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Investing.com -- Kerry Group (IR:KYGa) shares dropped 5% on Wednesday after the company reported second-quarter results that fell short of volume growth expectations, even as earnings margins improved and full-year guidance was reaffirmed.
Volume growth in the company’s Taste & Nutrition division rose 3% in the second quarter, missing both Jefferies’ estimate of 3.2% and the 3.4% consensus forecast.
The miss was narrower than some of Kerry’s peers, but it still flagged ongoing softness in demand, particularly in the APMEA region where volume growth slowed to 3.2% from 6.2% a year earlier.
Overall, Kerry’s group EBITDA for the first half of 2025 came in at €556 million, matching analyst expectations and reflecting a 7% increase from the same period last year.
The group’s EBITDA margin rose 100 basis points year over year to 16.1%, exceeding consensus by 20 basis points.
Despite the operational efficiency, the market appeared focused on the weaker top-line performance.
By region, the Americas led growth with a 3.9% volume increase in the second quarter and sales of €1.91 billion.
EBITDA margin in the region improved by 90 basis points to 18.5%, supported by strong performance in food service and retail channels.
In contrast, Europe reported flat volumes, with second-quarter growth at just 0.3% and sales of €731 million.
Retail was weaker in the region, though food service remained solid. APMEA’s slowdown was more pronounced, with volumes rising 3.2%, down sharply from 6.2% a year earlier. Sales there totaled €821 million.
Emerging markets continued to show resilience, with volumes up 5.6%, driven by Southeast Asia and Latin America.
The company also saw growth in its pharma and nutrition segments, led by demand for cell nutrition and supplement ingredients.
Kerry maintained its full-year 2025 guidance for adjusted EPS growth of 7% to 11%, broadly in line with consensus of 8.9% and Jefferies’ estimate of 10.7%, which assumes a -3.4% impact from currency movements.
The company also declared an interim dividend of €0.42 per share and continued its €300 million share buyback program.
Cash flow generation remained strong, with first-half operating cash flow rising to €399 million from €367 million last year.
Net debt stood at €2,056 million, equating to 1.7 times adjusted EBITDA. However, free cash flow conversion dropped to 89% from 131% a year earlier.
The company’s performance in food service, which saw 4.6% volume growth in the first half, was supported by new product launches and seasonal menu changes.
Retail performance was bolstered by brand innovation and nutritional reformulation efforts, though momentum varied by region.