launch of
our 2030 sustainability strategy Beyond the Horizon
in October 2020, a new sustainability element, will
be included in the LTIP, with a weighting of 20%.
Other metrics will remain unchanged and will be
proportionately reweighted. The maximum LTIP
opportunity for 2021 will be increased to 250% of
basic salary for the CEO (from 200%) and to 225% of
basic salary for the CFO (from 180%) and CEO Taste &
Nutrition (from 200%). In line with current best practice
and the UK Corporate Governance Code requirements,
the two-year holding period will apply to 100%
(previously 50%) of future vested long-term incentive
awards that are awarded from 2021 onwards.
Full details of changes proposed in the new LTIP policy,
are outlined in the Remuneration Policy on page 127.
Pay for Performance
Kerry has a strong track record of demonstrating
appropriate rigour and discipline when setting
stretching targets as illustrated by the following chart.
The Committee is satisfied that the targets set for the
2021 STIP and LTIP awards are appropriately stretching
given the current challenging environment, overall
market growth rates and the level of capital expenditure
required to support future growth ambitions.
STIP
% of Target
Achieved
% of Max
Achieved
LTIP
% of Max
Achieved
81%
90%
108%
85%
104%
94%
57%
63%
75%
59%
73%
65%
62%
29%
62%
64%
63%
56%
Year
2015
2016
2017
2018
2019
Average
Non-Executive Director Fees for 2021
Non-Executive Director fees were last reviewed in 2017
and increases were made effective from 1 January 2018.
The fees have not been increased since then and have
not been subject to increases for annual inflation.
The Chairman and non-Executive Directors' fees were
reviewed as part of the overall policy review. Following
the review, and having consulted with shareholders,
the Chairman’s fee is being increased by €27,500 to
€385,000 and the basic non-Executive Directors' fee is
being increased by €6,000 to €84,000. These increases
represent the equivalent of an annual 2.5% increase
since the last review, in line with the annual increase
applied to the general workforce in Ireland over the
same three-year period. Following the adjustment,
the Chairman’s fee and the non-Executive Director
fees remain within the market median range. The
allowance for non-Executive Directors based outside of
Europe will also be increased to reflect the extra time
commitment required to travel to our Board meetings.
All proposed changes are outlined in the Remuneration
Policy on page 128.
Remuneration Policy Outturn 2020
In determining the Executive Director’s remuneration
outturns for the financial year, the Committee
maintained a clear and rigorous focus on aligning
pay with performance in the context of a very
challenging year.
In 2020, despite the impact of COVID-19, our market
capitalisation and Total Shareholder Return increased.
The Total Shareholder Return graph at the top of the
next page shows that Kerry has generated a 60% return
for shareholders (including reinvestment of dividends)
over the last 5 years, outperforming its market indices.
2020 Short-Term Incentive Plan Outturn
As a direct result of the COVID-19 related restrictions,
and their impact on business performance in the first
half of 2020 in particular, the threshold performance
level for the financial metrics in the STIP were not
achieved.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT
180
160
140
120
100
80
5 Year Total Shareholder Return (Value of €100 Invested on 31/12/2015)
123
€180
€160
€140
€120
€100
€80
2015
2016
2017
2018
2019
2020
Kerry
MSCI Europe Food Producers
E300 Food & Beverage
The Committee carefully assessed the performance
of the Executive Directors against their individual
Personal and Strategic objectives in line with normal
practice. This assessment determined that an above
target performance was achieved by all three Executive
Directors, as detailed on pages 138-140. However, in
light of the overall performance, and following a request
from the Executive Directors not to be considered for
any element of their annual bonus in respect of 2020,
the Committee agreed that no award should be granted
under this element of the STIP.
As a result of the financial performance and downward
discretion applied in respect of the Personal and
Strategic objectives, there was no payout under the 2020
STIP to Executive Directors.
Long-Term Incentive Plan 2018-2020 Outturn
The three year performance period in respect of the
2018-2020 LTIP award ended on 31 December 2020. The
2018 LTIP award was subject to Adjusted Earnings per
Share (EPS), Total Shareholder Return (TSR) and Return on
Average Capital Employed (ROACE) performance metrics.
Good performance was achieved against our TSR and
ROACE performance metrics over the three year period.
However, the COVID-19 pandemic had a significant
impact on the EPS metric in 2020 (-9.4%), which
effectively negated the strong EPS growth achieved in
2018 (+8.6%) and 2019 (+8.3%). As a result, the threshold
level for this metric, weighted at 50% of the overall
award, was not achieved.
The Committee, having considered the current
environment, and following consultation with major
shareholders and proxy voting agencies, decided
not to amend the formulaic outcome. This is despite
some compelling arguments in support of an inflight
adjustment to recognise the anomalous conditions
created by the global pandemic and the impact
specifically of a negative EPS outturn in 2020 negating
the growth already achieved in 2018 and 2019. While
the decision was made not to exercise discretion for
the 2018 LTIP, the Committee would like to emphasise
its appreciation of the strong executive leadership over
the three year performance period (and especially in
2020), as well as the resilience of the Kerry business and
sustained shareholder return against the backdrop of
the COVID-19 pandemic.
The final outcome of the 2018-2020 LTIP award was
32.5% of maximum opportunity as outlined in further
detail on page 142.
Discretion
The Committee is satisfied, in reviewing the
remuneration for 2020 against performance, that
there has been an appropriate link between reward
and performance. In assessing performance, the
Committee also considered relevant environmental,
social and governance (ESG) matters when reviewing the
remuneration outturns.
Other Matters
EU Shareholders' Rights Directive
During 2020, the Committee implemented the new
requirements under the EU Shareholders' Rights Directive
which came into law in Ireland during 2020. The required
enhanced disclosures have been reflected in this report.
Conclusion
As noted earlier the new Remuneration Policy for the
period 2021 to 2023 and the implementation of the
existing policy in 2020 will be put to shareholders as
two separate advisory votes at this year’s AGM. Last
year almost 97% of our shareholders who voted,
voted in favour of the Directors' Remuneration Report.
I would like to express again my appreciation to those
shareholders who engaged with us as part of the 2021
Remuneration Policy review. I believe what we have
proposed, and refined based on shareholder feedback,
reflects a continuation and improvement of the policy
implemented in 2018 and will help drive Kerry’s future
growth and continued success.
As this is my last report as the Chairperson of the
Remuneration Committee, I would like to take this
opportunity to thank the members of the Remuneration
Committee, the wider Board, and all our shareholders
for their support during my years as Chairperson of the
Committee, it has been a real pleasure to be part of the
journey with Kerry Group plc.
Joan Garahy
Chairperson of the Remuneration Committee
Kerry Group Annual Report 2020 124
Section B:
Remuneration Committee
and Key Activities
Committee Membership
During 2020, the Remuneration Committee comprised
four independent non-Executive Directors; Dr. Karin
Dorrepaal, Mr. Tom Moran, Mr. Christopher Rogers and
was chaired by Ms. Joan Garahy. Following James C.
Kenny’s retirement from the Board and the Committee
in April, Christopher Rogers was appointed to the
Committee. Details of the skills and experience of the
Directors are contained in the Directors’ biographies on
pages 85-87.
Role and Responsibilities
On behalf of the Board, the Remuneration Committee
is responsible for determining the Remuneration
Policy for the CEO, other Executive Directors and senior
management on an annual basis. The CEO is invited to
attend Remuneration Committee meetings but does not
attend Committee meetings when his own remuneration
is discussed. The Committee also has access to internal
and external professional advice as required. The
Committee follows an annual and tri-annual calendar
with matters scheduled and planned well in advance.
Decisions are made within agreed reference terms,
with additional meetings held as required. In considering
the agenda, the Committee gives due regard to overall
business strategy, the interests of shareholders,
employees and the performance of the Group. The main
responsibilities of the Committee, which were reviewed
during 2020, are set out in written terms of reference
which are available from the Group’s website
www.kerrygroup.com or upon request.
Primary Responsibilities of the
Remuneration Committee
– To determine the Remuneration Policy for, and set the
remuneration of the CEO, Executive Directors and senior
management;
– To review the remuneration of the Chairman;
– To receive the recommendations of the CEO and set the
salaries and overall remuneration of senior management;
– To review and approve incentive plan structures and targets;
– To agree the design of all share incentive plans for approval by
the shareholders;
– To ensure alignment of incentives and rewards with strategy,
values and culture;
– To ensure the contractual terms of Executive Directors and
senior management are deemed fair and reasonable;
– To place before shareholders at each AGM, a Directors’
Remuneration Report setting out the Group’s policy and
disclosures on remuneration;
– To arrange where appropriate, external benchmarking of
overall remuneration levels and the effectiveness of incentive
schemes;
– To review annually its own performance and terms of
reference to ensure it is operating effectively;
– To engage with the workforce to explain how executive
remuneration aligns with the wider company pay policy;
– To review workforce remuneration and related policies and the
alignment of incentives and rewards with the Group’s culture,
and take these into account when setting the policy
for executives; and
– To consider appropriate application and use of clawback and
malus provisions as well as discretion to adjust the formulaic
outturns for performance related pay.
Remuneration Committee Meetings and Activities 2020
The Committee held four scheduled meetings and two additional meetings during 2020. The additional meetings
were required due to the significant amount of work associated with the policy review that was completed during the
year. Attendance at these meetings is outlined on page 103.
The key activities undertaken by the Committee in discharging its duties during 2020 are set out below:
Subject
Remuneration Committee Activity
Remuneration Report
A review of best practice remuneration reporting was completed during 2020 to ensure compliance
with relevant legislation and reporting requirements while also ensuring the delivery of a report
which is transparent and understandable for all shareholders. As part of this review, the Committee
considered the recent updates and guidance issued by the main shareholder representative bodies
and proxy agencies, together with the 2014 Irish Companies Act, the EU Shareholders’ Rights
Directive (which has now been transposed into Irish law), the 2018 UK Corporate Governance Code
and the UK Companies (Miscellaneous Reporting) Regulations 2018.
Remuneration Policy
Review
In line with the normal three-year cycle the Committee completed a review of the existing
Remuneration Policy during 2020 and arising from this review a new policy will be put to an
advisory vote at the 2021 AGM. See Remuneration Policy Review and Implementation sections for
proposed changes.
Impact of COVID-19 on
pay and conditions for
the general workforce
and on inflight STIP and
LTIP awards
The Committee considered the impact of COVID-19 on the pay and conditions for the general
workforce and on inflight STIP and LTIP awards.
See Implementation section on pages 134-136 for details on the outcome of the review and
proposed changes.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT 125
Subject
Remuneration Committee Activity
Senior Management
In accordance with the terms of the Code the Committee set the remuneration arrangements for
senior management and the Company Secretary.
Workforce Remuneration
and Related Policies
During the year, the Committee was provided with information on pay policies and procedures for
the wider workforce to consider and review fairness and alignment with Group strategy and the
Executive Directors' Remuneration Policy, as well as to inform its decision making in relation to
Executive Director remuneration.
This included an update on the impact which COVID-19 had on the pay and conditions for the wider
workforce, an update on the implementation of the findings from the Total Reward Review that
was conducted in 2019, a review of gender pay and an overview of the approach for the annual pay
reviews in all the countries in which the Group operates, as well as the structure and annual cost of
the STIP and LTIP awards below Board level.
See Implementation Section on pages 134-136 for details on the outcome of the review and
proposed changes.
New LTIP and All
Employee Share Plan
During the year the Committee agreed to implement a new LTIP and an All Employee Share Plan.
Shareholder approval for the new LTIP plan will be sought at the 2021 AGM and subsequent approval
will be sought at a later date for the All Employee Share Plan.
Shareholder Consultation The Committee reviewed the results of the shareholder vote on the Remuneration Report at the 2020
AGM noting that 96.6% of shareholders supported the Report. The Committee also reviewed the
additional feedback received from the shareholder proxy agencies.
In late 2020, the Chairperson of the Committee consulted with a number of the Company’s major
institutional shareholders and with proxy agencies regarding the proposed 2021 Remuneration
Policy and the impact of COVID-19 on inflight LTIP awards. The Committee welcomed the
engagement and the shareholders consulted were supportive of the proposals put forward and
provided important input and commentary which was considered by the Committee. These inputs,
together with inputs from shareholder representative bodies and governance groups, informed the
final Remuneration Policy and the Committee’s decision in relation to inflight LTIP awards.
Committee Evaluation
As outlined on page 105 an internal review of the Board and its Committees took place in 2020.
The outcome of the review is that the Remuneration Committee is operating effectively.
Terms of Reference
During the year, the Committee reviewed and updated its Terms of Reference. A copy of these terms
is available on the Group website www.kerrygroup.com.
Work of the Committee in Determining Executive Director Remuneration
The Committee considers the appropriateness of the Executive Directors’ remuneration not only in the context
of overall business performance and environmental, social and governance (ESG) matters but also in the context
of wider workforce pay conditions (taking into account workforce policies and practices) and external market
data to ensure that it is fair and appropriate for the role, experience of the individual, responsibilities and
performance delivered.
The Committee is satisfied in reviewing the remuneration for 2020 against performance, that there has been an
appropriate link between reward and performance in relation to the outturn for the STIP and LTIP.
Remuneration Committee Advisors
The Remuneration Committee is authorised by the Board to appoint external advisors and Korn Ferry is the advisor
to the Remuneration Committee. Korn Ferry has also provided other human capital related services to the Group
during the year through a separate part of the business. The Committee is comfortable that the controls in place at
Korn Ferry do not result in the potential for any conflicts of interest to arise.
The fees incurred with Korn Ferry for advising the Committee in 2020 were €217,584 (2019: €45,400).
Kerry Group Annual Report 2020 126
Section C: Remuneration Policy
Remuneration Principles
The Group’s Executive Director remuneration philosophy
is to ensure that executive remuneration is aligned to
the Group’s purpose and values, supports strategy,
promotes the long-term success of the company,
properly reflects the duties and responsibilities of
the Executives, and is structured to attract, retain
and motivate individuals of the highest quality on an
international basis. Remuneration includes performance
related elements designed to align Directors’ interests
with those of shareholders and to promote long-term
sustainable growth and performance at the highest
levels in line with the Group’s strategy.
A high proportion of Executive Directors’ potential
remuneration is based on short-term and long-
term performance related incentive programmes.
By incorporating these elements, the Remuneration
Committee believes that the interest and risk appetite
of the Executive Directors is properly aligned with the
interests of the shareholders and other stakeholders.
When authorising remuneration outcomes, the
Committee exercises independent judgement and
discretion, taking account of Group and individual
performance as well as the investor experience,
environmental, governance and social matters and wider
workforce pay conditions to ensure that it is fair and
appropriate for the role, experience of the individual,
responsibilities and performance delivered.
Matters
Examples
Remuneration Policy Review
Under the Shareholders' Rights Directive, which
was transposed into Irish Law in March 2020, Kerry
is not obliged to submit its Remuneration Policy to
shareholders for a non-binding advisory vote until
the 2022 Annual General Meeting. However consistent
with the Group’s commitment to comply with best
corporate governance practice and our existing three
year cycle, a new policy will be brought to shareholders
at the 2021 AGM.
As an Irish incorporated company Kerry Group plc is not
obliged to comply with the UK legislation which requires
UK companies to submit their remuneration policies to
a binding shareholder vote every three years or earlier if
changes are required prior to this.
Similarly, Kerry Group plc is not required to comply with
the remuneration reporting regulation contained in the
UK Companies (Miscellaneous Reporting) Regulations
2018 but follows the requirements as a matter of best
practice unless they conflict with Irish or other legal
requirements or there are other reasons where it is
considered not practicable to do so.
In designing the Remuneration Policy, the Committee
considered the best practice features detailed in the
2018 UK Corporate Governance Code as follows:
Clarity
The policy is clear, uncomplicated and well understood by the Executive Directors. It has been clearly
communicated to shareholders and proxy agencies. Our Chief Human Resources Officer’s (CHRO) role has
direct responsibility for engaging with our employees and collaborates closely with Mr. Tom Moran, our
designated workforce engagement Director. The Committee monitors the effectiveness of engagement with
the wider workforce through updates provided by the CHRO and the designated workforce engagement
Director. The Board is comfortable that our Remuneration Policy is clearly understandable by employees.
Simplicity
The Committee considers that the new Remuneration Policy is simple and easy to understand.
The Remuneration Policy is aligned with the strategy and business model of the Group. The Committee has
purposefully avoided any complex structures which have the potential to be misunderstood and deliver
unintended outcomes.
Risk
The Remuneration Policy is designed to discourage inappropriate risk taking and to ensure that it is not
rewarded. This is achieved by (i) the balanced use of both short-term and long-term incentive plans which
employ a blend of financial, non-financial and shareholder return targets (ii) the significant role played by
equity in our incentive plans together with shareholding requirements and (iii) malus and clawback provisions
and (iv) the ability of the Committee to utilise discretion to adjust formulaic outcomes to ensure outcomes are
aligned to, and are reflective of, the underlying business performance of the Group.
Predictability
Executive Directors’ remuneration is subject to individual participation caps, with our share-based plans
also subject to market standard dilution limits. The scenario charts on page 133 illustrate how the rewards
potentially receivable by our Executive Directors vary based on performance delivered and share price growth.
Proportionality
There is a clear link between individual rewards, delivery of strategy and long-term performance. In addition,
the significant role played by STIP and LTIP/‘at risk‘ pay, together with the structure of the Executive Directors
service contracts, ensures that poor performance is not rewarded.
Alignment to
Culture
Kerry has a relentless focus on delivering for our shareholders and other stakeholders and this is fully aligned
with our Remuneration Policy in that employee personal success is directly linked to the success of the Group
through the short-term and long-term incentive plans and targets we operate.
The Committee is satisfied the Remuneration Policy is fully aligned with the Group’s diverse, entrepreneurial
and results focused culture which is underpinned by our Values of Courage, Ownership, Inclusiveness,
Open-mindedness and Enterprising Spirit.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT 127
The overall design of the new policy was informed by a combination of reviewing the current policy against best
practice features as noted above, considering the evolution of the Company’s size and strategy, and taking feedback
from our shareholders during the review process. Following consideration of these factors, the Committee concluded
on the policy changes detailed below.
Remuneration Policy – Summary of Proposed Changes
The table below summarises the key changes, arising from the policy review conducted during the year, which have
been embedded in the new Remuneration Policy to apply for the three years 2021 to 2023.
Fixed Pay (comprising basic salary, benefits and pension)
Element
Pension
Current Policy
Proposed Policy
Rationale
Current employer
contribution rate is 18%
of basic salary for the CEO
and CFO
Align incumbent Executive Directors
pensions contribution rates to Kerry’s
Irish general workforce rate (10%) with
effect from 31 December 2022
Reflects market best practice as well
as compliance with the UK Corporate
Governance Code requirements with
effect from 2023
The contribution rate
for the CEO T&N is
currently 28%
Pensions contribution rates for
new Executive Directors aligned to
workforce rate on appointment
Short-Term Incentive Plan (STIP)
Element
Current Policy
Proposed Policy
Rationale
Maximum
Opportunity
(% of basic)
CEO: 150% of basic salary
(target: 105%). CFO and
CEO T&N: 125% of basic
salary (target: 87.5%)
Increase maximum STIP opportunity
and reduce target opportunity to 50%
of maximum with no softening of
expected performance levels
Target opportunity
currently 70% of maximum
CEO: 200% of basic salary (target: 100%)
CFO and CEO T&N: 175% of basic
salary (target: 87.5%)
Proposed target and maximum
opportunity consistent with the
increased growth and complexity
of the Group, driven by the same
stretching targets. Change to
proportion of bonuses payable at
target performance reflects current
investor expectations
STIP Deferral
Performance
Measures
25% of vested award
deferred into shares/
options for two years
Portion of vested award deferred into
shares/options for two years increased
to 33%
Stronger long-term focus and reflects
market best practice
Volume Growth (40%);
Margin Expansion (30%);
Cash Conversion (20%);
Strategic Objectives (10%)
Volume Growth (35%);
Margin Expansion (27%);
Cash Conversion (18%);
Strategic Objectives (20%)
Enhanced focus on strategic objectives
which have a direct impact on financial
metrics and individual actions that drive
long-term sustainable performance
Long-Term Incentive Plan (LTIP)
Element
Current Policy
Proposed Policy
Rationale
Maximum
Opportunity
(% of basic)
CEO: 200% of basic salary
CFO: 180% of basic salary
CEO T&N: 200% of
basic salary
Increase maximum LTIP opportunity
on a phased basis over two years as
follows:
CEO: 250% in 2021, 300% in 2022
CFO: 225% in 2021, 250% in 2022
CEO T&N: 225% in 2021, 250% in 2022
Increase in quantum consistent with
the increased size and complexity of
the Group and promotes long-term
sustainable performance
LTIP Deferral
50% of vested award
deferred for two years
Deferral increased to 100% of vested
award
Stronger alignment with shareholders
and ensures long-term focus
Performance
Measures
50% EPS; 30% TSR; 20%
ROACE
40% EPS; 25% TSR; 15% ROACE;
20% Sustainability metrics
Threshold vesting 25%
(30% for TSR) of maximum;
target vesting 50% of
maximum
Removal of target vesting point for EPS
and ROACE with straight line vesting
from threshold to maximum
Reduce TSR threshold vesting to 25%
of maximum while retaining current
stretching goals
Introduction of sustainability measure
fully aligned to our purpose and
strategic direction (including new
sustainability strategy)
Vesting schedule aligned to market
practice and consistency across all
measures
Peer Group
The peer group consists of
Kerry and 19 companies
listed on page 141
Aryzta will be replaced by Ingredion
for awards granted in 2021 and
subsequent years
Ingredion’s business profile more
closely aligns to that of Kerry Taste &
Nutrition
Kerry Group Annual Report 2020
128
Other
Element
Current Policy
Proposed Policy
Rationale
Share
Ownership
Requirements
CEO (200%), CFO (180%),
CEO T&N (200%)
No post-employment
shareholding requirement
Increase in-service shareholding
requirement (CEO 300%; Other
Executive Directors 250%)
Introduction of post-employment
shareholding requirement for a period
of two years
Stronger long-term focus and
alignment with shareholder interests,
as well as compliance with the
UK Corporate Governance Code
requirements
Malus and
Clawback
Trigger events include
material misstatement and
serious wrongdoing which
require a restatement of
accounts
Additional trigger events included:
payment made on basis of erroneous
data, gross misconduct, material
misstatement of accounts, serious
reputational damage, corporate failure
Alignment with the UK Corporate
Governance Code requirements and
market best practice
Discretion
Discretion available
Recruitment
Policy – Buyout
Awards
Current payment to
compensate new hires for
remuneration forfeited is
capped at 12 months target
remuneration
No requirement for restatement
of accounts
Enhanced Committee discretion to
apply a general incentive over-ride
that will enable the Committee to
sense check and adjust formula-based
incentive outcomes up and down
Remove cap of 12 months target
remuneration for buyout awards
with the ability to compensate for
remuneration forfeited on joining
to be provided but the quantum
and structure of any buyout set to
reflect the quantum, structure and
timing of the remuneration forfeited
and also to take into account any
performance requirements in relation
to awards forfeited
Aligns with UK Corporate Governance
Code and best practice
Ensure sufficient flexibility to
compensate future recruits for
awards forfeited
Non-Executive
Director Fees
Fees reviewed on a
triennial basis
For 2021 Chairman’s fee increased to
€385,000 (from €357,500)
Reflects increase in the size and
complexity of the Group
For 2021 basic non-Executive Director
fee increased to €84,000 (from
€78,000)
Allowance for non-European based
non-Executive Director increased to
€30,000 (from €19,000)
Equivalent to the annual increase
available to the general workforce
over three year period 2017-2020
(2.5% p.a.)
Compensate for additional time and
travel commitment
No changes to other fees
Propose to review fees annually going
forward in line with general workforce
adjustments
Kerry Group Annual Report 2020DIRECTORS‘ REPORT Remuneration Policy Table
The following table details the Remuneration Policy for the Executive Directors for the three year period 2021 to 2023.
Purpose and Link to Strategy Operation
Opportunity
Performance
Metrics
129
Basic Salary
Reflects the value of the individual,
their skills and experience
Competitive salaries are set to
promote the long-term success of
the Company and attract, retain
and motivate Executive Directors
to deliver strong performance for
the Group in line with the Group’s
strategic objectives
Benefits
To provide a competitive benefit
package aligned with the role
and responsibilities of Executive
Directors
Pension
To provide competitive retirement
benefits to attract and retain
Executive Directors
– Remuneration Committee sets the basic salary
– Set at a level to
– Not applicable
and benefits of each Executive Director
– Determined after taking into account a
number of elements including the Executive
Directors’ performance, experience and level of
responsibility
– Paid monthly in Ireland and bi-weekly in the US
– Salary is referenced to job responsibility and
internal/external market data
attract, retain and
motivate Executive
Directors
– Reviewed annually
– Full review
undertaken every
three years
– These benefits primarily relate to the use of a
– Not applicable
– Not applicable
company car or a car allowance
– Pension arrangements may vary based on the
– Pension values
– Not applicable
Executive Director’s location
– Irish resident Executive Directors participate
in the general employee defined contribution
pension scheme or receive a contribution to an
after-tax savings scheme (where the lifetime
earnings cap has been reached) or receive a
taxable cash alternative based on a percentage
of basic salary
– The existing Executive Director in the US
participates in the Group’s defined benefit
and defined contribution pension schemes.
The normal retirement age under the defined
benefit scheme is 65 years of age. Early
retirement is possible from age 55 onwards
currently vary based
on local practice
– The pension
contribution rates
for incumbent
Executive Directors
will be reduced
to 10% of basic
salary, in line with
Kerry’s Irish general
workforce rate,
with effect from 31
December 2022
– The maximum
company pension
contribution
rate for new
Executive Director
appointments is
aligned to that
of the general
workforce rate
Short-Term Incentive Plan (STIP)
To incentivise the achievement,
on an annual basis, of key
performance metrics and short-
term goals beneficial to the Group
and the delivery of the Group’s
strategy
One third of the award is deferred
in shares/options providing a two
year retention element and aligns
Executive Directors' interests with
shareholders’ interests
– Achievement of predetermined performance
targets set by the Remuneration Committee
– Performance targets aligned to the Group’s
published strategic targets with the targets
and weightings for financial metrics subject to
annual review
– Two thirds of the award is payable in cash
– One third of the award is awarded by way of
shares/options to be issued two years after
vesting following a deferral period
– Malus and clawback provisions are in place for
awards under the STIP (see page 131)
– Maximum
For FY 2021
opportunity is
175%-200% of
basic salary
– Target opportunity
is 50% of maximum
opportunity for on-
target performance
– Threshold
performance results
in a bonus payable
at 0% of maximum
– Volume Growth
– Margin
Expansion
– Cash
Conversion
– Strategic
Objectives
Kerry Group Annual Report 2020 130
Purpose and Link to Strategy Operation
Long-Term Incentive Plan (LTIP)
Retention of key personnel and
incentivisation of sustained
performance against key Group
strategic metrics over a longer
period of time
Share-based to provide alignment
with shareholder interests
A two year post vesting deferral
requirement aligns Executive
Directors’ interests with
shareholders’ interests
– The awards vest depending on a number of
performance metrics being met over a three
year performance period
– Conditional awards over shares or
share options
– Following vesting, 100% of the earned award
is deferred for a period of two years (i.e. giving
a combined performance period and deferral
period of five years)
– Malus and clawback provisions are in place for
awards under LTIP (see page 131)
Opportunity
Performance
Metrics
– Maximum
For FY 2021
opportunity is
250%-300% of
basic salary
– Adjusted
Earnings Per
Share ‘EPS‘
– Total
Shareholder
Return ‘TSR‘
– Return on
Average Capital
Employed
‘ROACE‘
– Sustainability
metrics
Shareholding Requirement
Maintain alignment of the
interests of the shareholders
and the Executive Directors and
commitment over the long-term
– Executive Directors are required to build and
to hold shares in the Company to a minimum
level of 250%-300% of their basic salary
– 250%-300% of
basic salary
– Not applicable
– Shareholding requirement to be satisfied
through retention of a minimum of 50%
of vested annual bonus and LTIP shares
(excluding the sale of shares to cover tax on
vesting), until the shareholding requirement
is met
– A post-employment shareholding requirement
obliges Executive Directors to hold the lower
of (i) their actual shareholding and (ii) their in-
service shareholding requirement for two years
post-employment. Applies to shares acquired
from new awards and does not apply to own
purchased shares
Selection of performance targets
STIP
Financial performance targets under the STIP are set by the Remuneration Committee with reference to the prior year, current
year budget and medium-term financial targets. They align with the Group’s strategic objectives while also ensuring the long-
term operational and financial stability of the Group. Targets are set at appropriately stretching levels to achieve threshold, target
and maximum payout levels. Performance targets are based predominately on the financial metrics of Volume Growth, Margin
Expansion and Cash Conversion (amounting to 80% of maximum opportunity).
Volume Growth and Margin Expansion are key performance metrics as they are the main drivers of Adjusted EPS Growth. Cash
Conversion is key to ensuring there are sufficient funds available for reinvestment or for return to shareholders.
Strategic objectives (amounting to 20% of maximum opportunity) are relevant to each Executive Director’s specific area of
responsibility and are key in ensuring focus on the strategic and functional priorities of the business.
Due to their commercial sensitivity, the Committee is of the view that it would be detrimental to the Company to disclose the
targets in advance of or during the relevant performance period. The Committee will disclose the targets and performance
against them in next year’s Remuneration Report.
LTIP
The performance targets under the LTIP are set to reflect the Group’s longer-term growth objectives and at a level where
maximum opportunity genuinely represents outperformance. The performance measures are currently based on Adjusted EPS
Growth, TSR, ROACE and Sustainability metrics.
Adjusted EPS Growth is a key performance metric encompassing all the components of growth important to the Group’s
stakeholders. EPS Growth is driven by the STIP metrics, Volume Growth and Margin Expansion. TSR is an important indicator of
how successful the Group has been in terms of shareholder value creation. ROACE represents a good perspective on the Group’s
internal rate of return and financial added value for shareholders. ROACE supports the strategic focus on growth and margins
through ensuring cash is reinvested to generate appropriate returns. Sustainability metrics are core to maintaining our strategy
and long-term sustainable performance and are reviewed at the time of each award.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT 131
How Remuneration Links with Strategy
Performance Measure
Strategic Priority
Incentive Scheme
Volume growth
Key driver of revenue growth
Margin expansion
Key driver of profit growth
Cash conversion
Cash generation for reinvestment or return to shareholders
Strategic objectives
Development and execution of business strategies
Adjusted EPS growth
Delivery of the Group’s long-term growth strategy
TSR
ROACE
Delivery of shareholder value
Balance growth and return
Sustainability
Core to our strategy and long-term sustainable performance
STIP
STIP
STIP
STIP
LTIP
LTIP
LTIP
LTIP
Malus/Clawback
The Committee has the discretion to reduce or impose further conditions on the STIP and LTIP awards prior to
vesting (malus). The Committee further has the discretion to recover incentives paid within a period of two years
from vesting (clawback).
The key trigger events for the use of malus and clawback provisions include material misstatement of the Company’s
audited financial results, serious wrongdoing, payment made on the basis of erroneous data, gross misconduct,
serious reputational damage and corporate failure.
Any recalculation of the award shall be effected in such manner and subject to such procedures as the Group
determines to be measured and appropriate, including repayment of any excess incentive or offset against any
amounts due or potentially due to the participant under any vested or unvested incentive awards.
The Company retains the right to apply the malus and clawback provisions to former directors STIP and LTIP awards.
Other elements of remuneration are not subject to malus or clawback provisions.
Committee Discretion
The Committee has discretion to adjust the formulaic outcomes under STIP and LTIP to ensure outcomes are aligned
to and are reflective of the underlying business performance of the Group.
In line with plan rules, the Committee may, at its discretion, amend or vary the performance metrics of the STIP and
LTIP related incentives, the calculation methodology for those performance metrics and the composition of the TSR
peer group when appropriate, in the interest of alignment and fairness.
Service Contracts
The CEO and Executive Directors have service contracts in place which can be terminated by either party giving
12 months notice. In addition, all service contracts include pay in lieu of notice, non-compete and non-solicitation
provisions of up to 12 months post departure, in order to protect the Group’s customer base, employees and
intellectual property.
No ex-gratia severance payments are provided for in respect of the CEO or Executive Directors.
Remuneration Policy for Recruitment of New Executive Directors
The Remuneration Committee will determine the contractual terms for new Executive Directors, subject to
appropriate professional advice to ensure that these reflect best practice and are subject to the limits specified in the
Group’s approved policy as set out in this report.
Salary levels for new Executive Directors will take into account the experience and calibre of the individual and his/her
remuneration expectations. Where it is appropriate to offer a lower salary initially, a series of increases to the desired
salary positioning may be made over subsequent years, subject to individual performance and development in the role.
Pension and benefits will be provided in line with the approved policy, with relocation, travel or other expenses
provided if necessary.
Kerry Group Annual Report 2020 132
The structure of the variable pay element will be in
accordance with and subject to the limits set out in
the Group’s approved policy detailed above. Different
performance measures may be set initially for STIP in
the year an Executive Director joins the Group taking
into account the responsibilities of the individual and the
point in the financial year that he/she joins the Board.
Subject to the rules of the scheme, an LTIP award may
be granted after joining the Group.
Change of Control
Outstanding STIP and LTIP awards/options would
normally vest and become exercisable on a change of
control, subject to plan rules, including the satisfaction
of any performance conditions and pro-rating. The
Committee may exercise its discretion to vary the level of
vesting having regard to the circumstances and reasons
for the events giving rise to the change of control.
If it is necessary to buyout incentive pay or benefit
arrangements (which would be forfeited on leaving
the previous employer) in the case of an external
appointment, this would be provided for taking
into account the form (cash or shares), timing and
expected value (i.e. likelihood of meeting any existing
performance criteria) of the remuneration being
forfeited. The general policy is that payment should
be no more than the Committee considers is required
to provide reasonable compensation for remuneration
being forfeited. The Group’s policy is that the period
of notice for new Executive Directors should not exceed
12 months and should include pay in lieu of notice,
non-compete and non-solicitation provisions to
protect the Group.
The Committee will ensure that any arrangements
agreed will be in the best interests of the Group and
shareholders.
Payments for Loss of Office
In the event of a Director’s departure, the Group’s policy
on termination is as follows:
– the Group will pay any amounts it is required to make
in accordance with or in settlement of a Director’s
statutory employment rights and in line with their
employment agreement;
– the Group will seek to ensure that no more is paid than
is warranted in each individual case;
– STIP and LTIP awards will be paid out in line with plan
rules on exit (i.e. for good leavers as defined in the
LTIP rules), with awards prorated to normal vesting
date, subject to performance and a two year holding
requirement and prorated to reflect the proportion of
the performance period that has elapsed on the date
of cessation; and
– other payments, such as legal or other professional
fees, repatriation or relocation costs and/or
outplacement fees, may be paid if it is considered
appropriate and at the discretion of the Committee.
A Director’s service contract may be terminated
without notice and without any further payment or
compensation, except for sums accrued up to the date of
termination, on the occurrence of certain events such as
gross misconduct.
Alignment with Workforce Pay and Policies
The Remuneration Policy provides an overview of
the structure that operates for the Group’s Executive
Directors and senior management. Differences
in quantum will depend on size of the role and
responsibility, the location of the role and local
market practice.
When setting the Remuneration Policy for Executive
Directors, the Committee considers the pay policies and
procedures for the wider workforce. The key difference
is that, overall, Remuneration Policy for the Executive
Directors is more heavily weighted towards variable pay
compared to other employees.
Basic salaries are operated under the same policy
as detailed in the Remuneration Policy table with
comparator groups used as a reference point. The
Committee considers the basic salary increase for the
broader workforce when determining the annual salary
review for the Executive Directors.
Senior management are invited to participate in both the
STIP and LTIP to incentivise performance through the
achievement of short-term and long-term objectives and
through the holding of shares in the Group.
The Committee will also seek shareholder approval at
a later date for an All Employee Share Plan which will
allow for the grant of various share-based awards to
employees across the Kerry Group once implemented
(subject to local tax and securities laws).
Consultation with Employees
While the Committee currently does not consult directly
with employees when setting remuneration for Executive
Directors, it does take into account the remuneration
structures, policies and practices in the Group as a
whole, the feedback from employee engagement
activities and the information provided by our external
advisors. In addition, matters relating to remuneration
which come to the attention of Mr. Tom Moran, in his
capacity as the designated workforce engagement
Director, are reported to the Committee. The Group has
a number of different channels for engagement and
the Committee will consider how it can engage more
effectively with the wider workforce to explain broader
pay policies and practices and the alignment to the
Executive Directors’ Remuneration Policy.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT 133
Edmond Scanlon
54%
14%
44%
17%
36%
29%
18%
82%
3%
4%
Basic Salary
Pension & Benefits
STIP
LTIP
29%
35%
6%
29%
Marguerite Larkin
53%
16%
43%
19%
35%
31%
18%
82%
3%
4%
Basic Salary
Pension & Benefits
STIP
LTIP
27%
34%
7%
28%
Gerry Behan
52%
16%
42%
19%
34%
30%
26%
74%
5%
6%
Basic Salary
Pension & Benefits
STIP
LTIP
26%
33%
10%
27%
The charts above exclude the effect of any Company
share price appreciation except in the ‘maximum +50%’
scenario.
Consultation with Shareholders
The Committee considers the guidelines issued by
the major institutional shareholders and the bodies
representing them and the feedback provided by such
proxy agencies and shareholders, when completing its
annual and triennial review of the Group’s Executive
Remuneration policies and practices. During 2020, the
Committee Chairperson engaged with a number of
major institutional shareholders and proxy agencies on
the changes proposed under the 2021 Remuneration
Policy Review and on the treatment of inflight LTIP
awards impacted by COVID-19. Changes were made
to Remuneration Policy proposals as a result of the
feedback received, for example quantum increases
will be phased over two years and the sustainability
metrics to be included in the new LTIP were further
finetuned based on shareholder input. Following
consultation, the Committee also decided not to amend
the formulaic outcome of the 2018 LTIP award. This is
despite the strong executive leadership over the three
year performance period (and especially in 2020) as well
as the resilience of the Kerry business and sustained
shareholder return against the backdrop of the
COVID-19 pandemic.
The Committee is committed to continued consultation
with shareholders regarding its Remuneration Policy.
Non-Executive Directors’
Remuneration Policy
Non-Executive Directors’ fees, which are determined by
the Executive Directors, fairly reflect the responsibilities
and time spent by the non-Executive Directors on
the Group’s affairs. In determining the fees, which
are set within the limits approved by shareholders,
consideration is given to both the complexity of the
Group and the level of fees paid to non-Executive
Directors in comparable companies. Fees are reviewed
on an annual basis, and a detailed benchmark
review is carried out on a three year basis and any
recommendations are presented to the Executive
Directors for approval. Non-Executive Directors do
not participate in the Group’s incentive plans, pension
arrangements or other elements of remuneration
provided to the Executive Directors. Non-Executive
Directors are reimbursed for travel and accommodation
expenses (and any personal tax that may be due
on those expenses). Non-Executive Directors are
encouraged to build up a shareholding in the Company.
Illustration of Remuneration Policy
The following diagrams show the minimum, target,
maximum and maximum +50% share appreciation,
composition balance between the fixed and variable
remuneration components for each Executive Director
effective for 2021. For illustration purposes target
performance for LTIP is reflected as 50% of maximum
opportunity. The inner most circle represents the
minimum potential scenario for remuneration, with
the 2nd circle representing target, the 3rd circle
representing maximum potential and the outer circle
representing maximum potential plus 50% increase in
the LTIP share value.
Kerry Group Annual Report 2020 134
Section D: Remuneration Policy Implementation
Part I: Remuneration Policy Implementation 2021
This part of the report sets out how the proposed Remuneration Policy as described on pages 126-128 will operate
in 2021.
Basic Salary and Benefits
The salaries of the Executive Directors effective for the year commencing on 1 February 2021, together with the
comparative figures, are as follows:
Directors
Edmond Scanlon
Marguerite Larkin
Gerry Behan
2021
€’000
1,219
754
$’000
987
2020
€’000
1,189
735
$’000
958
% Increase
2.5%
2.5%
% Increase
3.0%
The increases in salaries for the Executive Directors are in line with increases for the general workforce in Ireland
2.5% and the US 3.0%.
Benefits relate primarily to the use of a company car/car allowance. Any travel arrangements or travel costs required
for business purposes will also be met by the Group, on a net of tax basis.
Pensions
The Group CEO participates in the general employee Irish defined contribution scheme and the CFO receives
a taxable cash allowance based on a percentage of basic salary, in lieu of pension. The CEO Taste & Nutrition
participates in a US defined contribution scheme and a US defined benefit pension scheme.
Following the Remuneration Policy review carried out in 2020 pension contribution rates will continue as is for 2021.
The pension contribution rate for Executive Directors will be aligned to that of Kerry’s general workforce in Ireland
(currently a rate of 10%) with effect from 31 December 2022.
Short-Term Incentive Plan (STIP)
As part of the policy review, a review of the STIP design and metrics was completed in 2020 to ensure that they
remain appropriate, are linked to strategy, consistent with best practice and that the targets are appropriately
calibrated. The Committee concluded that while no changes are required to the performance metrics, a number of
other changes are required to reflect the increase in the size and complexity of the Group and to ensure that the STIP
continues to support the Group’s long-term sustainable growth and forward looking strategy as well as attracting,
motivating and retaining executives of the highest quality internationally.
The changes proposed to be implemented from 2021 onwards for STIP are outlined on page 127, with the main
changes being:
– the maximum STIP opportunity for 2021 will increase from 150% to 200% of basic salary for the CEO and from
125% to 175% of basic salary for the CFO and CEO Taste & Nutrition;
– toughening the approach to target setting within the STIP through reducing the target bonus opportunity to 50%
of maximum (from 70%), with no softening of expected performance levels;
– increase to the weighting on the strategic element (from 10% to 20%) with a proportionate reweighting of the other
metrics which remain unchanged; and
– increase to 33% (from 25%) the proportion of STIP delivered in shares/options following a two year deferral period.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT
135
2021 STIP – Performance Metrics and Weightings
Group Metrics
Volume growth*
Margin expansion*
Cash conversion
Strategic Objectives
Total
CEO
% of award
CFO
% of award
CEO T&N
% of award
Target
Max
Target
Max
Target
17.5%
13.5%
9%
10%
50%
35%
27%
18%
20%
100%
17.5%
13.5%
9%
10%
50%
35%
27%
18%
20%
100%
17.5%
13.5%
9%
10%
50%
Max
35%
27%
18%
20%
100%
*
The above metrics are measured at a Group level for the CEO and CFO and at a Taste & Nutrition level for the CEO of Taste & Nutrition.
Due to the commercial sensitivity of the financial metrics and strategic objectives, the Committee is of the view that
it would be detrimental to the Company to disclose the targets in advance of, or during the relevant performance
period. The Committee will disclose the targets and performance against them in next year’s Remuneration Report.
Long-Term Incentive Plan (LTIP)
A review of the LTIP metrics was completed in 2020 to ensure that they remain appropriate, linked to strategy
and that targets are appropriately stretching. The changes included in the new policy are required to reflect the
increase in the size and complexity of the Group and ensure that the LTIP continues to support the Group’s long-
term sustainable growth ambitions as well as attracting, motivating and retaining executives of the highest quality
internationally.
Subject to shareholder approval, the 2021 LTIP award will be granted under a new 2021 LTIP which replaces the
current LTIP approved by shareholders in 2013. The changes proposed to be implemented from 2021 onwards for
LTIP awards are outlined on page 127, with the main changes being;
– the maximum LTIP opportunity will increase from 200% of basic salary for the CEO to 250% in 2021. For the CFO
and CEO Taste & Nutrition, the maximum LTIP opportunity will increase from 180%/200% of basic salary to 225%
in 2021;
– consistent with the launch of our 2030 sustainability strategy Beyond the Horizon in October 2020, a new
sustainability element will be included in the LTIP, with a weighting of 20% and a proportionate reweighting of the
other metrics which remain unchanged;
– in line with current best practice and the UK Corporate Governance Code requirements, for LTIP awards granted
from 2021 onwards, the two-year deferral period will apply to 100% (previously 50%) of the award that vests;
– the payout % at threshold vesting level is being reduced for TSR from 30% to 25%, while retaining the current
stretching threshold and maximum levels; and
– the vesting schedules that apply to the EPS and ROACE performance metrics have also been simplified, with
straight line vesting from threshold to maximum.
Kerry Group Annual Report 2020
136
LTIP Award Year
Performance Metrics
EPS (40% weighting)*
Adjusted EPS growth per annum
% of award which vests
ROACE (15% weighting)
ROACE return achieved
% of award which vests
Relative TSR (25% weighting)
2021
Threshold
Maximum
6%
25%
10%
25%
12%
100%
14%
100%
Position of Kerry in TSR peer group**
Median
Greater than 75th%
% of award which vests
Sustainability (20% weighting)***
Nutrition Reach Goal
Carbon Reduction
Food Waste Reduction
% of award which vests
25%
1.11bn
19%
14%
25%
100%
1.27bn
23%
22%
100%
*
**
Adjusted EPS growth is measured on a constant currency basis.
The TSR Peer Group companies are listed on page 141. For LTIP awards granted in 2021 and subsequent years Aryzta is being replaced
with Ingredion.
*** Please see pages 30-31 for further details in relation to sustainability metrics.
The Committee is satisfied that the target ranges above are appropriately stretching particularly given the current
challenging trading environment, overall market growth rates, the level of capital expenditure required to support
future growth ambitions and performance achieved against the previous targets set (see pages 30 and 31).
Each Executive Director will be awarded their maximum LTIP opportunity in 2021 as follows, CEO 250% of basic
salary, CFO 200% of basic salary and CEO Taste & Nutrition 200% of basic salary.
See Group Key Performance Indicators (KPIs) on pages 30 and 31 for more information on the link between the
performance metrics used for incentive purposes and the Group’s Strategic Plan.
Non-Executive Director Remuneration Review
Non-Executive Director fees were last reviewed in 2017 and increases were made effective from 1 January 2018. The
fees have not been increased since then and have not been subject to increases for annual inflation.
In line with the three year review cycle the Chairman and non-Executive Directors fees were reviewed and
benchmarked during 2020. Following the review, the following increases are being applied effective 1 January 2021.
Fee Type*
Chairman fee
Non-Executive Director basic fee
Non-European allowance
2021 Fees
€
385,000
84,000
30,000
2020 Fees
€
357,500
78,000
19,000
*
There are no changes to the Committee member and Chair fees.
The increases represent the equivalent of an annual 2.5% increase since the last review, which is in line with the
annual increase available to the general workforce in Ireland over the same three-year period. Following the
adjustment, the Chairman’s fee and the non-Executive Director fees remain within the market median range. The
allowance for non-Executive Directors based outside of Europe has been increased to take account of the extra time
commitment required to travel to Board meetings.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT
137
Part II: Remuneration Policy Outturn 2020
Disclosures regarding Directors’ remuneration have been drawn up on an individual Director basis in accordance
with the requirements of the 2014 Irish Companies Act, the EU Shareholders' Rights Directive, the UK Corporate
Governance Code, the Irish Annex, the Euronext Dublin Stock Exchange and the UK Listing Authority.
The information in the tables 1, 4, 5, 6 and 7 below including relevant footnotes (identified as audited) forms an
integral part of the audited consolidated financial statements as described in the basis of preparation on page 166.
All other information in the Remuneration Report is additional disclosure and does not form an integral part of the
audited consolidated financial statements.
Executive Directors’ Remuneration
Table 1: Individual Remuneration for the year ended 31 December 2020 (Audited)
Irish Based Directors
Euros
Edmond Scanlon
CEO
Marguerite Larkin
CFO
US Based Director
US Dollars
Gerry Behan5
CEO T&N
Basic Salary1
Benefits
Pensions2
Total Fixed Remuneration
% Fixed v Total
STIP3
LTIP4
Total Variable Remuneration
% Variable v Total
Total Remuneration
2020
€’000
1,113
45
214
1,372
59%
-
951
951
41%
2,323
2019
€’000
1,151
39
207
1,397
35%
1,312
1,282
2,594
65%
3,991
2020
€’000
2019
€’000
688
34
132
854
77%
-
261
261
23%
716
33
129
878
56%
680
-
680
44%
1,115
1,558
2020
$’000
895
72
273
1,240
62%
-
751
751
38%
1,991
€’000
1,762
2019
$’000
928
80
217
1,225
33%
766
1,737
2,503
67%
3,728
€’000
3,329
Note 1:
As a solidarity gesture in light of COVID-19 and those impacted, the Executive Directors volunteered a 25% reduction in their basic
salary for a three month period.
Note 2: The pension figure for Edmond Scanlon relates to Irish defined contribution pension benefits. Marguerite Larkin received a taxable
cash payment in lieu of pension benefits. The employer pension contribution for both Edmond and Marguerite remained at
18% of their basic salaries before the 25% temporary voluntary reduction referred to above. The pension figure for Gerry Behan
includes both defined benefit and defined contribution retirement benefits and similarly his employer pension contribution was not
impacted by the voluntary basic salary reduction applied during the year.
Note 3:
No STIP was payable for 2020 due to performance not meeting the thresholds levels set for each of the financial metrics and
discretion being applied not to pay out on personal and strategic objectives. The 2019 STIP amount represents 75% delivered in
cash with 25% delivered by way of shares/share options which are deferred for two years.
Note 4:
The share price used to calculate the value of the LTIP is the average share price for the three months up to the end of the year
being reported. A positive share price movement versus that applicable at the date the conditional awards were granted has
increased the valuation of the awards (that will vest in 2021) over the three years by €268,082 for Edmond Scanlon, €56,076 for
Marguerite Larkin and by €187,359 for Gerry Behan. The LTIP included in this table was awarded in 2018. Marguerite Larkin was
appointed to the Board part way through 2018 and the level of her award reflects this.
Note 5:
The table shows the Executive Director’s pay in the currency of payment to ensure clarity in reflecting the year-on-year
payment comparisons.
Note 6:
The total remuneration for Executive Directors was €5,200k (2019: €8,878k) using a US dollar exchange rate of 1.13 (2019: 1.12).
Basic Salary Increases
Edmond Scanlon’s basic salary as Group CEO was increased by 2.5% and the basic salaries of Marguerite Larkin
and Gerry Behan were increased by 2.5% and 3% respectively effective from 1 February 2020 in line with increases
for the general workforce in Ireland and the US respectively. However as noted above, the Executive Directors took
a voluntary 25% basic salary reduction for a three month period as a solidarity gesture in light of COVID-19 and
those impacted.
Kerry Group Annual Report 2020 138
Annual Incentive Outcomes (STIP)
Table 2: Annual Bonus Achievement Against Targets
Financial Metrics (CEO, CFO, and CEO T&N – 90% weighting)
Metric
1. Volume Growth*
(40% weighing)
2. Margin Expansion*
(30% weighting)
3. Cash Conversion
(20% weighting)
s Threshold
t
e
g
r
a
T
Target
Max
Actual performance
Bonus outcome
Link to strategy
Group
0%
3%
5%
-2.9%
0%
Taste &
Nutrition
0%
4%
6%
-3%
0%
Group
0bps
Taste &
Nutrition
0bps
+30bps
+30bps
+40bps
+ 40bps
-100bps
-110bps
0%
0%
Group
70%
80%
90%
67%
0%
Volume Growth is a key
performance metric as it
is one of the main drivers
of Adjusted EPS Growth
Margin Expansion is a key
performance metrics as it
is another main driver of
Adjusted EPS Growth
Cash Conversion is key
to ensuring there are
sufficient funds available
for reinvestment or for
return to shareholders
*
The above metrics are measured at Group level for the CEO and CFO and at Taste & Nutrition level for the CEO of Taste & Nutrition.
When setting the targets above the Committee considered them to be appropriate as they are aligned with the
Group’s strategic plan, were reflective of overall market conditions pre COVID-19, and take account of planned
investments (both capital and operational) that the Group is making to enable the achievement of its strategic
priorities for growth and margin expansion as well as necessary working capital investments to mitigate the Brexit
and KerryConnect risks.
Personal and Strategic Objectives – 10% weighting
The table below sets out the performance outcome for the personal and strategic element of the STIP.
Metric
4. Personal and Strategic (All – 10% weighting)
Threshold
Target
s
t
e
g
r
a
T
Max
Actual performance
Bonus outcome
(after discretion, see page 140)
Link to strategy
CEO
0
7
10
8
0%
CFO
0
7
10
8
0%
CEO T&N
0
7
10
8
0%
Specific to the Executive Directors responsibility linked to strategic plan
implementation and talent management
Details of Personal and Strategic Objectives
The Executive Directors are also measured against Personal and Strategic objectives. Performance against these
objectives is determined by the Committee by reference to key targets agreed with the Executives at the start of
the year.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT
139
Outturn
8%
Objective
Achievement
CEO
Sustainability
Operating
Model
Technology
Portfolio
Leadership,
Talent &
Succession
CFO
Sustainability
– Led the development and launch of Kerry’s 2030 sustainability strategy Beyond the Horizon bringing
sustainability to the core of the Group’s strategy. Led tangible and public commitments for 2025 to
2030 across all ESG dimensions; people, society and planet.
– Successfully launched the revitalised Kerry brand, vision, purpose and values bringing The Kerry
Way to life externally and further embedding it internally.
– Continued to drive operating model improvements, strengthening and simplifying the commercial
organisation globally to further enhance Kerry’s customer experience.
– Further strengthened Kerry’s global Taste and Applied Health & Nutrition capabilities.
– Further strengthened the Group’s strategic focus on Authentic Taste, Nutrition, Foodservice and
Developing Markets.
– Identified, initiated and executed M&A transactions to further enhance and optimise the Group’s
leading technology portfolio and presence in key strategic markets.
– Continued to ensure rigour in executive succession planning and development. Global leadership
team further strengthened through key internal promotions and external appointments.
– Demonstrated excellent leadership in shaping the Group’s response to the COVID-19 pandemic;
prioritised around our people, our customers and our communities, ensuring the Group could
safely fulfil its critical role in the global food supply chain. Significant personal investment in
engagement with all key stakeholders on the Group’s response throughout the year.
– Co-led the development and launch of Kerry’s 2030 sustainability strategy Beyond the Horizon.
Identified key performance measures across all ESG dimensions and implemented effective
measurement methodology and governance to drive and monitor progress.
– Proactive and effective engagement with shareholders ensuring comprehensive understanding
of the Group’s sustainability strategy, performance and ongoing response to the challenges
presented by COVID-19.
8%
Operating
Model
– Continued to align and strengthen the commercial arm of the global finance organisation,
consistent with operating model developments in commercial, Taste & Nutrition.
– Ensured strong finance leadership and agile decision making throughout the COVID-19 pandemic,
ensuring continuity of supply and focused innovation investment in response to changing
consumer needs.
Technology
Portfolio
– Further strengthened the Group’s strategic focus on Authentic Taste, Nutrition, Foodservice and
Developing Markets.
– Identified, initiated and executed M&A transactions to further enhance and optimise the Group’s
leading technology portfolio and presence in key strategic markets.
Leadership,
Talent &
Succession
– Continued to build a high-performing Finance leadership team, further simplifying the global
finance leadership organisation. Ensured seamless succession and transition to a number of
finance leadership roles.
– Actively championed and sponsored talent and succession initiatives across the Group, focused on
strengthening overall leadership talent pipeline.
Kerry Group Annual Report 2020
140
Objective
Achievement
CEO T&N
Outturn
8%
Sustainability
– Co-led the development and launch of Kerry’s 2030 sustainability strategy Beyond the Horizon
ensuring alignment and capability of the Taste & Nutrition (T&N) organisation for their execution.
– Ensured a quality launch of the revitalised Kerry brand with key customers and other stakeholders
across T&N globally.
Operating
Model
– Continued to drive operating model improvements, strengthening and simplifying the commercial
organisation globally to further enhance Kerry’s customer experience. Further strengthened
Kerry’s global Taste and Applied Health & Nutrition capabilities.
– Sponsored further simplification and alignment of regional organisations behind Group strategy
and portfolio.
– Played a key leadership role throughout the COVID-19 pandemic in ensuring all manufacturing
plants and R&D centres safely operated throughout 2020 to meet customer needs. Ensured
effective partnerships with key customers, driving innovation and alignment of product portfolios
to changing consumer needs.
– Further strengthened the Group’s strategic focus on Authentic Taste, Nutrition, Foodservice and
Developing Markets.
– Identified, initiated and executed M&A transactions to further enhance and optimise the Group’s
leading technology portfolio and presence in key strategic markets.
– Continued to ensure rigour in T&N executive succession planning and development, strengthening
leadership teams across all regions and further aligning capabilities behind strategic priorities.
– Further strengthened the global T&N leadership through Chief Commercial Officer and Global
Head of Taste appointments.
Technology
Portfolio
Leadership,
Talent &
Succession
Discretion
The Committee carefully assessed the performance of the Executive Directors against their individual Personal and
Strategic objectives in line with normal practice and concluded that an above target performance was achieved by all
three Executive Directors. However, in light of the overall performance, and following a request from the Executive
Directors not to be considered for any element of their annual bonus in respect of 2020, the Committee agreed that
there should be no award under this element of the STIP.
Final Outturn for 2020
Despite the Executive Directors unrelenting commitment to the business and strong individual performances during
the year, they will receive no annual bonus payments under the STIP for 2020.
Long-Term Incentive Plan (LTIP)
2013 LTIP
The terms and conditions of the plan were approved by shareholders at the 2013 AGM. The Remuneration Committee
approves the terms, conditions and allocation of conditional awards under the Group’s LTIP to Executive Directors
and senior management. Under this plan, Executive Directors and senior management are invited to participate in
conditional awards over shares or share options in the Company.
Subject to performance metrics being met over a three year performance period, the LTIP award will vest on the third
anniversary of the date of grant. 50% of the award is delivered at the vesting date with the remaining 50% of the
award being delivered following a two year deferral period. This provides for a combined performance period and
deferral period of five years for half of the award that vests.
The first conditional awards under this scheme were made to Executive Directors in 2013. The maximum award that
can be made to an individual Executive Director under the LTIP over a 12 month period is equivalent to 180%-200% of
basic salary for that period.
An award may lapse if a participant ceases to be employed within the Group before the vesting date. The market
price of the shares on the date of each award outlined above is disclosed in note 27 to the financial statements.
The proportion of each conditional award which vests will depend on the Adjusted EPS Growth, TSR and ROACE
performance of the Group during the relevant three year performance period.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT
141
2018 LTIP Awards
Set out below is the performance against targets for the 2018 LTIP award where the three year performance period
ended on 31 December 2020 and the award vests in 2021.
EPS Performance Test
50% of the award vests according to the Group’s average adjusted EPS growth (‘EPS metric‘) over the performance
period. This measurement is determined by reference to the growth in the Group’s adjusted EPS calculated on a
constant currency basis in each of the three financial years in the performance period in accordance with the vesting
schedule outlined in the following table:
Average Adjusted EPS Growth
Percentage of the Award Which Vests
Threshold
Target
Maximum
6%
10%
12%
25%
50%
100%
Below 6% none of the award vests. Vesting between target points is on a straight line basis.
The COVID-19 pandemic had a particular impact on the EPS metric in 2020 (-9.4%), which negated the strong EPS
growth achieved in 2018 (+8.6%) and 2019 (+8.3%). As a result, the threshold level for this metric was not achieved
resulting in an award outcome of 0% out of a possible maximum of 50%.
TSR Performance Test
30% of the award vests according to the Group’s TSR performance over the period measured against the TSR
performance of a peer group of listed companies over the same three year performance period. The peer group
consists of Kerry and the following companies:
Chr. Hansen
Barry Callebaut
Corbion
Aryzta*
General Mills
Givaudan
Glanbia
Greencore
Danone
IFF
Kellogg’s
Sensient Technologies
McCormick & Co.
Symrise
Nestlé
Novozymes
Premier Foods
Tate & Lyle
Unilever
*
Aryzta will be replaced by Ingredion for awards granted in 2021 and subsequent years.
When assessing whether the performance hurdle has been met, this measurement is determined by reference to
the ranking of Kerry’s TSR over the three-year performance period, in comparison with the TSR performance of the
companies in the peer group. The awards vest in line with the following table:
Position of Kerry in the Peer Group
Percentage of the Award Which Vests
Below median
Median
0%
30%
Between median and 75th percentile
Straight line between 30% and 100%
Greater than 75th percentile
100%
The performance graph below shows Kerry’s TSR compared to the peer companies over the three year performance
period from 1 January 2018 to 31 December 2020 for the LTIP awards which issued in 2018. These awards have a
vesting date on or before 30 April 2021.
Kerry Group Annual Report 2020 140
120
100
80
60
40
20
0
-20
-40
-60
-80
-100
142
3 Year TSR: Kerry and Comparator 1 January 2018 - 31 December 2020
See chart on page 146, which illustrates the Group’s TSR performance from 2010 to 2020
Top Quartile
2nd Quartile
3rd Quartile
4th Quartile
140%
120%
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
-100%
1
r
e
e
P
2
r
e
e
P
3
r
e
e
P
4
r
e
e
P
5
r
e
e
P
6
r
e
e
P
Y
R
R
E
K
8
r
e
e
P
9
r
e
e
P
0
1
r
e
e
P
1
1
r
e
e
P
2
1
r
e
e
P
3
1
r
e
e
P
4
1
r
e
e
P
5
1
r
e
e
P
6
1
r
e
e
P
7
1
r
e
e
P
8
1
r
e
e
P
9
1
r
e
e
P
0
2
r
e
e
P
Vesting Level for TSR Metric
The outcome of the measurement of the TSR condition in relation to the 2018 awards is in the 2nd quartile, resulting
in an award outcome of 24.5% out of a possible maximum of 30%.
ROACE Performance Test
20% of the award vests according to the Group’s ROACE over the performance period. ROACE represents a good
perspective on the Group’s internal rate of return and financial added value for shareholders. ROACE supports the
strategic focus on growth and margins through ensuring cash is reinvested to generate appropriate returns.
This measurement is determined by reference to the ROACE in each of the three financial years included in the
performance period:
Return on Average Capital Employed
Percentage of the Award Which Vests
Threshold
Target
Maximum
10%
12%
14%
25%
50%
100%
Below 10% none of the award vests. Vesting between target points is on a straight line basis.
Vesting Level for ROACE Metric
The outcome of the measurement of the ROACE condition in relation to the 2018 award is a ROACE of 11.2% resulting
in a reward outcome of 8% out of a maximum of 20%.
Table 3: Overall Outcome of the 2018 LTIP Award Vesting in 2021
LTIP Metric*
Weighting %
Actual Vesting %
EPS
TSR
ROACE
50%
30%
20%
*
See TSR, EPS and ROACE tables above for details of performance metrics.
0%
24.5 %
8.0%
32.5%
Kerry Group Annual Report 2020DIRECTORS‘ REPORT
143
Summary of outstanding LTIP awards
The following table shows the Executive Directors’ and Company Secretary’s interests under the LTIP. Conditional
awards at 1 January 2020 relate to awards made in 2017, 2018 and 2019 which have a three year performance period.
The 2017 awards vested in 2020. The 2018 and 2019 awards will potentially vest in 2021 and 2022 respectively.
The market price of the shares on the date of each award is disclosed in note 27 to the financial statements.
Executive Directors’ and Company Secretary’s Interests in Long-Term Incentive Plan
Table 4: Individual Interest in LTIP (Audited)
LTIP Vesting and Conditional Awards
Conditional
Awards
at
1 January
2020
Share
Awards
Vested
During
the Year
Share
Option
Awards
Vested During
the Year
Share/Option
Awards
Lapsed
During
the Year
Conditional
Awards
Made
During
the Year
Conditional
Awards
at 31
December
2020
Share Price
at Date of
Conditional
Award Made
During the Year
LTIP
Scheme
Directors
Edmond Scanlon
2013
77,446
Marguerite Larkin
2013
20,569
–
–
Gerry Behan
2013
57,405
(13,906)
(11,524)
(6,827)
21,821
80,916
–
–
–
12,145
32,714
(8,238)
15,354
50,615
€109
€109
€109
Company Secretary
Ronan Deasy
2013
13,014
–
(2,212)
(1,311)
2,628
12,119
€109
Conditional LTIP awards made on 9 March 2020 have a three year performance period and will potentially vest in
March 2023. 50% of the shares/share options which potentially vest under the LTIP, are issued immediately upon
vesting. The remaining 50% of the award is issued to participants following a two year deferral period in March 2025.
The following table shows the share options which are held by the Executive Directors and the Company Secretary
under the STIP and LTIP:
Table 5: Share Options Held Under the STIP and LTIP (Audited)
Share Options
Outstanding at
1 January 2020
Share Options
Exercised
During the Year
Share Options
Vested During
the Year
Share Options
Outstanding at
31 December 2020
Exercise Price
Per Share
Directors
Edmond Scanlon1
Marguerite Larkin1
Company Secretary
15,823
696
–
–
14,532
1,560
30,355
2,256
€0.125
€0.125
Ronan Deasy
3,413
(2,078)
2,212
3,547
€0.125
Note 1: Share Options which vested in March 2020 related to 2017 LTIP awards and 25% of the 2019 STIP (paid in March 2020). 50% of share
options vested under the LTIP are subject to a two year deferral period and 25% of the STIP payments which are delivered in share
options are subject to a two year deferral period.
Once vested, share options under the LTIP can be exercised for up to seven years before they lapse. For share options
subject to the two year deferral period, they can be exercised for up to five years following the end of the two year
deferral period, before they lapse i.e. seven years following the vest date.
Kerry Group Annual Report 2020
144
Executive Directors’ Pensions
The pension benefits under defined benefit pension plans for Gerry Behan during the year are outlined in the
following table.
Table 6: Defined Benefit – Pensions Individual Summary (Audited)
Accrued Benefits on Leaving Service at End of Year
Increase During the Year
(Excluding Inflation)
$’000
Accumulated Total at
End of Year
$’000
Transfer Value of Increase in
Accumulated Accrued Benefits
$’000
Gerry Behan
2020
2019
31
25
583
552
451
321
Note: The table shows the Executive Director’s pension in the currency of payment to ensure clarity in reflecting the year on year
payment comparisons.
Note: Contributions were made to an Irish defined contribution plan in respect of Edmond Scanlon. Marguerite Larkin receives a taxable
cash payment in lieu of pension benefits. These contributions are reflected in the single figure table (table 1) on page 137.
Payments to Former Directors
No payments were made to former Directors during 2020 (2019: €nil) in respect of their duties as Directors.
Vested 2015 LTIP awards and vested 2017 STIP awards, which were subject to a two year deferral period and
delivered in 2020 in respect of former Executive Directors, were disclosed in previous annual reports when earned
and therefore are not disclosed separately.
Payment for Loss of Office
There were no payments for loss of office in 2020 (2019: €nil).
Non-Executive Director Remuneration
Table 7: Remuneration paid to non-Executive Directors in 2020 (Audited)
Hugh Brady
Gerard Culligan
Karin Dorrepaal
Joan Garahy
Emer Gilvarry*
James C. Kenny**
Tom Moran
Con Murphy
Christopher Rogers
Philip Toomey
Fees 20201
€
Fees 2019
€
91,875
73,125
91,875
98,000
78,000
98,000
120,000
128,000
14,666
39,000
103,125
73,125
102,037
335,156
-
117,000
105,000
78,000
103,000
357,500
1,043,984
1,162,500
Note 1: As a solidarity gesture in light of COVID-19 and those impacted, the Chairman and non-Executive Directors volunteered a 25%
reduction in their fees for a three month period.
Emer Gilvarry was appointed to the Board on 1 November 2020.
James Kenny retired from the Board on 30 April 2020.
*
**
Non-Executive Directors are reimbursed for travel and accommodation expenses and any personal tax that may be
due on those expenses. The gross amount of these expenses that were deemed to be taxable is €1,528.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT
145
Directors’ and Company Secretary’s Interests
There have been no contracts or arrangements with the Company or any subsidiary during the year, in which a
Director of the Company was materially interested, and which were significant in relation to the Group’s business.
The interests of the Directors and the Company Secretary of the Company and their spouses and minor children in
the share capital of the Company, all of which were beneficial unless otherwise indicated, are shown below:
Table 8: Directors' and Company Secretary Shareholdings
31 December
2020
Ordinary
Shares
Number
31 December
2020
Share
Options
Number
31 December
2020
Total
Number
31 December
2019
Ordinary
Shares
Number
31 December
2019
Share
Options
Number
31 December
2019
Total
Number
Directors
Gerry Behan
- Deferred1
Hugh Brady
Gerard Culligan
Karin Dorrepaal
Joan Garahy
Emer Gilvarry
James C. Kenny
Marguerite Larkin
- Deferred1
Tom Moran
Con Murphy
Christopher Rogers
Edmond Scanlon
- Deferred1
Philip Toomey
Company Secretary
Ronan Deasy
- Deferred1
55,581
16,071
–
–
–
1,050
–
–
1,500
–
539
7,721
640
9,611
–
6,000
3,230
–
–
–
–
–
–
–
–
–
–
2,256
–
–
–
17,199
13,156
–
1,106
2,441
55,581
16,071
–
–
–
47,830
17,074
1,250
–
–
1,050
1,050
–
–
1,500
2,256
539
7,721
640
26,810
13,156
6,000
4,336
2,441
–
–
1,500
–
539
7,721
640
9,611
–
6,000
3,230
–
–
–
–
–
–
–
–
–
–
696
–
–
–
8,195
7,628
–
998
2,415
47,830
17,074
1,250
–
–
1,050
–
–
1,500
696
539
7,721
640
17,806
7,628
6,000
4,228
2,415
Note 1: The deferred shares and share options above, relate to 25% of the Executive Directors 2018 and 2019 STIP awards and 50% of the
2016 and 2017 LTIP award (vested in March 2019 and 2020 respectively). These awards are subject to a two year deferral period and
will be delivered in shares/share options in March 2021 and March 2022 respectively.
Shareholding Guidelines
The table below sets out the Executive Directors’ shareholding at 31 December 2020 shown as a multiple of
basic salary. Refer to the Remuneration Policy Table on page 130 in Section C for details of the Executive Director
shareholding requirements.
Table 9: Individual Shareholding as a Multiple of Basic Salary
Executive Director
Edmond Scanlon
Marguerite Larkin2
Gerry Behan
As a Multiple of Basic Salary1
4.0x
0.6x
10.0x
Note 1: The share price used to calculate the above is the share price as at 31 December 2020 and the shareholding is based on all shares
held and vested option awards (including deferred) reflected in table 8 above.
Note 2: Marguerite Larkin, in line with the proposed new policy, has to increase her shareholding to at least the minimum 2.5x basic salary
through the retention of 50% of vested annual bonus and LTIP shares/options (after sales to meet taxes).
Kerry Group Annual Report 2020 600
500
146
400
300
200
TSR Performance and Chief Executive Officer Remuneration
The graph below illustrates the TSR performance of the Group over the past ten years showing the increase in value
100
of €100 invested in Group’s shares from 31 December 2010 to 31 December 2020. Also outlined in the table on
page 147, the remuneration of the Chief Executive Officer is calculated in line with the methodology captured under
legislation which was enacted for UK incorporated companies.
0
10 Year Total Shareholder Return
(Value of €100 Invested on 31/12/2010)
€600
€500
€400
€300
€200
€100
€0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Kerry
MSCI Europe Food Producers
E300 Food & Beverage
Table 10: Remuneration Paid to the CEO 2011–2020
The Committee believes that the Policy and the supporting reward structure provide a clear alignment with the
strategic objectives and performance of the Group. To maintain this relationship, the Committee regularly reviews
the business priorities and the environment in which the Group operates. The table below shows the Group CEO’s
total remuneration over the last 10 years and the achieved annual variable and long-term incentive pay awards as a
percentage of the plan maximum.
Total remuneration
€’000
Annual incentive
payout as a %
of maximum
LTIP
achieved as a
% of maximum
CEO – Stan McCarthy
2011
2012
2013
2014
2015
2016
2017
CEO – Edmond Scanlon
20171
2018
2019
2020
3,283
3,538
3,592
3,283
4,161
3,625
5,285
808
2,577
3,991
2,323
73%
74%
70%
57%
58%
62%
75%
75%
60%
76%
0%
100%
100%
100%
91.9%
61.8%
29.4%
62.3%
62.3%
63.7%
62.8%
32.5%
Note 1: Edmond Scanlon was appointed CEO and to the Board on 1 October 2017 and his remuneration reflected in the table above relates
to remuneration from that date.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT
147
Table 11: Annual change in pay for Directors and all employees
In line with the implementation of Articles 9a and 9b of European Directive 2017/828/EC1 (commonly known as
the Revised Shareholder Rights Directive or SRDII) into the Irish Companies Act 2014, the table below shows the
percentage change in each Director’s total remuneration and the global average total remuneration of an employee
from the year ended 31 December 2019 to the year ended 31 December 2020.
Year-on-year change in pay for Directors compared to the global average employee1
Executive Directors
Edmond Scanlon
Marguerite Larkin
Gerry Behan
Non-Executive Directors
Hugh Brady
Gerard Culligan
Karin Dorrepaal
Joan Garahy
Emer Gilvarry*
James C. Kenny**
Tom Moran***
Con Murphy
Christopher Rogers***
Philip Toomey
All Group Employees
TSR Performance2
2020
€
2,323,000
1,115,000
1,762,000
91,875
73,125
91,875
120,000
14,666
39,000
103,125
73,125
102,037
335,156
46,389
2019
€
3,991,000
1,558,000
3,329,000
98,000
78,000
98,000
128,000
-
117,000
105,000
78,000
103,000
357,500
45,824
YoY
Change %
(41.8%)
(28.4%)
(47.1%)
(6.3%)
(6.3%)
(6.3%)
(6.3%)
100%
(66.7%)
(1.8%)
(6.3%)
(0.9%)
(6.3%)
1.2%
7.4%
Note 1: Calculated by dividing the aggregate payroll costs of employees in 2020 (excluding social welfare costs and costs related to Executive
Directors) by the average number of employees in 2020, as disclosed in note 4 to the consolidated financial statements.
Note 2: TSR performance for the period from 31 December 2019 to 31 December 2020.
*
**
***
Emer Gilvarry joined the Board on 1 November 2020.
James Kenny retired from the Board on 30 April 2020.
Christopher Rogers was appointed to the Remuneration Committee in 2020 and received an additional Committee membership
fee as a result and Tom Moran received a full year fee for his role as the designated employee engagement Director following his
appointment to that role in June 2019 which are the reasons why their % decreases are not in line with those for the other Directors.
Performance of the Company: 5 Year Total Shareholder Return
180
160
140
120
100
80
€180
€160
€140
€120
€100
€80
2015
2016
2017
2018
2019
2020
Kerry
MSCI Europe Food Producers
E300 Food & Beverage
Kerry Group Annual Report 2020
148
Relative Importance of Spend on Pay
The total amount spent on Executive Director remuneration (including Long-Term Incentive Plan) and overall
employee pay is outlined below in relation to retained profit, dividends paid and taxation paid.
2020
2019
Director Remuneration (0.2%)
Director Remuneration (0.4%)
Profit after tax
before NTIs (26.5%)
Dividends Paid (6.7%)
Taxation Paid (10.3%)
Employee Costs (56.3%)
Profit after tax
before NTIs (30%)
Dividends Paid (5.8%)
Taxation Paid (8.9%)
Employee Costs (54.9%)
Dilution
The Group offers Executive Directors and senior management the opportunity to participate in share-based schemes
as part of the Group’s Remuneration Policy. In line with best practice guidelines, the Company ensures that the level
of share awards granted under all share schemes does not exceed 10% of the Group’s share capital over a rolling ten
year period, with a further limitation of 5% in any ten year period in respect of discretionary schemes. The dilution
resulting from all vested share awards/share options for the ten year period to 31 December 2020 is 0.9%. This level
of dilution is well below the maximum dilution level recommended for executive share-based incentive plans.
The potential future dilution level from unvested share awards/share options as a result of these schemes is
a further 0.7%.
Table 12: CEO Ratio
The UK Companies (Miscellaneous Reporting) Regulations 2018 require certain UK incorporated companies to
publish the ratio of CEO remuneration to UK staff pay. Although not a requirement for Irish incorporated companies,
the ratio of the CEO’s total remuneration to that of the median Irish employee is disclosed in the table below, in line
with the Group’s commitment to ensure that its remuneration policies, practices and reporting reflect best corporate
governance practices.
In providing the CEO ratio we have used Method C as set out in the regulations but have applied the principles
of Method A.
Chief Executive Officer: Total remuneration
Median Irish Employee: Total remuneration
Median Irish Employee: Salary only
Median Pay Ratio – Total remuneration
Median Pay Ratio – Excluding all variable short and long-term incentives
2020
2019
€2,323,000
€3,991,000
€42,137
€39,654
55x
33x
€40,592
€37,823
98x
34x
The Committee believes that our senior executives should have a significant proportion of their pay directly linked
to Group performance in order to drive alignment with shareholders. A significant portion of the Chief Executive
Officer’s remuneration is therefore delivered through the Group’s short-term and long-term incentive plans where
awards are linked to Group performance and share price movements over time. This means that ratios will depend
significantly on short-term and long-term incentive outturns and may fluctuate from year to year as a result.
The CEO pay ratio based on total remuneration has reduced year on year. Performance outturns in 2019 were strong
under both the short-term and long-term incentive plans with both outturns exceeding target. In 2020, as reported
in previous sections, there was no STIP payout and the LTIP award for the three-year period ended 31 December
2020 had a lower vesting outturn compared to prior years. As a result, the total remuneration for the Chief Executive
Officer has reduced in 2020 as compared to 2019. In addition, the single figure amount for the CEO reflects a 25%
voluntary reduction in basic salary for three months in 2020 in light of the COVID-19 pandemic.
In comparison the remuneration earned by the median Irish employee has increased year on year due to annual pay
increases with basic pay levels maintained despite COVID-19. As the median Irish employee does not participate in
the Group’s short-term or long-term performance related incentive plans, the Committee has provided the median
pay ratio excluding these variable pay elements again in 2020 and this ratio has also reduced year on year.
Kerry Group Annual Report 2020DIRECTORS‘ REPORT 149
Statement on Shareholder Voting
Below is an overview of the voting which took place at the most recent AGMs to approve the Directors’ Remuneration
Policy and the Directors' Remuneration Report.
Table 13: Votes on Remuneration
Total Votes Cast
Votes For
Votes Against
Votes Withheld/Abstained
Directors' Remuneration Policy (2018 AGM)
100,762,070
98,418,376
2,343,694
261,701
Directors' Remuneration Report (2020 AGM)
97.7%
2.3%
111,061,320
107,298,741
3,762,579
1,368,712
96.6%
3.4%
The Committee appreciates the level of support shown by the shareholders for the Remuneration Report and is
committed to continued consultation with shareholders with regard to the Remuneration Policy.
Kerry Group Annual Report 2020 150
INDEPENDENT AUDITORS‘ REPORT
INDEPENDENT AUDITORS' REPORT
Independent auditors’ report
to the members of Kerry Group plc
Separate opinion in relation to IFRSs as issued
by the IASB
As explained in note 1 to the financial statements, the
Group, in addition to applying IFRSs as adopted by the
European Union, has also applied IFRSs as issued by the
International Accounting Standards Board (IASB).
In our opinion, the consolidated financial statements
comply with IFRSs as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (Ireland) (‘ISAs (Ireland)’) and
applicable law. Our responsibilities under ISAs (Ireland)
are further described in the Auditors’ responsibilities
for the audit of the financial statements section of our
report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We remained independent of the Group in accordance
with the ethical requirements that are relevant to our
audit of the financial statements in Ireland, which
includes IAASA’s Ethical Standard as applicable to
listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by IAASA’s Ethical Standard
were not provided to the Group or the Company.
Other than those disclosed in note 3 to the financial
statements, we have provided no non-audit services to
the Group or the Company in the period from 1 January
2020 to 31 December 2020.
Report on the audit of the
financial statements
Opinion
In our opinion, Kerry Group plc’s consolidated financial
statements and Company financial statements (the
‘financial statements’):
– give a true and fair view of the Group’s and the
Company’s assets, liabilities and financial position as
at 31 December 2020 and of the Group’s profit and
the Group’s and the Company’s cash flows for the year
then ended;
– have been properly prepared in accordance with
International Financial Reporting Standards (‘IFRSs’)
as adopted by the European Union and, as regards
the Company’s financial statements, as applied in
accordance with the provisions of the Companies Act
2014; and
– have been properly prepared in accordance with the
requirements of the Companies Act 2014 and, as
regards the Group financial statements, Article 4 of the
IAS Regulation.
We have audited the financial statements, included
within the Annual Report, which comprise:
– the Consolidated and Company balance sheets as at
31 December 2020;
– the Consolidated income statement and Consolidated
statement of comprehensive income for the year then
ended;
– the Consolidated and Company statements of cash
flows for the year then ended;
– the Consolidated and Company statements of changes
in equity for the year then ended; and
– the notes to the financial statements, which include a
description of the significant accounting policies.
Certain required disclosures have been presented
elsewhere in the Annual Report, rather than in the
notes to the financial statements and are described as
being an integral part of the financial statements as set
out in the basis of preparation on page 166. These are
cross-referenced from the financial statements and are
identified as audited.
Our opinion is consistent with our reporting to the
Audit Committee.
Kerry Group Annual Report 2020 Our audit approach
Overview
151
Materiality
– €34.5 million (2019: €38 million) - Consolidated financial statements.
– Based on approximately 5% of three-year average profit before taxation and non-
trading items. In the prior year, materiality was based on approximately 5% of profit
before taxation and non-trading items.
– €8 million (2019: €8 million) - Company financial statements.
– Based on approximately 1% of Net Assets.
Audit scope
– We conducted audit work in 43 reporting components. We selected these components
due to their size or characteristics and to ensure appropriate audit coverage. An
audit of the full financial information of 33 components was performed and specified
procedures on selected account balances of a further 10 components were performed.
We also performed audit work at each of the principal shared service centres.
– Taken together, the reporting components where an audit of the full financial
information was performed accounted for in excess of 90% of Consolidated revenues
and approximately 89% of Consolidated profit before taxation and non-trading items.
Key audit matters
– Goodwill and indefinite life intangible assets impairment assessment.
– Business combinations.
– Income taxes.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements, for example in
respect of significant accounting estimates that involved making assumptions and considering future events that
are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal
controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material
misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the
audit of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the results of our procedures thereon, were addressed in
the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Kerry Group Annual Report 2020
152
INDEPENDENT AUDITORS‘ REPORT
Key audit matter
How our audit addressed the key audit matter
Goodwill and indefinite life intangible assets impairment
assessment
Refer to note 1 ‘Statement of accounting policies’ and note 12
‘Intangible assets’.
The Group has goodwill and indefinite life intangible assets
of €3,912.4 million at 31 December 2020 representing
approximately 41% of the Group’s total assets at year end.
Goodwill and indefinite life intangible assets are subject to
impairment testing on an annual basis or more frequently if
there are indicators of impairment.
We determined this to be a key audit matter given the scale
of the assets and because the determination of whether an
impairment charge for goodwill or indefinite life intangible
assets was necessary involves significant judgement in
estimating the future results of the business, including the
potential impact of COVID-19 on those results and determining
the appropriate discount rate to use.
Business combinations
Refer to note 1 ‘Statement of accounting policies’ and note 29
‘Business combinations’.
The Group completed 3 acquisitions during 2020, the most
significant of which were Bio-K Plus International Inc. and
Shandong Tianbo Food Ingredients Co., Ltd which are in the
Americas and APMEA regions of the Taste & Nutrition segment.
The Group was required to determine the fair values of all
acquired assets and liabilities including the identification and
valuation of intangible assets. The most significant acquired
asset in all cases was brand related intangibles.
In accordance with IFRS3, ‘Business Combinations’, the
valuations referred to above have been prepared on a
provisional basis. The Group will finalise its valuations within
the 12-month measurement period.
We determined this to be a key audit matter as significant
judgement is exercised in selecting an appropriate valuation
methodology.
Judgement is also exercised in determining assumptions such
as revenue growth rates and the excess earnings rate which
underlie the cash flows in the models.
Other significant assumptions include the discount rate and
contributory asset charge.
Our audit team, assisted by our in-house valuation experts,
interrogated the Group's impairment models and evaluated the
methodology followed and key assumptions used.
We assessed management's future cash flow forecasts, and
the process by which they were drawn up, and concluded they
were consistent with the latest management approved five
year forecast. In evaluating these forecasts we considered
the Group’s historic performance, its past record of achieving
strategic objectives and management’s assessment of the likely
impact which COVID-19 may have on financial performance. We
also tested the mathematical accuracy of the cash flow model.
We satisfied ourselves as to the appropriateness of the Group's
forecast growth rate assumptions used to calculate terminal
values at year five, by comparing them to independent sources
(for example, OECD statistics) of projected growth rates for
each region.
We challenged management’s calculation of the discount rates
used by recalculating an acceptable range of discount rates
(adjusted to reflect risks associated with each Group of CGUs)
using observable inputs from independent external sources
and concluded the discount rates used by management fell
within that range.
We also considered management’s sensitivity analysis and
performed our own sensitivity analysis on the impact of
changes in key assumptions on the impairment assessment, for
example the cash flows, discount rates and the rates of growth
assumed by management.
We assessed the appropriateness of the related disclosures
within the financial statements.
We obtained and evaluated the reports prepared by
management's valuation specialists to value brand related
intangibles.
We were assisted by our in-house valuation experts in assessing
the reasonableness of the valuation methodologies and
assumptions used by the Group.
We considered the assumptions used to derive the cash flows
underlying the valuation model, (including the growth rate
and the excess earnings rate) by agreeing them to the board
approved business case and external data where available.
In evaluating these forecasts we considered any likely impact
which COVID-19 may have on financial performance and how
this was reflected in the valuation models.
We also considered the discount rate and contributory asset
charge in light of the acquiree’s industry and geography.
We were satisfied that the methodology and assumptions used
were reasonable.
Kerry Group Annual Report 2020
153
Key audit matter
Income taxes
Refer to note 1 ‘Statement of accounting policies’,
note 7 ‘Income taxes’ and note 17 ‘Deferred tax assets
and liabilities’.
The global nature of the Group means that it operates
across a large number of jurisdictions and is subject to
periodic challenges by local tax authorities on a range
of tax matters during the normal course of business.
Tax legislation is open to different interpretations and
the tax treatments of many items are uncertain. Tax
audits can require several years to conclude, and transfer
pricing judgements may impact the Group’s tax liabilities.
Management judgement and estimation is required in the
measurement of uncertain tax positions in the context of
the recognition of current and deferred tax assets/liabilities.
We determined this to be a key audit matter due to
its inherent complexity and the estimation and judgement
involved in the measurement of uncertain tax positions
in the context of the recognition of current and deferred
tax assets/liabilities.
How our audit addressed the key audit matter
We obtained an understanding of the Group tax strategy through
discussions with management and the Group's in-house tax
specialists.
The team, assisted by PwC International and Irish taxation
specialists, challenged judgements used and estimates made
by management to measure uncertain tax positions in the
context of the recognition of current and deferred tax assets/
liabilities. This included obtaining explanations regarding the
tax treatment applied to material transactions and evidence to
corroborate management’s explanations. Such evidence included
management’s communications with local tax authorities and
copies of the tax advice obtained by management from its external
tax advisors including transfer pricing studies and the assessment
of the impact of COVID-19 on these studies where appropriate.
Based on the evidence obtained, while noting the inherent
uncertainty with such tax matters, we determined the measurement
of uncertain tax positions in the context of the recognition of current
and deferred tax assets/liabilities as at 31 December 2020 to be
within an acceptable range of reasonable estimates.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we
performed sufficient work to be able to give an opinion
on the financial statements as a whole, taking into
account the structure of the Group, the accounting
processes and controls, including those performed at
the Group’s shared service centres and the industry in
which the Group operates.
The Group is structured along two operating segments:
Taste & Nutrition and Consumer Foods across 31
countries. The majority of the Group’s components
are supported by one of four principal shared service
centres in Ireland, Malaysia, and the United States.
We determined that an audit of the full financial
information should be performed at 33 components
due to their size or risk characteristics and to ensure
appropriate coverage. These 33 components span
10 countries and include components that control
central Group functions such as Treasury and Employee
Benefits. Specific audit procedures on certain balances
and transactions were performed at 10 of the remaining
reporting components primarily to ensure appropriate
audit coverage. Taken collectively these components
represent the principal business of the Group and
account for in excess of 90% of Group revenue and
approximately 89% of Group profit before taxation and
non-trading items.
The Group team performed the audit of the central
function components and component auditors within
PwC ROI and from other PwC network firms, operating
under our instruction, performed the audit on all other
in scope components and the required supporting audit
work at each of the four principal shared service centres.
The Group team were responsible for the scope and
direction of the audit. Where the work was performed
by component auditors, we determined the level of
involvement the Group team needed to have to be
able to conclude whether sufficient appropriate audit
evidence had been obtained as a basis for our opinion
on the consolidated financial statements as a whole.
Due to the current restrictions on travel and social
distancing measures, enacted as a response to the
global pandemic, the Group engagement leader and
senior members of the Group engagement team used
video conferencing to facilitate our oversight of the
component auditor work and had video meetings and
discussions with management and component audit
teams in Ireland, the USA, Brazil, Mexico and the Asia
Pacific region.
The meetings with our component teams confirmed
their audit approach. The meetings also involved
discussing and understanding the significant audit
risk areas, and obtaining updates on local laws and
regulations and other relevant matters. In addition to
the meetings noted above, the Group team interacted
regularly with the component teams during all stages
of the audit. We received a detailed memorandum of
examination on work performed and relevant findings
in addition to an audit report which supplemented our
understanding of the individual components. In addition
to this, the Group engagement team reviewed certain
audit working papers of significant components. Post
audit conference calls were held with all in scope audit
teams to discuss their audit findings.
This, together with audit procedures performed by the
Group team over IT systems, treasury, post-retirement
benefits, the consolidation process and key audit
matters including uncertain tax positions, impairment
testing of goodwill and indefinite lived intangible assets,
and business combinations, gave us the evidence we
needed for our opinion on the consolidated financial
statements as a whole.
Kerry Group Annual Report 2020
154
INDEPENDENT AUDITORS‘ REPORT
Materiality
The scope of our audit was influenced by our application
of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative
considerations, helped us to determine the scope of
our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line
items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole
as follows:
Consolidated
financial
statements
Company
financial
statements
Overall
materiality
€34.5 million
(2019: €38 million).
€8 million
(2019: €8 million).
How we
determined it
Rationale for
benchmark
applied
Approximately 1%
of Net Assets.
The entity is a
holding Company
whose main
activity is the
management of
investments in
subsidiaries.
Approximately 5% of
three-year average profit
before taxation and
non-trading items. In the
prior year, materiality was
calculated using 5% of
profit before taxation and
non-trading items.
We applied this
benchmark because
in our view this is a
metric against which the
recurring performance of
the Group is commonly
measured by its
stakeholders and it results
in using a materiality level
that excludes the impact
of volatility in earnings.
The COVID-19 pandemic
impacted the results of
the business for the year
ended 31 December 2020.
However, the overall size
of the business, both
geographically and in
terms of products, did
not reduce.
We agreed with the Audit Committee that we would
report to them misstatements identified during our
audit above €1.7 million (Group audit) (2019: €1.8 million)
and €400,000 (Company audit) (2019: €400,000) as well
as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group
and Company’s ability to continue to adopt the going
concern basis of accounting included:
– evaluating management’s base case and downside
scenarios for the period of the going concern
assessment (being the period of 12 months from the
date on which the financial statements are authorised
for issue), and challenging the key assumptions. In
evaluating these forecasts we considered the Group’s
historic performance, its past record of achieving
strategic objectives and management’s assessment
of the likely impact which COVID-19 may have on
financial performance and liquidity for a period of
12 months from the date on which the financial
statements are authorised for issue;
– we also considered whether the assumptions
underlying the base case were consistent with related
assumptions used in other areas of the entity's
business activities, for example in testing for non-
financial asset impairment;
– considering the Group’s available financing and
maturity profile to assess liquidity through the going
concern assessment period;
– testing the mathematical integrity of the forecasts and
the models and reconciling these to board approved
budgets; and
– performing our own independent sensitivity analysis
to assess further appropriate downside scenarios.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group’s or the Company’s ability
to continue as a going concern for the period of the
going concern assessment.
In auditing the financial statements, we have concluded
that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is appropriate.
However, because not all future events or conditions
can be predicted, this conclusion is not a guarantee as
to the Group’s or the Company’s ability to continue as a
going concern.
In relation to the Company’s reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation
to the directors’ statement in the financial statements
about whether the directors considered it appropriate to
adopt the going concern basis of accounting.
We are required to report if the directors’ statement
relating to going concern in accordance with Rule 9.8.6
R (3) of the Listing Rules of the UK Financial Conduct
Authority and Rule 6.1.82 (3) (a) of the Listing Rules
for Euronext Dublin is materially inconsistent with our
knowledge obtained in the audit. We have nothing to
report in respect of this responsibility.
Our responsibilities and the responsibilities of the
directors with respect to going concern are described in
the relevant sections of this report.
Kerry Group Annual Report 2020 Reporting on other information
The other information comprises all of the information
in the Annual Report other than the financial statements
and our auditors’ report thereon. The directors are
responsible for the other information. Our opinion
on the financial statements does not cover the other
information and, accordingly, we do not express an
audit opinion or, except to the extent otherwise explicitly
stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements
or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify
an apparent material inconsistency or material
misstatement, we are required to perform procedures
to conclude whether there is a material misstatement
of the financial statements or a material misstatement
of the other information. If, based on the work we
have performed, we conclude that there is a material
misstatement of this other information, we are required
to report that fact. We have nothing to report based on
these responsibilities.
With respect to the Directors’ Report, we also considered
whether the disclosures required by the Companies Act
2014 (excluding the information included in the ‘Non
Financial Statement’ as defined by that Act on which we
are not required to report) have been included.
Based on the responsibilities described above and
our work undertaken in the course of the audit, ISAs
(Ireland), the Companies Act 2014 (CA14) and the
Listing Rules applicable to the Company (Listing Rules)
require us to also report certain opinions and matters
as described below (required by ISAs (Ireland) unless
otherwise stated).
Directors’ Report
– In our opinion, based on the work undertaken in the course
of the audit, the information given in the Directors’ Report
(excluding the information included in the ‘Non Financial
Statement’ on which we are not required to report) for
the year ended 31 December 2020 is consistent with the
financial statements and has been prepared in accordance
with the applicable legal requirements. (CA14)
– Based on our knowledge and understanding of the Group
and Company and their environment obtained in the course
of the audit, we did not identify any material misstatements
in the Directors’ Report (excluding the information included
in the ‘Non Financial Statement’ on which we are not
required to report). (CA14)
155
Corporate governance statement
– In our opinion, based on the work undertaken in the course
of the audit of the financial statements,
– the description of the main features of the internal control
and risk management systems in relation to the financial
reporting process included in the Corporate Governance
Report; and
– the information required by Section 1373(2)(d) of the
Companies Act 2014 included in the Report of the
Directors;
is consistent with the financial statements and has been
prepared in accordance with section 1373(2) of the
Companies Act 2014. (CA14)
– Based on our knowledge and understanding of the
Company and its environment obtained in the course of
the audit of the financial statements, we have not identified
material misstatements in the description of the main
features of the internal control and risk management
systems in relation to the financial reporting process
and the information required by section 1373(2)(d) of the
Companies Act 2014 included in the Corporate Governance
Report and the Report of the Directors. (CA14)
– In our opinion, based on the work undertaken during
the course of the audit of the financial statements,
the information required by section 1373(2)(a),(b),(e)
and (f) of the Companies Act 2014 and regulation 6 of
the European Union (Disclosure of Non-Financial and
Diversity Information by certain large undertakings and
Groups) Regulations 2017 is contained in the Directors’
Report. (CA14)
The directors’ assessment of the prospects of the Group
and of the principal risks that would threaten the
solvency or liquidity of the Group
We have nothing material to add or to draw attention to
regarding:
– The directors’ confirmation on page 106 of the Annual
Report that they have carried out a robust assessment of
the principal risks facing the Group, including those that
would threaten its business model, future performance,
solvency or liquidity.
– The disclosures in the Annual Report that describe those
risks and explain how they are being managed or mitigated.
– The directors’ explanation on page 83 of the Annual Report
as to how they have assessed the prospects of the Group,
over what period they have done so and why they consider
that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the Group
will be able to continue in operation and meet its liabilities
as they fall due over the period of their assessment,
including any related disclosures drawing attention to any
necessary qualifications or assumptions.
We have nothing to report having performed a review of
the directors’ statement that they have carried out a robust
assessment of the principal risks facing the Group and the
directors’ statement in relation to the longer-term viability of
the Group. Our review was substantially less in scope than an
audit and only consisted of making inquiries and considering
the directors’ process supporting their statements; checking
that the statements are in alignment with the relevant
provisions of the UK Corporate Governance Code (the ‘Code’);
and considering whether the statements are consistent with
the knowledge and understanding of the Group and the
Company and their environment obtained in the course of the
audit. (Listing Rules)
Kerry Group Annual Report 2020 156
INDEPENDENT AUDITORS‘ REPORT
Other Code provisions
We have nothing to report in respect of our responsibility to
report when:
– The statement given by the directors on page 92 that
they consider the Annual Report taken as a whole to be
fair, balanced and understandable and provides the
information necessary for the members to assess the
Group’s and Company’s position and performance,
business model and strategy is materially inconsistent
with our knowledge of the Group and Company obtained
in the course of performing our audit.
– The section of the Annual Report on pages 108-109
describing the work of the Audit Committee does not
appropriately address matters communicated by us to the
Audit Committee.
– The directors’ statement relating to the Company’s
compliance with the Code and the Irish Corporate
Governance Annex does not properly disclose a
departure from a relevant provision of the Code or
the Annex specified, under the Listing Rules, for review
by the auditors.
Responsibilities for the financial statements
and the audit
Responsibilities of the directors for the
financial statements
As explained more fully in the Directors’ Responsibility
Statement set out on pages 91-92, the directors
are responsible for the preparation of the financial
statements in accordance with the applicable framework
and for being satisfied that they give a true and fair view.
The directors are also responsible for such internal
control as they determine is necessary to enable the
preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group’s and the Company’s
ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using
the going concern basis of accounting unless the
directors either intend to liquidate the Group or the
Company or to cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole
are free from material misstatement, whether due to
fraud or error, and to issue an auditors’ report that
includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (Ireland) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
financial statements.
Our audit testing might include testing complete
populations of certain transactions and balances,
possibly using data auditing techniques. However, it
typically involves selecting a limited number of items
for testing, rather than testing complete populations.
We will often seek to target particular items for testing
based on their size or risk characteristics. In other
cases, we will use audit sampling to enable us to draw a
conclusion about the population from which the sample
is selected.
A further description of our responsibilities
for the audit of the financial statements is located
on the IAASA website at:
https://www.iaasa.ie/getmedia/b2389013-1cf6-
458b-9b8f-a98202dc9c3a/Description_of_auditors_
responsibilities_for_audit.pdf
This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared
for and only for the Company’s members as a body in
accordance with section 391 of the Companies Act 2014
and for no other purpose. We do not, in giving these
opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is
shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Kerry Group Annual Report 2020 157
Other required reporting
Companies Act 2014 opinions on other matters
– We have obtained all the information and explanations
which we consider necessary for the purposes of our
audit.
– In our opinion the accounting records of the Company
were sufficient to permit the Company financial
statements to be readily and properly audited.
– The Company balance sheet is in agreement with the
accounting records.
Other exception reporting
Directors’ remuneration and transactions
Under the Companies Act 2014 we are required to report
to you if, in our opinion, the disclosures of directors’
remuneration and transactions specified by sections
305 to 312 of that Act have not been made. We have no
exceptions to report arising from this responsibility.
We are required by the Listing Rules to review the
six specified elements of disclosures in the report to
shareholders by the Board on directors’ remuneration.
We have no exceptions to report arising from this
responsibility.
Prior financial year Non Financial Statement
We are required to report if the Company has not
provided the information required by Regulation 5(2) to
5(7) of the European Union (Disclosure of Non-Financial
and Diversity Information by certain large undertakings
and Groups) Regulations 2017 in respect of the prior
financial year. We have nothing to report arising from
this responsibility.
Appointment
We were appointed by the members on 28 April 2016
to audit the financial statements for the year ended 31
December 2016 and subsequent financial periods. The
period of total uninterrupted engagement is 5 years,
covering the years ended 31 December 2016 to 31
December 2020.
John McDonnell
for and on behalf of PricewaterhouseCoopers
Chartered Accountants and Statutory Audit Firm
Dublin
15 February 2021
Kerry Group Annual Report 2020
158
FINANCIAL STATEMENTS
Consolidated Income Statement
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
Before
Non-
Trading
Items
2020
€’m
Non-
Trading
Items
2020
€’m
Before
Non-
Trading
Items
2019
€’m
Non-
Trading
Items
2019
€’m
Total
2020
€’m
Notes
Continuing operations
Revenue
Trading profit
2
6,953.4
2/3
797.2
Intangible asset amortisation
12
(70.1)
-
-
-
6,953.4
7,241.3
797.2
902.7
(70.1)
(64.3)
-
-
-
Total
2019
€’m
7,241.3
902.7
(64.3)
Non-trading items
Operating profit
Finance income
Finance costs
Profit before taxation
5
3
6
6
-
(19.4)
(19.4)
-
(110.9)
(110.9)
727.1
(19.4)
707.7
838.4
(110.9)
727.5
0.2
(72.6)
-
-
0.2
0.3
(72.6)
(81.9)
-
-
0.3
(81.9)
654.7
(19.4)
635.3
756.8
(110.9)
645.9
Income taxes
7
(85.1)
3.9
(81.2)
Profit after taxation attributable to owners of the parent
569.6
(15.5)
554.1
(98.6)
658.2
19.2
(79.4)
(91.7)
566.5
Earnings per A ordinary share
- basic
- diluted
9
9
Cent
313.0
312.5
Cent
320.4
319.9
Kerry Group Annual Report 2020 159
Consolidated Statement of Comprehensive Income
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
Profit after taxation attributable to owners of the parent
Other comprehensive income:
Items that are or may be reclassified subsequently to profit or loss:
Fair value movements on cash flow hedges
Cash flow hedges - reclassified to profit or loss from equity
Net change in cost of hedging
Deferred tax effect of fair value movements on cash flow hedges
Exchange difference on translation of foreign operations
Fair value movement on revaluation of financial assets held at fair value through
other comprehensive income
Notes
2020
€’m
2019
€’m
554.1
566.5
7.9
2.9
(0.9)
(2.0)
23
23
17
(282.3)
13
(1.3)
7.2
0.1
0.6
(1.4)
67.0
(1.0)
Disposal of financial assets fair value movement reclassified to profit or loss
0.7
-
Items that will not be reclassified subsequently to profit or loss:
Re-measurement on retirement benefits obligation
Deferred tax effect of re-measurement on retirement benefits obligation
Net (expense)/income recognised directly in total other comprehensive income
Total comprehensive income
25
17
(67.0)
11.8
(330.2)
14.0
(2.0)
84.5
223.9
651.0
Kerry Group Annual Report 2020
160
Consolidated Balance Sheet
AS AT 31 DECEMBER 2020
Non-current assets
Property, plant and equipment
Intangible assets
Financial asset investments
Investment in joint ventures
Other non-current financial instruments
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash at bank and in hand
Other current financial instruments
Total assets
Current liabilities
Trade and other payables
Borrowings and overdrafts
Other current financial instruments
Tax liabilities
Provisions
Deferred income
Non-current liabilities
Borrowings
Other non-current financial instruments
Retirement benefits obligation
Other non-current liabilities
Deferred tax liabilities
Provisions
Deferred income
Total liabilities
Net assets
Issued capital and reserves attributable to owners of the parent
Share capital
Share premium
Other reserves
Retained earnings
Shareholders’ equity
31 December
2020
€’m
31 December
2019
€’m
Notes
11
12
13
14
22
17
16
18
22
22
19
22
22
24
20
22
22
25
21
17
24
20
26
1,990.6
4,687.1
2,062.9
4,589.7
37.0
17.8
82.0
33.8
41.7
16.2
82.7
38.9
6,848.3
6,832.1
975.6
993.3
1,042.0
1,066.3
563.1
14.1
2,594.8
9,443.1
554.9
57.7
2,672.2
9,504.3
1,543.3
1,643.0
2.8
10.0
132.6
5.2
2.4
190.8
12.1
140.7
25.2
2.2
1,696.3
2,014.0
2,505.8
2,355.3
0.5
54.4
144.9
330.2
36.1
19.4
3,091.3
4,787.6
4,655.5
22.1
398.7
(379.5)
4,614.2
4,655.5
-
11.9
167.9
338.9
33.2
20.9
2,928.1
4,942.1
4,562.2
22.1
398.7
(119.0)
4,260.4
4,562.2
The financial statements were approved by the Board of Directors on 15 February 2021 and signed on its behalf by:
Philip Toomey, Chairman
Edmond Scanlon, Chief Executive Officer
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
Company Balance Sheet
AS AT 31 DECEMBER 2020
Non-current assets
Property, plant and equipment
Investments in subsidiaries
Current assets
Trade and other receivables
Total assets
Current liabilities
Trade and other payables
Non-current liabilities
Deferred income
Total liabilities
Net assets
Issued capital and reserves
Share capital
Share premium
Other reserves
Retained earnings
Shareholders’ equity
161
31 December
2020
€’m
31 December
2019
€’m
Notes
11
15
18
19
20
26
0.3
714.4
714.7
168.9
168.9
883.6
10.4
10.4
0.1
0.1
10.5
873.1
22.1
398.7
92.2
360.1
873.1
0.3
714.4
714.7
135.8
135.8
850.5
21.5
21.5
0.1
0.1
21.6
828.9
22.1
398.7
79.7
328.4
828.9
The Company earned a profit after taxation of €174.8m for the financial year ended 31 December 2020 (2019: €140.3m).
The financial statements were approved by the Board of Directors on 15 February 2021 and signed on its behalf by:
Philip Toomey, Chairman
Edmond Scanlon, Chief Executive Officer
Kerry Group Annual Report 2020
162
Consolidated Statement of Changes in Equity
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
Group:
Share
Capital
€’m
Share
Premium
€’m
Other
Reserves
€’m
Retained
Earnings
€’m
Total
€’m
Notes
At 31 December 2018
22.0
398.7
(207.3)
3,821.0
4,034.4
Adjustment on initial application of IFRS 16 ‘Leases’
11
-
-
-
(9.4)
(9.4)
Adjusted balances at 1 January 2019
22.0
398.7
(207.3)
3,811.6
4,025.0
Profit after taxation attributable to owners of the parent
Other comprehensive income
Total comprehensive income
Shares issued during the financial year
Dividends paid
Share-based payment expense
At 31 December 2019
Profit after taxation attributable to owners of the parent
Other comprehensive expense
Total comprehensive (expense)/income
Shares issued during the financial year
Dividends paid
Share-based payment expense
At 31 December 2020
Other Reserves comprise the following:
-
-
-
0.1
-
-
-
-
-
-
-
-
-
566.5
566.5
73.9
73.9
10.6
84.5
577.1
651.0
-
-
-
0.1
(128.3)
(128.3)
14.4
-
14.4
22.1
398.7
(119.0)
4,260.4
4,562.2
-
-
-
-
-
-
-
-
-
-
-
-
-
554.1
554.1
(273.0)
(57.2)
(330.2)
(273.0)
496.9
223.9
-
-
-
-
(143.1)
(143.1)
12.5
-
12.5
22.1
398.7
(379.5)
4,614.2
4,655.5
26
10
27
26
10
27
FVOCI
Reserve
€’m
Note
Capital
Redemption
Reserve
€’m
Other
Undenominated
Capital
€’m
Share-Based
Payment
Reserve
€’m
Translation
Reserve
€’m
Hedging
Reserve
€’m
Cost of
Hedging
Reserve
€’m
Total
€’m
At 1 January 2019
Other comprehensive
(expense)/income
Share-based payment
expense
At 31 December 2019
Other comprehensive
(expense)/income
Share-based payment
expense
27
At 31 December 2020
1.6
(1.0)
27
-
0.6
(0.6)
-
-
1.7
-
-
1.7
-
-
1.7
0.3
63.3
(256.7)
(15.5)
(2.0)
(207.3)
-
-
-
67.0
7.3
0.6
73.9
14.4
-
-
-
14.4
0.3
77.7
(189.7)
-
(282.3)
(8.2)
10.8
(1.4)
(119.0)
(0.9)
(273.0)
12.5
-
-
-
12.5
0.3
90.2
(472.0)
2.6
(2.3)
(379.5)
-
-
The nature and purpose of each reserve within shareholders’ equity are described in note 34.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
163
Total
€’m
802.4
140.3
-
Company Statement of Changes in Equity
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
Share
Capital
€’m
Share
Premium
€’m
Other
Reserves
€’m
Retained
Earnings
€’m
Notes
Company:
At 1 January 2019
Profit after taxation
Other comprehensive income
Total comprehensive income
Shares issued during the financial year
Dividends paid
Share-based payment expense
At 31 December 2019
Profit after taxation
Other comprehensive income
Total comprehensive income
Shares issued during the financial year
Dividends paid
Share-based payment expense
At 31 December 2020
Other Reserves comprise the following:
At 1 January 2019
Share-based payment expense
At 31 December 2019
Share-based payment expense
At 31 December 2020
8
26
10
27
8
26
10
27
Note
27
27
22.0
398.7
65.3
-
-
-
0.1
-
-
-
-
-
-
-
-
22.1
398.7
-
-
-
-
-
-
-
-
-
-
-
-
22.1
398.7
316.4
140.3
-
140.3
140.3
-
0.1
(128.3)
(128.3)
-
-
-
-
-
14.4
79.7
-
328.4
14.4
828.9
-
-
-
-
-
174.8
174.8
-
-
174.8
174.8
-
-
(143.1)
(143.1)
12.5
92.2
-
360.1
12.5
873.1
Capital
Redemption
Reserve
€’m
Other
Undenominated
Capital
€’m
Share-Based
Payment
Reserve
€’m
1.7
-
1.7
-
1.7
0.3
-
0.3
-
0.3
63.3
14.4
77.7
12.5
90.2
Total
€’m
65.3
14.4
79.7
12.5
92.2
The nature and purpose of each reserve within shareholders’ equity are described in note 34.
Kerry Group Annual Report 2020
164
Consolidated Statement of Cash Flows
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
Operating activities
Trading profit
Adjustments for:
Depreciation (net)
Change in working capital
Pension contributions paid less pension expense
Payments on non-trading items
Exchange translation adjustment
Cash generated from operations
Income taxes paid
Finance income received
Finance costs paid
Net cash from operating activities
Investing activities
Purchase of assets (net)
Proceeds from the sale of assets
Capital grants received
Purchase of businesses (net of cash acquired)
Payments relating to previous acquisitions
Net cash used in investing activities
Financing activities
Dividends paid
Payment of lease liabilities
Issue of share capital
Repayment of borrowings (net of swaps)
Increase in borrowings
Net cash movement due to financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Exchange translation adjustment on cash and cash equivalents
Cash and cash equivalents at end of the financial year
Reconciliation of Net Cash Flow to Movement in Net Debt
Net increase in cash and cash equivalents
Cash flow from debt financing
Changes in net debt resulting from cash flows
Fair value movement on interest rate swaps (net of adjustment to borrowings)
Exchange translation adjustment on net debt
Movement in net debt in the financial year
Net debt at beginning of the financial year
Net debt at end of the financial year - pre lease liabilities
Lease liabilities
Total net debt* at end of the financial year
*
Prior year has been re-presented to include lease liabilities in total net debt.
Notes
2020
€’m
2019
€’m
28
797.2
902.7
200.7
(108.7)
(23.4)
(39.7)
(4.6)
821.5
(74.7)
0.2
(74.8)
672.2
191.4
(63.9)
(26.7)
(89.1)
(2.5)
911.9
(67.2)
0.5
(81.3)
763.9
(276.2)
(315.6)
28
28
5/13
7.7
0.1
29
(251.1)
(7.5)
(527.0)
(143.1)
(37.0)
-
(391.1)
462.9
(108.3)
36.9
549.7
(26.3)
560.3
36.9
(71.8)
(34.9)
7.6
26.5
(0.8)
10
28
26
28
28
28
32.8
3.0
(562.7)
(5.3)
(847.8)
(128.3)
(35.5)
0.1
(564.4)
950.0
221.9
138.0
403.9
7.8
549.7
138.0
(385.6)
(247.6)
12.5
(4.2)
(239.3)
(1,862.8)
(1,623.5)
22
(1,863.6)
(1,862.8)
11/28
22/28
(81.5)
(109.4)
(1,945.1)
(1,972.2)
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
Company Statement of Cash Flows
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
Operating activities
Trading profit
Adjustments for:
Depreciation
Change in working capital
Payments on non-trading items
Cash generated from operations
Finance income received
Net cash from operating activities
Financing activities
Dividends paid
Issue of share capital
Net cash movement due to financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Cash and cash equivalents at end of the financial year
165
Notes
2020
€’m
2019
€’m
28
11
28
10
26
28
168.8
152.4
-
(26.2)
-
142.6
0.5
143.1
-
(22.7)
(1.5)
128.2
-
128.2
(143.1)
(128.3)
-
0.1
(143.1)
(128.2)
-
-
-
-
-
-
Kerry Group Annual Report 2020
166
Notes to the Financial Statements
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
1. Statement of accounting policies
General information
Kerry Group plc is a public limited company incorporated
in the Republic of Ireland. The registered number is 111471
and registered office address is Prince’s Street, Tralee, Co.
Kerry, V92 EH11, Ireland. The principal activities of the
Company and its subsidiaries are described in the Business
Reviews and note 35 ‘Group entities’.
Basis of preparation
The consolidated financial statements of Kerry Group
plc have been prepared in accordance with International
Financial Reporting Standards (‘IFRS’), International
Financial Reporting Interpretations Committee (‘IFRIC’)
interpretations and those parts of the Companies Act, 2014
applicable to companies reporting under IFRS. The financial
statements comprise the Consolidated Income Statement,
the Consolidated Statement of Comprehensive Income, the
Consolidated Balance Sheet, the Company Balance Sheet,
the Consolidated Statement of Changes in Equity, the
Company Statement of Changes in Equity, the Consolidated
Statement of Cash Flows, the Company Statement of
Cash Flows and the notes to the financial statements.
The financial statements include the information in the
remuneration report that is described as being an integral
part of the financial statements. Both the Parent Company
and 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
hereafter refer to IFRS adopted by the EU.
The Parent Company’s financial statements are prepared
using accounting policies consistent with the accounting
policies applied to the consolidated financial statements by
the Group.
The consolidated financial statements have been prepared
under the historical cost convention, as modified by
the revaluation of certain financial assets and liabilities
(including derivative financial instruments) and financial
asset investments which are held at fair value. Assets
classified as held for sale are stated at the lower of carrying
value and fair value less costs to sell. The investments in
associates and joint ventures are accounted for using the
equity method.
The consolidated financial statements contained herein
are presented in euro, which is the functional currency
of the Parent Company, Kerry Group plc. The functional
currencies of the Group’s main subsidiaries are euro, US
dollar and sterling.
In the 2020 consolidated financial statements, the Group
has re-presented corresponding 2019 balances to align
with current year presentation in note 22 ‘Analysis of
financial instruments by category’, note 23 ‘Financial
instruments’ and note 28 ‘Cash flow components’ to reflect
the inclusion of lease liabilities in the Group’s definition of
total net debt.
Certain income statement headings and other financial
measures included in the consolidated financial statements
are not defined by IFRS. The Group make this distinction to
give a better understanding of the financial performance of
the business.
The consolidated and company 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 including liquidity and access to
financing as outlined in note 23, and position of the Group
including the impact of the current COVID-19 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 the recovery,
have been considered. This analysis indicated that,
notwithstanding the current global pandemic, it does not
affect the Group’s ability to continue as a going concern.
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.
Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the
financial statements of the Company and the entities
controlled by the Company (its subsidiaries), all of
which prepare financial statements up to 31 December.
Accounting policies of subsidiaries are consistent with
the policies adopted by the Group. Control is achieved
where the Company has the power over the investee,
has exposure or has rights to variable returns from its
involvement with the investee and has the ability to use
its power to affect its returns.
The results of subsidiaries acquired or disposed of during
the financial year are included in the Consolidated Income
Statement from the date the Company gains control until
the date the Company ceases to control the subsidiary.
All inter-group transactions and balances are eliminated
on consolidation.
Associates
Associates are all entities over which the Group
has significant influence but not control, generally
accompanying a shareholding of between 20% and 50%
of the voting rights. Significant influence is the power to
participate in the financial and operating policy decisions
of the investee but is not control or joint control over
those policies. Investments in associates are accounted
for using the equity method of accounting and are initially
recognised at cost. On acquisition of the investment in
associate, any excess of the cost of the investment over
the Group’s share of the net fair value of the identifiable
assets and liabilities of the investee is recognised as
goodwill, which is included within the carrying value of
the investment.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
167
Revenue is recorded when there is no unfulfilled obligation
on the part of the Group. An estimate is made on the
basis of historical sales returns and is recorded to allocate
these returns to the same period as the original revenue
is recorded. Rebates and discounts are provided for based
on agreements or contracts with customers, agreed
promotional arrangements and accumulated experience
using the expected value method. Any unutilised accrual
is released after assessment that the likelihood of such a
claim being made is highly improbable.
The Group disaggregates revenue by End Use Market
(EUM) and primary geographic market. 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 which affect the
nature, amount, timing and uncertainty of revenue and
cash flows are similar.
Trading profit
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.
Segmental analysis
Operating segments are reported in a manner consistent
with the internal management structure of the Group
and the internal financial information provided to the
Group’s Chief Operating Decision Maker (the Executive
Directors) who is responsible for making strategic
decisions, allocating resources, monitoring and assessing
the performance of each segment. Trading profit as
reported internally by segment is the key measure utilised
in assessing the performance of operating segments
within the Group. Other Corporate activities, such as
the cost of corporate stewardship and the cost of the
KerryConnect programme, are reported along with the
elimination of inter-group activities under the heading
‘Group Eliminations and Unallocated’. Intangible asset
amortisation, non-trading items, net finance costs and
income taxes are managed on a centralised basis and
therefore, these items are not allocated between operating
segments and are not reported per segment in note 2.
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 (Asia Pacific, Middle East and Africa). 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 an industry‐leading manufacturer of
chilled food products primarily in Ireland and UK markets.
1. Statement of accounting policies (continued)
Basis of consolidation (continued)
Associates (continued)
The Group’s share of its associates’ post-acquisition profits
or losses is recognised in ‘Share of associates and joint
ventures (profit)/loss after taxation’ within Trading Profit
in the Consolidated Income Statement, and its share of
post-acquisition movements in reserves is recognised in
reserves. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment,
less any impairment in value. Where indicators of
impairment arise, the carrying amount of the associate
is tested for impairment by comparing its recoverable
amount with its carrying amount.
Unrealised gains arising from transactions with associates
are eliminated to the extent of the Group’s interest in
the entity. Unrealised losses are eliminated to the extent
that they do not provide evidence of impairment. The
accounting policies of associates are amended where
necessary to ensure consistency of accounting treatment
at Group level.
Joint ventures
Joint ventures are all entities over which the Group has joint
control, whereby the Group has rights to the net assets
of the arrangement, rather than rights to its assets and
obligations for its liabilities. Investments in joint ventures
are accounted for using the equity method of accounting
and are initially recognised at cost. On acquisition of the
investment in joint venture, any excess of the cost of the
investment over the Group’s share of the net fair value
of the identifiable assets and liabilities of the investee
is recognised as goodwill, which is included within the
carrying value of the investment.
The Group’s share of its joint ventures post-acquisition
profits or losses is recognised in ‘Share of associates and
joint ventures’ (profit)/loss after taxation’ within Trading
Profit in the Consolidated Income Statement, and its share
of post-acquisition movements in reserves is recognised
in reserves until the date on which joint control ceases.
The cumulative post-acquisition movements are adjusted
against the carrying amount of the investment, less any
impairment in value. Where indicators of impairment
arise, the carrying amount of the joint venture is tested for
impairment by comparing its recoverable amount with its
carrying amount.
Unrealised gains arising from transactions with joint
ventures are eliminated to the extent of the Group’s
interest in the entity. Unrealised losses are eliminated to
the extent that they do not provide evidence of impairment.
The accounting policies of joint ventures are amended
where necessary to ensure consistency of accounting
treatment at Group level.
Revenue
Revenue represents the value of the consideration received
or receivable, for taste and nutrition applications and
consumer foods chilled food products, from third party
customers. Revenue is recorded at invoice value, net of
discounts, allowances, volume and promotional rebates and
excludes VAT. Revenue is recognised when control of the
products has transferred, which is usually upon shipment,
or in line with terms agreed with individual customers.
Kerry Group Annual Report 2020 168
1. Statement of accounting policies (continued)
Property, plant and equipment
Property, plant and equipment, other than freehold land,
are stated at cost less accumulated depreciation and any
accumulated impairment losses. Cost comprises purchase
price and other directly attributable costs. Freehold land
is stated at cost and is not depreciated. Depreciation on
the remaining property, plant and equipment is calculated
by charging equal annual instalments to the Consolidated
Income Statement at the following annual rates:
-
-
- Motor vehicles
Buildings
Plant, machinery and equipment
2% - 5%
7% - 25%
20%
The charge in respect of periodic depreciation is calculated
after establishing an estimate of the asset’s useful life and
the expected residual value at the end of its life. Increasing/
(decreasing) an asset’s expected life or its residual value
would result in a (decreased)/increased depreciation
charge to the Consolidated Income Statement as well as an
increase/(decrease) in the carrying value of the asset.
The useful lives of Group assets are determined by
management at the time the assets are acquired and
reviewed annually for appropriateness. These lives are
based on historical experience with similar assets as well
as anticipation of future events, which may impact their
life, such as changes in technology. Historically, changes in
useful lives or residual values have not resulted in material
changes to the Group’s depreciation charge.
Assets in the course of construction for production or
administrative purposes are carried at cost less any
recognised impairment loss. Cost includes professional fees
and other directly attributable costs. Depreciation of these
assets commences when the assets are ready for their
intended use, on the same basis as other property assets.
Leasing
At the commencement date of the lease, the Group
recognises a right-of-use asset and a lease liability on the
balance sheet. The right-of-use asset is measured at cost,
which consists of the initial measurement of the lease
liability, any initial direct costs incurred by the Group in
setting up/entering into the lease, an estimate of any
costs to dismantle and remove the asset at the end of the
lease and any payments made in advance of the lease
commencement date (net of any incentive received).
The Group depreciates right-of-use assets on a straight-
line basis from the lease commencement date to the
earlier of the end of the useful life or the end of the lease
term. The carrying amounts of right-of-use assets are
reviewed at each balance sheet date to determine whether
there is any indication of impairment. An impairment loss
is recognised when the carrying value of an asset exceeds
its recoverable amount.
The Group measures the lease liability at the present value
of the lease payments unpaid at that date, discounted
using the applicable incremental borrowing rate. Lease
payments included in the measurement of the lease liability
comprises of fixed or variable payments (based on an index
or rate), amounts expected to be payable under a residual
value guarantee and payments arising from options
reasonably certain to be exercised.
Subsequent to the initial measurement, the liability will be
reduced for payments made and increased for the interest
applied and it is remeasured to reflect any reassessment
or contract modifications. When the lease liability is
remeasured, the corresponding adjustment is reflected
in the right-of-use asset or in the Consolidated Income
Statement if the right-of-use asset is already reduced to zero.
The Group has elected to record short-term leases of less
than 12 months and leases of low-value assets as defined in
IFRS 16 as an operating expense in the Consolidated Income
Statement on a straight-line basis over the lease term.
The Group has also elected not to separate non-lease
components from lease components, and instead account
for each lease component and any associated non-
lease components as a single lease component further
increasing the lease liability.
Assets classified as held for sale
Assets are classified as held for sale if their carrying value
will be recovered through a sale transaction rather than
through continuing use. This condition is regarded as met
if, at the financial year end, the sale is highly probable,
the asset is available for immediate sale in its present
condition, management is committed to the sale and the
sale is expected to be completed within one year from the
date of classification.
Assets classified as held for sale are measured at the lower
of carrying value and fair value less costs to sell.
Intangible assets
Goodwill
Goodwill arises on business combinations and represents
the excess of the cost of acquisition over the Group’s interest
in the fair value of the identifiable assets and liabilities of a
subsidiary entity at the date control is achieved.
Goodwill arising on acquisitions before the date of
transition to IFRS has been retained at the previous Irish/
UK GAAP amounts subject to impairment testing. Goodwill
written off to reserves under Irish/UK GAAP prior to 1998
has not been reinstated and is not included in determining
any subsequent profit or loss on disposal.
At the date control is achieved, goodwill is allocated for
the purpose of impairment testing to groups of cash
generating units (CGUs) provided they represent the
lowest level at which management monitor goodwill for
impairment purposes. Goodwill is not amortised but is
reviewed for indications of impairment at least annually
and is carried at cost less accumulated impairment losses,
where identified. Impairment is recognised immediately
in the Consolidated Income Statement and is not
subsequently reversed. On disposal of a subsidiary, the
attributable amount of goodwill (not previously written off
to reserves) is included in the determination of the profit or
loss on disposal.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
169
An impairment loss is recognised immediately in the
Consolidated Income Statement for the amount by which
the asset’s carrying value exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair
value less costs to sell or its value in use. Value in use is
determined as the discounted future cash flows of the
CGU. The key assumptions during the financial year for the
value in use calculations are discount rates, cash flows and
growth rates.
When an impairment loss (other than on goodwill)
subsequently reverses, the carrying amount of the asset
is increased to the revised estimate of its recoverable
amount, not exceeding its carrying amount that would
have been determined had no impairment loss been
recognised for the asset in prior years. Assets that are
subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate
the carrying amount may not be recoverable. Impairment
is reviewed by assessing the asset’s value in use when
compared to its carrying value.
The carrying amounts of property, plant and equipment are
reviewed at each balance sheet date to determine whether
there is any indication of impairment. An impairment loss is
recognised when the carrying value of an asset exceeds its
recoverable amount.
Inventories
Inventories are valued at the lower of cost and net
realisable value. Cost includes raw materials, direct labour
and all other expenditure incurred in the normal course of
business in bringing the products to their present location
and condition. Cost is calculated at the weighted average
cost incurred in acquiring inventories. Net realisable value
is the estimated selling price of inventory on hand less
all further costs to completion and all costs expected to
be incurred in distribution and selling. Write-downs of
inventories are primarily recognised under ‘Raw materials
and consumables’ in the Consolidated Income Statement.
Income taxes
Income taxes include both current and deferred taxes.
Income taxes are charged or credited to the Consolidated
Income Statement except when they relate to items
charged or credited directly in other comprehensive
income or shareholders’ equity. In this instance the income
taxes are also charged or credited to other comprehensive
income or shareholders’ equity.
The current tax charge is calculated as the amount payable
based on taxable profit and the tax rates applying to those
profits in the financial year together with adjustments
relating to prior years. Deferred taxes are calculated using
the tax rates that are expected to apply in the period when
the liability is settled or the asset is realised, based on tax
rates that have been enacted or substantively enacted at
the balance sheet date.
1. Statement of accounting policies (continued)
Intangible assets (continued)
Brand related intangibles
Brand related intangibles acquired as part of a business
combination are valued at their fair value at the date
control is achieved. Intangible assets determined to have
an indefinite useful life are not amortised and are tested
for impairment at least annually. Indefinite life intangible
assets are those for which there is no foreseeable limit
to their expected useful life. In arriving at the conclusion
that these brand related intangibles have an indefinite
life, management considers the nature and type of the
intangible asset, the absence of any legal or other limits on
the assets’ use, the fact the business and products have a
track record of stability, the high barriers to market entry
and the Group’s commitment to continue to invest for the
long-term to extend the period over which the intangible
asset is expected to continue to provide economic benefits.
The classification of intangible assets as indefinite is
reviewed annually.
Finite life brand related intangible assets are amortised
over the period of their expected useful lives, which
predominantly range from 2 to 20 years, by charging
equal annual instalments to the Consolidated Income
Statement. The useful life used to amortise finite intangible
assets relates to the future performance of the assets
acquired and management’s estimate of the period over
which economic benefit will be derived from the asset.
Historically, changes in useful lives have not resulted in
material changes to the Group’s amortisation charge.
Computer software
Computer software separately acquired, including
computer software which is not an integral part of
an item of computer hardware, is stated at cost less
any accumulated amortisation and any accumulated
impairment losses. Cost comprises purchase price and
other directly attributable costs.
Costs relating to the development of computer software
for internal use are capitalised once the recognition criteria
outlined as follows are met:
-
-
an asset can be separately identified;
it is probable that the asset created will generate
future economic benefits;
the development cost of the asset can be measured
reliably;
it is probable that the expected future economic
benefits that are attributable to the asset will flow to
the entity; and
the cost of the asset can be measured reliably.
-
-
-
Computer software is amortised over its expected useful
life, which ranges from 3 to 7 years, by charging equal
annual instalments to the Consolidated Income Statement.
Amortisation commences when the assets are ready for use.
Impairment of non-financial assets
Goodwill and other intangible assets that have an
indefinite useful life are not subject to amortisation. They
are tested annually for impairment or when indications
exist that the asset may be impaired. For the purpose of
assessing impairment, these assets are allocated to groups
of cash generating units (CGUs) using a reasonable and
consistent basis.
Kerry Group Annual Report 2020 170
1. Statement of accounting policies (continued)
Income taxes (continued)
The Group is subject to uncertainties, including tax audits,
in any of the jurisdictions in which it operates. The Group
accounts for uncertain tax positions in line with IFRIC
23 ‘Uncertainty over Income Tax Treatments’. The Group
considers each uncertain tax treatment separately or
together with one or more uncertain tax treatments based
on which approach better predicts the resolution of the
uncertainty. If the Group concludes that it is not probable
that a taxation authority will accept an uncertain tax
treatment the Group reflects the effect of the uncertainty
in determining the related taxable profit, tax bases, unused
tax losses, unused tax credits or tax rate. The Group
reflects the effect of uncertainty for each uncertain tax
treatment using an expected value approach or a most
likely approach depending on which method the Group
expects to better predict the resolution of the uncertainty.
The unit of account for recognition purposes is the income
tax/deferred tax assets or liabilities and the Group does not
provide separately for uncertain tax positions. When the
final tax outcome for these items is different from amounts
recorded, such differences will impact the income tax and
deferred tax in the period in which such a determination is
made, as well as the Group’s cash position.
Deferred taxes are calculated based on the temporary
differences that arise between the tax base of the asset or
liability and its carrying value in the Consolidated Balance
Sheet. Deferred taxes are recognised on all temporary
differences in existence at the balance sheet date except for:
temporary differences which arise from the initial
-
recognition of an asset or liability in a transaction
other than a business combination that at the time of
the transaction does not affect accounting or taxable
profit or loss, or on the initial recognition of goodwill
for which a tax deduction is not available; and
temporary differences which arise on investments
in subsidiaries where the timing of the reversal
is controlled by the Group and it is probable that
the temporary difference will not reverse in the
foreseeable future.
-
The recognition of a deferred tax asset is based upon
whether it is probable that sufficient and suitable taxable
profits will be available in the future, against which the
reversal of temporary differences can be deducted.
Deferred tax assets are reviewed at each reporting date.
Current income tax assets and current income tax liabilities
are offset where there is a legally enforceable right to
offset the recognised amounts and the Group intends
to settle on a net basis. Deferred income tax assets and
deferred income tax liabilities are offset where there is a
legally enforceable right to offset the recognised amounts,
the deferred tax assets and deferred tax liabilities relate to
taxes levied by the same taxation authority and the Group
intends to settle on a net basis.
Retirement benefits obligation
Payments to defined contribution plans are recognised in
the Consolidated Income Statement as they fall due and
any contributions outstanding at the financial year end are
included as an accrual in the Consolidated Balance Sheet.
Actuarial valuations for accounting purposes are carried
out at each balance sheet date in relation to defined
benefit plans, using the projected unit credit method, to
determine the schemes’ liabilities and the related cost of
providing benefits. Scheme assets are accounted for at fair
value using bid prices.
Current service cost and net interest cost are recognised
in the Consolidated Income Statement as they arise.
Past service cost, which can be positive or negative, is
recognised immediately in the Consolidated Income
Statement. Gains or losses on the curtailment or
settlement of a plan are recognised in the Consolidated
Income Statement when the curtailment or settlement
occurs. Re-measurement on retirement benefits obligation,
comprising actuarial gains and losses and the return on
plan assets (excluding amounts included in net interest
cost) are recognised in full in the period in which they occur
in the Consolidated Statement of Comprehensive Income.
The defined benefit liability recognised in the Consolidated
Balance Sheet represents the present value of the
defined benefit obligation less the fair value of any plan
assets. Defined benefit assets are also recognised in the
Consolidated Balance Sheet but are limited to the present
value of available refunds from, and reductions in future
contributions to, the plan.
Provisions
Provisions can be distinguished from other types of liability
by considering the events that give rise to the obligation
and the degree of uncertainty as to the amount or timing
of the liability. These are recognised in the Consolidated
Balance Sheet when:
-
the Group has a present obligation (legal or
constructive) as a result of a past event;
it is probable that the Group will be required to settle
the obligation; and
a reliable estimate can be made of the amount of
the obligation.
-
-
The amount recognised as a provision is the best estimate
of the amount required to settle the present obligation at
the balance sheet date, after taking account of the risks
and uncertainties surrounding the obligation.
The outcome depends on future events which are by
their nature uncertain. In assessing the likely outcome,
management bases its assessment on historical experience
and other factors that are believed to be reasonable in the
circumstances. Provisions are disclosed in note 24 to the
consolidated financial statements.
Non-trading items
Certain items, by virtue of their nature and amount, are
disclosed separately in order for the user to obtain a
proper understanding of the financial information. These
items relate to events or circumstances that are not related
to normal trading activities and are labelled collectively as
‘non-trading items’.
Non-trading items include gains or losses on the disposal
of businesses, disposal of assets (non-current assets and
assets classified as held for sale), costs in preparation of
disposal of assets, material restructuring costs and material
transaction, integration and restructuring costs associated
with acquisitions. Non-trading items are disclosed in note 5
to the consolidated financial statements.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS 1. Statement of accounting policies (continued)
Research and development expenditure
Expenditure on research activities is recognised as an
expense in the financial year it is incurred.
Development expenditure is assessed and capitalised as an
internally generated intangible asset only if it meets all of
the following criteria:
-
it is technically feasible to complete the asset for use
or sale;
it is intended to complete the asset for use or sale;
the Group has the ability to use or sell the intangible
asset;
it is probable that the asset created will generate
future economic benefits;
adequate resources are available to complete the asset
for sale or use; and
the development cost of the asset can be measured
reliably.
-
-
-
-
-
Capitalised development costs are amortised over their
expected economic lives. Where no internally generated
intangible asset can be recognised, product development
expenditure is recognised as an expense in the financial
year it is incurred. Accordingly, the Group has not
capitalised product development expenditure to date.
Grants
Grants of a capital nature are accounted for as deferred
income in the Consolidated Balance Sheet and are released
to the Consolidated Income Statement at the same rates
as the related assets are depreciated. Grants of a revenue
nature are credited to the Consolidated Income Statement
to offset the matching expenditure.
Dividends
Dividends are accounted for when they are approved,
through the retained earnings reserve. Dividends proposed
do not meet the definition of a liability until such time as
they have been approved. Dividends are disclosed in note
10 to the consolidated financial statements.
Share-based payments
The Group has granted share-based payments to Executive
Directors and senior executives under a long-term
incentive plan and to Executive Directors under a short-
term incentive plan.
The equity-settled share-based awards granted under
these plans are measured at the fair value of the equity
instrument at the date of grant. The cost of the award
is charged to the Consolidated Income Statement over
the vesting period of the awards based on the probable
number of awards that will eventually vest, with a
corresponding credit to shareholders’ equity.
For the purposes of the long-term incentive plan, the fair
value of the award is measured using the Monte Carlo
Pricing Model. For the short-term incentive plan, the fair
value of the expense equates directly to the cash value of
the portion of the short-term incentive plan that will be
settled by way of shares/share options.
At the balance sheet date, the estimate of the level of
vesting is reviewed and any adjustment necessary is
recognised in the Consolidated Income Statement and
in the Statement of Changes in Equity. Share-based
payments are disclosed in note 27 to the consolidated
financial statements.
171
Foreign currency
Foreign currency transactions are translated into functional
currency at the rate of exchange ruling at the date of the
transaction. Exchange differences arising from either the
retranslation of the resulting monetary assets or liabilities
at the exchange rate at the balance sheet date or from the
settlement of the balance at a different rate are recognised
in the Consolidated Income Statement when they occur.
On consolidation, the income statements of foreign
currency subsidiaries are translated into euro at the
average exchange rate. If this average is not a reasonable
approximation of the cumulative effect of the rates
prevailing on the transaction dates, a weighted average
rate is used. The balance sheets of such subsidiaries are
translated at the rate of exchange at the balance sheet
date. Resulting exchange differences arising on the
translation of foreign currency subsidiaries are taken
directly to a separate component of shareholders’ equity.
Goodwill and fair value adjustments arising on the
acquisition of foreign subsidiaries are treated as assets and
liabilities of the foreign subsidiaries and are translated at
the closing rate.
On disposal of a foreign currency subsidiary, the
cumulative translation difference for that foreign subsidiary
is recycled to the Consolidated Income Statement as part of
the profit or loss on disposal.
Borrowing costs
Borrowing costs incurred for qualifying assets, which take
a substantial period of time to construct, are added to
the cost of the asset during the period of time required to
complete and prepare the asset for its intended use. Other
borrowing costs are expensed to the Consolidated Income
Statement in the period in which they are incurred.
Business combinations
The acquisition method of accounting is used for the
acquisition of subsidiaries. The cost of the acquisition is
measured at the aggregate fair value of the consideration
given. The acquiree’s identifiable assets, liabilities
and contingent liabilities that meet the conditions for
recognition under IFRS 3 ‘Business Combinations’ are
recognised at their fair value at the date the Group
assumes control of the acquiree. Acquisition related costs
are recognised in the Consolidated Income Statement as
incurred. If the business combination is achieved in stages,
the acquisition date fair value of the Group’s previously
held investment in the acquiree is remeasured to fair value
at the acquisition date through profit or loss.
Certain assets and liabilities are not recognised at their
fair value at the date control was achieved as they are
accounted for using other applicable IFRSs. These include
deferred tax assets/liabilities and also any assets related to
employee benefit arrangements.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which
the combination occurs, the Group reports provisional
amounts for the items for which the valuation of the fair
value of assets and liabilities acquired is still in progress.
Those provisional amounts are adjusted during the
measurement period of one year from the date control is
achieved when additional information is obtained about
facts and circumstances which would have affected the
amounts recognised as of that date.
Kerry Group Annual Report 2020 172
1. Statement of accounting policies (continued)
Business combinations (continued)
Where applicable, the consideration for the acquisition
includes any asset or liability resulting from a contingent
consideration arrangement measured at fair value at the
date control is achieved. Subsequent changes in such fair
values are adjusted against the cost of acquisition where
they qualify as measurement period adjustments. All
other subsequent changes in the fair value of contingent
consideration classified as an asset or liability are
accounted for in accordance with relevant IFRSs.
Any fair value adjustments in relation to acquisitions
completed prior to 1 January 2010 have been accounted for
under IFRS 3 ‘Business Combinations (2004)’.
Investments in subsidiaries
Investments in subsidiaries held by the Parent Company
are carried at cost less accumulated impairment losses.
Investments in associates and joint ventures
Investments in associates and joint ventures held by the
Group are accounted for using the equity method, after
initially being recognised at cost in the Consolidated
Balance Sheet.
Financial instruments
Financial assets and financial liabilities are recognised on
the Consolidated Balance Sheet when the Group becomes
party to the contractual provisions of the instrument.
Financial assets and liabilities are initially measured at fair
value plus transaction costs, except for those classified
as fair value through profit or loss, which are initially
measured at fair value.
All financial assets are recognised and derecognised
on a trade date basis, where the purchase or sale of a
financial asset is under a contract whose terms require
delivery of the financial asset within the timeframe of
the market concerned.
Financial assets and liabilities are offset and presented on
a net basis in the Consolidated Balance Sheet, only if the
Group holds an enforceable legal right of set off for such
amounts and there is an intention to settle on a net basis
or to realise an asset and settle the liability simultaneously.
In all other instances they are presented gross in the
Consolidated Balance Sheet.
The Group classifies its financial assets in the following
measurement categories:
-
those to be measured subsequently at fair value
(either through OCI or through profit or loss); and
those to be measured at amortised cost.
-
The classification depends on the Group’s business model
for managing the financial assets and the contractual terms
of the cash flows. For assets measured at fair value, gains
and losses will either be recorded in profit or loss or OCI.
For investments in equity instruments that are not held for
trading, this will depend on whether the Group has made
an irrevocable election at the time of initial recognition to
account for the equity investment at fair value through
other comprehensive income (FVOCI).
Debt instruments:
Subsequent measurement of debt instruments depend on
the Group’s business model for managing the asset and
the cash flow characteristics of the asset. There are three
measurement categories into which the Group classifies its
debt instruments:
-
Amortised cost: Assets that are held for collection
of contractual cash flows, where those cash flows
represent solely payments of principal and interest,
are measured at amortised cost. Any gain or loss
arising on derecognition is recognised directly in the
Consolidated Income Statement. Impairment losses
are presented in the Consolidated Income Statement.
FVOCI: Assets that are held for collection of contractual
cash flows and for selling the financial assets, where
the assets’ cash flows represent solely payments of
principal and interest, are measured at FVOCI. The
Group have no debt instruments measured at FVOCI.
FVPL: Assets that do not meet the criteria for amortised
cost or FVOCI are measured at fair value through profit
or loss (FVPL). In addition, assets that are irrevocably
designated as FVPL at origination to eliminate or
significantly reduce an accounting mismatch are also
measured at FVPL. A gain or loss on a debt investment
that is subsequently measured at FVPL is recognised in
the Consolidated Income Statement.
-
-
Equity instruments:
The Group subsequently measures all equity investments
at fair value. Where the Group’s management has
elected to present fair value gains and losses on equity
investments in OCI, there is no subsequent reclassification
of fair value gains and losses to the Consolidated Income
Statement following the derecognition of the investment.
Dividends from such investments continue to be
recognised in the Consolidated Income Statement when
the Group’s right to receive payments is established.
Changes in the fair value of financial assets measured
at FVPL (Rabbi Trust assets) are recognised in the
Consolidated Income Statement. Impairment losses (and
reversal of impairment losses) on equity investments
measured at FVOCI are not reported separately from other
changes in fair value.
Trade and other receivables:
Trade receivables are amounts due from customers for
goods sold or services performed in the ordinary course
of business. Trade receivables are recognised initially at
the amount of consideration that is unconditional unless
they contain significant financing components, when they
are recognised at fair value. The Group holds the trade
receivables with the objective to collect the contractual
cash flows and therefore measures them subsequently at
amortised cost using the effective interest method.
Cash and cash equivalents:
Cash and cash equivalents carried at amortised cost
consists of cash at bank and in hand, bank overdrafts held
by the Group and short-term bank deposits with a maturity
of three months or less from the date of placement. Cash
at bank and in hand and short-term bank deposits are
shown under current assets on the Consolidated Balance
Sheet. Bank overdrafts are shown within ‘Borrowings and
overdrafts’ in current liabilities on the Consolidated Balance
Sheet but are included as a component of cash and cash
equivalents for the purpose of the Statement of Cash
Flows. The carrying amount of these assets and liabilities
approximates to their fair value.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS 1. Statement of accounting policies (continued)
Financial instruments (continued)
Financial liabilities measured at amortised cost
Other non-derivative financial liabilities consist primarily
of trade and other payables and borrowings. Trade
and other payables are stated at amortised cost, which
approximates to their fair value given the short-term
nature of these liabilities. Trade and other payables are
non-interest bearing.
Debt instruments are initially recorded at fair value, net
of transaction costs. Subsequently they are reported at
amortised cost, except for hedged debt. To the extent
that debt instruments are hedged under qualifying fair
value hedges, the carrying value of the debt instrument
is adjusted for changes in the fair value of the hedged
risk, with changes arising recognised in the Consolidated
Income Statement. The fair value of the hedged item is
primarily determined using the discounted cash flow basis.
Financial liabilities at fair value through profit or loss (FVPL)
Financial liabilities at FVPL arise when the financial liabilities
are either derivative liabilities held for trading or they are
designated upon initial recognition as FVPL.
The Group classifies as held for trading certain derivatives
that are not designated and effective as a hedging
instrument. The Group does not have any other financial
liabilities classified as held for trading.
Impairment of financial assets
The Group assesses on a forward looking basis the
expected credit losses associated with its debt instruments
carried at amortised cost and FVOCI. The impairment
methodology applied depends on whether there has
been a significant increase in credit risk.
For trade receivables, the Group applies the simplified
approach permitted by IFRS 9 ‘Financial Instruments’,
which requires expected lifetime losses to be recognised
from initial recognition of the receivables. Further detail is
provided in note 18.
Derecognition of financial liabilities
The Group derecognises financial liabilities only when the
Group’s obligations are discharged, cancelled or expired.
Derivative financial instruments and hedge accounting
Derivatives are carried at fair value. The Group’s activities
expose it to risks of changes in foreign currency exchange
rates and interest rates in relation to international trading
and long-term debt. The Group uses foreign exchange
forward contracts, interest rate swaps and forward rate
agreements to hedge these exposures. The Group does
not use derivative financial instruments for speculative
purposes. When cross currency interest rate swaps are used
to hedge interest rates and foreign exchange rates, the
change in the foreign currency basis spreads element of
the contract that relates to the hedged item is recognised
within other reserves under the cost of hedging reserve.
At inception of the hedge relationship, the Group
documents the economic relationship between hedging
instruments and hedged items including whether changes
in the cash flows of the hedging instruments are expected
to offset changes in the cash flows of hedged items. The
Group documents its risk management objective and
strategy for undertaking its hedge transactions.
173
Fair value of financial instrument derivatives
The fair value of derivative instruments is calculated
using quoted prices. Where such prices are not available
a discounted cash flow analysis is used based on the
applicable yield curve adjusted for counterparty risk
for the duration and currency of the instrument, which
are observable:
-
foreign exchange forward contracts are measured
using quoted forward exchange rates to match the
maturities of these contracts; and
interest rate swaps are measured at the present
value of future cash flows estimated and discounted
based on the applicable yield curves adjusted for
counterparty credit risk.
-
Cash flow hedges
Where derivatives, including forward foreign exchange
contracts and floating to fixed interest rate swaps or cross
currency swaps are used, they are primarily treated as
cash flow hedges. The gain or loss relating to the effective
portion of the interest rate swaps and cross currency
interest rate swaps is recognised in other comprehensive
income and is reclassified to profit or loss in the period
when the hedged item is recognised through profit or loss.
All effective amounts are directly offset against movements
in the underlying hedged item. Any ineffective portion
of the hedge is recognised in the Consolidated Income
Statement. The gain or loss relating to the effective portion
of forward foreign exchange contracts is recognised in
other comprehensive income and is reclassified to profit or
loss in the period the hedged item is recognised through
profit or loss. Any ineffective portion of the hedge is
recognised in the Consolidated Income Statement. When
the hedged firm commitment or forecasted transaction
occurs and results in the recognition of an asset or liability,
the amounts previously recognised in the hedge reserve,
within other comprehensive income are reclassified
through profit or loss in the periods when the hedged item
is impacting the Consolidated Income Statement.
When a hedging instrument expires, or is sold or
terminated, or when a hedge no longer meets the criteria
for hedge accounting, any cumulative deferred gain or loss
and deferred cost of hedging in equity at that time remains
in equity until the forecast transaction occurs, resulting in
the recognition of a non-financial asset, such as inventory.
When the forecast transaction is no longer expected to
occur, the cumulative gain or loss and deferred cost of
hedging that were reported in equity are immediately
reclassified to profit or loss.
Cash flow hedge accounting is applied to foreign exchange
forward contracts which are expected to offset the changes
in fair value of expected future cash flows. In order to
achieve and maintain cash flow hedge accounting, it is
necessary for management to determine, at inception and
on an ongoing basis, whether a forecast transaction is
highly probable.
Fair value hedges
Where fixed to floating interest rate swaps are used,
they are treated as fair value hedges when the qualifying
conditions are met. Changes in the fair value of derivatives
that are designated as fair value hedges are recognised
directly in the Consolidated Income Statement, together
with any changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk.
Kerry Group Annual Report 2020 174
1. Statement of accounting policies (continued)
Financial instruments (continued)
Fair value hedges (continued)
Hedge accounting is derecognised when the hedging
relationship ceases to exist. The fair value adjustment to
the carrying amount of the hedged item arising from the
hedged risk is amortised over the remaining maturity
of the hedged item through the Consolidated Income
Statement from that date.
Trading derivatives
Certain derivatives which comply with the Group’s financial
risk management policies are not accounted for using
hedge accounting. This arises where the derivatives; (a)
provide a hedge against foreign currency borrowings
without having to apply hedge accounting; or (b) where
management have decided not to apply hedge accounting.
In these cases the instrument is reported independently at
fair value with any changes recognised in the Consolidated
Income Statement. In all other instances, cash flow or fair
value hedge accounting is applied.
Critical accounting estimates and judgements
Preparation of the consolidated 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 particular, information about significant areas of
estimation that have the most significant effect on
the amounts recognised in the consolidated financial
statements are described below and in the respective notes
to the consolidated financial statements.
We have considered the impact of the COVID-19 pandemic
on our business and the key impacts up to 31 December
2020 include:
-
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.
The Group considered the impact of the global
pandemic on its impairment risk around the carrying
value of the goodwill and indefinite life intangible
assets. The long-term outlook for the Group remains
positive and supports our valuations and given
there was significant headroom, no impairment
was identified.
While supporting our customers during this crisis
through the carrying of increased inventory and
receivable balances, the Group has assessed the risks
and to date, does not believe there are additional risks
around the recovery of these assets.
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. Third party revenue in our Taste & Nutrition
segment from the foodservice business was €1,390.5m
(2019: €1,767.6m).
-
-
-
The impact of COVID-19 on the critical accounting
estimates and judgements as outlined below has also been
assessed and is not considered material in the context of
the consolidated financial statements.
Impairment of goodwill and intangible assets
Determining whether goodwill and intangible assets
are impaired or whether a reversal of an impairment
of intangible assets (other than on goodwill) should be
recorded requires comparison of the value in use for the
relevant groups of cash generating units (CGUs) to the
net assets attributable to those CGUs. The value in use
calculation is based on an estimate of future cash flows
expected to arise from the CGUs and these are discounted
to net present value using an appropriate discount rate.
The tests are dependent on management’s estimates,
in particular in relation to the forecasting of future cash
flows, the discount rates applied to those cash flows,
the expected long-term growth rate of the applicable
businesses and terminal values. Such estimates are subject
to change as a result of changing economic conditions.
As forecasting future cash flows is dependent upon the
Group successfully leveraging its base of intangible assets
over the long-term, estimates are required in relation to
future cash flows which will support the asset value. These
estimates may depend upon the outcome of future events
and may need to be revised as circumstances change. The
impact of COVID-19 on the Group was considered and has
been reflected in the cash flow forecasts employed in the
value in use calculations. Details of the assumptions used
and key sources of estimation involved are outlined in note
12 to these consolidated financial statements.
The Group continues to monitor its assessment of the
economic environment particularly due to the pace and
extent of recovery in some markets as a result of COVID-19.
The long-term outlook for our businesses currently remains
positive, supports our CGU valuations and no impairment
was identified as a result of the impairment testing
review carried out. There is significant headroom in the
recoverable amount of the related CGUs as compared to
their carrying value.
Business combinations
When acquiring a business, the Group is required to bring
acquired assets and liabilities on to the Consolidated
Balance Sheet at their fair value, the determination of
which requires a significant degree of estimation.
Acquisitions may also result in intangible benefits being
brought into the Group, some of which qualify for
recognition as intangible assets while other such benefits
do not meet the recognition requirements of IFRS and
therefore form part of goodwill. Estimation is required in
the assessment and valuation of these intangible assets.
For intangible assets acquired, the Group bases valuations
on expected future cash flows taking into consideration
the impact of COVID-19 where applicable. This method
employs a discounted cash flow analysis using the present
value of the estimated after-tax cash flows expected to be
generated from the purchased intangible asset using risk
adjusted discount rates, revenue forecasts and estimated
customer attrition as appropriate. The period of expected
cash flows is based on the expected useful life of the
intangible asset acquired.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
175
1. Statement of accounting policies (continued)
Critical accounting estimates and judgements
(continued)
Business combinations (continued)
Depending on the nature of the assets and liabilities
acquired, determined provisional fair values may possibly
be adjusted within the measurement period as allowed by
IFRS 3 ‘Business Combinations’.
Business combinations are disclosed in note 29 to the
consolidated financial statements.
Income tax charge and income/deferred tax assets
and liabilities
Significant judgement and a high degree of estimation
is required in determining the income tax charge as the
Group operates in many jurisdictions and the tax treatment
of many items is uncertain with tax legislation being
open to different interpretation. Furthermore, the Group
can also be subject to uncertainties, including tax audits
in any of the jurisdictions in which it operates, which by
their nature, are often complex and can require several
years to conclude. The Group considers these uncertain
tax positions in the recognition of its income tax/deferred
tax assets or liabilities. In line with its accounting policy,
the Group bases its assessment on the probability of
a tax authority accepting its general treatment having
regard to all information available on the tax matter and
when it is not probable reflects the uncertainty in income
tax/deferred tax assets or liabilities. When applying its
accounting policy at the year end the Group generally
considered each uncertain tax treatment separately and
reflected the effect of the uncertainty in the income tax/
deferred tax assets or liabilities using an expected value
approach as this better predicts the resolution of the
uncertainty. Such estimates are determined based on
management judgement, interpretation of the relevant
tax laws, correspondence with the relevant tax authorities
and external tax advisors and past practices of the tax
authorities. Where the final outcome of these tax matters
is different from the amounts that were recorded, such
differences will impact the income tax and deferred tax
charge in the period in which such determination is made.
Income taxes and deferred tax assets and liabilities are
disclosed in notes 7 and 17 to the consolidated financial
statements, respectively.
Kerry Group Annual Report 2020 176
1. Statement of accounting policies (continued)
New standards and interpretations
Certain new and revised accounting standards and new International Financial Reporting Interpretations Committee (‘IFRIC’)
interpretations have been issued. The Group intends to adopt the relevant new and revised standards when they become
effective and the Group’s assessment of the impact of these standards and interpretations is set out below.
The following Standards and Interpretations are effective for the Group in 2020 but do not have
a material effect on the results or financial position of the Group:
- IFRS 3 (Amendments)
Business Combinations
- IFRS 9, IAS 39 &
IFRS 7 (Amendments)
Interest Rate Benchmark Reform
- IAS 1 (Amendments)
Presentation of Financial Statements
Effective Date
1 January 2020
1 January 2020
1 January 2020
- IAS 8 (Amendments)
Accounting Policies, Changes in Accounting Estimates and Errors
1 January 2020
- The Conceptual Framework
Revised Conceptual Framework for Financial Reporting
1 January 2020
The following Standards and Interpretations are not yet effective for the Group and are not expected
to have a material effect on the results or financial position of the Group:
- IFRS 16 (Amendment)
Leases
- IFRS 7, IFRS 4 &
IFRS 16 (Amendments)
Interest Rate Benchmark Reform - Phase 2
- IAS 1 (Amendments)
Presentation of Financial Statements
- IFRS 17
Insurance Contracts
Effective Date
1 June 2020
1 January 2021
1 January 2022
1 January 2023
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
177
2. Analysis of results
The Group has determined it has two reportable segments: Taste & Nutrition and Consumer Foods. The Taste & Nutrition
segment is the global leader in taste and nutrition, serving 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 our
consumer foods categories in the chilled cabinet primarily in Ireland and in the UK.
Taste &
Nutrition
2020
€’m
Consumer
Foods
2020
€’m
Group
Eliminations
and
Unallocated
2020
€’m
Taste &
Nutrition
2019
€’m
Consumer
Foods
2019
€’m
Total
2020
€’m
Group
Eliminations
and
Unallocated
2019
€’m
Total
2019
€’m
External revenue
5,678.4
1,275.0
-
6,953.4
5,939.1
1,302.2
-
7,241.3
Inter-segment revenue
74.8
3.6
(78.4)
-
78.5
4.4
(82.9)
-
Revenue
5,753.2
1,278.6
(78.4)
6,953.4
6,017.6
1,306.6
(82.9)
7,241.3
Trading profit
814.2
99.2
(116.2)
797.2
918.5
98.9
(114.7)
902.7
Intangible asset amortisation
Non-trading items
Operating profit
Finance income
Finance costs
Profit before taxation
Income taxes
Profit after taxation attributable to owners of the parent
Segment assets and liabilities
(70.1)
(19.4)
707.7
0.2
(72.6)
635.3
(81.2)
554.1
(64.3)
(110.9)
727.5
0.3
(81.9)
645.9
(79.4)
566.5
Segment assets
6,370.1
877.2
2,195.8
9,443.1
6,268.5
925.7
2,310.1
9,504.3
Segment liabilities
(1,295.0)
(332.9)
(3,159.7) (4,787.6) (1,565.7)
(311.8)
(3,064.6)
(4,942.1)
Net assets
5,075.1
544.3
(963.9)
4,655.5
4,702.8
613.9
(754.5)
4,562.2
Other segmental information
Property, plant and equipment
additions
225.0
20.7
-
245.7
247.2
32.7
0.7
280.6
Depreciation (net)
178.5
21.7
0.5
200.7
164.6
Intangible asset additions
Intangible asset amortisation
0.9
23.7
1.0
6.4
50.2
40.0
52.1
70.1
1.3
23.0
22.7
2.0
6.8
4.1
191.4
51.9
34.5
55.2
64.3
Kerry Group Annual Report 2020
178
2. Analysis of results (continued)
Revenue analysis
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 and primary geographic market. 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.
Analysis by EUM
Food
Beverage
Pharma
Taste &
Nutrition
2020
€’m
3,974.6
1,407.1
296.7
Consumer
Foods
2020
€’m
1,275.0
-
-
Total
2020
€’m
5,249.6
1,407.1
296.7
Taste &
Nutrition
2019
€’m
4,161.5
1,507.6
270.0
Consumer
Foods
2019
€’m
1,302.2
-
-
Total
2019
€’m
5,463.7
1,507.6
270.0
External revenue
5,678.4
1,275.0
6,953.4
5,939.1
1,302.2
7,241.3
Analysis by primary geographic market
Disaggregation of revenue from external customers is analysed by geographical split:
Republic of Ireland
Rest of Europe
Americas
APMEA
External revenue
Taste &
Nutrition
2020
€’m
171.1
1,204.0
3,085.4
1,217.9
5,678.4
Consumer
Foods
2020
€’m
262.2
1,012.8
-
-
1,275.0
Total
2020
€’m
433.3
2,216.8
3,085.4
1,217.9
6,953.4
Taste &
Nutrition
2019
€’m
184.9
1,271.5
3,197.8
1,284.9
5,939.1
Consumer
Foods
2019
€’m
252.5
1,049.7
-
-
1,302.2
Total
2019
€’m
437.4
2,321.2
3,197.8
1,284.9
7,241.3
Information about geographical areas
Europe
2020
€’m
Americas
2020
€’m
APMEA
2020
€’m
Total
2020
€’m
Europe
2019
€’m
Americas
2019
€’m
APMEA
2019
€’m
Total
2019
€’m
Segment assets by location
4,986.5
3,362.6
1,094.0
9,443.1
4,858.4
3,502.3
1,143.6
9,504.3
Property, plant and equipment additions
Intangible asset additions
61.1
51.6
130.2
54.4
245.7
0.5
-
52.1
87.9
54.3
114.7
78.0
280.6
0.9
-
55.2
Kerry Group plc is domiciled in the Republic of Ireland and the revenues from external customers in the Republic of Ireland
were €433.3m (2019: €437.4m). The non-current assets located in the Republic of Ireland are €903.1m (2019: €930.3m).
Revenues from external customers include €1,420.6m (2019: €1,527.9m) in the UK and €2,509.8m (2019: €2,597.5m) in the USA.
The non-current assets in the UK are €692.4m (2019: €737.2m) and in the USA are €2,035.6m (2019: €2,142.5m).
There are no material dependencies or concentrations on individual customers which would warrant disclosure under IFRS 8
‘Operating Segments’. The accounting policies of the reportable segments are the same as the Group’s accounting policies as
outlined in the Statement of Accounting Policies. Under IFRS 15 ‘Revenue from Contracts with Customers’ revenue is primarily
recognised at a point in time. Revenue recorded over time during the year was not material to the Group.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
179
Continuing
Operations
2020
€’m
Continuing
Operations
2019
€’m
6,953.4
7,241.3
Notes
3,699.8
3,897.7
895.6
948.0
4
1,356.9
1,330.9
11
11
20
18
14
12
5
169.4
158.6
33.8
(2.5)
9.6
(2.2)
(2.6)
(1.6)
797.2
70.1
19.4
707.7
35.2
(2.4)
6.5
(1.0)
(34.3)
(0.6)
902.7
64.3
110.9
727.5
281.9
291.4
3. Operating profit
(i) Analysis of costs by nature
Revenue
Less operating costs:
Raw materials and consumables
Other general overheads
Staff costs
Depreciation:
- property, plant and equipment
- right-of-use assets
Capital grants amortisation
Loss allowances on trade receivables
Foreign exchange gains
Change in inventories of finished goods
Share of joint ventures profit after taxation during the financial year
Trading profit
Intangible asset amortisation
Non-trading items
Operating profit
And is stated after charging:
Research and development costs
(ii) Auditors’ remuneration
Statutory disclosure:
Group audit
Other assurance services
Total assurance services
Tax advisory services
Other non-audit services
Total non-audit services
PwC
Ireland
2020
€’m
PwC
Other
2020
€’m
PwC
Worldwide
2020
€’m
PwC
Ireland
2019
€’m
PwC
Other
2019
€’m
PwC
Worldwide
2019
€’m
1.5
0.1
1.6
-
-
-
1.7
-
1.7
-
-
-
3.2
0.1
3.3
-
-
-
1.5
0.1
1.6
-
-
-
1.7
-
1.7
-
-
-
3.2
0.1
3.3
-
-
-
Total auditors’ remuneration
1.6
1.7
3.3
1.6
1.7
3.3
Assurance services
Non-audit services
Total
100%
-
100%
100%
-
100%
Group audit consists of fees payable for the consolidated and statutory audits of the Group and its subsidiaries. Included in
Group audit are total fees of €4,720 (2019: €4,720) which are due to the Group’s auditor in respect of the Parent Company.
Reimbursement of auditors’ expenses amounted to €0.1m (2019: €0.2m).
Kerry Group Annual Report 2020
180
4. Total staff numbers and costs
The average number of people employed by the Group was:
Europe
Americas
APMEA
Taste &
Nutrition
2020
Number
Consumer
Foods
2020
Number
Total
2020
Number
Taste &
Nutrition
2019
Number
Consumer
Foods
2019
Number
Total
2019
Number
5,291
9,961
4,879
5,888
11,179
-
-
9,961
4,879
5,312
9,349
4,872
6,557
11,869
-
-
9,349
4,872
20,131
5,888
26,019
19,533
6,557
26,090
The aggregate payroll costs of employees (including Executive Directors) was:
Europe
Americas
APMEA
Taste &
Nutrition
2020
€’m
347.1
621.0
162.7
Consumer
Foods
2020
€’m
226.1
-
-
Total
2020
€’m
573.2
621.0
162.7
Taste &
Nutrition
2019
€’m
347.0
576.7
164.0
Consumer
Foods
2019
€’m
243.2
-
-
Total
2019
€’m
590.2
576.7
164.0
1,130.8
226.1
1,356.9
1,087.7
243.2
1,330.9
Social welfare costs of €144.7m (2019: €126.5m) and share-based payment expense of €12.5m (2019: €14.4m) are included in
payroll costs. Pension costs included in the payroll costs are disclosed in note 25.
5. Non-trading items
Taste & Nutrition acquisition related and other costs
Consumer Foods Realignment Programme
Loss on disposal of businesses and assets
Tax on above
Non-trading items (net of tax)
Notes
(i)
(ii)
(iii)
2020
€’m
(17.5)
-
(1.9)
(19.4)
3.9
(15.5)
2019
€’m
(80.7)
(26.7)
(3.5)
(110.9)
19.2
(91.7)
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
181
5. Non-trading items (continued)
(i) Taste & Nutrition acquisition related and other costs
Acquisition integration and restructuring costs of €13.1m (2019: €80.7m) primarily related to costs of integrating recent
acquisitions into the Group’s operations. These costs reflect the relocation of resources, the restructuring of operations in order
to integrate the acquired businesses into the existing Kerry operating model and external costs associated with deal preparation,
integration planning and due diligence. The Group has commenced a programme to evolve and restructure our global business
services model to better enable the business and support further growth, costs incurred to date are €4.4m (2019: €nil).
A tax credit of €3.5m (2019: €14.9m) arose due to tax deductions available on acquisition integration and other costs.
(ii) Consumer Foods Realignment Programme
During 2019, the Consumer Foods business completed a programme to simplify its business model in terms of footprint
and resources in response to the challenging marketplace. The charge relating to this in 2019 was €26.7m, which reflects
redundancies, relocation of resources and the streamlining of operations. The associated tax credit was €4.5m.
(iii) Loss on disposal of businesses and assets
During the year, the Group disposed of property, plant and equipment in North America, Europe and APMEA for a consideration
of €2.4m resulting in a loss of €1.9m for the year ended 31 December 2020. In 2019, the Group disposed of property, plant and
equipment primarily in the UK, US and Australia for a consideration of €32.8m resulting in a loss of €3.5m. Please see note 28
for a reconciliation of the loss and cash impact on disposal of businesses and assets.
A tax credit of €0.4m (2019: a tax charge of €0.2m) arose on the disposal of assets and businesses.
There were no impairments of assets held for sale recorded in the financial year.
6. Finance income and costs
Finance income:
Interest income on deposits
Finance costs:
Interest payable
Interest rate derivative
Net interest cost on retirement benefits obligation
25
Finance costs
Note
2020
€’m
2019
€’m
0.2
0.3
(73.5)
0.9
(72.6)
-
(72.6)
(84.0)
2.9
(81.1)
(0.8)
(81.9)
Kerry Group Annual Report 2020
182
7. Income taxes
Recognition in the Consolidated Income Statement (before credit on non-trading items)
Notes
2020
€’m
2019
€’m
Current tax expense in the financial year
Adjustments in respect of prior years
Deferred tax in the financial year
Income tax expense (before credit on non-trading items)
On non-trading items:
Current tax
Deferred tax
Recognition in the Consolidated Income Statement (after credit on non-trading items)
Current tax expense in the financial year
Adjustments in respect of prior years
Deferred tax in the financial year
Income tax expense (after credit on non-trading items)
78.4
1.6
80.0
5.1
85.1
(1.8)
(2.1)
(3.9)
76.6
1.6
78.2
3.0
81.2
86.3
(0.2)
86.1
12.5
98.6
(6.1)
(13.1)
(19.2)
80.2
(0.2)
80.0
(0.6)
79.4
5
17
The tax on the Group’s profit before taxation differs from the amount that would arise applying the standard corporation tax
rate in Ireland as follows:
Profit before taxation
Taxed at Irish Standard Rate of Tax (12.5%)
Adjustments to current tax and deferred tax in respect of prior years
Net effect of differing tax rates
Changes in standard rates of taxes
Income not subject to tax
Utilisation of unprovided deferred tax assets
Other adjusting items
Income tax expense
2020
€’m
635.3
2019
€’m
645.9
79.4
(0.1)
2.0
3.9
(1.6)
-
(2.4)
81.2
80.7
(1.3)
3.6
2.3
(2.2)
(1.0)
(2.7)
79.4
An increase in the Group’s applicable tax rate of 1% would reduce profit after taxation by €6.3m (2019: €6.4m). Factors that may
affect the Group’s future tax charge include the effects of restructuring, acquisitions and disposals, changes in tax legislation
and rates and the use of brought forward losses.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
183
8. Profit attributable to Kerry Group plc
In accordance with section 304(2) of the Companies Act, 2014, the Company is availing of the exemption from presenting its
individual income statement to the Annual General Meeting and from filing it with the Registrar of Companies. The Company’s
profit after taxation for the financial year is €174.8m (2019: €140.3m).
9. Earnings per A ordinary share
Basic earnings per share
Profit after taxation attributable to owners of the parent
313.0
554.1
320.4
566.5
EPS
cent
2020
€’m
EPS
cent
2019
€’m
Diluted earnings per share
Profit after taxation attributable to owners of the parent
312.5
554.1
319.9
566.5
Number of Shares
Note
Basic weighted average number of shares
Impact of share options outstanding
Diluted weighted average number of shares
Actual number of shares in issue as at 31 December
26
10. Dividends
Group and Company:
2020
m’s
177.0
0.3
177.3
176.7
2019
m’s
176.8
0.3
177.1
176.5
2020
€’m
2019
€’m
Amounts recognised as distributions to equity shareholders in the financial year
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)
97.3
86.7
Interim 2020 dividend of 25.90 cent per A ordinary share paid 13 November 2020
(Interim 2019 dividend of 23.50 cent per A ordinary share paid 15 November 2019)
45.8
143.1
41.6
128.3
Since the financial year end the Board has proposed a final 2020 dividend of 60.60 cent per A ordinary share which amounts
to €107.1m. The payment date for the final dividend will be 14 May 2021 to shareholders registered on the record date as at
16 April 2021. The consolidated financial statements do not reflect this dividend.
11. Property, plant and equipment
Group:
Property, plant and equipment
Right-of-use assets
Notes
2020
€’m
2019
€’m
(i)
(ii)
1,916.2
1,963.4
74.4
99.5
1,990.6
2,062.9
Kerry Group Annual Report 2020
184
11. Property, plant and equipment (continued)
(i) Property, plant and equipment analysis
Land and
Buildings
€’m
Notes
Plant,
Machinery
and
Equipment
€’m
Construction
in Progress
€’m
Motor
Vehicles
€’m
Total
€’m
Group:
Cost
At 1 January 2019
Businesses acquired
Additions
Transfer from construction in progress
Disposals
Transfer to held for sale
Exchange translation adjustment
1,150.4
1,999.7
63.9
25.6
65.8
(26.3)
5.9
23.8
50.0
69.2
140.9
(133.2)
0.3
43.8
At 31 December 2019
1,309.1
2,170.7
Businesses acquired
29
Additions
Purchase adjustments
Transfer from construction in progress
Disposals
Exchange translation adjustment
At 31 December 2020
Accumulated depreciation and impairment
At 1 January 2019
Charge during the financial year
Impairments
Disposals
Transfer to held for sale
Exchange translation adjustment
At 31 December 2019
Charge during the financial year
Disposals
Exchange translation adjustment
At 31 December 2020
Carrying value
At 31 December 2019
At 31 December 2020
5
3
3
3
5
16.8
10.1
(2.7)
42.4
(3.8)
(73.2)
1,298.7
3.9
35.2
(3.8)
110.1
(16.7)
(122.1)
2,177.3
412.9
1,258.9
36.7
0.2
120.8
-
(15.7)
(107.8)
3.9
8.8
0.3
28.9
446.8
1,301.1
129.8
(13.4)
(75.2)
1,342.3
38.5
(2.9)
(23.8)
458.6
862.3
840.1
Included in the impairments above is €nil (2019: €0.2m) charged to non-trading items.
286.0
0.7
142.1
(206.7)
-
-
6.0
228.1
0.4
181.3
-
(152.5)
-
(18.9)
238.4
-
-
-
-
-
-
-
-
-
-
-
14.6
3,450.7
0.1
1.8
-
(2.1)
-
0.4
14.8
0.1
1.0
-
-
(0.9)
(1.2)
13.8
11.9
1.1
-
(1.8)
-
0.2
11.4
1.1
(0.8)
(0.6)
11.1
114.7
238.7
-
(161.6)
6.2
74.0
3,722.7
21.2
227.6
(6.5)
-
(21.4)
(215.4)
3,728.2
1,683.7
158.6
0.2
(125.3)
4.2
37.9
1,759.3
169.4
(17.1)
(99.6)
1,812.0
869.6
835.0
228.1
238.4
3.4
2.7
1,963.4
1,916.2
Kerry Group Annual Report 2020FINANCIAL STATEMENTS 11. Property, plant and equipment (continued)
(i) Property, plant and equipment analysis (continued)
Company:
Cost
At 1 January 2019
At 31 December 2019 and 2020
Accumulated depreciation
At 1 January 2019
Charge during the financial year 2019 and 2020
At 31 December 2019 and 2020
Carrying value
At 31 December 2019 and 2020
185
Land and
Buildings
Total
€’m
4.7
4.7
4.4
-
4.4
0.3
Kerry Group Annual Report 2020
186
11. Property, plant and equipment (continued)
(ii) Right-of-use assets analysis
Group:
Cost
At 31 December 2018
Adjustment on initial application of IFRS 16 ‘Leases’
at 1 January 2019
Businesses acquired
Additions
Terminations
Exchange translation adjustment
At 31 December 2019
Businesses acquired
Additions
Terminations
Exchange translation adjustment
At 31 December 2020
Accumulated depreciation
At 31 December 2018
Charge during the financial year
Terminations
Exchange translation adjustment
At 31 December 2019
Charge during the financial year
Terminations
Exchange translation adjustment
At 31 December 2020
Carrying value
At 31 December 2019
At 31 December 2020
Land and
Buildings
€’m
Notes
Plant,
Machinery
and
Equipment
€’m
Motor
Vehicles
€’m
-
71.3
0.3
27.3
(4.4)
-
94.5
-
11.8
(8.9)
(6.8)
90.6
-
23.2
(2.0)
-
21.2
22.5
(5.8)
(2.5)
35.4
73.3
55.2
-
11.8
0.1
8.6
(0.8)
-
19.7
-
5.0
(3.6)
(1.4)
19.7
-
5.6
(0.8)
-
4.8
5.9
(2.8)
(0.6)
7.3
14.9
12.4
-
12.1
-
6.0
(1.2)
-
16.9
-
1.3
(2.3)
(0.9)
15.0
-
6.4
(0.8)
-
5.6
5.4
(2.3)
(0.5)
8.2
11.3
6.8
29
3
3
Total
€’m
-
95.2
0.4
41.9
(6.4)
-
131.1
-
18.1
(14.8)
(9.1)
125.3
-
35.2
(3.6)
-
31.6
33.8
(10.9)
(3.6)
50.9
99.5
74.4
The right-of-use assets consist of:
-
land and buildings for warehouse space, offices and manufacturing facilities. The lease terms vary and range from 2 to 93
years for buildings and range from 2 to 90 years for land;
machinery, equipment, tools, furniture and other equipment when combined are insignificant to the total leased assets
portfolio and have an average remaining lease term of 2 years; and
motor vehicles for management and sales functions and trucks for distribution in specific businesses. The lease terms for
motor vehicles range from 2 to 5 years with an average remaining term of 1 year.
-
-
At 1 January 2019, on transition to IFRS 16, the Group recognised right-of-use assets of €95.2m and lease liabilities of €107.3m.
The Group recorded the difference of €12.1m and the related deferred tax asset of €2.7m in retained earnings.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS 11. Property, plant and equipment (continued)
(iii) Lease disclosures
(iii.i) Amounts recognised in the Consolidated Income Statement:
Depreciation charged during the financial year
Expenses relating to short-term leases
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets
Interest on lease liabilities*:
- on transition to IFRS 16
- charged during the financial year
*
included in interest payable
(iii.ii) Amounts recognised in the Consolidated Statement of Cash Flows:
Total cash outflow for leases during the year*
2020
€’m
33.8
2.1
0.2
-
5.9
2020
€’m
45.2
*
includes interest expense and principal repayments of lease liabilities and short-term and low-value lease expenses
(iii.iii) Lease liabilities
At beginning of the financial year
Additions
Terminations
Remeasurements
Payments
Exchange translation adjustment
At end of the financial year
Analysed as:
Current liabilities
Non-current liabilities
At end of the financial year
2020
€’m
109.4
16.2
(3.8)
1.9
(37.0)
(5.2)
81.5
2020
€’m
27.0
54.5
81.5
187
2019
€’m
35.2
1.9
0.2
4.6
1.7
2019
€’m
43.9
2019
€’m
107.3
39.5
(3.7)
2.4
(35.5)
(0.6)
109.4
2019
€’m
34.9
74.5
109.4
(iii.iv) At the balance sheet date the Group had commitments
under non-cancellable leases which fall due as follows:
Discounted
2020
€’m
Undiscounted
2020
€’m
Discounted
2019
€’m
Undiscounted
2019
€’m
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
After 5 years
27.0
20.6
26.6
7.3
81.5
31.4
22.6
29.0
9.1
92.1
34.9
24.4
32.8
17.3
40.9
27.2
33.0
18.6
109.4
119.7
Kerry Group Annual Report 2020
188
12. Intangible assets
Cost
At 1 January 2019
Businesses acquired
Additions
Purchase adjustment
Disposals
Exchange translation adjustment
At 31 December 2019
Businesses acquired
Additions
Purchase adjustment
Exchange translation adjustment
At 31 December 2020
Accumulated amortisation and impairment
At 1 January 2019
Charge during the financial year
Disposals
Exchange translation adjustment
At 31 December 2019
Charge during the financial year
Exchange translation adjustment
At 31 December 2020
Carrying value
At 31 December 2019
At 31 December 2020
Notes
Goodwill
€’m
Brand
Related
Intangibles
€’m
Computer
Software
€’m
Total
€’m
2,377.4
1,880.1
261.6
4,519.1
200.7
237.0
-
5.1
-
41.0
-
5.4
-
21.2
-
55.2
-
(0.5)
0.7
437.7
55.2
10.5
(0.5)
62.9
2,624.2
2,143.7
317.0
5,084.9
149.2
-
20.2
(127.0)
2,666.6
18.7
-
-
1.9
20.6
-
(4.0)
16.6
124.1
-
(0.4)
(78.8)
2,188.6
235.9
37.8
-
5.5
-
52.1
-
(0.7)
368.4
273.3
52.1
19.8
(206.5)
5,223.6
168.9
423.5
26.5
(0.5)
0.5
64.3
(0.5)
7.9
279.2
195.4
495.2
41.7
(24.4)
296.5
28.4
(0.4)
223.4
70.1
(28.8)
536.5
2,603.6
2,650.0
1,864.5
1,892.1
121.6
145.0
4,589.7
4,687.1
29
3
3
Allocation of the purchase price in a business combination affects the results of the Group as finite life intangible assets
are amortised, whereas indefinite life intangible assets, including goodwill, are not amortised. This could result in differing
amortisation charges based on the allocation to finite life and indefinite life intangible assets.
Included in the cost of brand related intangibles are intangibles of €1,262.4m (2019: €1,307.2m) which have indefinite lives.
Approximately €17.5m (2019: €16.5m) of computer software additions during the year were internally generated, included in this
are payroll costs of €13.1m (2019: €11.2m). The Group has not capitalised product development expenditure in 2020 (2019: €nil).
The Group has no separate individual intangible asset that is material, as all intangibles acquired are integrated and developed
within the existing business.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS 189
12. Intangible assets (continued)
Impairment testing
Goodwill and indefinite life intangibles are subject to impairment testing on an annual basis, or more frequently if there are
indicators of impairment. These assets are allocated to groups of cash generating units (CGUs). The recoverable amount of
each of the four CGUs is determined on value in use calculations. Intangible assets acquired in a business combination are
allocated to CGUs that are expected to benefit from the business acquisition, rather than where the assets are owned.
Cash flow forecasts employed for the value in use calculations are for a five year period approved by management and a
terminal value which is applied to the year five cash flows. The terminal value reflects the discounted value of the cash flows
beyond year five which is based on the weighted average long-term growth rates for each CGU. Management also considered
the impact of COVID-19 on the Group which has been reflected in the cash flow forecasts used in the value in use calculations.
No impairment was recognised in 2020 or 2019 as a result of the impairment testing which identified significant headroom in
the recoverable amount of the related CGUs as compared to their carrying value. In 2020, there was no specific impairment
charge (2019: €nil) in relation to goodwill recorded in non-trading items in the Consolidated Income Statement due to the
classification of a business as held for sale.
A summary of the allocation of the carrying value of goodwill and indefinite life intangible assets by CGU, is as follows:
Taste & Nutrition
Europe
Americas
APMEA
Consumer Foods
Europe
Goodwill
2020
€’m
496.5
1,507.3
243.5
Goodwill
2019
€’m
Indefinite Life
Intangibles
2020
€’m
Indefinite Life
Intangibles
2019
€’m
507.4
1,492.1
182.7
77.0
1,088.1
51.4
102.3
1,106.0
51.6
402.7
2,650.0
421.4
2,603.6
45.9
47.3
1,262.4
1,307.2
Key assumptions
Forecasts are generally derived from a combination of internal and external factors based on historical experience and take
account of expected growth in the relevant region. The key assumptions for calculating value in use calculations are those
relating to the discount rate, growth rate and cash flows. The table below outlines the weighted average discount rates and
weighted average long-term growth rates used in the terminal value for each CGU:
Taste & Nutrition
Europe
Americas
APMEA
Consumer Foods
Europe
Discount
Rates
2020
Discount
Rates
2019
Growth
Rates
2020
Growth
Rates
2019
6.7%
7.1%
9.5%
6.5%
6.9%
8.8%
1.4%
1.1%
3.5%
1.9%
2.4%
4.9%
6.6%
6.4%
1.5%
1.9%
Management estimate discount rates using pre-tax rates consistent with the Group’s weighted average cost of capital and
the risks specific to the CGUs. A higher discount rate is applied to higher risk markets, while a lower rate is applied to more
stable markets.
Long-term growth rates are based on external market data, are broadly in line with long-term industry growth rates and
are conservative in nature. Generally, lower growth rates are used in mature markets while higher growth rates are used in
emerging markets.
Kerry Group Annual Report 2020
190
12. Intangible assets (continued)
Impairment testing (continued)
The assumptions used by management in estimating cash flows for each CGU include future profitability, capital expenditure
requirements and working capital investment. The cash flows included in the value in use calculations are generally determined
based on historical performance, management’s past experience, management’s expectation of future trends affecting the
industry and other developments and initiatives in the business. Management also considered the impact of COVID-19 on
the Group which has been reflected in the cash flow forecasts employed in the value in use calculations. Capital expenditure
requirements to maintain the CGUs performance and profitability are based on the Group’s strategic plans, excluding future
development activity, and broadly assume that historic investment patterns will be maintained. Working capital requirements
are forecast to move in line with activity.
Sensitivity analysis
Sensitivity analysis has been performed across the four CGUs. If the discount rate was 1% higher than management’s
estimates, there would have been no requirement for the Group to recognise any impairment charge in 2020 or 2019. Further,
a 5% increase would not have resulted in an impairment charge in 2020 or 2019 as there is headroom in the discounted cash
flows. If the estimated growth rate was 1% lower than management’s estimates, there would have been no requirement for
the Group to recognise any impairment charge in 2020 or 2019. If the estimated cash flows were 5% lower than management’s
estimates, again there would have been no requirement for the Group to recognise any impairment charge in 2020 or 2019.
Management believes that no reasonable change, in normal circumstances, in any of the above key assumptions would cause
the carrying value of any CGU to exceed its recoverable amount.
13. Financial asset investments
At 1 January 2019
Additions
Disposals
Fair value movements
Exchange translation adjustment
At 31 December 2019
Additions
Disposals
Fair value movements
Exchange translation adjustment
At 31 December 2020
FVOCI
Investments
€’m
Other
Investments
€’m
5.3
30.0
-
-
(1.0)
-
4.3
-
(3.0)
(1.3)
-
-
3.0
(1.5)
5.4
0.5
37.4
2.0
(2.8)
3.6
(3.2)
37.0
Total
€’m
35.3
3.0
(1.5)
4.4
0.5
41.7
2.0
(5.8)
2.3
(3.2)
37.0
Investments held at fair value through other comprehensive income
These represent investments in equity securities. These investments have no fixed maturity or coupon rate. A fair value
assessment was performed at 30 June 2020 which resulted in a decrease to the carrying value of these assets of €1.3m
(2019: €1.0m) through other comprehensive income. In October 2020, the Group disposed of these equity securities for
a consideration of €5.3m.
Other investments
The Group maintains a Rabbi Trust in respect of a non-qualified deferred compensation plan in the USA. The assets of the
trust primarily consist of equities, bonds and cash which are restricted for use. These assets are fair valued through profit or
loss at each financial year end using quoted market prices. The corresponding liability is recognised within other non-current
liabilities (note 21).
Kerry Group Annual Report 2020FINANCIAL STATEMENTS 14. Investments in joint ventures
At 1 January
Share of profit after taxation during the financial year
At 31 December
191
2019
€’m
15.6
0.6
16.2
Note
3
2020
€’m
16.2
1.6
17.8
The Group has a call option to acquire the remaining 45% interest in Proparent B.V. under an agreed valuation methodology in
2022. The Group is satisfied that the fair value attached to this call option is nominal.
15. Investments in subsidiaries
Company:
At 1 January and 31 December
16. Inventories
Raw materials and consumables
Finished goods and goods for resale
Expense inventories
At 31 December
2020
€’m
2019
€’m
714.4
714.4
2020
€’m
409.3
517.8
48.5
975.6
2019
€’m
441.8
515.2
36.3
993.3
Write-downs of inventories recognised as an expense approximates to 1.4% (2019: 1.2%) of raw materials and consumables in
the Consolidated Income Statement.
Kerry Group Annual Report 2020
192
17. Deferred tax assets and liabilities
The following is an analysis of the movement in the major categories of deferred tax liabilities/(assets) recognised by the Group:
Short-Term
Temporary
Differences
and Other
Differences
€’m
Total
€’m
(33.5) 287.0
-
(2.7)
(33.5) 284.3
(4.8)
(0.6)
1.4
(1.1)
(0.9)
3.4
8.4
4.5
(9.2)
-
(9.2)
3.8
2.0
-
0.1
Property,
Plant and
Equipment
€’m
Note
Intangible
Assets
€’m
Tax Credits
and NOLs
€’m
Retirement
Benefits
Obligation
€’m
At 31 December 2018
Adjustment on initial application of IFRS 16 ‘Leases’
Adjusted balances at 1 January 2019
82.3
(2.7)
79.6
268.9
(21.5)
-
-
268.9
(21.5)
Consolidated Income Statement movement
7
(4.2)
Recognised in OCI during the financial year
Related to businesses acquired/(disposed)
Exchange translation adjustment
At 31 December 2019
2.1
-
7.1
3.5
2.5
-
(0.7)
(0.3)
-
3.1
2.1
80.6
281.6
(20.0)
(3.3)
(38.9) 300.0
Consolidated Income Statement movement
7
(2.5)
Recognised in OCI during the financial year
Related to businesses acquired/(disposed)
Exchange translation adjustment
At 31 December 2020
-
-
(5.7)
72.4
3.8
-
23.0
(19.7)
288.7
2.0
-
-
1.6
3.6
(11.8)
-
0.1
(3.9)
3.0
2.0 (9.8)
-
23.0
3.9 (19.8)
(16.4)
(11.4)
(36.9) 296.4
The short-term temporary differences and other temporary differences recognised in other comprehensive income comprise
fair value movements on cash flow hedges of €2.0m (2019: €1.4m). In the above table, NOLs refers to Net Operating Losses.
The following is an analysis of the deferred tax balances (after offset) for balance sheet purposes:
Deferred tax assets
Deferred tax liabilities
2020
€’m
(33.8)
330.2
296.4
2019
€’m
(38.9)
338.9
300.0
The total deductible temporary differences for which deferred tax assets have not been recognised is €21.8m (2019: €27.4m).
The Group does not have any unrecognised losses which have an expiry date.
Deferred tax has not been recognised in respect of withholding taxes and other taxes that would be payable on the unremitted
earnings of foreign subsidiaries, as the Group is in a position to control the timing of reversal of the temporary differences and
it is probable that the temporary differences will not reverse in the foreseeable future. The deferred tax liabilities which have
not been recognised in respect of these temporary differences are not material as the Group can rely on the availability of
participation exemptions and tax credits in the context of the Group’s investments in subsidiaries.
An increase of 1% in the tax rates at which deferred tax is calculated would increase the net deferred tax balance of the Group
by €15.0m (2019: €14.5m).
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
18. Trade and other receivables
Trade receivables
Loss allowances
Trade receivables due within 1 year
Other receivables and prepayments
Amounts due from subsidiaries
VAT receivable
Receivables due after 1 year
193
Group
2020
€’m
993.2
(37.1)
956.1
45.8
-
39.4
0.7
Group
2019
€’m
1,002.4
(35.7)
966.7
56.8
-
40.4
2.4
Company
2020
€’m
Company
2019
€’m
-
-
-
3.9
165.0
-
-
-
-
-
-
135.8
-
-
1,042.0
1,066.3
168.9
135.8
All receivable balances are due within 1 year except for €0.7m (2019: €2.4m) outlined above. All receivable balances are within
terms with the exception of certain trade receivables which are past due and are detailed below.
The following table shows an analysis of trade receivables split between past due and within terms accounts, where past due is
deemed to be when an account exceeds the agreed terms of trade:
Within terms
Past due not more than 1 month
Past due more than 1 month but less than 2 months
Past due more than 2 months but less than 3 months
Past due more than 3 months
Trade receivables (net)
The following table summarises the movement in loss allowances:
At beginning of financial year
Increase in loss allowance charged to the Consolidated Income Statement
Note
3
Utilised during the financial year
Exchange translation adjustment
At end of the financial year
2020
€’m
829.4
92.8
22.5
9.6
1.8
2019
€’m
823.9
100.4
31.1
9.2
2.1
956.1
966.7
2020
€’m
35.7
9.6
(5.5)
(2.7)
37.1
2019
€’m
31.5
6.5
(3.1)
0.8
35.7
Trade and other receivables are stated at amortised cost less loss allowances. The fair value of these receivables approximates
their carrying value as these are short-term in nature; hence, the maximum exposure to credit risk at the reporting date is the
carrying value of each class of receivable.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on
shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of sales and
the corresponding historical credit loss experience. The historical loss rates are adjusted to reflect current and forward looking
information on macroeconomic factors, including the GDP of the countries in which the Group sells its goods and services, that
affect the ability of customers to settle receivables.
Before accepting any new customer, the Group uses a credit scoring system to assess the potential customer’s credit quality
and defines credit limits by customer. These credit limits are reviewed regularly throughout the financial year. The Group does
not typically require collateral in respect of trade receivables.
There is no significant concentration of credit risk or transaction currency risk with respect to trade receivables, as the Group
has a large number of internationally dispersed customers. Further disclosures on currency risk are provided in note 23 to the
financial statements.
Kerry Group Annual Report 2020
194
19. Trade and other payables
Trade payables
Other payables and accruals
Lease liabilities
Deferred payments on acquisition of businesses
PAYE
Social security costs
Group
2020
€’m
Group
2019
€’m
Company
2020
€’m
Company
2019
€’m
1,293.9
1,376.9
186.5
202.0
27.0
17.1
11.7
7.1
34.9
13.0
9.1
7.1
6.4
-
-
4.0
-
-
15.7
-
-
5.8
-
-
1,543.3
1,643.0
10.4
21.5
Trade and other payables are stated at amortised cost, which approximates to fair value given the short-term nature of these
liabilities. The above balances are all due within 1 year.
20. Deferred income
Group
2020
€’m
Group
2019
€’m
Company
2020
€’m
Company
2019
€’m
Note
Capital grants
At beginning of the financial year
Grants received during the financial year
Amortised during the financial year
3
Disposal
Exchange translation adjustment
At end of the financial year
Analysed as:
Current liabilities
Non-current liabilities
23.1
0.3
(2.5)
-
0.9
21.8
2.4
19.4
21.8
22.4
3.2
(2.4)
(0.2)
0.1
23.1
2.2
20.9
23.1
0.1
0.1
-
-
-
-
-
-
-
-
0.1
0.1
-
0.1
0.1
-
0.1
0.1
There are no material unfulfilled conditions or other contingencies attaching to any government grants received.
21. Other non-current liabilities
Other payables and accruals
Lease liabilities
Deferred payments on acquisition of businesses
Group
2020
€’m
85.3
54.5
5.1
Group
2019
€’m
Company
2020
€’m
Company
2019
€’m
84.7
74.5
8.7
144.9
167.9
-
-
-
-
-
-
-
-
All of the above balances are due within 2 to 5 years except for €7.3m (2019: €17.3m) which is not due until after 5 years.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
22. Analysis of financial instruments by category
The following table outlines the financial assets and liabilities held by the Group at the balance sheet date:
Financial
Assets/
(Liabilities)
at Amortised
Cost
2020
€’m
Assets/
(Liabilities)
at Fair Value
through
Profit
or Loss
2020
€’m
Derivatives
Designated
as Hedging
Instruments
2020
€’m
Assets/
(Liabilities) at
FVOCI
2020
€’m
Group:
Financial asset investments
Forward foreign exchange contracts
Interest rate swaps
Notes
13
23 (i.i)
23 (ii.ii)
Trade and other receivables
18
1,042.0
Cash at bank and in hand
23 (iii.i)
Total financial assets
Current assets
Non-current assets
563.1
1,605.1
1,605.1
-
1,605.1
-
-
-
37.0
-
-
-
-
-
14.2
81.9
-
-
37.0
96.1
Borrowings and overdrafts
23 (iii.i)
(2,474.9)
(33.7)
Forward foreign exchange contracts
Interest rate swaps
23 (i.i)
23 (ii.ii)
-
-
Trade and other payables
19/21
(1,688.2)
-
-
-
Total financial liabilities
(4,163.1)
(33.7)
(10.5)
Current liabilities
Non-current liabilities
Total net financial (liabilities)/assets
(1,546.1)
(2,617.0)
(4,163.1)
(2,558.0)
Included in the above table are the following components of total net debt:
Analysis of total net debt by category
-
37.0
37.0
-
(33.7)
(33.7)
3.3
-
-
(33.7)
(33.7)
-
-
14.1
82.0
96.1
-
(10.5)
-
-
(10.0)
(0.5)
(10.5)
85.6
-
-
-
-
81.9
-
81.9
-
81.9
(2.8)
-
(2,472.1)
(2,474.9)
-
563.1
(1,911.8)
(33.7)
(81.5)
-
(1,993.3)
(33.7)
Bank overdrafts
Bank loans
Senior notes
Borrowings and overdrafts
Interest rate swaps
Cash at bank and in hand
Net debt - pre lease liabilities
Lease liabilities
Total net debt
195
Total
2020
€’m
37.0
14.2
81.9
1,042.0
563.1
1,738.2
1,619.2
119.0
1,738.2
(2,508.6)
(10.5)
-
(1,688.2)
(4,207.3)
(1,556.1)
(2,651.2)
(4,207.3)
(2,469.1)
(2.8)
-
(2,505.8)
(2,508.6)
81.9
563.1
(1,863.6)
(81.5)
(1,945.1)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Kerry Group Annual Report 2020 196
22. Analysis of financial instruments by category (continued)
All Group borrowings and overdrafts and interest rate swaps are guaranteed by Kerry Group plc. No assets of the Group have
been pledged to secure these items.
Part of the Group’s debt portfolio includes US$750m of senior notes issued in 2013, maturing in 2023 (the 2023 senior notes)
and US$200m (2019: US$408m) of senior notes issued in 2010 (private placement notes). At the time of issuance, US$250m of
the 2023 senior notes and US$500m of the 2010 US$600m senior notes were swapped, using cross currency swaps, to euro.
US$192m and US$208m of the private placement notes were repaid in January 2017 and January 2020 respectively and the
related swaps matured at those dates. In addition, the Group holds €750m of senior notes issued in 2015 (the 2025 senior
notes), of which €175m were swapped, using cross currency swaps, to US dollar. No interest rate derivatives were entered into
for the September 2019 €750m senior notes issuance (the 2029 senior notes) or for the €200m of senior notes issued in 2020 as
a tap onto the 2025 senior notes.
The adjustment to senior notes classified under liabilities at fair value through profit or loss of €33.7m (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.
Notes
13
23 (i.i)
23 (ii.ii)
18
23 (iii.i)
Group:
Financial asset investments
Forward foreign exchange contracts
Interest rate swaps
Trade and other receivables
Cash at bank and in hand
Total financial assets
Current assets
Non-current assets
Borrowings and overdrafts
Forward foreign exchange contracts
Interest rate swaps
23 (iii.i)
23 (i.i)
23 (ii.ii)
Financial
Assets/
(Liabilities) at
Amortised Cost
2019
€’m
Assets/
(Liabilities)
at Fair Value
through
Profit
or Loss
2019
€’m
Derivatives
Designated
as Hedging
Instruments
2019
€’m
Assets/
(Liabilities) at
FVOCI
2019
€’m
Total
2019
€’m
41.7
12.0
128.4
1,066.3
554.9
37.4
-
-
-
-
-
12.0
128.4
-
-
4.3
-
-
-
-
37.4
140.4
4.3
1,803.3
-
-
-
1,066.3
554.9
1,621.2
1,621.2
-
1,621.2
-
-
(2,521.2)
(24.9)
-
37.4
37.4
-
-
-
57.7
82.7
140.4
-
(12.1)
-
-
-
4.3
4.3
-
-
-
-
-
-
-
-
1,678.9
124.4
1,803.3
(2,546.1)
(12.1)
-
(1,810.9)
(4,369.1)
(1,845.9)
(2,523.2)
(4,369.1)
4.3
(2,565.8)
Trade and other payables
19/21
(1,810.9)
Total financial liabilities
(4,332.1)
(24.9)
(12.1)
Current liabilities
Non-current liabilities
Total net financial (liabilities)/assets
(1,833.5)
(2,498.6)
(4,332.1)
(2,710.9)
(0.3)
(24.6)
(24.9)
12.5
(12.1)
-
(12.1)
128.3
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
22. Analysis of financial instruments by category (continued)
Included in the previous table are the following components of total net debt:
Financial
Assets/
(Liabilities) at
Amortised Cost
2019
€’m
Assets/
(Liabilities)
at Fair Value
through
Profit
or Loss
2019
€’m
Derivatives
Designated
as Hedging
Instruments
2019
€’m
Assets/
(Liabilities) at
FVOCI
2019
€’m
Analysis of total net debt by category
Bank overdrafts
Bank loans
Senior notes
Borrowings and overdrafts
Interest rate swaps
Cash at bank and in hand
(5.2)
(1.2)
(2,514.8)
(2,521.2)
-
554.9
-
-
(24.9)
(24.9)
-
-
-
-
-
-
128.4
-
Net debt - pre lease liabilities
(1,966.3)
(24.9)
128.4
Lease liabilities*
Total net debt*
(109.4)
-
-
(2,075.7)
(24.9)
128.4
*
Prior year has been re-presented to include lease liabilities in total net debt.
The following table outlines the financial assets and liabilities held by the Company at the balance sheet date:
-
-
-
-
-
-
-
-
-
197
Total
2019
€’m
(5.2)
(1.2)
(2,539.7)
(2,546.1)
128.4
554.9
(1,862.8)
(109.4)
(1,972.2)
Company:
Financial assets at amortised cost
Cash at bank and in hand
Trade and other receivables
Total financial assets - all current
Financial liabilities at amortised cost
Borrowings and overdrafts
Trade and other payables
Total financial liabilities - all current
Notes
2020
€’m
2019
€’m
18
19
-
168.9
168.9
-
(10.4)
(10.4)
-
135.8
135.8
-
(21.5)
(21.5)
Total net financial assets
158.5
114.3
Kerry Group Annual Report 2020
198
23. Financial instruments
Capital management
The financing structure of the Group is managed in order to optimise shareholder value while allowing the Group to take
advantage of opportunities that might arise to grow the business. The Group targets acquisition and investment opportunities
that are value enhancing and the Group’s policy is to fund these transactions from cash flow or borrowings while maintaining
its investment grade debt status.
The capital structure of the Group consists of debt related financial liabilities, cash and cash equivalents, deferred payments
on acquisitions of businesses and equity attributable to owners of the parent, comprising issued capital, reserves and retained
earnings are disclosed in the Consolidated Statement of Changes in Equity, as represented in the table below:
Issued capital and reserves attributable to owners of the parent
Net debt - pre lease liabilities
Lease liabilities*
Deferred payments on acquisition of businesses
Notes
22
19/21
19/21
2020
€’m
4,655.5
1,863.6
81.5
22.2
2019
€’m
4,562.2
1,862.8
109.4
21.7
6,622.8
6,556.1
*
Prior year has been re-presented to include lease liabilities in total net debt.
In June 2019, the Group completed a five year €1.1bn revolving credit facility which matures in June 2024 and replaced the
existing facility that was due to mature in April 2022. The facility contains two extension options exercisable on the first and
second anniversaries of the facility. During 2020 the Group exercised the first of these extension options which extended
maturity until June 2025. The second option, if exercised, will extend the maturity date of the facility to June 2026. In keeping
with the Group’s commitment to ESG, the facility incorporates a price adjustment mechanism which is linked to the Group
meeting or exceeding its carbon, water and waste efficiency metrics.
In April 2020, the Group completed a €200m tap issuance onto our 2025 Senior Notes. These notes are rated by S&P and
Moody’s and are listed on Euronext Dublin. The proceeds of the issuance were retained for general corporate purposes. In
September 2019, the Group issued €750m senior notes carrying an annual coupon of 0.625%. The proceeds of the issuance
were used primarily to repay existing debt and for general corporate purposes.
All senior notes issued by the Group are rated by S&P and Moody’s.
Capital is managed by setting net debt to earnings before finance income and costs, income taxes, depreciation (net),
intangible asset amortisation and non-trading items (EBITDA) targets while allowing flexibility to accommodate significant
acquisition opportunities. Any expected variation from these targets should be reversible within 18 to 24 months; otherwise
consideration would be given to issuing additional equity in the Group.
Net debt is subject to seasonal fluctuations that can be up to 25% above year end debt levels.
The private placement notes issued in 2010 have $200m outstanding and this series of notes carry financial covenants
calculated in accordance with the Note Purchase Agreement. The principal financial covenants are:
-
-
the ratio of Net debt to EBITDA of a maximum of 3.5 times; and
EBITDA to Net interest charge of a minimum of 4.0 times.
At 31 December these ratios were as follows:
Net debt: EBITDA*
EBITDA: Net interest*
2020
Times
1.9
13.8
2019
Times
1.8
13.2
*
Calculated in accordance with lenders’ facility agreements which take account of adjustments as outlined on page 233.
No other financial arrangements carry financial covenants.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
199
23. Financial instruments (continued)
Financial risk management objectives
The Group has a clearly defined Financial Risk Management Programme, which is approved by the Board of Directors and is
subject to regular monitoring by the Finance Committee and Group Internal Audit. The Group operates a centralised treasury
function, which manages the principal financial risks of the Group and Company.
The principal objectives of the Group’s Financial Risk Management Programme are:
-
-
-
-
to manage the Group’s exposure to foreign exchange rate risk;
to manage the Group’s exposure to interest rate risk;
to ensure that the Group has sufficient credit facilities available to manage liquidity risk; and
to ensure that counterparty credit risk is monitored and managed.
Residual exposures not managed commercially are hedged using approved financial instruments. The use of financial
derivatives is governed by the Group’s policies and procedures. The Group does not engage in speculative trading.
The principal objectives of the Group’s Financial Risk Management Programme are further discussed across the following
categories:
(i)
Foreign exchange rate risk management - key foreign exchange exposure of the Group and the disclosures on forward
foreign exchange contracts.
(ii) Interest rate risk management - key interest rate exposures of the Group and the disclosures on interest rate derivatives.
(iii) Liquidity risk management - key banking facilities available to the Group and the maturity profile of the Group’s debt.
(iv) Credit risk management - details in relation to the management of credit risk within the Group.
(v) Price risk management - key price risk exposures of the Group.
(vi) Fair value of financial instruments - disclosures in relation to the fair value of financial instruments.
(vii) Offsetting financial instruments - disclosures in relation to the potential offsetting values in financial instruments.
(i) Foreign exchange rate risk management
The Group is exposed to transactional foreign currency risk on trading activities conducted by subsidiaries in currencies other
than their functional currency. Group policy is to manage foreign currency exposures commercially and through netting of
exposures wherever possible. Any residual exposures arising on foreign exchange transactions are hedged in accordance
with Group policy using approved financial instruments, which consist primarily of spot and forward exchange contracts and
currency swaps.
As at 31 December, the Group had an exposure to a US dollar asset of €29.4m (2019: €26.4m liability) and a sterling asset of
€8.4m (2019: €11.7m). Based on these net positions, as at 31 December 2020, a weakening of 5% of the US dollar and sterling
against all other key operational currencies, and holding all other items constant, would have impacted the profit after taxation
of the Group for the financial year by a decrease of €1.6m (2019: increase of €0.7m).
The Group’s gain or loss on the retranslation of the net assets of foreign currency subsidiaries is taken directly to the translation
reserve. As at 31 December 2020 a 5% strengthening of the euro against the US dollar and sterling, holding all other items
constant, would have resulted in an additional translation reserve loss of €21.6m (2019: €21.7m) and €22.9m (2019: €23.0m),
respectively.
(i.i) Forward foreign exchange contracts
The Group’s activities expose it to risks of changes in foreign currency exchange rates in relation to international trading,
primarily sales in US dollar and sterling out of the Eurozone and sales and purchases in US dollar in APMEA. The Group uses
forward foreign exchange contracts to hedge these exposures. All such exposures are highly probable. Derivative financial
instruments are held in the Consolidated Balance Sheet at their fair value.
The following table details the portfolio of forward foreign exchange contracts* at the balance sheet date:
Designated in a hedging relationship:
- current 1
- non-current 2
Forward foreign exchange contracts
Location of line item in the Consolidated Balance Sheet
*
1 Other current financial instruments
2 Other non-current financial instruments
2020
€’m
Asset
2020
€’m
Liability
2020
€’m
Total
2019
€’m
Asset
2019
€’m
Liability
2019
€’m
Total
14.1
0.1
14.2
(10.0)
(0.5)
(10.5)
4.1
(0.4)
3.7
12.0
(12.1)
(0.1)
-
-
-
12.0
(12.1)
(0.1)
Kerry Group Annual Report 2020
200
23. Financial instruments (continued)
Financial risk management objectives (continued)
(i) Foreign exchange rate risk management (continued)
(i.i) Forward foreign exchange contracts (continued)
The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the
hedged item is more than twelve months and as a current asset or liability if the maturity of the hedged item is less than
twelve months.
The Group adopted the hedge accounting requirements of IFRS 9 ‘Financial Instruments’. The Group enters into hedge
relationships when there is an economic relationship between the underlying highly probable forecasted transactions
(hedged item) and the forward foreign exchange contracts (hedged instruments). As the critical terms match for the
prospective assessment of effectiveness, a qualitative assessment is performed. The Group has established a 1:1 hedge
ratio as the underlying risks in the forward foreign currency exchange contract are identical to the hedged risk components.
Hedge effectiveness is determined at the origination of the hedging relationship. In instances where changes occur to the
hedged item which result in the critical terms no longer matching, the Group uses the hypothetical derivative method to
assess effectiveness.
The Group does not hold any forward foreign exchange contracts classified as fair value hedges.
The following table details the foreign exchange contracts classified as cash flow hedges at 31 December:
Forward foreign exchange contracts
less than 1 year
1 - 2 years
Forward foreign exchange contracts - cash flow hedges
Fair Value Asset/(Liability)
2019
€’m
2020
€’m
Notional Principal
2019
€’m
2020
€’m
4.1
(0.4)
3.7
(0.1)
1,105.0
1,735.7
-
31.4
19.8
(0.1)
1,136.4
1,755.5
The following table details the impact of forward foreign exchange contracts - cash flow hedges on the Consolidated Balance
Sheet as at 31 December:
Forward foreign exchange contracts - cash flow hedges
Retained earnings and other reserves:
Cash flow hedging reserve
Amount reclassified from OCI to profit or loss
2020
€’m
3.7
(2.9)
(0.8)
(3.7)
2019
€’m
(0.1)
(1.6)
1.7
0.1
The fair value included in the hedging reserve will primarily be released to the Consolidated Income Statement within 7 months
(2019: 6 months) of the balance sheet date. All forward contracts relate to sales revenue and purchases made in their respective
currencies and forward foreign exchange contracts that provide a hedge against foreign currency receivables from ‘within
Group’ lending.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS 23. Financial instruments (continued)
Financial risk management objectives (continued)
(i) Foreign exchange rate risk management (continued)
(i.i) Forward foreign exchange contracts (continued)
The following table details the impact of forward foreign exchange contracts* - cash flow hedges on the Consolidated Income
Statement and Consolidated Statement of Comprehensive Income during the financial year:
201
Movements recognised in the Consolidated Statement of Comprehensive Income
Total hedging gain recognised in OCI in the financial year
Amount reclassified from OCI to profit or loss
Movements recognised in the Consolidated Income Statement
Income reclassified from OCI to profit or loss 1
Ineffectiveness recognised in profit or loss 1
Location of line item in the Consolidated Income Statement
*
1 Other general overheads
2020
€’m
(2.1)
3.4
1.3
(3.4)
-
(3.4)
2019
€’m
(2.4)
0.6
(1.8)
(0.6)
-
(0.6)
There were no transactions during 2020 or 2019 which were designated as hedges that did not occur, nor are there hedges
on forecast transactions that are no longer expected to occur.
(ii) Interest rate risk management
The Group is exposed to interest rate risk as the Group holds borrowings on both a fixed and floating basis. This exposure
to interest rate risk is managed by optimising the mix of fixed and floating rate borrowings and by using interest rate swaps,
cross currency swaps and forward rate agreements to hedge these exposures, in accordance with Group policy as approved
by the Board of Directors. The Group reviews the mix of fixed and floating rate borrowings on an ongoing basis and adjusts
where necessary to comply with Group policy. Derivative financial instruments are held in the Consolidated Balance Sheet at
their fair value.
(ii.i) Interest rate profile of financial liabilities excluding related derivatives fair value
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 (including lease liabilities):
Euro
Sterling
US Dollar
Others
At 31 December 2020
Euro
Sterling
US Dollar
Others
At 31 December 2019*
Total
Pre CCS
€’m
Impact
of CCS
€’m
Total
after CCS
€’m
Floating
Rate Debt
€’m
Fixed
Rate Debt
€’m
(1,562.0)
(191.7)
(1,753.7)
(25.0)
(1,728.7)
78.2
(591.5)
82.0
(1,993.3)
-
78.2
78.2
-
191.7
(399.8)
(196.1)
(203.7)
-
-
82.0
82.0
-
(1,993.3)
(60.9)
(1,932.4)
(1,295.5)
(411.0)
(1,706.5)
(158.8)
(1,547.7)
53.7
(922.9)
89.0
(2,075.7)
-
53.7
53.7
-
411.0
(511.9)
(289.2)
(222.7)
-
-
89.0
89.0
-
(2,075.7)
(305.3)
(1,770.4)
*
Prior year has been re-presented to include lease liabilities, which are included under floating rate debt.
The currency profile of debt highlights the impact of the US$450m (2019: US$658m) of cross currency swaps entered into at the
time of issuance of senior notes. For the 2013 senior notes, US$250m were swapped from US dollar fixed to euro fixed and are
accounted for as cash flow hedges. For the private placement notes, US$200m (2019: US$408m) were swapped from US dollar
fixed to euro floating and are accounted for as fair value hedges. The retranslation of the foreign currency debt of US$450m
(2019: US$658m) to the balance sheet rate resulted in a foreign currency loss of €36.8m (2019: €116.3m) which is directly offset
by a gain of €36.8m (2019: €116.3m) on the application of hedge accounting on the cross currency swaps.
Kerry Group Annual Report 2020 202
23. Financial instruments (continued)
Financial risk management objectives (continued)
(ii) Interest rate risk management (continued)
(ii.i) Interest rate profile of financial liabilities excluding related derivatives fair value (continued)
In addition, the Group holds €950m of 2025 senior notes of which €750m were issued in 2015 and €200m were issued in 2020.
€175m of the 2025 senior notes from 2015 were swapped, using cross currency swaps, from euro fixed to US dollar floating and
are accounted for as fair value hedges of the related debt. The fair value of the related derivative includes an asset of €16.2m
(2019: €1.5m) for movement in exchange rates since the date of execution which is directly offset by a loss of €16.2m (2019:
€1.5m) on the application of hedge accounting on the cross currency swaps.
The floating rate financial liabilities are at rates which fluctuate mainly based upon LIBOR or EURIBOR and comprise of bank
borrowings and other financial liabilities bearing interest rates fixed in advance for periods ranging from 1 to 6 months. At the
financial year end 24% (2019: 31% after lease liabilities) of gross debt was held at floating rates.
If the interest rates applicable to floating rate net debt were to rise by 1% holding all other items constant, the profit of the
Group before taxation and non-trading items in the Consolidated Income Statement could decrease by 1% (2019: 1%).
(ii.ii) Interest rate swap contracts
The Group’s activities expose it to risks of changes in interest rates in relation to long-term debt. The Group uses interest rate
swaps, cross currency swaps and forward rate agreements to hedge these exposures. Derivative financial instruments are held
in the Consolidated Balance Sheet at their fair values.
The Group adopts an ‘exit price’ approach to valuing interest rate derivatives to allow for credit risk.
The following table details the portfolio of interest rate derivative contracts* at the balance sheet date:
2020
€’m
Asset
2020
€’m
Liability
2020
€’m
Total
2019
€’m
Asset
2019
€’m
Liability
2019
€’m
Total
Notes
Designated in a hedging relationship:
Interest rate swap contracts - cash flow hedges
(a)
- non-current 2
8.4
8.4
Interest rate swap contracts - fair value hedges
(b)
73.5
- current 1
- non-current 2
Interest rate swap contracts
-
73.5
81.9
Location of line item in the Consolidated Balance Sheet
*
1 Other current financial instruments
2 Other non-current financial instruments
-
-
-
-
-
-
8.4
8.4
18.4
18.4
73.5
110.0
-
73.5
81.9
45.7
64.3
128.4
-
-
-
-
-
-
18.4
18.4
110.0
45.7
64.3
128.4
The Group adopted the hedge accounting requirements of IFRS 9 ‘Financial Instruments’. The Group enters into hedge
relationships when there is an economic relationship between the identified notional amount of the underlying debt
instrument (hedged item) and the interest rate swap contract (hedged instrument).
Interest rate swap
As the critical terms match for the prospective assessment of effectiveness, a qualitative assessment is performed. The Group
has established a 1:1 hedge ratio as the underlying risks in the interest rate swap contracts are identical to the hedged risk
components. Hedge effectiveness is determined at the origination of the hedging relationship. In instances where changes
occur to the hedged item which result in the critical terms no longer matching, the Group uses the hypothetical derivative
method to assess effectiveness. Hedge ineffectiveness may occur due to the credit/debit value adjustment on the interest rate
swaps which is not matched by the loan.
Cross currency interest rate swap
The Group uses the hypothetical derivative method to assess effectiveness for such swaps as while the critical terms match,
both qualitative and quantitative assessments are required to be performed as there remains characteristics in cross currency
interest rate swap contracts that are not present in the hedged item, being basis risks. The Group has established a 1:1 hedge
ratio as the underlying risks in the cross currency interest rate swap contracts are identical to the hedged risk components.
Hedge effectiveness is determined at the origination of the hedging relationship and at each reporting date.
The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the
hedged item is more than twelve months and as a current asset or liability if the maturity of the hedged item is less than
twelve months. The classification of the maturity profile of the interest rate derivative contracts are set out in the following
tables (a) and (b).
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
203
23. Financial instruments (continued)
Financial risk management objectives (continued)
(ii) Interest rate risk management (continued)
(ii.ii) Interest rate swap contracts (continued)
Cross currency interest rate swap (continued)
The tables as set out reflect the hedging relationships affected by interest rate benchmark reform (IBOR reform) as financial
instruments transition to risk free rates. Group treasury are managing the IBOR transition process. The principal change
is expected to be for the contractual terms of IBOR-referenced interest rate swaps and debt instruments and the related
impact on hedge designation, systems and processes. While general communication with swap and debt counterparties has
commenced, no specific changes have been agreed to date. In assessing the potential impact the Group has assumed that the
uncertainty in relation to the IBOR reform will remain until the Group has completed specific changes with the swap and debt
counterparties and the Group will continue to apply the amendments to IFRS 9 until this date.
(a) Interest rate swap contracts - cash flow hedges
Under interest rate swap contracts, including cross currency interest rate swaps, the Group agrees to exchange the difference
between the fixed and floating rate interest amounts calculated on the agreed notional principal amounts.
The following table details the notional principal amounts and remaining terms of the cash flow hedges, where the Group
receives a floating or a fixed interest rate and pays fixed interest rate on swaps as at 31 December:
Average Contracted
Fixed Interest Rate
Fair Value Asset
Notional Principal
2020
%
2019
%
2020
€’m
2019
€’m
2020
€’m
2019
€’m
Interest rate swap contracts
2 - 5 years
Interest rate swap contracts - cash flow hedges
2.58
2.58
8.4
8.4
18.4
18.4
203.7
203.7
222.7
222.7
The following table details the impact of interest rate swap contracts* - cash flow hedges on the Consolidated Balance Sheet as
at 31 December:
Interest rate swap contracts - cash flow hedges
Fixed rate borrowings:
2020
€’m
8.4
2019
€’m
18.4
Amount reclassified from hedge reserve to profit or loss re: foreign exchange rate fluctuations1
(8.3)
(27.2)
Retained earnings and other reserves:
Cash flow hedging reserve
Cost of hedging reserve
Accumulated hedge ineffectiveness
0.3
(0.6)
0.2
(8.4)
9.8
(1.4)
0.4
(18.4)
Location of line item in the Consolidated Balance Sheet
*
1 Borrowings & overdrafts
The following table details the impact of interest rate swap contracts - cash flow hedges on the Consolidated Statement of
Comprehensive Income during the financial year:
Total hedging loss recognised in cash flow hedging reserve
Total hedging gain recognised in cost of hedging reserve
Amount reclassified from hedge reserve to profit or loss re: foreign exchange rate fluctuations
Amount reclassified from OCI to profit or loss re: interest rate fluctuations
Ineffectiveness recognised in profit or loss
Net impact
2020
€’m
(27.7)
0.7
18.9
(0.5)
(0.2)
(8.8)
2019
€’m
(4.3)
0.2
(4.2)
(0.5)
(0.1)
(8.9)
Kerry Group Annual Report 2020
204
23. Financial instruments (continued)
Financial risk management objectives (continued)
(ii) Interest rate risk management (continued)
(ii.ii) Interest rate swap contracts (continued)
(a) Interest rate swap contracts - cash flow hedges (continued)
The following table details the income/(expense) impact of interest rate swap contracts* - cash flow hedges and the hedged
item on the Consolidated Income Statement during the financial year:
Interest rate swap contracts - cash flow hedges:
Foreign exchange rate fluctuations 1
Amount reclassified from OCI to profit or loss re: interest rate fluctuations 2
Ineffectiveness recognised in profit or loss 2
Fixed rate borrowings:
Foreign exchange rate fluctuations 1
Net impact
2020
€’m
2019
€’m
(18.9)
0.5
0.2
18.9
0.7
4.2
0.5
0.1
(4.2)
0.6
Location of line item in the Consolidated Income Statement
*
1 Other general overheads
2
Finance costs
The interest rate swaps settle on a 6 monthly basis, the difference between the floating rate or fixed rate due to be received and
the fixed rate to be paid are settled on a net basis.
(b) Interest rate swap contracts - fair value hedges
Under interest rate swap contracts including cross currency interest rate swaps, the Group agrees to exchange the difference
between the floating and fixed interest amounts calculated on the agreed notional principal amounts.
The following table details the notional principal amounts and remaining terms of the fair value hedges, where the Group
receives a fixed interest rate and pays a floating interest rate on swaps as at 31 December:
Average Contracted
Fixed Interest Rate
Fair Value Asset
Notional Principal
2020
%
2019
%
2020
€’m
2019
€’m
2020
€’m
2019
€’m
Interest rate swap contracts
less than 1 year
1 - 2 years
2 - 5 years
> 5 years
-
4.9
3.1
-
4.8
-
3.8
3.1
-
21.9
51.6
-
45.7
-
33.6
30.7
-
185.3
101.9
439.8
-
-
334.0
241.8
761.1
Interest rate swap contracts - fair value hedges
73.5
110.0
541.7
The interest rate swaps settle on a 6 monthly or annual basis. The floating interest rate paid by the Group is based on 6 month
EURIBOR or LIBOR. All hedges are highly effective on a prospective and retrospective basis.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS 205
23. Financial instruments (continued)
Financial risk management objectives (continued)
(ii) Interest rate risk management (continued)
(ii.ii) Interest rate swap contracts (continued)
(b) Interest rate swap contracts - fair value hedges (continued)
The following table details the impact of interest rate swap contracts* - fair value hedges and the hedged items on the
Consolidated Balance Sheet as at 31 December:
Interest rate swap contracts - fair value hedges
Fixed rate borrowings:
Foreign exchange rate fluctuations 1
Interest rate movements 1
Receivables:
Foreign exchange rate fluctuations 2
Retained earnings and other reserves:
Hedge ineffectiveness
Cost of hedging reserve
2020
€’m
73.5
(28.5)
(33.7)
2019
€’m
110.0
(89.1)
(24.9)
(16.2)
(1.5)
2.0
2.9
2.7
2.8
(73.5)
(110.0)
Location of line item in the Consolidated Balance Sheet
*
1 Borrowings and overdrafts
2
Receivables: €175m of the 2015 senior notes issuance were swapped from Euro to US dollars and subsequently on-lent
from a Euro entity to a US dollar entity
The following table details the impact of interest rate swap contracts - fair value hedges on the Consolidated Statement of
Comprehensive Income during the financial year:
Amounts recognised in the cost of hedging reserve
2020
€’m
0.1
2019
€’m
(0.8)
The following table details the income/(expense) impact of interest rate swap contracts*/** - fair value hedges and the hedged
items on the Consolidated Income Statement during the financial year:
Interest rate swap contracts - fair value hedges:
Foreign exchange rate fluctuations 1
Interest rate movements 2
Ineffectiveness recognised in profit or loss 2
Fixed rate borrowings:
Foreign exchange rate fluctuations 1
Interest rate movements 2
Receivables:
Foreign exchange rate fluctuations 3
Net impact
2020
€’m
2019
€’m
(0.4)
8.7
0.7
15.2
(8.7)
(14.8)
0.7
3.7
11.7
2.8
(7.0)
(11.7)
3.3
2.8
Location of line item in the Consolidated Income Statement
*
** Location of line item in the Consolidated Balance Sheet
1 Other general overheads
2
3
Finance costs
Receivables: €175m of the 2015 senior notes issuance were swapped from Euro to US dollars and subsequently on-lent
from a Euro entity to a US dollar entity within the Group
Kerry Group Annual Report 2020 206
23. Financial instruments (continued)
Financial risk management objectives (continued)
(iii) Liquidity risk management
Liquidity risk considers the risk that the Group could encounter difficulties in meeting obligations associated with financial
liabilities that are settled by delivering cash or another financial asset. There is no significant concentration of liquidity risk.
Following the renewal of the revolving credit facility in June 2019 and the issuance of the €750m 2029 senior notes in
September 2019, the Group entered 2020 with significant available liquidity. During 2020, this position was further
strengthened by (a) completing a €200m tap issuance onto our 2025 senior notes and (b) the exercise of the first of the two
‘plus one year’ extension options on our June 2019 revolving credit facility.
Group funding and liquidity is managed by ensuring that sufficient facilities are available from diverse funding sources with
an appropriate spread of debt maturities to match the underlying assets. The Group uses cash flow forecasts to constantly
monitor the funding requirements of the Group.
Group businesses are funded from cash generated from operations, borrowings from banks and senior notes from capital
markets. It is Group policy to ensure that:
-
-
sufficient facilities are available to cover its gross forecast debt by at least 1.25 times; and
at least 75% of total facilities available are committed.
Both targets were met at 31 December 2020 and 2019.
Funding is sourced from banks via syndicated and bilateral arrangements and from institutional investors.
All Group credit facilities are arranged and managed by Group Treasury and approved by the Board of Directors. Where
possible, facilities have common security and terms and conditions. The private placement notes for which US$200m remains
outstanding have financial covenants attached - no other debt issued has financial covenants. Other than the pre existing
contractual exercise of the ‘plus one year’ extension option on the revolving credit facility agreement, the Group did not
undertake any liability modifications to contracts for existing debt during 2020.
At 31 December 2020, the Group had undrawn committed bank facilities of €1,100m (2019: €1,100m), and a portfolio of
undrawn standby facilities amounting to €320m (2019: €330m). The undrawn committed facilities comprise primarily of a
revolving credit facility maturing between 4 - 5 years (2019: between 4 - 5 years). As set out above during the year the Group
exercised the first of its two ‘plus one year’ extension options on the revolving credit facility. As a result of the extension option
the Group now holds a committed facility until June 2024 for €1,100m at which time it reduces to a committed facility of
€1,022m from June 2024 to June 2025.
(iii.i) Contractual maturity profile of non-derivative financial instruments
The following table details the Group’s remaining contractual maturity of its non-derivative financial instruments, including
lease liabilities and deferred payments on acquisitions of businesses, excluding the remaining trade and other payables
(note 19) and other non-current liabilities (note 21), of which €1,499.2m (2019: €1,595.1m) is payable within 1 year, €85.3m
(2019: €84.7m) between 2 and 5 years. This information has been drawn up based on the undiscounted cash flows of financial
liabilities to the earliest date on which the Group can be required to repay. The analysis includes both interest commitments
and principal cash flows. To the extent that interest rates are floating, the rate used is derived from interest rate yield curves at
the end of the reporting date and as such, are subject to change based on market movements.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS 23. Financial instruments (continued)
Financial risk management objectives (continued)
(iii) Liquidity risk management (continued)
(iii.i) Contractual maturity profile of non-derivative financial instruments (continued)
207
Bank overdrafts
Bank loans
Senior notes
Borrowings and overdrafts
Lease liabilities (undiscounted)
11 (iii.iv)
Deferred payments on acquisition
of businesses
Interest commitments on
borrowings and overdrafts
At 31 December 2020
Reconciliation to net debt position:
Borrowings and overdrafts
Senior notes - fair value adjustment
Borrowings and overdrafts
Interest rate swaps
Cash at bank and in hand
Net debt - pre lease liabilities
Lease liabilities (discounted)
11 (iii.iv)
Total net debt as at 31 December 2020
Bank overdrafts
Bank loans
Senior notes
Borrowings and overdrafts
Lease liabilities (undiscounted)
11 (iii.iv)
Deferred payments on acquisition
of businesses
Interest commitments on
borrowings and overdrafts
At 31 December 2019*
Reconciliation to net debt position:
Borrowings and overdrafts
Senior notes - fair value adjustment
Borrowings and overdrafts
Interest rate swaps
Cash at bank and in hand
Net debt - pre lease liabilities
Lease liabilities (discounted)
11 (iii.iv)
Total net debt as at 31 December 2019*
On demand &
up to 1 year
€’m
Note
Up to
2 years
€’m
-
-
(101.9)
(101.9)
(22.6)
(1.6)
2 - 5
years
€’m
-
-
(1,630.3)
(1,630.3)
(29.0)
(3.5)
> 5 years
€’m
-
-
(739.9)
(739.9)
(9.1)
-
Total
€’m
(2.8)
-
(2,472.1)
(2,474.9)
(92.1)
(22.2)
(126.1)
(1,662.8)
(749.0)
(2,589.2)
(50.2)
(86.4)
(17.4)
(208.9)
(2.8)
-
-
(2.8)
(31.4)
(17.1)
(51.3)
(54.9)
(106.2)
(176.3)
(1,749.2)
(766.4)
(2,798.1)
(2.8)
-
(2.8)
-
563.1
560.3
(27.0)
533.3
(101.9)
(1,630.3)
(739.9)
(2,474.9)
(4.3)
(29.4)
-
(33.7)
(106.2)
(1,659.7)
(739.9)
(2,508.6)
21.9
-
(84.3)
(20.6)
60.0
-
-
-
81.9
563.1
(1,599.7)
(739.9)
(1,863.6)
(26.6)
(7.3)
(81.5)
(104.9)
(1,626.3)
(747.2)
(1,945.1)
On demand &
up to 1 year
€’m
Note
Up to
2 years
€’m
(5.2)
-
(185.3)
(190.5)
(40.9)
(13.0)
(244.4)
(53.2)
-
(1.2)
-
(1.2)
(27.2)
(2.7)
(31.1)
(52.8)
2 - 5
years
€’m
-
-
(777.6)
(777.6)
(33.0)
(6.0)
(816.6)
(105.2)
> 5 years
€’m
-
-
Total
€’m
(5.2)
(1.2)
(1,551.9)
(2,514.8)
(1,551.9)
(2,521.2)
(18.6)
-
(119.7)
(21.7)
(1,570.5)
(2,662.6)
(34.6)
(245.8)
(297.6)
(83.9)
(921.8)
(1,605.1)
(2,908.4)
(190.5)
(0.3)
(190.8)
45.7
554.9
409.8
(34.9)
374.9
(1.2)
-
(1.2)
-
-
(1.2)
(24.4)
(25.6)
(777.6)
(1,551.9)
(2,521.2)
(7.0)
(17.6)
(24.9)
(784.6)
(1,569.5)
(2,546.1)
52.0
-
(732.6)
(32.8)
(765.4)
30.7
-
128.4
554.9
(1,538.8)
(1,862.8)
(17.3)
(109.4)
(1,556.1)
(1,972.2)
*
Prior year has been re-presented to include lease liabilities in total net debt.
Kerry Group Annual Report 2020
208
23. Financial instruments (continued)
Financial risk management objectives (continued)
(iii) Liquidity risk management (continued)
(iii.ii) Contractual maturity profile of derivative financial instruments
The following table details the Group’s remaining contractual maturity of its derivative financial instruments. The table has been
drawn up based on the undiscounted net cash inflows and outflows on derivative instruments that settle on a net basis. To the
extent that the amounts payable or receivable are not fixed, the rate used is derived from interest rate yield curves at the end
of the reporting date and as such are subject to change based on market movements.
Interest rate swaps inflow
Interest rate swaps outflow
Net interest rate swaps inflow
Forward foreign exchange contracts inflow/(outflow)
At 31 December 2020
Interest rate swaps inflow
Interest rate swaps outflow
Net interest rate swaps inflow
Forward foreign exchange contracts outflow
At 31 December 2019
On demand &
up to 1 year
€’m
Up to
2 years
€’m
25.3
(12.5)
12.8
4.1
16.9
On demand &
up to 1 year
€’m
73.2
(20.0)
53.2
(0.1)
53.1
38.4
(11.7)
26.7
(0.4)
26.3
Up to
2 years
€’m
27.3
(19.2)
8.1
-
8.1
2 - 5
years
€’m
52.2
(9.0)
43.2
-
43.2
2 - 5
years
€’m
98.9
(40.9)
58.0
-
58.0
> 5 years
€’m
-
-
-
-
-
> 5 years
€’m
18.0
-
18.0
-
18.0
Total
€’m
115.9
(33.2)
82.7
3.7
86.4
Total
€’m
217.4
(80.1)
137.3
(0.1)
137.2
Included in the interest rate swaps inflow and outflow is the foreign currency differential on final maturity of the cross currency
interest rate swaps as follows:
Swaps inflow
- Up to 1 year - swaps inflow of €nil (2019: €45.4m)
1 - 2 years - swaps inflow of €17.8m (2019: €nil)
-
2 - 5 years - swaps inflow of €35.2m (2019: €54.6m)
-
- Greater than 5 years - swaps inflow of €nil (2019: €17.8m)
(iii.iii) Summary of borrowing arrangements
(a) Bank loans
Bank loans comprise committed term loan facilities, committed revolving credit facilities, bilateral term loans and other
uncommitted facilities:
- Demand facilities;
-
- Bilateral term loans with maturities ranging up to 1 year.
Syndicate revolving credit facilities of €1,100m to June 2024 at which time it reduces to €1,022m until June 2025; and
(b) 2029 Euro senior note - public
In 2019 the Group issued a 10 year euro note of €750m at an interest rate of 0.625% with a maturity date on 20 September 2029.
(c) 2025 Euro senior note - public
In 2015 the Group issued a debut 10 year euro note of €750m at an interest rate of 2.375% with a maturity date on
10 September 2025. During 2020 the Group completed a €200m tap issuance onto our 2025 Euro Senior Note.
(d) 2023 US dollar senior note - public
In 2013 the Group issued a debut 10 year USA public note of US$750m at an interest rate of 3.2% with a maturity date on
9 April 2023.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
209
23. Financial instruments (continued)
Financial risk management objectives (continued)
(iii) Liquidity risk management (continued)
(iii.iii) Summary of borrowing arrangements (continued)
(e) 2010 Senior notes - private placement notes
The Group placed US$600m of senior notes with USA institutional investors in four tranches with maturity as follows:
-
-
-
-
Tranche A of US$192m - matured and repaid on 20 January 2017
Tranche B of US$208m - matured and repaid on 20 January 2020
Tranche C of US$125m - maturing on 20 January 2022
Tranche D of US$75m - maturing on 20 January 2025
The interest rates listed above are before the effects of related interest rate swaps.
The US$200m of private placement notes have financial covenants attached to them. The Group was in full compliance with
these covenants for the financial years 2020 and 2019.
(f) Lease liabilities
The Group’s lease liabilities are set out in note 11 (iii).(iii).
(iv) Credit risk management
Cash deposits and other financial assets give rise to credit risk on the amounts due from counterparties.
The Group controls and monitors the distribution of this exposure by ensuring that all financial instruments are held with
reputable and financially secure institutions and that exposure to credit risk is distributed across a number of institutions.
At 31 December 2020 and 2019 all cash, short-term deposits and other liquid investments had a maturity of less than 3 months.
Credit risk exposure to financial institutions is actively managed across the portfolio of institutions by setting appropriate credit
exposure limits based on a value at risk calculation that takes EBITDA of the Group and calculates approved tolerance levels
based on credit default swap rates for the financial institutions. These levels are applied in controlling the level of material
surplus funds that are placed with counterparties and for controlling the institutions with which the Group enters into derivative
contracts. Credit default swaps for those financial institutions are as published by independent credit rating agencies and are
updated and reviewed on an ongoing basis.
The Group’s exposure to its counterparties is continuously monitored and the aggregate value of transactions entered into is
spread amongst approved counterparties.
Trade receivables consist of a large number of customers, spread across diverse geographical areas. Ongoing credit evaluation
is performed on the financial condition of accounts receivable at operating unit level at least on a monthly basis.
The Group’s maximum exposure to credit risk consists of gross trade receivables (note 18), cash deposits (note 22) and other
financial assets (note 22), which are primarily interest rate swaps and foreign exchange contracts.
In relation to credit risk on derivative financial instruments, where appropriate, the Group credit risk is actively managed
across the portfolio of institutions through monitoring the credit default swaps (CDS) and setting appropriate credit exposure
limits based on CDS levels. These levels are applied in controlling the level of material surplus funds that are placed with
counterparties and for controlling institutions with which the Group enters into derivative contracts.
(v) Price risk management
The Group’s exposure to equity securities price risk, due to financial asset investments held, is considered to be low as the level
of securities held versus the Group’s net assets is not material.
(vi) Fair value of financial instruments
(a) Fair value of financial instruments carried at fair value
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).
-
Kerry Group Annual Report 2020
210
23. Financial instruments (continued)
Financial risk management objectives (continued)
(vi) Fair value of financial instruments (continued)
(a) Fair value of financial instruments carried at fair value (continued)
Financial assets
Interest rate swaps:
Non-current
Current
Forward foreign exchange contracts:
Non-current
Current
Financial asset investments:
Fair value through profit or loss
Fair value through other comprehensive income
Financial liabilities
Forward foreign exchange contracts:
Non-current
Current
Fair Value
Hierarchy
2020
€’m
2019
€’m
Level 2
Level 2
Level 2
Level 2
Level 1
Level 3
81.9
-
0.1
14.1
37.0
-
82.7
45.7
-
12.0
37.4
4.3
Level 2
(0.5)
-
Level 2
(10.0)
(12.1)
The reconciliation of Level 3 assets is provided in note 13. There have been no transfers between levels during the current or
prior financial year.
(b) Fair value of financial instruments carried at amortised cost
Except as detailed in the following table, it is considered that the carrying amounts of financial assets and financial liabilities
recognised at amortised cost in the financial statements approximate their fair values.
Financial liabilities
Senior notes - Public
Senior notes - Private
Carrying
Amount
2020
€’m
Fair
Value
2020
€’m
Carrying
Amount
2019
€’m
Fair
Value
2019
€’m
Fair Value
Hierarchy
Level 2
(2,309.2)
(2,466.9)
(2,151.4)
(2,217.1)
Level 2
(163.0)
(177.3)
(363.4)
(372.9)
(2,472.2)
(2,644.2)
(2,514.8)
(2,590.0)
(c) Valuation principles
The fair value of financial assets and liabilities are determined as follows:
-
-
-
-
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.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS 211
23. Financial instruments (continued)
Financial risk management objectives (continued)
(vii) Offsetting financial instruments
The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting
agreements. The ISDA agreements do not meet the criteria for offsetting in the Consolidated Balance Sheet. This is because
the Group does not have any current legally enforceable right to offset recognised amounts, because the right to offset is
enforceable only on the occurrence of future events such as a default on the bank loans or other credit events. No collateral is
paid or received.
The following table sets out the carrying amounts of recognised financial instruments that are subject to the above agreements.
The table also sets out where the Group has offset bank overdrafts against cash at bank and in hand based on a legal right of
offset as set out in the banking agreements.
Gross amounts
of financial
assets in the
Consolidated
Balance Sheet
€’m
Gross amounts
of financial
liabilities in the
Consolidated
Balance Sheet
€’m
Amounts
of financial
instruments
presented in the
Consolidated
Balance Sheet
€’m
Related
financial
instruments
that are not
offset
€’m
Net amount
€’m
At 31 December 2020
Financial assets
Cash at bank and in hand
Forward foreign exchange contracts
Interest rate swaps
Financial liabilities
Bank overdrafts
Forward foreign exchange contracts
Interest rate swaps
At 31 December 2019
Financial assets
Cash at bank and in hand
Forward foreign exchange contracts
Interest rate swaps
Financial liabilities
Bank overdrafts
Forward foreign exchange contracts
Interest rate swaps
563.1
14.2
81.9
659.2
-
-
-
-
554.9
12.0
128.4
695.3
-
-
-
-
-
-
-
-
(2.8)
(10.5)
-
(13.3)
-
-
-
-
(5.2)
(12.1)
-
(17.3)
563.1
14.2
81.9
659.2
(2.8)
(10.5)
-
(13.3)
554.9
12.0
128.4
695.3
(5.2)
(12.1)
-
(17.3)
-
(6.0)
-
(6.0)
-
6.0
-
6.0
-
(8.3)
-
(8.3)
-
8.3
-
8.3
563.1
8.2
81.9
653.2
(2.8)
(4.5)
-
(7.3)
554.9
3.7
128.4
687.0
(5.2)
(3.8)
-
(9.0)
Kerry Group Annual Report 2020
212
24. Provisions
Group:
At 1 January 2019
Provided during the financial year
Utilised during the financial year
Transferred to payables and accruals
Exchange translation adjustment
At 31 December 2019
Provided during the financial year
Utilised during the financial year
Released during the financial year
Transferred to payables and accruals
Exchange translation adjustment
At 31 December 2020
Analysed as:
Current liabilities
Non-current liabilities
Insurance
€’m
Non-Trading Items
€’m
Total
€’m
45.2
0.8
-
-
0.6
46.6
5.2
(5.6)
(6.2)
-
(1.0)
39.0
7.2
9.6
-
(4.9)
(0.1)
11.8
-
(0.1)
(0.6)
(8.8)
-
2.3
2020
€’m
5.2
36.1
41.3
52.4
10.4
-
(4.9)
0.5
58.4
5.2
(5.7)
(6.8)
(8.8)
(1.0)
41.3
2019
€’m
25.2
33.2
58.4
Insurance
The Group operates a level of self-insurance. Under these arrangements, the Group retains certain exposures up to pre-
determined self-insurance levels. The amount of self-insurance is reviewed on a regular basis to ensure it remains appropriate.
The provision for these exposures represents amounts provided based on advice from insurance consultants, industry
information, actuarial valuation and historical data in respect of claims that are classified as incurred but not reported and
outstanding loss reserves. The methodology of estimating the provision is periodically reviewed to ensure that the assumptions
made continue to be appropriate. The utilisation of the provision is dependent on the timing of settlement of the outstanding
claims. Historically, the average time for settlement of outstanding claims ranges from 2 to 4 years from claim date.
Non-trading items
Non-trading items relate to restructuring and acquisition integration provisions incurred in 2020 and 2019; these costs are
expected to be paid within 24 months.
25. Retirement benefits obligation
The Group operates post-retirement benefit plans in a number of its businesses throughout the world. These plans are
structured to accord with local conditions and practices in each country they operate in and can include both defined
contribution and defined benefit plans. The assets of the schemes are held, where relevant, in separate trustee
administered funds.
Defined benefit post-retirement schemes exist in a number of countries in which the Group operates, primarily in Ireland and
the Netherlands (Eurozone), the UK and the USA (included in Rest of World). These defined benefit plans, most of which are
closed to future accrual, comprise final salary pension plans, career average salary pension plans and post-retirement medical
plans. The post-retirement medical plans operated by the Group relate primarily to a number of USA employees. Defined
benefit schemes in Ireland, the UK, and the USA are administered by Boards of Trustees. The Boards of Trustees generally
comprise of representatives of the employees, the employer and independent trustees. These Boards are responsible for the
management and governance of the plans including compliance with all relevant laws and regulations.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS 213
25. Retirement benefits obligation (continued)
The values used in the Group’s consolidated financial statements are based on the most recent actuarial valuations and have
been updated by the individual schemes’ independent and professionally qualified actuaries to incorporate the requirements of
IAS 19 ‘Employee Benefits’ in order to assess the liabilities of the various schemes as at 31 December 2020 using the projected
unit credit method. All assets in the schemes have been measured at their fair value at the balance sheet date. Full actuarial
valuations for funding purposes are carried out for the Group’s pension plans in line with local requirements. The actuarial
reports are not available for public inspection.
The Group continues to harmonise, standardise and integrate the benefit offering to employees across the countries in which
it operates. As a result, a number of deferred members transferred their past service benefits out of the Irish defined benefit
plans during 2019 and 2020.
The defined benefit plans expose the Group to risks such as interest rate risk, investment risk, inflation risk and mortality risk.
Interest rate risk
The calculation of the present value of the defined benefit obligation is sensitive to the discount rate which is derived from the
interest yield on high quality corporate bonds at the balance sheet date. Market conditions in recent years have resulted in
volatility in discount rates which has significantly impacted the present value of the defined benefit obligation. Such changes
lead to volatility in the Group’s Consolidated Balance Sheet, Consolidated Income Statement and Consolidated Statement of
Comprehensive Income. Interest rates also impact on the funding requirements for the plans.
Investment risk
The net deficit recognised in the Consolidated Balance Sheet represents the present value of the defined benefit obligation less
the fair value of the plan assets. When assets generate a rate of return less than the discount rate this results in an increase
in the net deficit. Currently the plans have a diversified portfolio of investments in equities, bonds and other types of asset
classes. External investment consultants periodically conduct an investment review and advise on the most appropriate asset
allocation taking account of asset valuations, funding requirements, liability duration and the achievement of an appropriate
return on assets.
Inflation risk
A significant proportion of the defined benefit obligation is linked to inflation, therefore an increase in inflation rates will
increase the defined benefit obligation. However, a portion of the plan assets are inflation-linked debt securities which
mitigates some of the effects of inflation movements.
Mortality risk
The present value of the defined benefit obligation is calculated by reference to the best estimate of the mortality of plan
participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the
defined benefit obligation.
(i) Recognition in the Consolidated Income Statement and Consolidated Statement of Comprehensive Income
The following amounts have been recognised in the Consolidated Income Statement and the Consolidated Statement of
Comprehensive Income in relation to defined contribution and defined benefit post-retirement plans:
Service cost:
- Costs relating to defined contribution schemes
- Current service cost relating to defined benefit schemes
- Past service and settlements
Net interest cost
Recognised in the Consolidated Income Statement
Re-measurements of the net defined benefit liability:
2020
€’m
2019
€’m
63.9
3.2
(12.8)
-
54.3
64.0
2.7
(9.9)
0.8
57.6
- Return on plan assets (excluding amounts included in net interest cost)
(95.0)
(198.5)
- Experience (gains)/losses on schemes’ liabilities
- Actuarial gains arising from changes in demographic assumptions
- Actuarial losses arising from changes in financial assumptions
Recognised in the Consolidated Statement of Comprehensive Income
Total
(5.5)
(3.0)
170.5
67.0
121.3
3.3
(8.9)
190.1
(14.0)
43.6
The total service cost is included in total staff numbers and costs (note 4) and the net interest cost is included in finance income
and costs (note 6).
Kerry Group Annual Report 2020 214
25. Retirement benefits obligation (continued)
(ii) Recognition in the Consolidated Balance Sheet
The Group’s net defined benefit post-retirement schemes’ deficit at 31 December, which has been recognised in the
Consolidated Balance Sheet, was as follows:
Present value of defined benefit obligation
Fair value of plan assets
Net recognised deficit in plans before deferred tax
Net related deferred tax asset
Net recognised deficit in plans after deferred tax
31 December
2020
€’m
31 December
2019
€’m
(1,505.5)
(1,441.6)
1,451.1
1,429.7
(54.4)
10.8
(43.6)
(11.9)
3.3
(8.6)
(iii) Financial and demographic assumptions
The principal financial assumptions used by the Group’s actuaries in order to calculate the defined benefit obligation at
31 December, some of which have been shown in range format to reflect the differing assumptions in each scheme,
were as follows:
2020
2019
Inflation assumption
Rate of increase in salaries
Eurozone
%
1.50
N/A*
UK
%
2.80
N/A*
Rate of increase for pensions in payment
and deferred pensions
1.50
2.00 - 2.70
Rest of
World
%
2.50
3.00
-
Eurozone
%
1.50
N/A*
UK
%
2.60
N/A*
1.50
1.80 - 2.60
Rest of
World
%
2.50
3.00
-
Rate used to discount schemes’ liabilities
1.20
1.50
1.75 - 2.25
1.15 - 1.50
2.10
2.50 - 3.00
* Not applicable due to closure of the Irish, Netherlands and UK defined benefit plans to future accrual.
The most significant demographic assumption is mortality. The mortality assumptions used are based on advice from the
pension schemes’ actuaries and reflect each scheme’s population. The life expectancy of a member retiring at 31 December at
age 65, now and in 20 years’ time, some of which have been shown in range format to reflect the differing assumptions in each
scheme, is as follows:
2020
2019
Eurozone
Years
UK
Years
Male - retiring now
Female - retiring now
Male - retiring in 20 years’ time
22
24
24
Female - retiring in 20 years’ time
25 - 26
20
23
22
24
Eurozone
Years
UK
Years
Rest of
World
Years
21 - 22
22 - 23
22 - 23
22
24 - 25
24
24
25 - 27
Rest of
World
Years
21 - 22
23 - 24
22 - 24
24 - 25
20
23
21
24
There are inherent uncertainties surrounding the financial and demographic assumptions adopted by the Group. The
assumptions may differ from the actual data as a result of changes in economic and market conditions as well as the actual
experience within each scheme. The present value of post-retirement benefit schemes’ liabilities is heavily dependent on the
discount rate. As the discount rate is based on a market driven measure, which is the interest yield on high quality corporate
bonds at the balance sheet date, the present value of post-retirement benefit schemes’ liabilities can fluctuate significantly
from valuation to valuation. The expected rate of inflation impacts the schemes’ liabilities in that inflation is the basis for the
calculation of the assumed future salary and revaluation increases in each scheme where applicable. In relation to demographic
assumptions, differing expectations regarding current and future changes in mortality rates can have a significant impact on
the schemes’ liabilities.
The following table gives an approximate indication of the impact of a change in the principal financial actuarial assumptions
(discount rate, inflation rate, salary increases and pensions in payment and deferred pension increases) and the principal
demographic actuarial assumption (mortality) on the schemes’ liabilities. The present value of the defined benefit obligation
has been calculated using the projected unit credit method. The impact on the defined benefit obligation at 31 December
2020 is calculated on the basis that only one assumption is changed with all other assumptions remaining unchanged.
The assessment of the sensitivity analysis below could therefore be limited as a change in one assumption may not occur
in isolation as assumptions may be correlated. There have been no changes from the previous year in the methods and
assumptions used in preparing the sensitivity analysis.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS 215
25. Retirement benefits obligation (continued)
(iii) Financial and demographic assumptions (continued)
Assumption
Discount rate
Inflation rate
Change in assumption
Impact on schemes’ liabilities
Increase/decrease of 0.50%
Decrease/increase of 11.6%
Increase/decrease of 0.50%
Increase/decrease of 8.0%
Salary increases
Increase/decrease of 0.50%
Increase/decrease of 0.0%
Pensions in payment and deferred
pensions increases
Increase/decrease of 0.50%
Increase/decrease of 5.7%
Mortality
Increase/decrease in life expectancy of 1 Year
Increase/decrease of 3.8%
(iv) Reconciliations for defined benefit plans
The movements in the defined benefit schemes’ obligation during the financial year were:
Present value of the defined benefit obligation at beginning of the financial year
(1,441.6)
(1,280.4)
2020
€’m
2019
€’m
Current service cost
Past service and settlements
Interest expense
Contributions by employees
Benefits paid
Re-measurements:
- experience gains/(losses) on schemes’ liabilities
- actuarial gains arising from changes in demographic assumptions
- actuarial losses arising from changes in financial assumptions
Decrease arising on settlement
Exchange translation adjustment
(3.2)
12.8
(26.8)
-
56.8
5.5
3.0
(170.5)
-
58.5
(2.7)
9.9
(34.3)
-
59.7
(3.3)
8.9
(190.1)
31.0
(40.3)
Present value of the defined benefit obligation at end of the financial year
(1,505.5)
(1,441.6)
Present value of the defined benefit obligation at end of the financial year that relates to:
Wholly unfunded plans
Wholly or partly funded plans
(17.2)
(20.0)
(1,488.3)
(1,421.6)
(1,505.5)
(1,441.6)
The weighted average duration of the defined benefit obligation at 31 December 2020 is approximately 22 years
(2019: approximately 21 years).
The movements in the schemes’ assets during the financial year were:
Fair value of plan assets at beginning of the financial year
Interest income
Contributions by employer
Contributions by employees
Benefits paid
Re-measurements:
- return on plan assets (excluding amounts included in net interest cost)
Decrease arising on settlement
Exchange translation adjustment
Fair value of plan assets at end of the financial year
2020
€’m
2019
€’m
1,429.7
1,227.2
26.8
13.8
-
(56.8)
95.0
-
(57.4)
1,451.1
33.5
19.5
-
(59.7)
198.5
(31.0)
41.7
1,429.7
Kerry Group Annual Report 2020
216
25. Retirement benefits obligation (continued)
(iv) Reconciliations for defined benefit plans (continued)
The fair values of each of the categories of the pension schemes’ assets at 31 December were as follows:
Equities
- Global Equities
- Emerging Market Equities
- Global Small Cap Equities
Government Fixed Income
Other Fixed Income
Multi-asset Funds
- Diversified Growth Funds
- Hedge Funds
Cash and other
2020
€’m
2019
€’m
566.5
70.7
-
25.1
605.3
164.4
-
19.1
662.1
67.3
3.5
25.9
473.3
166.6
0.1
30.9
Total fair value of pension schemes’ assets
1,451.1
1,429.7
The majority of equity securities and bonds have quoted prices in active markets. The schemes’ assets are invested with
professional investment managers. Investments in the Group’s own financial instruments, if any, are solely at the discretion
of the investment managers concerned. The actual amount of the Group’s own financial instruments held by the pension
schemes during 2020 and 2019 were not material. No property held by the pension schemes was occupied by the Group nor
were any other pension schemes’ assets used by the Group during 2020 or 2019.
Both the UK and Irish Schemes have invested in pooled Liability Driven Investment (LDI) strategies. The primary goal of
this asset class is to mitigate volatility and enable better matching of investment returns with the cash outflows required to
pay benefits. The pooled LDI solutions invest in various levered and unlevered bonds and the value of the LDI assets at 31
December 2020 across UK and Irish schemes was €355.8m (2019: €337.0m) which is based on the latest market bid price for
the underlying investments, which are traded daily on liquid markets.
(v) Funding for defined benefit plans
The Group operates a number of defined benefit plans in a number of countries and each plan is required to be operated
in line with local legislation, conditions, practices and the regulatory framework in place for the specific country. As a result,
there are a number of different funding arrangements in place that accord with the specific local legislative, regulatory and
actuarial requirements.
Funding for each plan is carried out by cash contributions from the Group’s subsidiaries. These funding arrangements have
been advised by the pension schemes’ actuaries and agreed between the Group and the relevant Trustees. It is the aim of the
Group to eliminate actuarial deficits, on average over seven to eight years. Actuarial valuations, which are not available for
public inspection, are carried out every three years in Ireland and the UK; and every year in the USA. During the financial year
ending 31 December 2021, the Group expects to make contributions of approximately €14.4m to its defined benefit plans.
26. Share capital
Group and Company:
Authorised
280,000,000 A ordinary shares of 12.50 cent each
Allotted, called-up and fully paid (A ordinary shares of 12.50 cent each)
At beginning of the financial year
Shares issued during the financial year
At end of the financial year
The Company has one class of ordinary share which carries no right to fixed income.
2020
€’m
2019
€’m
35.0
22.1
-
22.1
35.0
22.0
0.1
22.1
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
217
26. Share capital (continued)
Shares issued
During 2020 a total of 185,094 (2019: 216,526) A ordinary shares, each with a nominal value of 12.50 cent, were issued at
nominal value per share under the Long-Term and Short-Term Incentive Plans.
The total number of shares in issue at 31 December 2020 was 176,700,036 (2019: 176,514,942).
Share buy back programme
At the 2020 Annual General Meeting, shareholders passed a resolution authorising the Company to purchase up to 5% of its
own issued share capital. In 2020 and 2019, no shares were purchased under this programme.
27. Share-based payments
The Group operates two equity-settled share-based payment plans. The first plan is the Group’s Long-Term Incentive Plan and
the second is the element of the Group’s Short-Term Incentive Plan that is settled in shares/share options after a 2 year deferral
period. Details on each of these plans are outlined below.
The Group recognised an expense of €12.5m (2019: €14.4m) related to equity-settled share-based payment transactions in
the Consolidated Income Statement during the financial year. The expectation of meeting performance criteria was taken into
account when calculating this expense.
(i) Long-Term Incentive Plan
The Group operates an equity-settled Long-Term Incentive Plan (LTIP) under which an invitation to participate was made to
Executive Directors and senior executives. The proportion of each invitation which vests will depend on the Adjusted Earnings
Per Share (EPS) performance, Total Shareholder Return (TSR) and Return on Average Capital Employed (ROACE) of the Group
during a three year period (‘the performance period’). The invitations made in 2018, 2019 and 2020 will potentially vest in
2021, 2022 and 2023 respectively. 50% of the award will be issued at the date of vesting, with 50% being issued after a 2 year
deferral period.
Up to 50% of the shares/share options subject to an invitation will vest according to the Group’s Adjusted EPS growth
calculated on a constant currency basis compared with target during the performance period. Up to 30% of the shares/share
options subject to an invitation will vest according to the Group’s TSR performance during the performance period measured
against the TSR performance of a peer group of listed companies. The remaining 20% of the shares/share options will vest
according to the Group’s ROACE versus predetermined targets. An invitation may lapse if a participant ceases to be employed
within the Group before the vesting date.
Under the LTIP, the Group introduced career shares awards, under which an invitation to participate was made to a limited
number of senior executives. The proportion of each invitation which vests will depend on personal objectives during a three
year period (‘the performance period’) and the senior executives remaining within the Group for a four year period (‘the
retention period’). The invitations made in 2015, 2016, 2017, 2018, 2019 and 2020 will potentially vest in 2021, 2022, 2023,
2024, 2025 and 2026 respectively. An invitation may lapse if a participant ceases to be employed within the Group before the
vesting date.
Kerry Group Annual Report 2020 218
27. Share-based payments (continued)
(i) Long-Term Incentive Plan (continued)
A summary of the status of the LTIP as at 31 December and the changes during the financial year are presented below:
Outstanding at beginning of the financial year
Forfeited
Shares vested
Share options vested
Relinquished
New conditional awards
Number of
Conditional
Awards
2020
Number of
Conditional
Awards
2019
1,297,017
1,143,665
(76,535)
(77,717)
(140,034)
(138,147)
391,671
(77,784)
(68,094)
(107,713)
(101,492)
508,435
Outstanding at end of the financial year
1,256,255
1,297,017
Share options arising under the LTIP
Outstanding at beginning of the financial year
Options released at vesting date
Options released from deferral
Exercised
Outstanding and exercisable at end of the financial year
Number of
Share Options
2020
Number of
Share Options
2019
126,274
180,615
74,131
49,552
(89,474)
160,483
58,316
36,113
(148,770)
126,274
Share options under the LTIP scheme have an exercise price of 12.50 cent. The remaining weighted average life for share
options outstanding is 4.8 years (2019: 4.4 years). The weighted average share price at the date of exercise was €109.57
(2019: €101.09). 65,903 share options (2019: 49,397 share options) which vested in the financial year are deferred and
therefore are not exercisable at year end.
At the invitation grant date, the fair value per conditional award and the assumptions used in the calculations are as follows:
LTIP Scheme
2020
Conditional
Award at
Grant Date
2019
Conditional
Award at
Grant Date
2018
Conditional
Award at
Grant Date
2017
Conditional
Award at
Grant Date
Conditional Award Invitation date
March 2020
March 2019
March 2018
March 2017
Year of potential vesting
Share price at grant date
Exercise price per share/share options
Expected volatility
Expected life
Risk free rate
Expected dividend yield
Expected forfeiture rate
2023/2026
2022/2025
2021/2024
2020/2023
€109.00
€0.125
20.8%
€95.40
€0.125
19.3%
€81.95
€0.125
19.8%
€74.52
€0.125
20.7%
3/7 years
3/7 years
3/7 years
3/7 years
(1.0%)
0.7%
5.0%
(0.5%)
0.7%
5.0%
(0.5%)
0.7%
5.0%
(0.8%)
0.7%
5.0%
Weighted average fair value at grant date
€92.06/€103.97
€78.00/€95.92
€66.52/€77.96
€61.64/€70.94
Valuation model
Monte Carlo
Pricing
Monte Carlo
Pricing
Monte Carlo
Pricing
Monte Carlo
Pricing
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
219
27. Share-based payments (continued)
(i) Long-Term Incentive Plan (continued)
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three
years. Market based vesting conditions, such as the TSR condition, have been taken into account in establishing the fair
value of equity instruments granted. The TSR performance over the period is measured against the TSR performance of a
peer group of listed companies. Non‐market based performance conditions, such as the EPS and ROACE conditions, were not
taken into account in establishing the fair value of equity instruments granted, however the number of equity instruments
included in the measurement of the transaction is adjusted so that the amount recognised is based on the number of equity
instruments that eventually vest.
(ii) Short-Term Incentive Plan
In 2013 the Group’s Short-Term Incentive Plan (STIP) for Executive Directors was amended to incorporate a share-based
payment element with 25% of the total bonus to be settled in shares/share options. The shares/share options awarded as
part of this scheme will be issued 2 years after the vesting date once a deferral period has elapsed. There are no further
performance conditions relating to the shares/share options during the deferral period.
There are 1,114 share options (2019: 4,829 share options) outstanding and exercisable in relation to the STIP.
A share-based payment expense is recognised in the Consolidated Income Statement for the scheme to reflect the cash value
of the bonus to be paid by way of shares/share options. The issuance of shares/share options under the STIP which related to
the 2019 and 2020 financial years will be released from deferral in 2021 and 2022 respectively.
28. Cash flow components
(i) Cash flow analysis
Profit before taxation
Intangible asset amortisation
Non-trading items
Finance income
Finance costs
Trading profit
Change in working capital
Increase in inventories
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Increase in non-current liabilities
Share-based payment expense
Purchase of assets
Purchase of property, plant and equipment
Purchase of intangible assets
Sale/(purchase) of financial assets
Cash and cash equivalents
Cash at bank and in hand
Bank overdrafts
Notes
12
5
6
6
27
12
13
22
22
Group
2020
€’m
635.3
70.1
19.4
(0.2)
72.6
797.2
(39.7)
(48.1)
(42.2)
8.8
12.5
Group
2019
€’m
645.9
64.3
110.9
(0.3)
81.9
902.7
(78.6)
(49.9)
45.7
4.5
14.4
(108.7)
(63.9)
(227.9)
(52.1)
3.8
(258.9)
(55.2)
(1.5)
(276.2)
(315.6)
563.1
(2.8)
560.3
554.9
(5.2)
549.7
Company
2020
€’m
Company
2019
€’m
168.3
137.5
-
-
0.5
-
-
14.9
-
-
168.8
152.4
-
(33.2)
(5.5)
-
12.5
(26.2)
-
(41.7)
4.6
-
14.4
(22.7)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Kerry Group Annual Report 2020
220
28. Cash flow components (continued)
(ii) Disposal of assets and businesses reconciliation
Assets and businesses
Property, plant and equipment
Net assets and businesses disposed
Consideration
Cash received
Total consideration received
Notes
11
Group
2020
€’m
(4.3)
(4.3)
2.4
2.4
Loss on disposal of assets and businesses
5
(1.9)
Net cash inflow on disposal:
Cash
Less: cash at bank and in hand balance disposed of
(iii) Net debt reconciliation
Total
2020
€’m
2.4
-
2.4
Group
2019
€’m
(36.3)
(36.3)
32.8
32.8
(3.5)
Total
2019
€’m
32.8
-
32.8
Cash at
bank and
in hand
€’m
Interest
Rate
Swaps
€’m
Overdrafts
due within
1 year*
€’m
Borrowings
due within
1 year*
€’m
Borrowings
due after
1 year*
€’m
Net Debt
- pre lease
liabilities
€’m
Lease
liabilities*
€’m
Total
Net
Debt**
€’m
Note
413.8
133.1
8.0
96.2
-
-
(9.9)
4.9
(0.2)
(3.9)
(2,119.7)
(1,623.5)
-
(1,623.5)
3.9
-
(389.5)
(247.6)
(35.5)
(283.1)
(12.0)
(4.2)
-
(4.2)
At 1 January 2019
Cash flows
Foreign exchange
adjustments
Other non-cash movements
-
32.2
-
(185.6)
165.9
12.5
(73.9)
(61.4)
At 31 December 2019
22
554.9
128.4
(5.2)
(185.6)
(2,355.3)
(1,862.8)
(109.4)
(1,972.2)
Cash flows
Foreign exchange
adjustments
34.8
(45.5)
(26.6)
(20.1)
Other non-cash movements
-
At 31 December 2020
22
563.1
19.1
81.9
2.1
0.3
-
(2.8)
185.3
(211.6)
(34.9)
-
72.9
26.5
37.0
7.8
2.1
34.3
0.3
(11.8)
7.6
(16.9)
(9.3)
-
(2,505.8)
(1,863.6)
(81.5)
(1,945.1)
Liabilities from financing activities.
*
** Prior year has been re-presented to include lease liabilities in total net debt.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
29. Business combinations
During 2020, the Group completed a total of three acquisitions, all of which are 100% owned by the Group.
Notes
11
12
17
12
Recognised amounts of identifiable assets acquired and liabilities assumed:
Non-current assets
Property, plant and equipment
Brand related intangibles
Current assets
Cash at bank and in hand
Inventories
Trade and other receivables
Current liabilities
Trade and other payables
Non-current liabilities
Deferred tax liabilities
Other non-current liabilities
Total identifiable assets
Goodwill
Total consideration
Satisfied by:
Cash
Deferred payment
Net cash outflow on acquisition:
Cash
Less: cash and cash equivalents acquired
Less: prepayments made in 2019 in relation to 2020 acquisitions
221
Total
2020
€’m
21.2
124.1
1.2
11.1
16.8
(19.1)
(23.0)
(1.5)
130.8
149.2
280.0
270.3
9.7
280.0
Total
2020
€’m
270.3
(1.2)
(18.0)
251.1
The acquisition method has been used to account for businesses acquired in the Group’s financial statements. Given that the
valuation of the fair value of assets and liabilities recently acquired is still in progress, some of the above values are determined
provisionally. The valuation of the fair value of assets and liabilities will be completed within the measurement period. For
the acquisitions completed in 2019, 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’. None of the
acquisitions completed during the period were considered material to warrant separate disclosure.
The goodwill is attributable to the expected profitability, revenue growth, future market development and assembled workforce
of the acquired businesses and the synergies expected to arise within the Group after the acquisition. €30.9m of goodwill
recognised is expected to be deductible for income tax purposes.
Transaction expenses related to these acquisitions of €1.4m were charged in the Group’s Consolidated Income Statement
during the financial year. The fair value of the financial assets includes trade and other receivables with a fair value of €16.8m
and a gross contractual value of €16.8m.
In relation to the €18.7m prepayments made in 2019 relating to future acquisitions, €18.0m is attributable to 2020 acquisitions
with the €0.7m remaining prepayment for acquisitions yet to be completed.
Kerry Group Annual Report 2020
222
29. Business combinations (continued)
From the date of acquisition, the acquired businesses have contributed €23.8m of revenue and €1.6m of profit after taxation
attributable to owners of the parent to the Group. If the acquisition dates had been on the first day of the financial year, the
acquired businesses would have contributed €75.0m of revenue and €5.3m of profit after taxation attributable to owners of the
parent to the Group.
The following acquisitions were completed by the Group during 2020:
Acquisition
Acquired
Principal activity
Tecnispice, S.A.
April
Tecnispice, located in Guatemala, is a leading savoury taste business serving
the meat and snacks markets incorporating spices, herbs and seasonings.
Global Spice, a sister company of Tecnispice, based in Costa Rica was also
acquired as part of this transaction.
Bio-K Plus International Inc.
October
Bio-K+, based in Canada, is a leading biotechnology company with probiotics
in beverage and supplement applications.
Shandong Tianbo Food
Ingredients Co., Ltd
November
Shandong Tianbo (Jining Nature Group) is a leading manufacturer of savoury
flavours and seasonings serving the meat, snacks and meals markets, based
in China.
30. Contingent liabilities
Company:
2020
€’m
2019
€’m
(i) Guarantees in respect of borrowings of subsidiaries
2,474.9
2,521.2
(ii) For the purposes of Section 357 of the Companies Act, 2014, the Company has undertaken by Board resolution to indemnify
the creditors of its subsidiaries incorporated in the Republic of Ireland, as set out in note 35, in respect of all amounts shown
as liabilities or commitments in the statutory financial statements as referred to in Section 357 (1) (b) of the Companies Act,
2014 for the financial year ending on 31 December 2020 or any amended financial period incorporating the said financial
year. All other provisions of Section 357 have been complied with in this regard. The Company has given similar indemnities
in relation to its subsidiaries in Germany (section 264-289 and 325-329 of the Commercial Code), Luxembourg (Article 70
of the Luxembourg law of 19 December 2002 as amended) and Netherlands (Article 2:403 of the Dutch Civil Code), as set
out in note 35. In addition, the Company has also availed of the exemption from filing subsidiary financial statements in
Luxembourg, Germany, Netherlands and Ireland.
The Company does not expect any material loss to arise from these guarantees and considers their fair value to be negligible.
31. Other financial commitments
Commitments for the acquisition of property, plant, equipment and computer software at 31 December for which no provision
has been made in the accounts are as follows:
Group:
Commitments in respect of contracts placed
Expenditure authorised by the Directors but not contracted for at the financial year end
2020
€’m
2019
€’m
67.0
152.2
219.2
109.1
115.5
224.6
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
223
32. Related party transactions
(i) Trading with Directors
In their ordinary course of business as farmers, certain Directors have traded on standard commercial terms with the Group’s
Agribusiness division. Aggregate purchases from, and sales to, these Directors amounted to €0.2m (2019: €0.2m) and €0.1m
(2019: €0.1m) respectively. The trading balance outstanding to the Group at the financial year end was €nil (2019: €nil).
All transactions with Directors were on standard commercial terms. No expense has been recognised in the financial year for
bad or doubtful debts in respect of amounts owed by Directors.
(ii) Trading between Parent Company and subsidiaries
Transactions in the financial year between the Parent Company and its subsidiaries included dividends received of €179.0m
(2019: €172.5m), cost recharges of €14.7m (2019: €19.0m), and trade and other receivables of €165.0m (2019: €135.8m). The
Parent Company has also provided a guarantee in respect of borrowings of subsidiaries which is disclosed in note 30.
(iii) Trading with joint ventures
Details of transactions and balances outstanding with joint ventures are as follows:
Joint ventures
Rendering of services
Sale of goods
2020
€’m
0.1
2019
€’m
0.1
2020
€’m
1.8
2019
€’m
0.4
Amounts receivable/
(payable) at 31 December
2020
€’m
(0.2)
2019
€’m
(0.2)
These trading transactions are undertaken and settled at normal trading terms.
(iv) Trading with other related parties
As detailed in the Directors’ Report, Kerry Co-operative Creameries Limited is considered to be a related party of the Group as
a result of its significant shareholding in the Parent Company. During 2020, dividends of €18.0m (2019: €17.3m) were paid to
Kerry Co-operative Creameries Limited based on its shareholding. A subsidiary of Kerry Group plc traded product to the value
of €0.1m (2019: €0.1m) on behalf of Kerry Co-operative Creameries Limited.
(v) Transactions with key management personnel
The Board of Directors are deemed to be key management personnel of Kerry Group plc as they are responsible for planning,
directing and controlling the activities of the Group.
In addition to their salaries and short-term benefits, the Group also contributes to post-retirement defined benefit, defined
contribution and saving plans on behalf of the Executive Directors (note 25). The Directors also participate in the Group’s Long-
Term Incentive Plan (LTIP) (note 27).
Remuneration cost of key management personnel is as follows:
Short-term benefits (salaries, fees and other short-term benefits)
Post-retirement benefits
LTIP accounting charge
Other long-term benefits
Termination benefits
Total
2020
€’m
2019
€’m
3.9
0.6
1.0
-
-
5.5
6.7
0.5
2.3
-
-
9.5
Retirement benefit charges of €0.2m (2019: €0.2m) arise under a defined benefit scheme relating to 1 Director
(2019: 1 Director) and charges of €0.3m (2019: €0.3m) arise under a defined contribution scheme relating to 2 Directors
(2019: 2 Directors). The LTIP accounting charge above is determined in accordance with the Group’s accounting policy for
share-based payments.
Post-retirement benefits in the above table and the statutory and listing rules disclosure in respect of pension contributions in
the Executive Directors’ remuneration table in the remuneration report are determined on a current service cost basis.
The aggregate amount of gains accruing to Executive Directors on the exercise of share options is €nil (2019: €nil). Dividends
totalling €0.1m (2019: €0.1m) were also received by key management personnel during the financial year, based on their
personal interests in the shares of the company.
Kerry Group Annual Report 2020
224
33. Events after the balance sheet date
Since the financial year end, the Group has proposed a final dividend of 60.60 cent per A ordinary share (note 10).
There have been no other significant events, outside the ordinary course of business, affecting the Group since
31 December 2020.
34. Reserves
Fair value through other comprehensive income reserve (FVOCI)
The fair value through other comprehensive income reserve represents the unrealised gains and losses on the financial assets
held at fair value through other comprehensive income by the Group.
Capital redemption reserve
Capital redemption reserve represents the nominal cost of the cancelled shares in 2007.
Other undenominated capital
Other undenominated capital represents the amount transferred to reserves as a result of renominalising the share capital of
the Parent Company due to the euro conversion in 2002.
Share-based payment reserve
The share-based payment reserve relates to invitations made to employees to participate in the Group’s Long-Term Incentive
Plan and the element of the Group’s Short-Term Incentive Plan that is settled in shares/share options. Further information in
relation to this share-based payment is set out in note 27.
Translation reserve
Exchange differences relating to the translation of the balance sheets of the Group’s foreign currency operations from their
functional currencies to the Group’s presentation currency (euro) are recognised directly in other comprehensive income and
accumulated in the translation reserve.
Hedging reserve
The hedging reserve represents the effective portion of gains and losses on hedging instruments from the application of
cash flow hedge accounting for which the underlying hedged transaction is not impacting profit or loss. The cumulative
deferred gain or loss on the hedging instrument is reclassified to profit or loss only when the hedged transaction affects the
profit or loss.
Cost of hedging reserve
The cost of hedging reserve arises from where the Group has entered into cross currency interest rate swaps. Such cross
currency interest rate swaps have basis risk as there are characteristics in the cross currency interest rate swap contracts that
are not present in the hedged item, being currency basis spreads.
Retained earnings
Retained earnings refers to the portion of net income, which is retained by the Group rather than distributed to shareholders
as dividends.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
35. Group entities
Principal subsidiaries and joint venture undertakings
Country
Company Name
Nature of Business
Registered Office
225
Ireland
Accommodation Tralee Limited
Ballyfree Farms Limited
Breeo Brands Limited
Breeo Foods Limited
Carteret Investments Unlimited Company
Cuarto Limited
Dawn Dairies Limited
Denny Foods Limited
Duffy Meats Limited
Fambee Limited
Glenealy Farms (Turkeys) Limited
Golden Vale Clare Limited
Golden Vale Dairies Limited
Golden Vale Food Products Unlimited Company
Golden Vale Holdings Limited
Golden Vale Investments Limited
Golden Vale Limited
Grove Farm Limited
Helios Limited
Henry Denny & Sons (Ireland) Limited
Ichor Management Limited
Ivernia Pig Developments Limited
Kerry Agri Business Holdings Limited
Kerry Agri Business Trading Limited
Kerry Creameries Limited
Kerry Food Ingredients (Cork) Limited
Kerry Foods Limited
Kerry Group Business Services Limited
Kerry Group Financial Services Unlimited Company
Kerry Group Finance International Limited
Kerry Group Services International Limited
Kerry Group Services Limited
Kerry Health and Nutrition Institute Limited
Kerry Holdings (Ireland) Limited
Kerry Ingredients & Flavours Limited
Kerry Ingredients (Ireland) Limited
Kerry Ingredients Holdings (Ireland) Limited
Kerry Taste & Nutrition (Ireland) Limited
Kerry Treasury Services Limited
Kerry Van Sales (Ireland) Limited
Kerrykreem Limited
Lifesource Foods Research Limited
Investment
Consumer Foods
Consumer Foods
Consumer Foods
Investment
Taste & Nutrition
Consumer Foods
Investment
Consumer Foods
Consumer Foods
Consumer Foods
Investment
Agribusiness
Investment
Investment
Investment
Investment
Investment
Investment
Consumer Foods
Investment
Consumer Foods
Investment
Agribusiness
Agribusiness
Taste & Nutrition
Consumer Foods
Services
Services
Services
Services
Services
Taste & Nutrition
Investment
Taste & Nutrition
Taste & Nutrition
Investment
Taste & Nutrition
Services
Consumer Foods
Consumer Foods
Investment
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
Kerry Group Annual Report 2020
226
35. Group entities (continued)
Principal subsidiaries and joint venture undertakings (continued)
Country
Company Name
Ireland
Linovale Limited
Maddens Milk Limited
National Food Ingredients Limited
Newmarket Co-operative Creameries Limited
Plassey Holdings Limited
Princemark Holdings Designated Activity Company
Putaxy Limited
Rye Developments Limited
Rye Investments Limited
Rye Valley Foods Limited
Selamor Limited
Tacna Investments Limited
William Blake Limited
Zenbury International Limited
UK
Henry Denny & Sons (N.I.) Limited
Dairy Produce Packers Limited
Golden Cow Dairies Limited
Golden Vale (NI) Limited
Leckpatrick Dairies Limited
Leckpatrick Holdings Limited
RVF (UK) Limited
Kerry Foods Limited
Kerry Holdings (U.K.) Limited
Kerry Savoury Foods Limited
Noon Group Limited
Noon Products Limited
Oakhouse Foods Limited
Rollover Holdings Limited
Rollover Group Limited
Rollover Limited
Tarafield Limited
E B I Foods Limited
Gordon Jopling (Foods) Limited
Kerry Ingredients (UK) Limited
Kerry Ingredients Holdings (U.K.) Limited
Titusfield Limited
Kerry Flavours UK Limited
Belgium
Kerry Holdings Belgium NV
Netherlands
Kerry (NL) B.V.
Kerry Group B.V.
Proparent B.V. (55% shareholding)
Nature of Business
Registered Office
Investment
Investment
Taste & Nutrition
Taste & Nutrition
Investment
Services
Investment
Services
Consumer Foods
Consumer Foods
Consumer Foods
Investment
Taste & Nutrition
Services
Consumer Foods
Consumer Foods
Consumer Foods
Investment
Consumer Foods
Investment
Consumer Foods
Consumer Foods
Investment
Consumer Foods
Consumer Foods
Consumer Foods
Consumer Foods
Consumer Foods
Consumer Foods
Consumer Foods
Investment
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Investment
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Investment
Taste & Nutrition
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
3
3
4
4
4
4
4
4
5
6
6
7
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
35. Group entities (continued)
Principal subsidiaries and joint venture undertakings (continued)
Country
Company Name
Nature of Business
Registered Office
227
Czech Republic Kerry Ingredients & Flavours S.R.O.
France
Kerry Ingredients France SAS
Kerry Ingredients Holdings France SAS
Kerry Savoury Ingredients France SAS
Kerry Flavours France SAS
Germany
Kerry Food GmbH
Kerry Ingredients GmbH
SuCrest GmbH
Vicos Nahrungsmittel GmbH
Red Arrow Handels GmbH
Belarus
Unitary Manufacturing Enterprise ‘Vitella‘
Denmark
Cremo Ingredients A/S
Italy
Kerry Ingredients & Flavours Italia S.p.A.
Poland
Kerry Polska Sp. z.o.o.
Hungary
Kerry Hungaria Kft
Luxembourg
Kerry Luxembourg S.a.r.l.
Zenbury International Limited S.a.r.l.
Romania
Kerry Romania s.r.l.
Russia
Spain
Kerry Limited Liability Company
Kerry Iberia Taste & Nutrition S.L.U.
Harinas y Sémolas del Noroeste S.A.U.
Pevesa Biotech S.A.U.
Slovakia
Dera SK S.R.O.
Sweden
Ukraine
USA
Tarber AB
Kerry Ukraine LLC
Kerry Holding Co.
Kerry Inc.
Ganeden Biotech, Inc.
Insight Beverages, Inc.
Fleischmann’s Vinegar Company, Inc.
Kerry Stock & Broth Company Inc.
Canada
Kerry (Canada) Inc.
Mexico
Brazil
Bio-K Plus International Inc.
Kerry Ingredients (de Mexico) S.A. de C.V.
Kerry do Brasil Ltda.
Kerry da Amazonia Ingredientes e Aromas Ltda.
Costa Rica
Baltimore Spice Central America S.A.
Global Spice S.A.
Chile
Kerry Chile Ingredientes, Sabores Y Aromas Ltda.
Colombia
Kerry Ingredients & Flavours Colombia S.A.S.
Panama
Kerry Panamá S.A.
Tecnispice Corp
Taste & Nutrition
Taste & Nutrition
Investment
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Services
Services
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Investment
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
8
9
9
9
10
11
11
12
12
13
14
15
16
17
18
19
19
20
21
22
23
24
25
26
27
28
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
Kerry Group Annual Report 2020
228
35. Group entities (continued)
Principal subsidiaries and joint venture undertakings (continued)
Country
Company Name
Nature of Business
Registered Office
Guatemala
Baltimore Spice Guatemala S.A.
Aromaticos de Centroamerica S.A.
Tecnispice S.A.
El Salvador
Baltimore Spice de El Salvador S.A. de C.V.
Aromaticos de Centro America S.A. de C.V.
Thailand
Kerry Ingredients (Thailand) Limited
Philippines
Kerry Food Ingredients (Philippines), Inc.
Kerry Manufacturing (Philippines), Inc.
Singapore
Kerry Ingredients (S) PTE Limited
Malaysia
Kerry Ingredients (M) Sdn. Bhd.
Japan
China
Kerry Group Business Services (ASPAC) Sdn. Bhd.
Kerry Japan Kabushiki Kaisha
Kerry Food Ingredients (Hangzhou) Co. Ltd
Kerry Ingredients Trading (Shanghai) Co. Ltd
Kerry Foods (Nantong) Co Limited
TianNing Flavour & Fragrance (Jiangsu) Co., Ltd
Zhejiang Hangmai Food Technologies Co. Ltd
SIAS (Dachang) Food Co., Ltd
Shandong Tianbo Food Ingredients Co., Ltd
Egypt
Kerry Egypt LLC
Indonesia
PT Kerry Ingredients Indonesia
India
Kerry Ingredients India Private Limited
Australia
Kerry Ingredients Australia Pty Limited
New Zealand
Kerry Ingredients (NZ) Limited
Kenya
Kerry Kenya Limited
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
South Africa
Kerry Ingredients South Africa (Proprietary) Limited
Taste & Nutrition
Season to Season Flavour Manufacturers (Pty) Limited
Taste & Nutrition
South Korea
Kerry Ingredients Korea LLC
Jungjin Food Co. Limited
Saudi Arabia
AATCO Food Industries LLC
Oman
AATCO Food Industries LLC
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Taste & Nutrition
Vietnam
Kerry Taste & Nutrition (Vietnam) Company Limited
Taste & Nutrition
UAE
Kerry MENAT DMCC
Taste & Nutrition
44
45
46
47
47
48
49
50
51
52
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
Notes
(a) All group entities are wholly owned subsidiaries unless otherwise stated.
(b) Country represents country of incorporation and operation. Ireland refers to the Republic of Ireland.
(c)
With the exception of the USA, Canadian and Mexican subsidiaries, where the holding is in the form of common stock, all
holdings are in the form of ordinary shares.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
229
35. Group entities (continued)
Registered Office
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
Prince’s Street, Tralee, Co Kerry, V92 EH11, Ireland.
Millburn Road, Coleraine, Northern Ireland BT52 1QZ, United Kingdom.
Thorpe Lea Manor, Thorpe Lea Road, Egham, Surrey TW20 8HY, United Kingdom.
Kerry, Bradley Road, Royal Portbury Dock, Bristol BS20 7NZ, United Kingdom.
Havenlaan 86C, Bus 204, 1000 Brussels, Belgium.
Maarssenbroeksedijk 2a, 3542 DN Utrecht, Netherlands.
Cuneraweg 9c, 4051 CE, Ochten, Netherlands.
Jindřišská 937/16, Nové Město, 110 00 Praha 1, Czech Republic.
43 Rue Louis Pasteur, 62575 Blendecques, France.
Zone Industrielle du Plan, BP 82067, 06131 Grasse, CEDEX, France.
Hauptstrasse 22-26, D-63924 Kleinheubach, Germany.
Neckarstraße 9, 65239 Hochheim/Main, Germany.
Hanna-Kunath-Strasse 25, 28199, Bremen, Germany.
P. Brovki Str., 44 210039 Vitebsk, Belarus.
Toftegardsvej 3, DK-5620, Glamsbjerg, Denmark.
Via Capitani di Mozzo 12/16, 24030 Mozzo, Bergamo, Italy.
Ul. Zagnanska 97A, 25-558 Kielce, Kielce, Poland.
Dévai utca 26-28, Budapest, H-1134, Hungary.
17 Rue Antoine Jans, Luxembourg L-1820, Luxembourg.
Biroul Nr.5, Etaj 5, Nr. 4D, Corp C, Strada Gara Herastrau, Bucureşti Sectorul 2, Romania.
RigaLand Business Centre, 26 km Baltiya Highway, Krasnogorskiy District, 143421, Moscow, Russia.
Calle Coto de Doñana, 15, 28320 Pinto, Madrid, Spain.
Polígono Industrial de las Gándaras de Budino, O Porrino, Pontevedra, Spain.
Avda de la Industria s/n, Visos del Alcor, Seville, Spain.
Hodžovo námestie 1A, Bratislava, 811 06, Slovakia.
Box 1420 - Frejgatan 13, 114 79 Stockholm, Sweden.
Office 2-301, build 2, Ave Ohtyrsky 7, Kiev, Ukraine.
3400 Millington Road, Beloit WI 53511, United States.
5800 Landerbrook Drive, Suite 300, Mayfield Heights OH 44124, United States.
635 Oakwood Road, Lake Zurich IL 60047, United States.
12604 Hiddencreek Way # Suite A, Cerritos, CA 90703, United States.
1711 North Liberty Street, Harrisonburg VA 22802, United States.
615 Jack Ross Avenue Woodstock ON N4S 8A4, Canada.
1000 De La Gauchetière Street West, Suite 2100, Montréal Québec H3B 4W5, Canada.
Carretara Panamericana, Irapuato-Salamanca Km 11.2, Apartado Postal 789, Guanajuato, 36660, Mexico.
Avenida Mercedes Benz 460, Distrito Industrial, Campinas, Sao Paolo, 13054-750, Brazil.
Rua Hidra 188, Santo Agostinho, Manaus, 69036-520, Brazil.
Liceo de Pavas 200 mts West, 100 Norte Zip Code 10909, San José, Costa Rica.
De la esquina noreste fabrica BTICINO, 50 mts al este, edificio a mano izquierda, San Jose, Costa Rica.
C.M. El Trovador No. 4280, Of 1205, Las Condes, Suc. Cerro Portezuelo 9901, Quilicura, Santiago, Chile.
Carrera 7 No 71-52, Torre A Piso 5, Bogota, Colombia.
Parque Industrial Costa del Este, Calle Avenida Principal y 3ra Lote 88. Corregimiento, Parque Lefevre
0819-01869, Panama.
Kerry Group Annual Report 2020
230
35. Group entities (continued)
Registered Office (continued)
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
Distrito Panama, Provincia Panama, Panama.
Avenida Petapa 52-20, Zona 12, Guatemala, Guatemala.
23 Avenida 34-61, Zona 12, Colonia Santa Elisa, Ciudad de Guatemala, CP. 01012, Guatemala.
Kilómetro 26.5 carretera al pacifico, paso a desnivel, entrada a Amatitlán, Guatemala.
2 Calle Oriente Avenida Melvin Jones, Local 14, Centro Comercial Argoz, Santa Tecla, La Libertad, El Salvador.
No 618, Moo 4, Bangpoo Industrial Estate, Praksa Sub District, Muang District, Samutprakarn Province, Thailand.
Room 406, Cebu Business & Investments Consultants, 4th Floor, Tulips Centre, AS Fortuna Street, Mandaune City, Cebu,
6014, Philippines.
8/F The W Fifth Avenue Building, Fifth Avenue , Bonifacio Global City, Taguig, Philippines.
8 Biomedical Grove, #02-01/04 Neuros, Singapore 138665, Singapore.
Suite 1301, 13th Floor, City Plaza, Jalan Tebrau, 80300 Johor Bahru, Johor, Malaysia.
Kamiyacho Sankei Building. 2F, 1-7-2, Azabudai 1-chome, Minato-ku, Tokyo 106-0041, Japan.
Renhne Industry Zone, Jiulong Village, Hangzhou, China.
Room 311, Floor 3, Building 1, No 239 Gang-Ao Road, Pilot Free Trade Zone, Shanghai, China.
North side of Xiangjiang Road, Rudong County, Nantong City, China.
Dujiashan, Huayang County, Jurong, Jiangsu Province, 212425, China.
26 Tai Ping Qiao Industry Park, Xin’an, Deqing County, Zheijiang Province, China.
North side of XinYe Road, West side of LiDaXian, DaChang Industrial District, LangFang City, HeBei Province, China.
No.6 Haichuan Road, Jiezhuang Street, Hi-tech Zone, Jining, Shandong Province, China.
Olympic Building, Ramsis Extension St., ext 6th District, Nasr City, Cairo, Egypt.
JL Industri Utama Blok SS No. 6, Jababeka II Mekarmukti, Cikarang Utara, Bekasi 17520, Indonesia.
Unit No. 302, 3rd Floor, Ecospace Campus 3B, Marathahalli – Sarjapur Outer Ring Road, Bellandur, Bangalore – 560103,
Karnataka, India.
No 8 Holker Street, Newington, NSW 2127, Australia.
11-13 Bell Avenue, Otahuhu, Auckland, New Zealand.
Avocado Towers, L.R. No 209/1907, Muthithi Road, Nairobi, 00100, Kenya.
Block 3 Nguni Park, 4-6 Lucas Drive, Hillcrest, Durban, Kwazulu-Natal, 3610, South Africa.
Stand 372, Angus Crescent, Northlands Business Park, Northriding, 2164, South Africa.
9th Fl., Sheenbang Bldg, 1366-18, Seocho-dong, Seocho-Gu, Seoul, 137-863, Republic of Korea.
#82 Yuolgum-5gil, Sunghwan-eup, Cheonan-si, Choongchungnam-do, Republic of Korea.
PO Box Number: 42511, PC 21551, Jeddah, Al Mehjar, 2nd Industrial City-Jeddah-Kin, Saudi Arabia.
PO Box 793, P.C-112, Muscat, Sultanate of Oman, Oman.
Me Linh Point Tower, 2 Ngo Duc De Street, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam.
Unit No: AG -- GF - 01, AG Tower, Plot No: JLT-PH1-I1A, Jumeirah Lakes Towers, Dubai, United Arab Emirates.
Kerry Group Annual Report 2020FINANCIAL STATEMENTS
231
Financial Definitions
(NOT COVERED BY INDEPENDENT AUDITORS’ REPORT)
SUPPLEMENTARY INFORMATION
1. Revenue
Volume performance
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.
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.
Revenue Reconciliation
Volume
performance
(3.0%)
(2.6%)
(2.9%)
4.0%
(2.2%)
2.8%
Price
0.1%
1.2%
0.3%
0.1%
(0.5%)
-
Transaction
currency
Acquisitions/
Disposals
Translation
currency
Reported
revenue
performance
(0.1%)
-
(0.1%)
-
-
-
1.2%
-
1.0%
5.8%
-
4.7%
(2.6%)
(0.7%)
(2.3%)
2.6%
0.3%
2.1%
(4.4%)
(2.1%)
(4.0%)
12.5%
(2.4%)
9.6%
2020
Taste & Nutrition
Consumer Foods
Group
2019
Taste & Nutrition
Consumer Foods
Group
2. EBITDA
EBITDA represents profit before finance income and costs, income taxes, depreciation (net of capital grant amortisation),
intangible asset amortisation and non-trading items.
Profit after taxation attributable to owners of the parent
Finance income
Finance costs
Income taxes
Non-trading items
Intangible asset amortisation
Depreciation (net of capital grant amortisation)
EBITDA
2020
€’m
554.1
(0.2)
72.6
81.2
19.4
70.1
200.7
997.9
2019
€’m
566.5
(0.3)
81.9
79.4
110.9
64.3
191.4
1,094.1
Kerry Group Annual Report 2020
232
FINANCIAL DEFINITIONS
3. Trading Profit
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.
Operating profit
Intangible asset amortisation
Non-trading items
Trading profit
4. Trading Margin
Trading margin represents trading profit, expressed as a percentage of revenue.
Trading profit
Revenue
Trading margin
5. Operating Profit
Operating profit is profit before income taxes, finance income and finance costs.
Profit before taxation
Finance income
Finance costs
Operating profit
2020
€’m
707.7
70.1
19.4
797.2
2019
€’m
727.5
64.3
110.9
902.7
2020
€’m
797.2
2019
€’m
902.7
6,953.4
7,241.3
11.5%
12.5%
2020
€’m
2019
€’m
635.3
645.9
(0.2)
72.6
(0.3)
81.9
707.7
727.5
6. Adjusted Earnings Per Share and Performance in Adjusted Earnings Per Share
on a Constant Currency Basis
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 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.
Basic earnings per share
Brand related intangible asset amortisation
Non-trading items (net of related tax)
Adjusted earnings per share
2020
EPS
cent
313.0
23.6
8.8
345.4
Impact of retranslating prior year adjusted earnings per share at current year average exchange rates
-
Adjusted earnings per share on a constant currency basis
Performance in adjusted earnings per share on a constant currency basis
345.4
(9.4%)
2019
EPS
cent
320.4
21.4
51.9
393.7
(12.3)
381.4
8.3%
Kerry Group Annual Report 2020
233
7. Free Cash Flow
Free cash flow is trading profit plus depreciation, movement in average working capital, capital expenditure, payment of lease
liabilities, pensions 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 year 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’.
Net cash from operating activities
Difference between movement in monthly average working capital and movement in the
financial year end working capital
Expenditure on acquisition integration and restructuring costs
Purchase of assets
Payment of lease liabilities
Proceeds from the sale of property, plant and equipment
Capital grants received
Exchange translation adjustment
Free cash flow
8. Cash Conversion
2020
€’m
672.2
6.2
39.7
(276.2)
(37.0)
2.4
0.1
4.6
2019
€’m
763.9
(25.6)
89.1
(315.6)
(35.5)
32.8
3.0
2.5
412.0
514.6
Cash conversion is defined as free cash flow, expressed as a percentage of adjusted earnings after taxation.
Free cash flow
Profit after taxation attributable to owners of the parent
Brand related intangible asset amortisation
Non-trading items (net of related tax)
Adjusted earnings after taxation
Cash Conversion
2020
€’m
412.0
554.1
41.7
15.5
611.3
67%
2019
€’m
514.6
566.5
37.8
91.7
696.0
74%
9. Financial Covenants
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 and deferred payments in relation to acquisitions. As outlined on
page 198, these ratios are calculated in accordance with lenders’ facility agreements and these agreements specifically require
these adjustments in the calculation.
Net debt: EBITDA
EBITDA: Net interest
Covenant
Maximum 3.5
Minimum 4.0
2020
Times
1.9
13.8
2019
Times
1.8
13.2
Kerry Group Annual Report 2020
234
FINANCIAL DEFINITIONS
10. Average Capital Employed
Average capital employed is calculated by taking an average of the shareholders’ equity and net debt - pre lease liabilities
over the last three reported balance sheets plus an additional €527.8m relating to goodwill written off to reserves pre
conversion to IFRS.
2020
€’m
H1 2020
€’m
2019
€’m
H1 2019
€’m
2018
€’m
Shareholders’ equity
4,655.5
4,508.5
4,562.2
4,186.5
4,034.4
Goodwill amortised (pre conversion to IFRS)
527.8
527.8
527.8
527.8
527.8
Adjusted equity
5,183.3
5,036.3
5,090.0
4,714.3
4,562.2
Net debt - pre lease liabilities
1,863.6
1,996.4
1,862.8
1,918.2
1,623.5
Total
7,046.9
7,032.7
6,952.8
6,632.5
6,185.7
Average capital employed
7,010.8
6,590.3
11. Return on Average Capital Employed (ROACE)
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.
Profit after taxation attributable to owners of the parent
Non-trading items (net of related tax)
Brand related intangible asset amortisation
Net finance costs
Adjusted profit
Average capital employed
Return on average capital employed
12. Total Shareholder Return
2020
€’m
2019
€’m
554.1
566.5
15.5
41.7
72.4
91.7
37.8
81.6
683.7
777.6
7,010.8
6,590.3
9.8%
11.8%
Total shareholder return represents the change in the capital value of Kerry Group plc shares plus dividends in the financial year.
Share price (1 January)
Interim dividend (cent)
Dividend paid (cent)
Share price (31 December)
Total shareholder return
13. Market Capitalisation
Market capitalisation is calculated as the share price times the number of shares issued.
Share price (31 December)
Shares in issue (‘000)
Market capitalisation (€’m)
14. Enterprise Value
2020
€111.10
25.9
55.1
2019
€86.50
23.5
49.2
€118.50
€111.10
7.4%
29.3%
2020
2019
€118.50
€111.10
176,700.0
176,514.9
20,939.0
19,610.8
Enterprise value is calculated as per external market sources. It is market capitalisation plus reported borrowings less total cash
and cash equivalents.
15. Total Net Debt
Total net debt comprises borrowings and overdrafts, interest rate derivative financial instruments, lease liabilities and cash at
bank and in hand. See full reconciliation of total net debt in note 22 to the financial statements on pages 195 to 197.
Kerry Group Annual Report 2020
NOTES
NOTES
Kerry Group
Prince’s Street, Tralee,
Co. Kerry, V92 EH11, Ireland.
T: +353 66 718 2000
www.kerrygroup.com
CBP006226