Kerry Group Prince’s Street, Tralee, Co. Kerry, V92 EH11, Ireland. T: +353 66 718 2000 ## Expanding Horizons is the story of ## www.kerry.com ## Kerry’s remarkable journey, from ## our origins in the dairy pastures of ## Southwest Ireland, to the company ## we are today, a world leader in Kerry Group Annual Report 2022 ## taste and nutrition. th In 2022, as we celebrated our 50 anniversary, this theme enabled us to reflect on our heritage, on what we have achieved and to look to the future with determination and optimism. We celebrated the people who made Kerry what it is today and who continue to do so every day, delivering real impact for our customers, as we strive to create a world of sustainable nutrition. ### Kerry Group ### Annual Report 2022 CBP010293 Kerry Group Prince’s Street, Tralee, Co. Kerry, V92 EH11, Ireland. T: +353 66 718 2000 ## Expanding Horizons is the story of ## www.kerry.com ## Kerry’s remarkable journey, from ## our origins in the dairy pastures of ## Southwest Ireland, to the company ## we are today, a world leader in Kerry Group Annual Report 2022 ## taste and nutrition. th In 2022, as we celebrated our 50 anniversary, this theme enabled us to reflect on our heritage, on what we have achieved and to look to the future with determination and optimism. We celebrated the people who made Kerry what it is today and who continue to do so every day, delivering real impact for our customers, as we strive to create a world of sustainable nutrition. ### Kerry Group ### Annual Report 2022 CBP010293 ### Courage ### Enterprising Spirit Open-mindedness ### Ownership ### Inclusiveness 1 ## 50 Years of ## Expanding Horizons In January 1972, Kerry hired its first employee. Over the next few years, against the odds, a team of dedicated visionaries sowed the seeds of the global food, beverage and pharma business we have today. 50 years on, we celebrated our anniversary at all our sites across the world, with our teams, customers and friends of the business, through events and activities that inspired a renewed sense of purpose, pride and ambition for the future. As we celebrated our from-food-for-food heritage, we took the opportunity to reinforce our unique culture. Through the commemoration activities and the inspiring stories and memories that were shared, it is clear that the core values, fostered in those earliest days in Listowel, County Kerry, are very much alive today. As we reflect on the past five decades and how far we’ve come, we are proud to share the results of our 50 years of experience, expertise and success, as we strive towards our vision of being our customers’ most valued partner, creating a world of sustainable nutrition. 2 ## CONTENTS ## Kerry is a world-leading provider of ## taste and nutrition solutions for the ## food, beverage and pharmaceutical ## markets, with our broad range of ## ingredients reaching over 1 billion ## consumers globally. 3 | Strategic Report | Directors’ Report | Financial Statements | | --- | --- | --- | | 6 Our Performance in 2022 | 108 Board of Directors | 172 IndependentAuditors’Report | | 8 Our Purpose | 111 ReportoftheDirectors | 180 Financial Statements | | 10 Kerry Group at a Glance |  GovernanceReport | 188 Notes to the | Financial Statements 12 Chairman’s Statement 117 Corporate   GovernanceReport 14 ChiefExecutiveOfficer’sReview 131 Audit Committee Supplementary Information 18 Our People   Report 26 Our Business Model 255 FinancialDefinitions 137 Governance, 28 Our Technologies Nomination and 30 Our Markets Sustainability 32 Our Strategy   CommitteeReport 34 Strategy & Targets 143 Remuneration   CommitteeReport 36 Why Kerry? 38 Key Performance Indicators 40 FinancialReview 47 BusinessReview: Taste & Nutrition 51 BusinessReview: Dairy Ireland 52 SustainabilityReview 94 RiskManagementReport Strategic Report 4 KerryGroupAnnualReport2022 ## STRATEGIC ## REPORT KerryGroupAnnualReport2022 5 Strategic Report 6 Our Performance in 2022 8 Our Purpose 10 Kerry Group at a Glance 12 Chairman’s Statement 14 ChiefExecutiveOfficer’sReview 18 Our People 26 Our Business Model 28 Our Technologies 30 Our Markets 32 Our Strategy 34 Strategy & Targets 36 Why Kerry? 38 Key Performance Indicators 40 FinancialReview 47 BusinessReview:Taste&Nutrition 51 BusinessReview:DairyIreland 52 SustainabilityReview 94 RiskManagementReport 6 Strategic Report Our Performance in 2022 KerryGroupAnnualReport2022 ## Our Performance in 2022 ### An outstanding year of growth, ### combined with continued financial ### development and progress against ### our sustainability objectives. KerryGroupAnnualReport2022 7 FINANCIAL PERFORMANCE MEASURES 2022 €8.8 billion 2022 6.1% 2021 €7.4 billion 2021 8.0% 1 | | EBITDA | | | | | | | Group EBITDA Margin¹ | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2022 | | | | €1.2 billion | | | 2022 | | | | 13.9% | | (80bps) | | | | 2021 | | | €1.1 billion | | | | 2021 | | | | | 14.7% | | +30bps | | Group Revenue | | | | | | | Volume Growth¹ | | | | | | | | | | | Net Cash from Operating Activities | | | | | | | Free Cash Flow¹ (cash conversion percentage) | | | | | | | | | | 2022 | | | €722 million | | | | 2022 | | €640 million82% | | | | | | | | 2021 | €654 million | | | | | | 2021 | €566 million | | | 84% | | | | | | Basic EPS | | | | | | | Constant Currency Adjusted EPS¹ | | | | | | | | | | 2022 | | 341.9 cent | | | (20.6%) | | 2022 | | | 440.6 cent +7.3% | | | | | | | 2021 | | | | 430.6 cent +37.6% | | | 2021 | | 380.8 cent +12.1% | | | | | | | Total Dividend Per Share | | | | Return on Average Capital Employed¹ | | | --- | --- | --- | --- | --- | --- | | 2022 2022 | | 104.8 cent +10.1% | | | 10.3% | | 2021 | 95.2 cent | | +10.1% | 2021 | 10.5% | NON-FINANCIAL PERFORMANCE MEASURES Consumers Reached with Absolute Carbon Reduction² Positive and Balanced Nutrition Solutions² 2022 2022 1.2 billion 48% 2021 1.1 billion 2021 33% 1 SeeKeyPerformanceIndicatorssectionpages38-39andtheSupplementaryInformationsectionpage255fordefinitions, calculations and reconciliations of Alternative Performance Measures 2 SeeSustainabilityReviewpages52-73forfurtherinformationonnon-financialmetrics Strategic Report Our Purpose8 KerryGroupAnnualReport2022 ## Our Purpose – ## Inspiring Food,Nourishing Life ### Five years ago, Kerry embarked on ### a journey to articulate our company's ### purpose. That Purpose, Inspiring ### Food, Nourishing Life, truly reflects ### our company’s culture, heritage ### and evolution and the essence and ### ambition of our people. Through workshops, training and ### Inspiring Food is about innovation. role modelling, our leaders have ### Kerry is committed to co-creating better thoroughly embedded our purpose in a meaningful way, right across ### tasting, better performing and better- the organisation, to ensure every ### for-you consumer-led solutions for the employee, no matter their region or role, understands why Kerry ### food and beverage industry with our matters in the world. ### customers and partners. Sharing our purpose, what it means and how our employees can contribute, is central to our culture and our onboarding programmes in ### Nourishing Life is about the wellbeing Kerry. We revisit our purpose at all major internal meetings and events, ### of our employees. We foster a shared and we start every meeting with a ### passion and the expertise to deliver reminder of our shared goal. ### balanced nutrition solutions to the This year, as we celebrated Kerry’s th ### lives of over one billion people around 50 anniversary, remembering our heritage, reinforcing our culture ### the world, without compromising our andreaffirmingthevaluesthat ### planet’sfiniteresources. were fostered in those earliest days in Listowel, Co. Kerry we gave new life to our purpose. ## " Our purpose is an undisputed + Our People ## decision-makingfilter,tounlock Pages 18-25 ## value and drive success right Sustainability Review Pages 52-93 ## across the business." KerryGroupAnnualReport2022 KerryGroupAnnualReport2022 9 9 Connecting Purpose to Strategy As a global leader in the food industry, Kerry has an important role to play in the transformational change required to tackle the global food challenges we all face. Inspiring Food, Nourishing Lifeaddressesthesechallengesfirst-hand and over the last three years, we have put purpose into action to establish ambitioustargetsthatensureimpactbeyondprofit. We’ve demonstrated our purpose through partnerships and commitments that aremakingadifferencetoourpeopleandplanet,acceleratingoursustainable nutrition impact, and that of our customers. Ourpurposeisanundisputeddecision-makingfilter,tounlockvalueanddrive success right across the business. Our focus on our strategic priorities of Taste, Nutrition and Emerging Markets is testament to our purpose. Together, they inform our innovation and acquisition strategies – driving us to invest in markets and technologies where we can make the greatest impact towards our goal of reaching two billion people with sustainable nutrition solutions by 2030. Kerry envisions a world of sustainable nutrition, and by working with our network of customers, suppliers, and partners, we are advancing towards our sustainability targets and gearing our business to make this vision a reality. Strategic Report Group at a Glance10 Kerry Group Annual Report 2022 KerryGroupAnnualReport2022 ## Kerry Group at a Glance ### Kerry is a world-leading provider ### of taste and nutrition solutions ### for the food, beverage and ### pharmaceutical markets, with our ### broad range of ingredients reaching ### over 1 billion consumers globally. ## What We Do We solve our customers' complex challenges with differentiated solutions. | Our Performance | | | Our People | Our Business | | | --- | --- | --- | --- | --- | --- | | €8.8bn | €1.2 | bn | 23,000+ 1,100+ | 147 18,000+ | | | Revenue | EBITDA | | Employees R&Dscientists | Manufacturing | Products | locations ### Our ### Sustainability ### Ratings Kerry Group Annual Report 2022 11 ## Our Businesses Taste & Nutrition Kerry is a world-leading provider of taste and nutrition solutions for the food, beverage and pharmaceutical markets. We use our broad range of ingredient solutions to innovate with our customers to create great tasting products, with improved nutrition and functionality, while ensuring a better impactfortheplanet.Ourleadingconsumerinsights,R&Dteamofover 1,100 food scientists and extensive global footprint enable us to solve our customers’ most complex challenges with differentiated solutions. At Kerry, we are driven to be our customers’ most valued partner, creating a world of sustainable nutrition. Taste & NutritionBusinessDimensions Dairy Ireland DairyIrelandisaleadingIrishproviderofvalue-adddairyingredientsandconsumer products. Our dairy ingredients product portfolio includes functional proteins and nutritional bases, while our well-loved dairy consumer brands can be found in chilled cabinets in retailers across Ireland and the UK. 12 Strategic Report Chairman's Statement Kerry Group Annual Report 2022 ## Chairman's ## Statement ### A year of growth, ### footprint expansion and ### strategic development - ### which have been at the ### heart of Kerry's success ### over the past 50 years. Tom Moran Chairman customers create healthier, more Overview Strategic Update nutritious products that taste great Inthis,myfirstChairman's 2022isthefirstyearoftheGroup’s in a way that protects people and statement, I am pleased to refreshed strategic plan and the the environment around us. One report another year of strong management team has made a of those actions was the launch growth against the backdrop successful start implementing of our EvolveDairySustainability ofsignificantmacroeconomic the growth strategies. Programme, which supports the challenges.Thisexemplifiesthe accelerated adoption of science- resilience of the organisation and The Group completed four based sustainable actions and our collective drive to deliver long acquisitions during the year best practice on the farms of term sustainable results through as Kerry continues to evolve ourIrishsuppliers.Refertothe the execution of our strategy. its portfolio to strengthen our SustainabilityReviewonpages70 The growth delivered was further position as a world-leading and 73 for further details. re-affirmationofourpositioning taste and nutrition company. as a market leader in the industry, Since year end the Group The2022SustainabilityReport meeting our customers' needs to announced the potential sale published alongside the Annual enhance the nutrition, wellness of its Sweet Ingredients Portfolio. ReportdetailstheGroup’sprogress and functionality of their products This portfolio repositioning is against its sustainability strategy in a way that protects people another important development and targets in reference to Global and the environment around us in Kerry’s strategic evolution. ReportingInitiative(GRI)standards. without compromising on taste. The Group will continue to pursue DetailsregardingtheGroup’s th organic and acquisitive growth 50 Anniversary sustainability strategy, targets, opportunities aligned with the th performance, policies and In 2022, Kerry celebrated its 50 Group’s strategic priorities and programmes are outlined in the anniversary. Across the world, key growth platforms. SustainabilityReviewonpages52- employees engaged in activities 93 and in the 2022 Sustainability with customers, local communities Sustainability Report,whichisavailableon and each other to mark this kerry.com. | milestone anniversary with pride. | The Group’s 2030 Beyond the | | | --- | --- | --- | | Through these celebrations, the | Horizon sustainability strategy | | | Board recognised that Kerry’s | underpins Kerry’s future growth | Corporate Governance | | values, energy and passion, | as we continue to partner | | TheBoardisfirmlycommittedto partofourDNAfromourearliest with our customers across the maintaining the highest standards days in 1972, continue to drive globe to create a world of of corporate governance in line the business today. 50 years sustainable nutrition. withbestpractice.During2022, on, the values of courage, the Board reviewed the Company’s enterprising spirit, inclusiveness, The Board, through the corporate governance policies and ownership and open-mindedness Governance,Nominationand procedures to monitor compliance are alive, and the collective Sustainability Committee, with the 2018 UK Corporate ambition of our employees, contributed to, reviewed Governance Code and the Irish customers and suppliers to do andapprovedthesignificant Annex and with latest best practice better for people and the planet sustainability developments developments. We also engaged is stronger than ever. actioned in 2022 as we help our with our stakeholders during the Kerry Group Annual Report 2022 13 | year as we believe listening to their | During2022,theBoardhas | | | leaders and emerging talent | | --- | --- | --- | --- | --- | | views and needs is fundamental | continued to ensure that | | | from the region, to visit two | | to building a sustainable business. | management promotes our | | | manufacturing sites and observe | | Further details of our stakeholder | purpose and values to unite | | | their process technology | | engagement activities are outlined | the organisation across diverse | | | capabilities in operation and | | on pages 122-125. | cultures and geographies. | | | seefirst-handhowtheyhave | | | Staying true to our purpose as | | | benefitedfromsignificantcapital | | Each year the Board undertakes | the organisation has responded | | | investment approved by the | | a formal evaluation of its | to the | | economic challenges arising | Board,andfinallytoparticipatein | | effectivenessandthatofits | fromtheinflationaryenvironment, | | | customer immersion experiences | | Committees. In 2022 the evaluation | which was exacerbated by the | | | that showcased the Group’s | | was externally facilitated and the | invasion of Ukraine, has shown | | | capabilities in helping customers | | outcome of this review is that the | the | extraordinary agility, | | to solve industry challenges with | | Board and its Committees consider | compassion and resilience of | | | differentiatedsolutions. | | thattheyareoperatingeffectively. | ourpeople,operatingindifficult | | | | circumstances, to do the right Dividend thing for our customers, our Board Changes TheBoardrecommendsafinal shareholders, our communities PhilipToomeyretiredasDirector dividendof73.4centpershare and the environment. and Chairman of the Board (an increase of 10.0% on the 2021 following the Group’s Annual final dividend)payableon12May People and Engagement | General Meeting on 28 April 2022. | | 2023 to shareholders registered | | --- | --- | --- | | On behalf of the Board, I wish | Central to Kerry Group’s continued | ontherecorddateof14April2023. | | to pay tribute to Philip for his | success is the hard work and | | | commitment and dedication to the | commitment of all our employees. | Together with the interim | | success of the Group throughout | As the cost of living crisis develops, | dividendof31.4centpershare, | | his years of service. | the Board is overseeing how | this brings the total dividend for | | | the Group is actively supporting | theyearto104.8cent,anincrease | | FionaDawsonandPatrickRohan | employees, especially those in | of 10.1% on 2021. | | joined the Board as non-Executive | lower paid positions, during this | | | Directorson4January2022and | periodofsignificantlyhigher | | Prospects 16 January 2023 respectively. I look inflation.TheBoardisalsoproud TheBoardremainsconfident forward to both of them making of the support provided by the that the Group's business model significantcontributionstothe leadership team and employees and strategic priorities will Board in the years ahead. in general to our Ukrainian continue to deliver shareholder colleagues and their families as valueandbenefitourother Gerard Culligan and Con Murphy they have had to deal with the stakeholders in the years to come. retired from the Board at the consequences of the invasion in Kerry will continue to pursue conclusion of the 2022 AGM. On their country. organic and acquisitive growth behalf of the Board, I would like opportunities and the Group's to thank Gerard and Con for their The Board also recognises balance sheet is well placed to strongcontributionovertheirfive the importance of employee support our objectives. The view years of service. engagement and continues of management regarding the to enhance our employee business outlook for 2023 is As part of the ongoing Board engagementactivities.During presented in the Chief Executive refreshment process, the 2022,Dr.KarinDorrepaal,the Officer'sReview. Governance,Nomination& newly appointed Workforce Sustainability Committee will EngagementDirector,engagedin On behalf of the Board, I would continue its search for suitable a programme of activities where like to sincerely thank Edmond candidates to join the Board in she had the opportunity to gauge and the Executive Management the context of the skillsets the engagement levels of our team for their exceptional required, the Group’s diversity people supporting our business, leadership and thank everyone commitments, as well as enhanced bothin-personwithinouroffices throughout the organisation for stakeholder expectations and andsitesandremotely.Detailsof their contribution to the ongoing regulatory requirements in these activities are outlined in the success of the Group. relation to Board diversity. CorporateGovernanceReporton pages 117-130. Purpose and Values Operational Visits Our Purpose, Inspiring Food, | Nourishing Life, and our Values | As restrictions eased in 2022, | | --- | --- | | of Courage, Enterprising Spirit, | the June 2022 Board meeting was | | Inclusiveness, Open-mindedness | held in the Group’s Technology | Tom Moran and Ownership guide our actions and Innovation Centre in Beloit, Chairman and behaviours, keeping us on USA.ThevisitaffordedBoard 15 February 2023 the right path toward achieving members the opportunity to a world of sustainable nutrition. meet and engage with key 14 Strategic Report ChiefExecutiveOfficer’sReview KerryGroupAnnualReport2022 ## Chief Executive ## Officer’s Review ### 2022 was a milestone ### year for Kerry, where we ### achieved record revenue ### despite an exceptionally ### dynamic operating ### environment, testament ### to the continued strategic ### evolution of our business. Edmond Scanlon ChiefExecutiveOfficer ### Dearfellowshareholdersandallstakeholders, th ### When I reflect on Kerry’s 50 year, I am proud ### of the Group’s achievements in 2022, where total ### revenue increased to €8.8bn, driven by strong ### organic growth of 18.0%. The year began with industry supply chain constraints, a heightened levelofinflationandchallengingeconomicconditions,whichwere amplifiedbytheRussianinvasionofUkraine.Theseglobalmarket challenges also presented opportunities for Kerry, as our teams continued to work closely with our customers and supported them as they navigated through the year. As we managed through this unprecedentedinflationarypricingenvironment,wewerevery pleased with the resilience of our strong volume growth in Taste &NutritionandfurthervolumegrowthinDairyIreland. Overall growth was broad-based across our regions and channels in our food and beverage markets, thanks to a continued strong level of innovation activity. This growth was driven by an excellent performance across our range of taste technologies, combined with increased demand from our customers to enhance the nutrition, wellness and functionality of their products. We continued to engage with our customers on enhancing thesustainabilityprofileoftheirofferingsthroughtheyear,and we were pleased to see our emerging markets deliver yet another standout year of double-digit volume growth. We also continued to make good strategic progress in 2022 with footprint expansion, the initiation of our Accelerate Operational Excellence transformation programme, and further evolution of our portfolio,alignedtoourstrategicprioritiesofTaste,Nutritionand Emerging Markets. I would like to take this opportunity to recognise the contribution of our people over the past 50 years of our journey. You have been the key ingredient to Kerry’s success, as we continue to inspire food and nourish life. Kerry Group Annual Report 2022 15 ## A Year of Record Growth and Strategic Developments Throughout the year we worked in close collaboration with our customers to passthroughinputcostinflation,demonstratingtherobustnessofKerry’spricing model. The impact from this heightened level of pricing was seen across our industry, while the limited level of elasticity our volumes experienced highlighted 10 15 20 0 5 theimportanceofKerry’ssolutionstoourcustomers’finishedproducts. Q1 6.8% 4.6% 11.4% ### Excellent Organic Growth Q2 10.3% 7.2% 17.7% | Q3 | 8.2% | | 10.6% | | 19.0% | | | --- | --- | --- | --- | --- | --- | --- | | | | | 19.0% | | | Taste&Nutritiondeliveredstrongvolume | | | | 17.7% | | 18.0% | | | growth of 7.8% in the year, which was broad- Q4 18.0% based across our Food and Beverage end 6.1% 11.7% 7.2% 11.4% 10.6% use markets, with excellent growth across 11.7% Snacks,MeatandDairy. 5 10 15 20 4.6% 10.3% 6.8% 8.2% The foodservice channel continued to deliver Volume Price Transaction fx 6.1% strong double-digit growth and our retail channel achieved good mid single-digit Q1 Q2 Q3 Q4 volume growth. Volume Price Transaction fx Taste&NutritionQuarterlyOrganicRevenueGrowth Q1 6.8% 4.6% 11.4% ### Strategic Footprint Expansion In the year we continued to enhance and Q2 10.3% 7.2% 17.7% expand our global presence and footprint. Q3 8.2% 10.6% 19.0% ThenewandexpandedfacilitiesinRome, DurbanandJeddahwereofficiallyopened, and we made good progress in the Q4 18.0% 6.1% 11.7% development of our new Taste facility in Karawang, Indonesia. 5 10 15 20 ### Acquisitions aligned to our Strategic Priorities We made a number of acquisitions aligned to our strategic priorities during the year. In Taste, we acquired Kraft Heinz’s B2B powdered cheese business. Under Nutrition, the acquisition of c-LEcta enhanced our biotechnology innovation Taste Nutrition Emerging capability,whileNatreonenhancedourbotanical Markets ingredients portfolio. In Emerging Markets, the acquisition of Almer expanded our presence in Southeast Asia. Since the year end, we announced the potential sale of our Sweet Ingredients Portfolio, as we continuetoenhanceandrefineourportfolio to areas where we can add the most value. 16**Strategic Report**^{}[] Chief Executive Officer's Review Kerry Group Annual Report 2022 ![img-0.jpeg](img-0.jpeg) ## Our Markets The overall demand environment remained robust through the year despite the macroeconomic backdrop. Consumers continued to seek new taste experiences, cleaner labels and added functional benefits through food and beverages. The cost-of-living crisis has resulted in many consumers looking for relative value options to meet their purchase preferences, depending on their available resources. Customers continued to prioritise the resiliency of their supply chains through this period of inflationary pressure. Innovation has become increasingly targeted, as they seek to meet various consumer preferences at different price ranges. The industry has evolved significantly in recent years, as many of our customers reconfigure aspects of their operations in the face of challenges such as geopolitical volatility, increased regulations and lack of labour availability in certain markets. The macroeconomic developments across the year had a substantial effect on interest rates and global equity markets. Share prices and valuations across our sector were significantly adversely impacted, with the effect most acute across growth stocks including Kerry. While the share price performance in the year was disappointing, we have created significant value over many years. We remain intensely focused on delivering against our targets and continuing to strategically evolve our business, which we believe will deliver long-term shareholder return. ## Our Performance In the year we delivered strong overall growth, with Group reported revenue increasing by 19.3% to €8.8 billion, driven primarily by volume growth of 6.1% and pricing of 11.7%. Group EBITDA increased by 12.9% to €1.2 billion, representing an EBITDA margin of 13.9%. Adjusted earnings per share increased by 7.3% in constant currency, while free cash flow increased to €640m. We also made good progress in 2022 on our *Beyond the Horizon* sustainability journey. Under Better for People, we increased our nutritional reach with positive and balanced nutrition solutions to 1.2 billion people, as we continue to work with our customers to improve the nutritional profile of their products. Under Better for Society, we made important steps on our health and safety performance. We also rolled out a range of programmes to support our Diversity, Inclusion and Belonging objectives and continued to support those communities most in need, through our employee programmes and partnerships with leading NGOs. Under Better for the Planet, we delivered a 48% reduction in carbon, as we accelerated our shift towards renewable electricity. We also made significant progress across a number of other measures, including reducing food waste by 32% across our operations. We are pleased with our progress to date, while recognising the challenges ahead for our industry and the need to intensify our efforts, as we continue to create a world of sustainable nutrition. ![img-1.jpeg](img-1.jpeg) KerryGroupAnnualReport2022 17 Regional Performance Forward Looking Statement TheAmericasachievedvolumegrowthof8.4%in The Group began its 2022-2026 strategic cycle the year, which was strong across both channels and with a strong year of growth, good overall financial particularly in the Beverage, Meat and Bakery end use performance and continued progress against Kerry's markets. Growth in LATAM remained strong across Beyond the Horizon sustainability commitments. both Mexico and Brazil. At the outset of 2023, while market conditions are Europe delivered strong volume growth of 6.2% given the currently uncertain, Kerry remains strongly positioned economic backdrop in the region. Growth was driven by for growth ahead of its markets. The Group will theSnacks,DairyandMealsendusemarkets.Thisgrowth continue to manage input cost fluctuations with its was broad-based across the region, with the exception well-established pricing model. Kerry will continue of Eastern Europe, where we made the decision to exit to invest capital aligned to its strategic priorities and RussiaandBelarusposttheinvasionofUkraine. strategically evolve its portfolio. The APMEA region achieved volume growth of 8.1%, which represented a very strong performance given the challenging conditions in China through the year. This growth was led by the Snacks, Meat and Bakery end use Edmond Scanlon markets. Our performance in the region was particularly Chief Executive Officer strong across the Middle East and Southeast Asia. 15 February 2023 DairyIrelanddeliveredstrongorganicgrowthintheyear, reflecting a significant level of pricing. Overall volume growth in the year was modest, given strong prior year comparatives. Volume growth in dairy ingredients was partially offset by lower category volumes in consumer products, as a result of price increases. Strategic Report Our People18 KerryGroupAnnualReport2022 ## Our People behaviour in everything we do and continue to reinforce ### Our Culture this through our standards, policies, and practices. ### At Kerry, our Purpose Inspiring Food, We believe in giving talented, curious people the ### Nourishing Life reflects our enduring opportunitytomakeadifferenceandarecommitted ### culture and further ignites our passion to nurturing a highly inclusive workplace where all our people can be at their best, contribute to our success ### to build a better future for our people and excel personally and professionally. Our people ### and planet. Over the last five years, we practices reinforce our purpose, vision, and values, ### have embedded our purpose into all our from how we attract talent, to how we develop skills and behaviours, reward individual and team performance, ### people policies, processes and practices, build future talent, and play a role in society, supporting ### connecting our 23,000+ people across the local communities through volunteering and other ### world through a shared vision to be our charitable activities. ### customers’ most valued partner, creating We lead with a purpose mindset and engaging and ### a world of sustainable nutrition. empowering our teams is fundamental to our group- wide approach to people leadership. Our leaders are Our people represent 118 nationalities, and we work committed to their role in building a great place to work, across 200+ locations in more than 50 countries globally. a place where our people are engaged in meaningful Throughout 2022, guided by our purpose and our work that is connected to our purpose and can values, our people continued to demonstrate resilience contribute fully to our shared success. Ensuring that the and agility, through constantly evolving circumstances. diversityofourleadershipteamsreflectsandcelebrates Against a challenging macro-economic and geopolitical the diversity of the communities in which we live and backdrop, and through continued Covid-19 lockdowns work continues to be a key imperative for us. In 2022 in key geographies, we leveraged the strength of our we further enhanced the cultural and gender diversity culture, our deep specialist expertise and our industry- of our leadership talent pipelines through internal leading taste and nutrition capabilities to continue to promotions and strategic hires, and we are encouraged enhance the lives of others, solving our customers’ by the progression of local talent into our regional complexchallengeswithdifferentiatedsolutions. leadership teams. Weseektodifferentiateourselvesasanorganisation Expanding Horizons through the quality, commitment and integrity of our th people.WethinkandactwithaSafetyFirst,Quality Throughout 2022, we celebrated our 50 anniversary, Always mindset and remain focused on delivering value with our people coming together and connecting, many to our customers. We hold ourselves accountable for forthefirsttime,throughvariouseventsaroundthe meeting the highest standards of business and ethical worldtomarkthissignificantmilestoneinourhistory. Kerry Group Annual Report 2022 19 Celebrating together inspired a renewed sense of team across Kerry and showcased our core value of inclusiveness in action. Events ranged from local team building activities, charity donations and town halls to commemorative plaques, globally-led Inspiring People awards anchored around our Kerry values and new community partnerships, including numerous opportunities to connect with family, customers, and former employees. A common theme across all our celebrations was the opportunity to feature and enjoy our innovative Kerry taste and nutrition solutions from around the world, reinforcing our purpose to inspire food and nourish life. Our Values Our values are inspired by our diversity within our workforce, purpose. They underpin the and we understand and respect ### Courage culture we continue to cultivate the strength that different and develop to sustain our perspectives and backgrounds We’re brave, we success. They unite us across our can bring to our decisions. speak up and we inspire each other to diverse cultures and geographies, Every voice counts. get the best results. providing a guiding framework for building trust and mutual We welcome feedback, enabling respect through the engagement two-way communication of our people, our customers and between our people and senior ### our communities. They represent leadership so that we may Enterprising ### strengths from our heritage as improve and fulfil our future Spirit well as new capabilities, which we potential together. We’re bold, we think want to collectively embed across big picture, we add our expanding global footprint. We see opportunities where value and we grow. Our leaders continue to prioritise others see problems, we learn how they role model our values in from each other, we remain action, each and every day, across resilient and work together all areas of Kerry. to make it easier and more ### Inclusiveness valuable for our customers to Reflectingtheessenceofour do business with Kerry. We’re welcoming, we are authentic values, we empower our people and we see strength to have the courage to challenge We act as owners, we embrace in diversity. the status quo when it poses a risk accountability, and we never to progress, and to express their compromise on doing the right unique perspectives. We ask our thing for our business, our people to consider the art of the people and our customers. ### Open- possible, and to bring new and ### innovative ideas to how we do Aligning our whole organisation mindedness our work. We encourage all our behind our purpose and values We’re curious, we people to have the courage is critical to being the first innovate and we to speak up and integrity is choice for the best talent. We believe in possibility. non-negotiable. are committed to fostering an environment where our In turn, Kerry commits to people are highly engaged listening. We remain open to and motivated to invest their ### Ownership new ways of working and are time, commitment and passion We’re accountable always reviewing opportunities in shaping Kerry’s successful and we care about to grow our business, taking the growth; an environment where the business as if views of our people, who know our people feel fulfilled by, and it were our own. our business best, into account. valued for, their day-to-day At Kerry we have a wealth of contributions to Kerry’s success. 20 Strategic Report Our People Kerry Group Annual Report 2022 It demonstrates that our people see value in sharing ### Enhancing our their feedback, which is used as key input in helping ### Employee Experience to make Kerry a better and more successful business for the future. ### At Kerry, we are fully committed to ### creating an environment where our This year we aligned our engagement focus areas underthreepillars:‘MakingitBetter,MakingitClearer ### people can thrive, be inspired to innovate and Making it Easier’. These three pillars will guide how ### and are comfortable bringing their we approach our engagement action planning across ### authentic selves to work every day. We Kerryandfocusoureffortsonimprovingtheworking experience for our people. ### view the engagement of our people as a ### lead indicator of our future sustainable During2022,theroleofdesignatedWorkforce ### business growth and performance and EngagementDirectortransitionedfromMr.TomMoran toDr.KarinDorrepaal,whoparticipatedinnumerous ### invest our collective energy in nurturing employee engagement activities throughout the year. ### and enhancing the engagement of all This important role ensures the employee’s voice is ### teams across the globe. considered and represented by the Board when making decisions impacting our people, ensuring we are confidentthatwearemakingtherightdecisionsfor Each year, the needs of our people and our business Kerry overall. change and evolve. To ensure we are providing the right support and the best employee experience, we regularly Activities this year included an opportunity to join the pulse-check our employee engagement and take action panelforKerry’sFlagshipPridewebinar‘Together on the feedback we receive from our people. We have with Pride – A Womxn’s Perspective’ and a number of a stated ambition of being a top quartile employer for manufacturing plant visits to engage with our teams employee engagement, and through our continuous inEuropeandNorthAmerica.Dr.Dorrepaalcontinues listening strategy and frequent monitoring, we are pleased to champion and help us shape Kerry’s engagement with our continued progress against that ambition. strategy, ensuring we are bringing industry-best practices and giving due consideration to the external In 2022, we completed our global employee engagement environment within which Kerry operates. For further survey for the fourth year running. We are particularly details on key activities supported during 2022, please proud of our participation rate of 92% across all our see our Corporate Governance section on page 117. regions and functions. This demonstrates the trust and willingness of our people to share their voice. ### PILLAR 1 PILLAR 2 PILLAR 3 ### MAKINGITBETTER MAKINGITCLEARER MAKINGITEASIER | Making it Better encompasses | Making it Clearer covers aspects | Making it Easier is a hugely | | --- | --- | --- | | the actions that impact the | relating to Kerry’s vision, brand | important pillar for Kerry. | | working life of everyone at Kerry. | and strategy. Following our | Our relentless drive to work | | Learning and development | strategy refresh in 2021, Kerry’s | smarter is core to the culture at | | opportunities, our Diversity, | senior leadership team invested | Kerry. Through our Accelerate | | Inclusion and Belonging | considerable time and effort | Operational Excellence | | agenda, wellbeing and reward | throughout 2022 in ensuring | Transformation programme, | | and recognition initiatives all | that every individual at Kerry | we are continuing to realise | | fall under this pillar. Through | understands our strategic | ongoing benefits, with specific | | the survey feedback in 2022, | objectives and how their role | focus on performance and | | our people shared that they | contributes to Kerry’s long- | delivery across our plant | | have experienced positive | term goals. The refresh of | network. In addition, we are | | developments in all these areas. | Kerry.com was a major milestone | further enhancing the portfolio | | Further details on actions we | in our 2022 brand agenda. This | and scope of our Global | | have taken in these areas are | resource is available for all Kerry | Business Services organisation, | | covered in our later sections | stakeholders, including Kerry | making it easier for our people | | focused on Diversity, Inclusion | employees, to better understand | to access the support they | | and Belonging, Leadership | the vast scope of products | need, when they need it | | andTalentandRewards | and services we provide to | in the most efficient and | | andRecognition. | our valued customers. | effective way. | Kerry Group Annual Report 2022 21 Highlights based on feedback from our employee engagement survey in 2022 include: ### Engagement Last year, we commenced our Accelerate Operational Excellence transformation programme, helping us to build and sustain consistent ### of our plant excellence across all plants. Through the survey feedback in 2022, we ### colleague haveseenthisfocusedeffortleadtomarkedlyincreasedengagement across all plant leaders who have been through the programme. Their ### community plant teams also had, on average, improved engagement scores, as compared to the previous year's survey. This shows that the investment in our plant population is being felt, and the programme is making it better, clearer and easier to work at Kerry. ### Engagement We continue to support our leaders to shape our workplace for the future, listen to their teams, and implement robust action plans for ### of our people continuous improvement based on two-way dialogue. We saw continued ### leader population improvement in our people’s experience of their people leaders’ effectivenessinour2022survey.Wehaveseenthatpositiveengagement levelsofindividualpeopleleadersmakeasignificantpositiveimpacton the engagement of their team and we will continue our priority focus and investment in our people leaders’ skills and behaviours. ### Inclusion Index Following the launch of our Inclusion Index as an integral part of our 2021 employee engagement survey, we were delighted to see an improvement across all elements of the index in 2022. Our most positive feedback through the index is centred around Trust – which references our approach to fostering open and honest communications and how respected our people feel. This is core to building inclusivity in organisations and is the basis for all other aspects of the Inclusion Index:FairTreatment,PsychologicalSafety,IntegratingDifferences and Belonging. We will bring insights from the Inclusion Index into our 2023Diversity,InclusionandBelongingplans,ensuringwecontinueto evolve and drive progress in this important space. 22 Strategic Report Our People Kerry Group Annual Report 2022 to build a more inclusive workplace. Available in 11 ### Fostering Diversity, languages, it provides practical ideas, templates and ### Inclusion and Belonging tools aligned to our Inclusion Index. In addition, people leaders can self-assess their leadership style and ### We have set out our ambition to approach across key people processes such as assigning ### build an inclusive workplace at Kerry. teammemberstoprojects,managingflexibleworking requests and selecting a new team member. OurDiversity,InclusionandBelongingFrameworkis Embedding a truly inclusive workplace is made possible aligned to this ambition and is fuelled by our desire to byourglobalDiversity,InclusionandBelongingteams bethefirstchoiceforthebesttalent.Wecelebrateand working together with our global employee networks harness our diversity to drive business performance and –PRYSM,supportingLGBTQI+colleaguesandallies foster a healthy and inclusive environment that enables andSEEN,raisingawarenessandsupportingonissues our people to be at their best and continue to drive relatingtoraceandsocialequity.During2022,PRYSMhas positive change at a systemic level, both structurally continuedtoworktopromoteLGBTQI+rightsnotonly and behaviourally. internally, but also in collaboration with Kerry customers and with the broader international community. This year, During2022,weembarkedonadetailedplanningexercise wesawover70ofourofficesandplantscomingtogether with representatives from each region, to agree a strategic toraisethemodernprideflag,inconjunctionwith roadmap for each region in pursuit of our shared 2030 th customers to celebrate our 50 anniversary. In 2022, our goals. Key areas of focus include continuing to build SEENnetworkhostedourfirstglobaleventdedicatedto diverse and inclusive leadership, promoting greater depth race, ethnicity, cultural and social equity. This focused on and breadth in our talent pipelines, embedding our agile raising awareness of topics such as unconscious bias and working practices, encouraging employee-led initiatives, the impact of privilege, with external experts educating engagingwithalignedexternalpartnersandconfirming colleagues and many Kerry employees sharing their Executive Leadership Team sponsorship for and ownership personal and professional stories and experiences. ofouroverallDiversity,InclusionandBelongingambition. In2022,weestablishedourGlobalDiversity,Inclusionand We continue to make positive progress on our gender Belonging Council, comprising selected members of our diversity goals. We set ourselves a goal of achieving Executive Leadership Team. Together with our regional equal gender representation in senior management committees,dedicatedDiversity,InclusionandBelonging roles by 2030, with women representing 35% of leadsandglobaltaskforce,ourGlobalDiversity,Inclusion senior leadership roles by 2025. We achieved 36% and Belonging Council will help us to further shape our representation of women in senior management and overall ambition and support our continued progress 33% in senior leadership roles by the end of 2022, and through 2023. we continue to focus on targeted strategies to accelerate this in 2023. Examples include our new Women in Building on positive feedback received in 2021 during Leadership programme in Europe this year, which we our Inclusive Leadership workshops, we launched an aim to roll out globally to all regions, as well as our Inclusive Leader toolkit in 2022. This toolkit equips our RegionalWomen@Kerrynetworks,helpingtopromote peopleleaderswiththeconfidenceandcapabilitiesto opportunities to improve workplace policies and lead diversity, inclusion and belonging conversations practices for women across Kerry. with their teams, making it easier to work together Kerry Group Annual Report 2022 23 content and unique opportunities to engage with leading experts on key topics to build leadership capabilities. Our functional curriculum supports business growth through enabling the development and application of our foundational technologies and fostering a customer-centric approach. In 2022, the Taste Technical Excellence Programme and Applied Health and NutritionTechnicalExcellenceProgrammebrought togethersubject-matterexpertsfromdifferentareas in the business to share their expertise and support our strategic growth pillars. The overall aim of these programmes has been to further develop expertise and capability in using our new technologies in specificapplications,maximisingvaluetocustomers whilst solidifying foundations for longer term career developmentofourpeople. In the commercial area, we have been transforming our approach to capability building, whereby teams, including leaders, participate in 'just-in-time' experiential sessions aligned to our commercial campaigns, ensuring newly developed skills and behaviours which can be applied immediately in the role. We continue to enhance our commercial ### Investing in Learning, Leadership effectivenessprogrammes,fromtheonboardingof ### and Talent to Fuel our Growth new team members to programmes that build greater cross-functional collaboration across Kerry. ### Our aim is to unleash the potential of ### our workforce to perform at their best, Kerry’s early careers programme is a core component of our strategy to strengthen our future pipeline, providing ### while instilling a sentiment of self-growth opportunities to develop skills and experience across ### and excitement across the organisation a wide range of core disciplines, enabling longer-term ### about the future. We continue to build sustainable leadership for the organisation. We have recently consolidated our graduate programmes globally ### our learning technologies, to increase tocreateoneunifiedapproachfor2023.Wehavealso ### our reach and speed of building reviewed our approach this year to apprenticeship ### capabilities globally. programmes in regions and opportunities to expand our offeringsinthisspace,especiallyforfunctionswithin During2022,wefocusedonbuildingleadership integrated operations in 2023. expertise across our manufacturing facilities, with the launchofanew,targetedPlantLeaderDevelopment We continue to support development of enterprise Programme. With a combination of internal and external initiatives across the group to build capabilities aligned expertise, plus peer-to-peer support, this programme to our strategic objectives. One such example is our aims to build the plant leader skills and behaviours Sustainability Essentials programme, launched in 2022, needed for current and future success. Over 70% of designed to foster a sustainability mindset in all our the plant leader population are now engaged in the people, and which is an integral part of all day-to-day programme and this will continue into 2023, with a activities at Kerry. focus on following up on results and sustaining behavioural change. Finally, we have continued to strengthen the quality of our leadership talent pipelines through ongoing We also continued our focus on the role of the people strategic talent reviews across our regional businesses leader, recognising the unique role they play in the and global functions. This includes ongoing initiatives ongoing performance and engagement of our people. to build the quality of our leadership teams, making key OurrefreshedManagingPeople@KerryProgrammein strategic appointments as well as continuing to invest 2022, underpinned by our Kerry Leadership Competency in building individual future leaders. We also continue Framework,isdesignedtobuildconfidenceand to invest in activities to accelerate succession readiness competence across all aspects of the role. All newly ofidentifiedtalentforexecutiveleadershiproles,where promoted people leaders are now automatically enrolled individuals participate in externally benchmarked intotheprogrammetosupportthefirststepintheir assessments, and internally led 360-feedback tools to leadership career. We have also increased the scope of better target leadership development plans, including our Virtual Leadership Academy which now engages access to individual coaching, mentoring and businesss approximately 1,500 of our people leader population, school programmes. giving access to timely and relevant thought-leadership 24 Strategic Report Our People Kerry Group Annual Report 2022 ![img-2.jpeg](img-2.jpeg) ## Rewarding and Recognising our People 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 striving to be the first choice for the best talent by providing fair, competitive offerings which our people value and which drive an ownership mindset to achieve Kerry's goals. 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. During 2022, we implemented the next phase of our Total Rewards roadmap which will continue into 2023. 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. Some examples of enhancements made during 2022, and actions planned for 2023, are as follows: - During 2022, we undertook a detailed review to design Kerry's first Global All Employee Share Plan which will provide employees the opportunity to become shareholders and allow them to share in the success of the company. The Board and Executive Directors believe that share ownership is a powerful and important way of creating an ownership culture and mindset and as such we will be asking Shareholders to approve this new plan at our 2023 AGM. Further details can be found in the AGM Notice of Meeting, and we intend to implement the plan on a phased basis, commencing in 2023. - We are actively engaged with the UK Living Wage Foundation, with the objective of being accredited by them as a UK Living Wage Employer in Q1 2023. In addition, given the increasing global focus on living wage and the associated business, societal and wider economic benefits, we are exploring how we could expand the Living Wage commitment across our wider global footprint from 2023 onwards. - We continued to promote and embed our Global Recognition Programme, Inspiring People, which was launched in 2021. Since the plan was launched almost 10,000 Kudos Awards have been made across all regions. We held our first global 'Inspiring People' awards in June. Kerry Group Annual Report 2022 25  InQ22022,welaunchedanewonlineLong-Term  Greaterflexibilityinourpayreviewprocessto IncentivePlan(LTIP)platformandapplication, target higher increases for lower paid positions and EquatePlus.ThissignificantlyenhancestheLTIP togivemanagersgreaterflexibilitytodifferentiate experience; driving transparency and understanding, wherepaylevelsaremateriallyimpactedbyinflation. further aligning our participants’ experience with Where appropriate, more frequent salary increases that of our shareholders, whilst simplifying and weremadeincountriesexperiencinghyperinflation. automating how they manage their awards.  Promotionofemployeebenefitanddiscount In addition to changes to our global programmes, we platforms where available. madeenhancementstolocalin-countrybenefitplans, inaccordancewithourregionalandcountryspecific  Globalmentalwellbeingandfinancialwellbeing reward roadmaps. We are committed to gender pay seminars available to all employees. equity and continue to proactively monitor the pay of male and female colleagues engaging in similar Through our wider Wellbeing Framework and roles to ensure it is comparable. We appoint and commitment, we foster a healthy, positive work promote based on merit and will continue to encourage environment by providing our people with the physical, the career development of all our people, paying emotional,nutritionalandfinancialresourcesto attention to our promotion and recruitment practices support them through the various life stages. This is with regards to gender, and supporting greater underpinned by a balanced set of programmes, all representation of women at all senior management enabled by a wellbeing centre and toolkit which provides levels in line with our commitments. a suite of relevant educational material designed to empower our people to best manage their wellbeing. Promoting Health and Wellbeing We continue to prioritise the health and wellbeing We recognise the critical role family plays in our of our people and we are particularly cognisant of the employees' wellbeing, making sure we have the right currenteconomicenvironmentandglobalinflationary levelofpoliciesprovidingflexibilityandtimeawayfrom challenges. To support employees through the ongoing work to cater for the demands of a busy professional cost of living pressures, a number of targeted actions and family life. Every Kerry employee, as well as their havebeentaken: family members, has access to our Global Employee AssistanceProgramme(EAP).EAPisacomplimentary, Country merit budgets are designed to track confidentialservicethatisavailable24hoursaday, market movement and are informed by seven days a week, 365 days a year. EAP is run by comprehensive market intelligence. Annual a team of counsellors, psychologists and work-life salary budgets this year are greater than or consultants who provide expert guidance and specialist equal to last year. support on any kind of issue - from everyday matters to more serious wellbeing problems. 26 Strategic Report Our Business Model Kerry Group Annual Report 2022 ## Our Business Model ## How Our Integrated Business ## Model Creates Sustainable Value ## What We Do ## What We Depend On The Value We Create Kerry is a world-leading provider of taste and nutrition ## (Inputs) solutions for the food, beverage and pharmaceutical markets, (Outputs) with our broad range of ingredients reaching over 1 billion consumers globally. ## Why We Do It Our Purpose ### Financial ### Financial Inspiring Food, Nourishing Life Growthinrevenue,profitandcashflow Funding available to the Group Our Vision To be our customers’ most valued partner, creating a world of sustainable nutrition. ### Manufacturing ### Manufacturing ## How We Do It >18,000 products with 80%+ delivering 147manufacturinglocationsand positive and balanced nutrition global supply chain infrastructure Our Unique Business Model ### Unique Our Technology Portfolio Intellectual ### Intellectual Proposition Taste Nutrition Customer-specificinnovation Consumer insights, technology, Our Integrated Value Creation Engine combinedwithdifferentiatednew know-howandR&Dcapabilities technologies and solutions ### Human ### Human Delivering Taste & An inclusive workplace that enables people 23,000+ talented employees Nutrition Solutions to excel both personally and professionally across 50+ countries ### Social and Relationships ### Social and Relationships ## What We Focus On Concern Worldwide, Global LGBTI Equality Global brand and relationships (PGLE) and the UN World Food Programme Taste & Nutrition Strategic Framework with local communities, regulators and industry bodies ### Natural ### Natural Responsibleconsumptionandproduction A global network of >10,000 with sustainable sourcing, emissions raw materials suppliers reduction and waste recovery Kerry Group Annual Report 2022 27 ## The Impact We Deliver ## What We Depend On The Value We Create Supporting our customers in creating great tasting ## (Inputs) (Outputs) products, with improved nutrition and functionality, while ensuring a better impact for the planet. ## Who We Benefit ### Financial ### Financial Growthinrevenue,profitandcashflow Funding available to the Group ### Manufacturing Customers and ### Manufacturing Consumers >18,000 products with 80%+ delivering 147manufacturinglocationsand positive and balanced nutrition global supply chain infrastructure ### Intellectual ### Intellectual Customer-specificinnovation Consumer insights, technology, combinedwithdifferentiatednew know-howandR&Dcapabilities technologies and solutions ### Human ### Human An inclusive workplace that enables people 23,000+ talented employees to excel both personally and professionally across 50+ countries ## How We Contribute ### Social and Relationships ### Social and Relationships Concern Worldwide, Global LGBTI Equality Core SDGs Global brand and relationships (PGLE) and the UN World Food Programme with local communities, regulators and industry bodies Linked SDGs ### Natural ### Natural Responsibleconsumptionandproduction A global network of >10,000 with sustainable sourcing, emissions raw materials suppliers reduction and waste recovery 28 Strategic Report Our Technologies Kerry Group Annual Report 2022 ## Our Technologies ## Our Technology Strategy ### Breadth | Depth | Integration ### Our technology strategy is built ### onthreefoundations:breadthof ### technology capability, depth and ### expertise within each of these ### technologies, and the integration ### of these technology capabilities to ### deliver unique and value-added ### solutions for customers. ## Creating Value Through Value-add ## Integrated Solutions Integrated ## 22 Customer Core Solution technologies E C H N O L O G L T I E A S N E D I E N T S R G R F T E I N O X & R E M This enables us to create U L A T | | integrated technologies | S | | I O | | --- | --- | --- | --- | --- | | | | E I | | N | | 25 | | | Embedded in our | | | | specific to the needs of | G | | E | | | | O | | X | | | | L | Integrated | P | | | our customer and their | O | | E | | Process | | N | Technologies | R | T H S I end use markets. C E E technology T S S E C C platforms O O R P R E E T S H C E I G O L O N Thermal Agglomeration Processing Encapsulation Extrusion T E G R A T E D I N P R O C E S Spray S ## 1,100+ Reaction & T Drying E C Cooking H E N We combine this core Methods T Forming, S Enabled through our O A L Robing & Scientists T O technology expertise with Process Enrobing G Technologies Y our extensive process Distillation Baking technology expertise E including fermentation, N C B I O S C I E Pyrolysis Ultrafiltration distillation and extrusion. Enzymolysis Fermentation & Hydrolysis Texturants Proteins Probiotics & ## 33 Bioactives Modulation Lipids End use market Natural Our broad range of core technologies spans across Development and Extracts Broad Range of Enzymes both taste and nutrition. Core Technologies Application Centres Across Dairy Bio- Our extensive taste Our nutrition technologies across the globe Taste and Nutrition Flavours preservation technologies include include our broad our range of flavours, protein range, probiotics, Sweet modulation and enzymes, and range of Emulsifiers Flavours natural extracts. functional ingredients. Savoury Pharma Flavours Kerry’s technologies are sold as both single technologies and integrated solutions. Kerry Group Annual Report 2022 29 Each distinct customer challenge presents its ## How We Solve own opportunity to showcase and deploy the ## Our Customers’ breadth of Kerry’s technology portfolio and depth of applications expertise, as we strive ## Complex Challenges to be our customers’ most valued partner. ### 60% salt reduction in snack with no taste compromise Customer Challenge Kerry Solution NewWorldHealth Fermentation, modulation, Organisation(WHO)and application and sensory HFSS(HighFat,Saltand Developedtwonewproprietarykeys Sugar)regulations Reducedsodiumfrom Dramaticallyreduce >600mg to <250mg salt content Consumer and customer Maintain premium preferred taste taste profile ### Next generation natural preservation solution Customer Challenge Kerry Solution Regulatorychallenge– No-nitratenaturalsolution remove commonly used from vegetable sources preservation ingredient Fermentation-derived nitrate from ham Consumer friendly labelling Shelf life and food safety challenge Naturalflavouring Consistent premium taste Consumer and customer preferred taste and colour Maintain natural pink colour Maintain stability over shelf life ### Innovation at pace – de-stress fruit flavoured gummy Customer Challenge Kerry Solution ® Two day development Clinically-backed Sensoril target ® Tastesense masking Stress support claims Applications expertise GMO-free and clean label Speed to market using Masking off-notes with co-manufacturer enhanced flavour Strategic Report Our Markets30 KerryGroupAnnualReport2022 ## Our Markets ### The food and beverage market is highly ### dynamic. Consumer demands and trends are ### continually evolving, leading to an increased ### need for innovation support. Kerry’s unique ### capabilities help to solve our customers’ ### challenges and meet the demands of today ### and tomorrow’s consumer. ## Key Market Dynamics Premiumisation Customer of Taste Innovation Retail Foodservice Channel Channel Focus on Food Waste Outsourced Reduction Sustainability Personal Holistic Health Affordable Quality Within the retail channel, innovation has become far more The foodservice channel continues to move at an even collaborative, with an increased demand for outsourced faster pace than retail, given how that landscape has innovation. Consumers are looking for the latest premium evolved over the past number of years. Simplification taste profiles, while removing sugar, sodium and fat. and improvement of back-of-house operations is a focus, Improving the sustainability impact of products is an given more challenging labour markets. Larger chains important focus area for all companies, with food waste continue to gain market share. Foodservice operators reduction a key enabler. Consumers continue to favour continue to develop their menu offerings to retain their food and beverage as a means to fulfil their personal existing customer base and entice new customers, with holistic health needs, while the importance of affordability sustainability, and particularly food waste reduction has risen, but without any compromise on quality. increasing in importance. Kerry Group Annual Report 2022 31 The size of our market is approximately €80 billion and ## Value-Add Ingredients continues to expand, as customers continue to strive to meet ## and Solutions Market the ever-evolving needs of a growing and more demanding consumer base. We estimate the market has the potential to expand to between €90-€100 billion in the coming years. ### O p p o r ### r y t u ### s t n ### i t ### u y ### d ### n ### I Snacks Dairy & Dairy Beverage Alternatives ## Kerry’s ## €80bn ## Market Meat & Meat Meals Alternatives Bakery, Cereal & Confectionery Pharma ### y p p ### u o r t O ### p p o ### p p ### O 32 Strategic Report Our Strategy Kerry Group Annual Report 2022 ## Our Strategy ### Kerry focuses on the Food, Beverage and Our strategic framework includes the ### Pharma markets. Our strategic priorities key growth platforms of Authentic ### ofTaste,Nutrition,andEmerging Taste, Plant-based, Food Waste and ### Markets help ensure capital allocation Health & Bio-Pharma. ### decisions are aligned to strategy. Taste for Kerry is built on our 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. ### Taste Our Nutrition, Wellness & Functionality delivers benefits such as immunity support, digestive health, cleaner labels, and preservation. These benefits are achieved by leveraging our broad foundational technology platform which includes Proteins, Probiotics and Bioactives, Lipids, Enzymes, Bio-preservation and Pharma. ### Nutrition Our local knowledge and focus, combined with our global expertise and capabilities have been key to our excellent track record ## FOOD +BEVERAGE+PHARMA of growth in emerging markets. ### Emerging Our target is to achieve average annual ### Markets volume growth in emerging markets of 10%+. DairyIrelandisaleadingproviderofvalue-adddairy Dairy Ireland ingredients and consumer products, with a product portfolio including functional proteins and nutritional bases along with our well-loved chilled dairy consumer brands across Ireland and the UK. We will continue to grow by leveraging the full potential of our world class, dairy eco-system across added value dairy ingredients and our range of leading consumer foods dairy products. Kerry Group Annual Report 2022 33 Strategy in Action Key Achievements in 2022 Taste Very strong growth achieved in Snacks and Meat driven largely by performance of Kerry’s Taste technologies. ® Excellent growth in Kerry’s Tastesense salt reduction technologies. Successful launch of plant-based succulence, a nutritionally- optimised taste solution which mimics the real taste of fat. Nutrition Strong growth across our range of science-backed botanical extractsincludingtherecentlyacquiredNatreonbusiness. Successful launch of Puremul™ as a label-friendly non-GMO lecithin replacement.  Theacquisitionofc-LEctasignificantlyenhancedKerry’s biotechnology innovation capabilities. ®  KerryHealth&NutritionInstitute – launched the microbiome hub comprising leading insights and expert research. Emerging Markets  Excellentvolumegrowthof10.4%inemergingmarkets,drivenby very strong growth in the Middle East, Southeast Asia and LATAM, partiallyoffsetbychallenginglocalconditionsinChina.  OpenedtheKerryKualaLumpurandQuerétaroCentres,which host our Global Business Services teams and other key functions. Enhanced Kerry’s emerging markets capabilities with the acquisition of Almer and the opening of our Jeddah facility in Saudi Arabia. Strong progress in advancement of our foodservice model and strategy with strong double-digit growth. Strong organic growth as we passed through input cost inflation. Solid growth in dairy ingredients with category volumes in consumer products impacted by higher prices. Expanded plant-based range with launch of products under ‘Dairy Free Pure’ and ‘Plant Based Dairygold’ brands. Strategic Report Strategy & Targets34 KerryGroupAnnualReport2022 ## Strategy & Targets ### Kerry’s targets are aligned to our value ### creation framework, which is a combination ### of growth, return and sustainability. KerryGroupAnnualReport2022 35 ## Our Value Creation Framework ## Growth, Return and Sustainability FINANCIAL PERFORMANCE MEASURES ## Volume Growth EBITDA Margin ## 4-6% 18%+ Average Target by 2026 ## Growth ## Cash Return ## 80%+ 10-12% Cash Conversion ROACE ## Return ### Nutritional Food ### Carbon | | Reach | | | Waste | | --- | --- | --- | --- | --- | | Reach2billion | | 55% reduction | 50% reduction | | | people with | | in Scope 1 & 2 | in Food Waste | | | | sustainable | carbon emissions | | | ## Sustainability nutrition solutions Note1: FinancialTargetsarefortheperiod2022-2026 Note2: Volumegrowthtargetassumes2%abovemarketgrowthrates Note3: Sustainabilitytargetstobeachievedby2030.Carbonreductiontargetsinclude30%intensityreduction + inScope3emissionsby2030.FormoredetailonKerry’sscience-basedtargets,seeSustainabilityReview FinancialReview on pages52-73. Pages 40-46 Fulldefinitionscanbefoundonpages255-259. Strategic Report Why Kerry?36 KerryGroupAnnualReport2022 ## Why Kerry? ### AGlobalLeaderinTaste,NutritionandSustainability | 1. | 2. | 3. | | --- | --- | --- | | Strategically Positioned in | Kerry is a Truly | Strong Leadership Positions | | a Highly Attractive Industry | Unique Business | | We have strong leadership 1 | While the range of ingredient | We have an extensive global | positions | across all five dimensions | | --- | --- | --- | --- | | solutions we offer represents a small | network of over 23,000 talented | of our business model. In our End | | | percentage of the final product, | colleagues, who are driven to | Use Markets, we are a leading | | | they often deliver the key value-add | innovate and collaborate with our | | | solutions partner for Beverage and component or a driver of repeat customers to deliver food and a market leader in Meat and Meat purchase behaviour. beverage products that are better Alternatives, while Kerry’s Pharma for consumers, customers, and the Solutions are used in 6 of the top The market we serve is estimated planet. We have a strong science 10BlockbusterDrugs. at €80bn and is continuing to and technology background, with grow, as customers are looking for over 1,100 scientists and we are part We have leadership positions innovation partners to support them of a broad ecosystem that includes right across all food and beverage accelerators and universities. acrossourGlobal,Regionaland categories from Ideation to Launch, Local Customers. Within our to Impact. The combination of our people, Geographies, we are number one in science, technology and integrated Taste&NutritioninNorthAmerica, solutions capability enables and have a history of market leading us to solve the industry’s most growth in Emerging Markets. Our complex challenges with truly Technology leadership includes differentiated solutions. number one global positions in Authentic Savoury Taste Solutions for Meat and Snacks, Food Protection & Preservation, and Probiotics in ambient food and beverage applications. Within our Channels, we are a global leader in the foodservice channel and are a leading solutions partner for CPGs and own-brands. KerryGroupAnnualReport2022 37 ## 4. 5. Track Record of Value Creation Winning Growth Strategies 2 9.5%CAGRforrevenue The markets we focus on are food, beverage 2 12.6%CAGRfortradingprofit and pharma. Our strategic priorities of Taste, 2 11.9%CAGRforadjustedEPS Nutrition,andEmergingMarketshelpensure 2 13.7%CAGRonshareprice capital allocation decisions are aligned to 2 16.1%CAGRondividendpershare strategy. Our key growth platforms are 3 48%Absolutecarbonreduction Authentic Taste, Plant-based, Food Waste and Health & Bio-Pharma. 1 Leadership positions above are within the value-add ingredients and solutions market we serve. 2  CAGR=CompoundAverageGrowthRate(1986-2022) 3  Scope1+2reductionversusour2017baseyear. 38 Strategic Report Key Performance Indicators Kerry Group Annual Report 2022 Kerry’s value creation model is a combination of ## Key Performance growth, return and sustainability metrics, which have helped the Group achieve its strong track ## Indicators record of long-term shareholder return. ### GROWTH | Metric | Volume | EBITDA | | --- | --- | --- | | | Growth | Margin | | | +6.1% | (80bps) | Performance | 2022 | | 6.1% | | 2022 | | | €1,216m | | | 13.9% | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2021 | | | 8.0% | 2021 | | €1,077m | | | 14.7% | | | 2020 | (2.9%) | | | 2020 | €998m | | | 14.4% | | | | Commentary | Group volumes increased by 6.1%, which | EBITDAgrowthwasstrongintheyear,increasingfrom | ReturnonAverageCapital | Cash Conversion was 82% reflecting | | --- | --- | --- | --- | --- | | | represented a strong performance given | €1,077mto€1,216m,withEBITDAmargindecreasing | Employed(ROACE)fortheyear | a working capital investment partially | | | the significant level of pricing in the year | by 80bps due to the significant dilutive impact of | was 10.3% reflective of recent | offset by lower net capital expenditure | | | and the strong prior year comparatives. | passing through input cost inflation in prices. | portfolio developments. | due to the timing of projects. | | Strategic Importance / | Volume growth is an important metric as it | EBITDAmarginexpansionisakeymeasureof | ROACEisakeymeasureofthereturn | Cash conversion is an important metric | | | is a key driver of organic top-line business | profitability. It is a metric in the short-term incentive | the Group achieves on its investment | as it measures how much of the Group’s | Link to Remuneration improvement. It is a metric in the short-term plan and is a key driver of adjusted EPS growth on a in capital expenditure projects, adjusted earnings is converted into cash. incentive plan and is a key driver of adjusted constant currency basis, which is a metric for the acquisitions and other strategic It is a performance metric for the EPS growth, which is a metric for the long- long-term incentive plan. investments. It is a performance short-term incentive plan. term incentive plan. metric for the long-term incentive plan. Comparable Reportedrevenuegrowth: Operatingprofit: ThereisnoIFRSmeasure Netcashfromoperatingactivities: +19.3%(2021:+5.7%). (13.6%)(2021:+25.2%). comparabletoROACE. €721.8m(2021:€654.0m). IFRS measure For more information see the Supplementary Information section – Financial Definitions on pages 255-259. ### SUSTAINABILITY Metric Nutritional Reach ### 1.2 billion Performance | Commentary | NutritionalReachisameasureofthenumberofconsumers | Scope1&2CarbonReductionisa | Food waste reduction measures food | | --- | --- | --- | --- | | | we impact with positive and balanced nutritional solutions | measure of progress towards Kerry's | loss and waste across our operations, | | | as we strive to be Better for People. | environmental targets, as part of its | andalignswithUNSDG12andour | | | | Better for Planet ambition. | Better for Planet ambition. | | Strategic Importance / | As consumers seek healthier more sustainable diets, | At Kerry, we are addressing our | We are committed to halving food waste | | | Kerry is ideally placed to support customers in the | operational emissions as part of | across our operations and supporting | Link to Remuneration | development of products that deliver sustainable nutrition. | our total carbon footprint and are | our customers in reducing their food | | --- | --- | --- | | This is a sustainability performance metric within the | committedtoachievingNetZero | waste with sustainable solutions. This | | long-term incentive plan. | before 2050. This is a sustainability | is a sustainability performance metric | | | performance metric within the | within the long-term incentive plan. | long-term incentive plan. 2022 1.2 billion 2022 48% 2022 32% Furtherdefinitions,calculationsanddetailforthesearesetoutaboveandwithintheSustainabilityReviewonpages52-73. | 2022 | | 6.1% | | | | | | 2022 | | | | 10.3% | | | | 2022 | | | €640m | | | 82% | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | 2022 | | | | €1,216m | | | 13.9% | 2022 | | | 10.3% | | | | | | 2022 | | | €640m | | | 82% | | | | | | | | | 2021 | | 1.1 billion | | | | | | | | | | | | 2021 | | | | | 33% | | | | | | | | 2021 | | 17% | | 2021 | | | 8.0% | | | | | 2021 | | | | 10.5% | | | | 2021 | | | €566m | | 84% | | | | | | | | | | | | | | | | | | | | | 2021 | | | €1,077m | | | 14.7% | | 2021 | | | 10.5% | | | | | | 2021 | | €566m | | | 84% | | | | | | | | | | 2020 | 1.0 billion | | | | | | | | | | | | | 2020 | | | 18% | | | | | | | | | | 2020 | 15% | | | 2020 | (2.9%) | | | | | | | 2020 | | | | 10.4% | | | | 2020 | €412m | | | 67% | | | | | | | | | | | | | | | | | | | | | | 2020 | | €998m | | | 14.4% | | | 2020 | | | 10.4% | | | | | | 2020 | €412m | | | 67% | | | | | | Kerry Group Annual Report 2022 39 We use a number of financial and non-financial key performance indicators(KPIs)tomeasureperformanceacrossourbusiness. These KPIs help inform decision making, assist effective goal setting and track progress in achieving our strategic objectives. ## RETURN RETURN ### OUR VALUE | | Return on Average | | | | | | CREATION | | --- | --- | --- | --- | --- | --- | --- | --- | | Metric | | | Free Cash Flow | | | | | | | Capital Employed | | | Conversion | | FRAMEWORK | | | | | 10.3% | | | 82% | | | Performance | 2022 | 10.3% | 2022 | | €640m | | | 82% | | --- | --- | --- | --- | --- | --- | --- | --- | | 2021 | 10.5% | 2021 | | €566m | | 84% | | | 2020 | 10.4% | 2020 | €412m | | 67% | | | GROWTH RETURN | Commentary | Group volumes increased by 6.1%, which | EBITDAgrowthwasstrongintheyear,increasingfrom | ReturnonAverageCapital | Cash Conversion was 82% reflecting | | | --- | --- | --- | --- | --- | --- | | | represented a strong performance given | €1,077mto€1,216m,withEBITDAmargindecreasing | Employed(ROACE)fortheyear | a working capital investment partially | | | | the significant level of pricing in the year | by 80bps due to the significant dilutive impact of | was 10.3% reflective of recent | offset by lower net capital expenditure | | | | and the strong prior year comparatives. | passing through input cost inflation in prices. | | | SUSTAINABILITY | | | | | portfolio developments. | due to the timing of projects. | | | Strategic Importance / | Volume growth is an important metric as it | EBITDAmarginexpansionisakeymeasureof | ROACEisakeymeasureofthereturn | Cash conversion is an important metric | | | | is a key driver of organic top-line business | profitability. It is a metric in the short-term incentive | the Group achieves on its investment | as it measures how much of the Group’s | | Link to Remuneration improvement. It is a metric in the short-term plan and is a key driver of adjusted EPS growth on a in capital expenditure projects, adjusted earnings is converted into cash. incentive plan and is a key driver of adjusted constant currency basis, which is a metric for the acquisitions and other strategic It is a performance metric for the LONG-TERM EPS growth, which is a metric for the long- long-term incentive plan. investments. It is a performance short-term incentive plan. SHAREHOLDER term incentive plan. metric for the long-term incentive plan. RETURN Comparable Reportedrevenuegrowth: Operatingprofit: ThereisnoIFRSmeasure Netcashfromoperatingactivities: +19.3%(2021:+5.7%). (13.6%)(2021:+25.2%). comparabletoROACE. €721.8m(2021:€654.0m). IFRS measure | Metric | Carbon Reduction | | Reduction in Food Waste | | | | --- | --- | --- | --- | --- | --- | | | | 48% | | 32% | | | Performance | | | | | SHARE PRICE HISTORY | Totalshareholderreturn(TSR) for the year decreased by 25%, as global markets and share prices were impacted by a number of | Commentary | NutritionalReachisameasureofthenumberofconsumers | Scope1&2CarbonReductionisa | Food waste reduction measures food | macroeconomic developments. | | --- | --- | --- | --- | --- | | | we impact with positive and balanced nutritional solutions | measure of progress towards Kerry's | loss and waste across our operations, | Kerry’sTSRhasgrownata | | | as we strive to be Better for People. | environmental targets, as part of its | andalignswithUNSDG12andour | compound annual growth rate of | | | | Better for Planet ambition. | Better for Planet ambition. | 9% and 10% over the past 10 and | 20 years respectively. Strategic Importance / As consumers seek healthier more sustainable diets, At Kerry, we are addressing our We are committed to halving food waste Kerry is ideally placed to support customers in the operational emissions as part of across our operations and supporting TSRisanimportantindicatorofhow Link to Remuneration development of products that deliver sustainable nutrition. our total carbon footprint and are our customers in reducing their food successful the Group has been in This is a sustainability performance metric within the committedtoachievingNetZero €84 waste with sustainable solutions. This terms of shareholder value creation. long-term incentive plan. before 2050. This is a sustainability is a sustainability performance metric RelativeTSRisaperformancemetric performance metric within the within the long-term incentive plan. for the long term incentive plan. long-term incentive plan. €40 2022 1.2 billion 2022 1.2 billion 2022 48% 2022 2022 32% 48% 2022 32% €13 | | | | 2022 | | 6.1% | | | 2022 | 2022 | | | €1,216m | | 6.1% | 13.9% | | 2022 | 2022 | | | 10.3% | €1,216m | | | 13.9% | | | | | | | | 2022 | | | €640m | | | 82% | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2021 | | 1.1 billion | | | | | 2021 | | | | 1.1 billion | | | 2021 | | | | | 33% | | | | | | | | 2021 | 2021 | | 17% | | 33% | | | | | | | 2021 | | 17% | | | | | 2021 | | | 8.0% | | 2021 | 2021 | | €1,077m | | | 14.7% | 8.0% | | 2021 | 2021 | | | 10.5% €1,077m | | | 14.7% | | | | | | | | | 2021 | | €566m | | | 84% | | | | | 2020 | 1.0 billion | | | | | | 2020 | | | 1.0 billion | | | | 2020 | | 18% | | | | | | | | | | | 2020 | 2020 | 15% 18% | | | | | | | | | | 2020 | 15% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2002 | | | | | 20222012 | | | | | | | | | | | | | | | 2020 | (2.9%) | | | | 2020 | 2020 | €998m | (2.9%) | | 14.4% | | | | 2020 | 2020 | | €998m | 10.4% | | 14.4% | | | | | | | | | | 2020 | €412m | | | 67% | | | | | 2020 40 Strategic Report FinancialReview40 KerryGroupAnnualReport2022 ## Financial Review ### We delivered strong ### growth through a ### year of unprecedented ### macroeconomic ### challenges. Marguerite Larkin ChiefFinancialOfficer ### TheFinancialReviewprovidesanoverviewoftheGroup’sfinancial ### performancefortheyearended31December2022andtheGroup’s ### financial position at that date. 9.0 1250 500 1070 660 1200 640 The Key Financial Performance Indicators outlined below are used to track business and 1050 8.5 1150 operational performance and help the Group drive value creation. The Group has a good, 450 620 1100 long-termtrackrecordandadisciplinedfinancialapproachoftargetingcontinuedgrowth 600 1030 | 8.0 | 1050 | while meeting return on investment objectives. | 400 | | 580 | | --- | --- | --- | --- | --- | --- | | | 1000 | | | 1010 | 560 | | 7.5 | 950 | | 350 | | 540 | 990 900 Key Financial Metrics 520 7.0 850 300 500 970 800 480 6.5 750 250 950 460 ## Growth Return ### Revenue Adjusted ROACEEBITDA Free ### Volume Margin % EPS Growth Cash Flow ### Growth (ccy) Conversion ### +6.1% 13.9% +7.3% 10.3% 82% €1.2bn €8.8bn €640m 13.9% 10.5% €1.1bn 441c 10.3% 14.7% €7.4bn €566m 381c 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 Further detail is set out within the Key Performance Indicators section on pages 38-39 and within the Supplementary Informationsection-FinancialDefinitionsonpages255-259. Kerry Group Annual Report 2022 41 Growth Revenue Kerry Group +4.3% (9.8%) We delivered strong revenue growth in 2022 with reported revenue of €8.8bn +7.0% +19.3% up 19.3% from €7.4bn . This was driven €8,771.9m +11.7% primarily from volume growth of 6.1% (2021:8.0%)andsignificantpriceincrease of 11.7% (2021:1.2%)offsetbythedisposal +6.1% oftheMeatsandMealsbusinessinQ4 €7,350.6m 2021 and the exit of all Group activities inRussiaandBelarus. FY 2021 PriceVolume Acquisitions Disposals FY 2022Currency FY 202 8. 1.2 1. +1.8 3.5% 5.7 | RevenueintheTaste&Nutritionsegment | | | Taste & Nutrition | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | | +5.6% | (1.1%) | €7,416.6m | | increased by | 29.4% | from €5.7bn in 2021 | | | | | +8.4% to €7.4bn . Volume growth represented +8.7% 7.8% (2021:8.7%)andthisgrowthwas +7.8% broad-based across all three regions. €5,729.4m Price increases of 8.7% (2021:0.9%)reflect significantinputcostincreasesacross all three regions including energy, most notably in Europe. FY 2021 PriceVolume Acquisitions Disposals FY 2022Currency FY 2 2 8.7 0.9 2.8% 2.4 9.2 Kerry Group +4.3% (9.8%) +7.0% +19.3% Dairy Ireland +1.3% (37.6%) DairyIrelandrevenue,onareportedbasis, €8,771.9m +22.8% +11.7% | | decreased from €1.8bn in 2021 to | | €1.5bn | , | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | driven by the disposal of the Meats and | | | | €1,777.6m | | | (13.4%) | | 1.2 | 1.2 | 0.15 | | | | +0.1% | | | | | +6.1% Mealsbusiness.Revenuegrowthwas | | | | | | €1,538.9m | | | 1.0 | primarily driven by dairy market prices 1.0 | | | | | | | | €7,350.6m 0.12 reflecting 22.8% (2021:1.8%)ofprice 0.8 increases. Volume growth was modest 0.8 0.09 | | FY 2021 PriceVolume Acquisitions Disposals FY 2022Currency | at | 0.1% | (2021:6.2%). | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 0.6 | | 0.6 | | | | | | | | | FY 202 | 8. | | 1.2 | 1. 0.06 | +1.8 | 3.5% | 5.7 | FY 2021 PriceVolume Disposals FY 2022Currency | 0.4 | | 0.4 | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | FY 2 | 2 | 6.2 | +1.8 | 1.1 | (13.0% | 3.9% | | | Kerry Group | | 0.03 | +4.3% (9.8%) | | | | | | | | | | 0.2 | | 0.2 | | | +29.4% | | | | | | | | Taste & Nutrition | | | +7.0% | | | €7,416.6m | | --- | --- | --- | --- | --- | --- | | | | | +5.6% | (1.1%) | +19.3% | | 0.0 | 0.0 | +8.4% 0.00 | | | | €8,771.9m +11.7% +8.7% EBITDA & Margin % +7.8% +6.1% €5,729.4m GroupEBITDAincreased 12.9% from €7,350.6m €1.1bn to €1.2bn driven primarily by the strong volume performance in Taste & FY 2021 PriceVolume Acquisitions Disposals FY 2022Currency Nutrition.ReportedEBITDAmarginof FY 2021 PriceVolume Acquisitions Disposals FY 2022Currency | Kerry Group Taste & Nutrition Dairy Ireland | | | | | | | | | | 13.9% | (2021:14.7%)reflectsthepricing | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | FY 202 FY 2 | 2 | | 8. 8.7 | 1.2 0.9 | | 1. 2.8% | +1.8 2.4 | 3.5% | 5.7 9.2 | | | | | | | | | | | | | | | | impact on margin of | | 180bps | ,offsetby | | | | 13.9% | | | 16.5% | | | | | | | | | the overall, positive impacts of portfolio 14.7% | | €1.2bn | | €1.2bn | | development, operating leverage, mix | | --- | --- | --- | --- | --- | --- | | | | 17.7% | | +29.4% | | | €1.1bn | | | | | andefficiencies. | 7.7% €1.0bn 1 €0.14bn  PrioryearPro-FormaEBITDA&Margin comparativeforDairyIrelandexcluding disposed Meats and Meals business 1 6.3% 4.6% €0.07bn €0.07bn AcomprehensiveanalysisoftherevenueandtradingperformanceoftheTaste&NutritionandDairyIrelanddivisionsisincluded intheBusinessReviewsonpages47-51. 2021 2022 2021 2022 2021 20222021PF | + + + + + + + + + + + + + + + + + + + ( ( ( ( ( ( ( ( ( | 8%) 8%) 8%) 0% 0% 0% | 0 0 0 % % % % % % % % % % % % % % % % % % % % ) ) ) ) ) ) 1 1 1 1 1 1 ) | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | - - | | | | | | | | | | Taste & Nutrition | | | | | | | | +29.4% | | Dairy Ireland | | | | +1.3% | | (37.6%) | | | | | | | +22.8% | | +5.6% | | (1.1%) | €7,416.6m | +8.4% €1,777.6m +8.7% (13.4%) +0.1% +7.8% €1,538.9m €5,729.4m FY 2021 PriceVolume Acquisitions Disposals FY 2022Currency FY 2021 PriceVolume Disposals FY 2022Currency + + + + ( - FY 2 0 % % % % ) 1 2 8.7 0.9 2.8% 2.4 9.2 + + ( FY 2 0 % % % ) 1 ) 2 6.2 +1.8 1.1 (13.0% 3.9% Dairy Ireland +1.3% (37.6%) +22.8% €1,777.6m +0.1% (13.4%) €1,538.9m FY 2021 PriceVolume Disposals FY 2022Currency + + ( FY 2 0 % % % ) 1 ) 2 6.2 +1.8 1.1 (13.0% 3.9% 42 Strategic Report FinancialReview Kerry Group Annual Report 2022 Growth (continued) EBITDA & Margin % (continued) | | | % | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | | | change | | | €'m | | €'m | | | Revenue | +19.3% 8,771.9 | | | | 7,350.6 | | | | EBITDA | +12.9% 1,216.1 | | | | 1,077.0 | | | | EBITDA margin | | | 13.9% | | | 14.7% | | | Depreciation(net) | | | (221.6) | | (201.5) | | | | Computer software amortisation | | | (31.8) | | | (34.6) | | | Financecosts(net) | | | (66.2) | | | (69.9) | | | Share of joint ventures' results after taxation | | | | (0.4) | | | - | | Adjusted earnings before taxation | | | 896.1 | | | 771.0 | | | Incometaxes(excludingnon-tradingitems) | | | (114.5) | | | (96.2) | | | Adjusted earnings after taxation +15.8% | | | 781.6 | | | 674.8 | | | Brand related intangible asset amortisation | | | (50.9) | | | (46.2) | | | Non-tradingitems(netofrelatedtax) | | | (124.2) | | | 134.4 | | | Profit after taxation | | | 606.5 | | | 763.0 | | EPS cent EPS cent | Basic EPS (20.6%) | | 341.9 | 430.6 | | --- | --- | --- | --- | | Brand related intangible asset amortisation | | 28.7 | 26.0 | | Non-tradingitems(netofrelatedtax) | | 70.0 | (75.8) | | Adjusted EPS | +15.7% | 440.6 | 380.8 | | Impact of exchange rate translation | (8.4%) | | | | Adjusted EPS growth in constant currency | +7.3% | | | Computer Software Amortisation Computer software amortisation decreased by €2.8m to €31.8m(2021:€34.6m)reflectingthecompletionofthe KerryConnect programme and the disposal of the Meats and Meals business. Brand Related Intangible Asset Amortisation Brand related intangible asset amortisation increased to €50.9m(2021:€46.2m)whichisreflectiveofrecent acquisition activity. Finance Costs (net) Financecosts(net)fortheyeardecreasedby€3.7m to €66.2m(2021:€69.9m)primarilyduetodepositinterest earnedoncashatbank.TheGroup'saveragecostoffinancefortheyearwas2.3%(2021:2.7%). Taxation The tax charge for the year before non-trading items was €114.5m(2021:€96.2m)representinganeffectivetaxrate of 13.5%(2021:13.3%)andreflectiveofthegeographicalmixofearnings. Non-Trading Items Duringtheyear,theGroupincurredanon-tradingchargeof €124.2m (2021:€134.4mcredit)netoftax.Thechargein theyearprimarilyrelatedtotheimpairmentoftheGroup’sRussiaandBelarusassetsandthepreviouslyannounced AccelerateOperationalExcellencetransformationprogramme,whichpredominantlyreflectsconsultancyfees,project management costs and costs of streamlining operations while we work to enhance our continuous improvement in manufacturing processes and deliver step change manufacturing excellence across the organisation. The credit in theprioryearprimarilyrelatedtothegainonthedisposaloftheMeatsandMealsbusiness,partiallyoffsetbycosts related to acquisition integration. Foreign Exchange Groupresultsareimpactedbyyear-on-yearfluctuationsinexchangeratesversustheeuro.Theprimaryratesdriving thecurrencyimpactinthefiguresabovewereUSDandGBPwhichhadaverageratesof1.05(2021:1.19)and0.85 (2021:0.86)respectively. Kerry Group Annual Report 2022 43 Return Capital Employed | | | 2022 | H1 2022 | | | 2021 | | H1 2021 | | | | 2020 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | €’m | | €’m | | €’m | | | | €’m | | €’m | | Total capital employed | 8,439.3 | | 8,545.0 7,725.3 6,943.7 6,600.6 | | | | | | | | | | | Average capital employed | 8,236.5 | | | | 7,089.9 | | | | | | | | | | | | | | | | 2022 | | | | | 2021 | | | | | | | | | | | | €'m | | €'m | | Adjustedprofit | | | | | | | | | 847.7 | | | 744.7 | | Average capital employed | | | | | | | | 8,236.5 | | | 7,089.9 | | | Return on average capital employed | | | | | | | | | 10.3% | | | 10.5% | FurtherdetailissetoutwithintheSupplementaryInformationsection-FinancialDefinitionsonpages255-259. ThemovementinROACEisprimarilyduetothetimingofacquisitionsanddivestmentsandthetranslationimpacton underlying assets. Free Cash Flow In2022,theGroupachievedfreecashflowof €640.4m(2021:€566.1m)reflecting82%cashconversionintheyear. Free Cash Flow 2022 2021 €’m €’m EBITDA 1,216.1 1,077.0 Movement in average working capital (201.4) (37.7) Pension contributions paid less pension expense (15.7) (14.7) Financecostspaid(net) (62.0) (71.3) Income taxes paid (80.0) (72.0) Purchase of non-current assets (254.7) (334.6) Sales proceeds on disposal of non-current assets 38.1 19.4 Free cash flow 640.4 566.1 Cash conversion¹ 82% 84% 1  Cashconversionisfreecashflowexpressedasapercentageofadjustedearningsaftertaxation.  ### 1800 Theaverageworkingcapitalinvestmentissignificant,primarilyduetotheunprecedentedlevelsofinflationand ### 1600 volumegrowth.Thisisfurtherreflectedintheoverallyearonyearinvestmentinworkingcapitalof€224mfrom ### 1400 December2021toDecember2022.TheGrouphadlowercapitalexpenditureintheyearduetotimingofprojectsand 1200 theconclusionofanumberofsignificantinvestmentsin2021includingtherolloutofKerryConnectinNorthAmerica. ### 1000 ### 800 Maturity Profile of 2022 Total Net Debt ### 600 ### 400 Total Net Debt = €2,217m ### 200 ### 0 ### -200 ### -400 ### -600 ### -800 €1,492m €985m €17m (€277m) The weighted average maturity of net debt in years is 4.6. The weighted average maturity excluding the 2023 Bond repayable in April 2023 is 5.8 years. Between 1 and 2 years Between 2 and 5 years Over 5 years Within 1 year 44 Strategic Report FinancialReview Kerry Group Annual Report 2022 Return (continued) Key Financial Ratios TheGroup'sbalancesheetisinastrongposition.WithaNetdebttoEBITDAratioof1.8 times, the Group has sufficientheadroomtosupportfuturegrowthplans. 2022 2021 NetdebtEBITDA 1.8 2.0 EBITDA:Netinterest 18.1 14.9 Total Net Debt Total net debt at the end of the year was €2,217.4m(2021:€2,124.1m).Theincreaseduringtheyearisanalysedin thetablebelow: | Movement in Total Net Debt 2022 | | | | | 2021 | | --- | --- | --- | --- | --- | --- | | | | €'m | | | €'m | | Free cash flow | | 640.4 | | | 566.1 | | Acquisitions(netofdisposals)includingpaymentsrelatingtopreviousacquisitions | (391.2) | | | (344.0) | | | Purchaseoffinancialassetinvestments | | (10.4) | | | (4.4) | | Differencebetweenaverageworkingcapitalandyearendworkingcapital | | (22.6) | | (146.6) | | | Share of results from joint ventures | | | - | | (3.9) | | Non-tradingitems | | (85.4) | | | (76.1) | | Dividendspaid | (173.6) | | | (157.5) | | | Exchange translation adjustment | | (27.2) | | | (0.7) | | Increaseinnetdebtresultingfromcashflows | | (70.0) | | (167.1) | | | Fair value movement on interest rate swaps | | 1.4 | | | (0.1) | | Exchange translation adjustment on net debt | | (29.7) | | | (19.1) | | Increase in net debt in the year | | (98.3) | | (186.3) | | | Netdebtatbeginningofyear | (2,049.9) | | | (1,863.6) | | | Net debt at the end of year - pre-lease liabilities | (2,148.2) | | | (2,049.9) | | | Lease liabilities | | (69.2) | | | (74.2) | | Total net debt at the end of year | (2,217.4) | | | (2,124.1) | | The exchange translation adjustment of €29.7m results primarily from borrowings denominated in US dollar translated at a year end rate of $1.07 versus a rate of $1.13 in 2021. Financing Undrawn committed facilities at the end of the year were €1,100m(2021:€1,100m)whileundrawnstandbyfacilities were €343.0m (2021:€337.0m). FulldetailsoftheGroup'sfinancialliabilities,cashatbankandinhandandcreditfacilitiesaredisclosedinnotes 23and24totheConsolidatedFinancialStatements.Ofthecashatbankandinhandatyearend, €70.7m (2021: €100.0m)wasonshorttermdepositunderaSustainableDepositsprogramme. Kerry Group Annual Report 2022 45 Sustainability-Linked Bond Progress Report In2021,Kerryissueda€750million,tenyearSustainability-LinkedBond(SLB)alignedwiththeSustainability-Linked BondPrinciples(SLBPs)administeredbytheInternationalCapitalMarketsAssociation.Thebondhasasustainability- linked feature that could result in an interest coupon step-up if certain KPI targets are not met, as outlined below, byDecember2030. TheKPIsthathavebeenincludedintheSLBhavebeenselectedastheyreflectmaterialenvironmentalsustainability challenges for our industry and key focus areas under our Beyond the Horizon sustainability strategy. These KPIs andtargetsareasfollows: KPI1:55%AbsolutereductioninScope1&2greenhousegasemissions KPI2:50%Foodwastereductionacrossouroperations 2022 Performance In2022,wemadecontinued,strongprogressagainstbothtargets,deliveringa48%(2021:33%)reductioninourabsolute Scope1&2emissionsanda32%(2021:17%)reductioninourfoodwastevolumes,versusa2017baselineforbothKPIs. | | | | | | 1 | | | | 1 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Emissions (CO | 2 e) 2022 2017 | | | | | Food Waste 2022 2017 | | | | | Scope1&2(Tonnes) | | 486,146 | | 938,001 Tonnes | | | 9,636 | 14,097 | | | % change | | | 48% | | | % change | 32% | | | 1  The2017KPIbaselinehasbeenadjustedinaccordancewithourNovember2021Sustainability-LinkedBondFrameworkRecalculation Policy, to take into account structural changes including acquisitions and divestitures. Formoredetailsonourprogressinreducingemissionsandfoodwaste,seeourSustainabilityReviewonpage52and alsoour2022SustainabilityReportatkerry.com. Financial Risk Management WithintheGroupriskmanagementframeworkasdescribedintheRiskManagementReportonpage95,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94-105andinnote24totheConsolidatedFinancialStatements. Dividend and Annual General Meeting Duringtheyear,theGrouppaidaninterimdividendof31.4centperAordinaryshare,whichwasanincreaseof 10.2%.TheBoardhasproposedafinaldividendof73.4centperAordinaryshare,payableon12May2023to shareholdersregisteredontherecorddateof14April2023.Whencombinedwiththeinterimdividend,thetotal dividendfortheyearamountsto104.8centpershare(2021:95.2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 35 years as a listed company, the Group has grown its dividend at a compound rate of 16.1%. Kerry's Annual General Meeting is scheduled to take place on 27 April 2023. 46**Strategic Report**^{}[] Financial Review Kerry Group Annual Report 2022 ## A strong history of positive results | | 2013 €m | 2014 €m | 2015 €m | 2016 €m | 2017 €m | 2018 €m | 2019 €m | 2020 €m | 2021 €m | 2022 €m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | **Revenue** | 5,836.7 | 5,756.6 | 6,104.9 | 6,130.6 | 6,407.9 | 6,607.6 | 7,241.3 | 6,953.4 | 7,350.6 | 8,771.9 | | **EBITDA*** | 720.3 | 739.9 | 823.6 | 878.8 | 915.2 | 939.7 | 1,094.1 | 997.9 | 1,077.0 | 1,216.1 | | Depreciation (net)* | (108.9) | (103.5) | (123.5) | (129.2) | (133.9) | (134.1) | (191.4) | (200.7) | (201.5) | (221.6) | | Computer software amortisation | (11.5) | (13.6) | (18.7) | (23.4) | (24.3) | (25.0) | (26.5) | (28.4) | (34.6) | (31.8) | | Finance costs (net) | (67.6) | (52.9) | (69.3) | (70.4) | (65.6) | (67.0) | (81.6) | (72.4) | (69.9) | (66.2) | | Share of joint ventures' results after taxation | - | - | - | - | - | - | - | - | - | (0.4) | | **Adjusted earnings before taxation**** | 532.3 | 569.9 | 612.1 | 655.8 | 691.4 | 713.6 | 794.6 | 696.4 | 771.0 | 896.1 | | Income taxes (excluding non-trading items) | (79.1) | (79.6) | (81.1) | (86.7) | (89.5) | (89.2) | (98.6) | (85.1) | (96.2) | (114.5) | | **Adjusted earnings after taxation**** | 453.2 | 490.3 | 531.0 | 569.1 | 601.9 | 624.4 | 696.0 | 611.3 | 674.8 | 781.6 | | Brand related intangible asset amortisation | (16.6) | (14.4) | (18.7) | (23.0) | (23.6) | (28.8) | (37.8) | (41.7) | (46.2) | (50.9) | | Non-trading items (net of related tax) | (352.2) | 4.0 | 13.1 | (13.0) | 10.2 | (55.1) | (91.7) | (15.5) | 134.4 | (124.2) | | **Profit after taxation** | 84.4 | 479.9 | 525.4 | 533.1 | 588.5 | 540.5 | 566.5 | 554.1 | 763.0 | 606.5 | | Non-controlling interests | - | - | - | - | - | - | - | - | - | (0.1) | | **Profit after taxation attributable to equity holders of the parent** | 84.4 | 479.9 | 525.4 | 533.1 | 588.5 | 540.5 | 566.5 | 554.1 | 763.0 | 606.4 | | **Adjusted EPS (cent)**** | 257.9 | 278.9 | 301.9 | 323.4 | 341.2 | 353.4 | 393.7 | 345.4 | 380.8 | 440.6 | \* Following the adoption of IFRS 16, depreciation on right-of-use assets is recorded for the financial years 2019 to 2022. Comparatives from prior financial years have not been represented in line with this. \*\* 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 257. KerryGroupAnnualReport2022 47 ## Business Review ## TASTE&NUTRITION | Revenue | EBITDA | | --- | --- | | €7.4bn | €1.2bn | | Volume Growth | EBITDA Margin | | +7.8% | 16.5% | 48 Strategic Report BusinessReview KerryGroupAnnualReport2022 ## Taste & Nutrition Very strong growth across our Food and Beverage EUMs Retail channel volume growth of 5.5% with foodservice growth of 14.0% Pricing of 8.7% reflected the strong management of input cost inflation EBITDA increased by 20.4% to €1.2bn, with overall margin reduction resulting from the effect of passing through input cost inflation Taste&Nutritionreportedrevenueincreasedby 29.4%to€7.4billionintheyear. Very strong volume growth was achieved through the year across all regions, despite the backdrop of managing significant price increases and supply chain constraints. This volume growth was supported by strong performances in Kerry’s authentic taste technologies across botanicals, natural extracts and ® Tastesense salt and sugar reduction, while Kerry’s range of food waste reduction technologies continued to perform well. The retail channel delivered strong growth with customers targeting innovation around new taste experiences, relative value options, improved nutrition and food waste reduction. Kerry’s foodservice channel delivered very strong growth through seasonal products and limited time offerings, combined with continued co-development on back-of- house efficiencies. Business volumes in emerging markets increased by 10.4%intheyear,asverystronggrowthintheMiddle East, Southeast Asia and LATAM were partially offset by challenging conditions in China. ## Excellent growth across ## our end use markets, ## regions and channels. EXPANDING MORIZONS Kerry Group Annual Report 2022 49 # Americas Region - → Volume growth of 8.4% - → Growth led by Meat, Beverage and Bakery - → Very strong growth across both retail and foodservice channels - → LATAM delivered excellent growth Revenue in the region increased by 33.0% to €4.2 billion in the year. This reflected volume growth of 8.4%, increased pricing of 7.4%, favourable transaction currency of 0.1% and favourable translation currency of 12.5%, with a contribution from acquisitions of 4.6%. Growth in North America remained strong across both retail and foodservice channels through the year. This was led by an excellent performance in Meat and Meat Alternatives across food preservation, culinary taste, texture systems and clean-smoke technologies. Performance in the Beverage EUM continued to be strong, driven by new innovations incorporating Kerry's authentic natural taste, coffee extract and Tastesense® sugar reduction technologies. Good performance was achieved in Bakery through increased demand for functional solutions and texture systems, while Snacks continued to deliver strong growth with category leaders. Growth in foodservice remained strong due to seasonal and promotional menu offerings, as well as new launches enhancing back-of-house efficiency for customers across both food and beverage applications. LATAM delivered excellent growth across the year led by Mexico and Brazil. Volume growth in Mexico was strong across Beverage and Snacks, supported by wins in authentic taste, while volumes in Brazil were driven by performance in Meals and Meat. Within the global Pharma EUM, volumes in excipients were lower in the year due to supply chain constraints. During the year, the Group acquired the B2B powdered cheese business and related assets of the Kraft Heinz Company based in the US, enhancing Kerry's scale, manufacturing capability and customer base in the snacking category. # Europe Region - → Volume growth of 6.2% - → Snacks, Dairy and Meals delivered strongest growth - → Growth led by foodservice while retail performed well Revenue in the region increased by 25.1% to €1.5 billion in the year. This reflected volume growth of 6.2%, increased pricing of 13.9%, favourable transaction currency of 0.2% and translation currency of 2.1%, with a contribution from acquisitions net of disposals of 2.7%. Growth in the year was particularly strong given the economic backdrop in the region. The Snacks EUM delivered strong growth through savoury taste launches and Kerry's Tastesense® salt reduction technology portfolio, given increased customer focus on enhancing product nutritional profiles. Growth in Dairy was supported by new innovations in ice-cream and dairy alternative launches in the foodservice channel, while Meals continued to achieve good growth through taste systems and functional solutions. Performance in the foodservice channel was supported by continued innovation with quick service restaurants on new menu development and seasonal products. Growth across the region was strongest in Central and Southern Europe, while the UK and Ireland had a very strong finish to the year. Performance in Eastern Europe was impacted by the ongoing war in the region. During the year, the Group divested its operations in Russia and Belarus, while further investing in its biotechnology capabilities with the acquisition of c-LEcta, which is a leading biotechnology innovation company based in Leipzig, Germany. ![img-3.jpeg](img-3.jpeg) 50 Strategic Report BusinessReview50 Strategic Report BusinessReview KerryGroupAnnualReport2022 ## APMEA ## Region Volume growth of 8.1% Growth led by Snacks, Meat and Bakery Middle East and Southeast Asia achieved excellent growth Revenueintheregionincreasedby26.8%to€1.7 billion in the year. This reflected volume growth of 8.1%, increased pricing of 7.1%, favourable transaction currency of 0.2% and translation currency of4.5%,withacontributionfromacquisitionsof6.9%. Growth in the region was primarily driven by very strong performances in the Middle East and Southeast Asia, partially offset by performance in China,whichwasimpactedbylocalisedCOVID-19 related restrictions across the course of the year. Overall growth was strong across all end use markets and channels. Snacks achieved very strong growth driven by local authentic taste innovations with regional leaders. Growth in Meat was led by savoury taste and smoke innovations, particularly in the foodservice channel, while growth in Bakery was supported by texture solutions and increased demand for preservation systems. The Group continued to enhance its local presence in the region through the acquisition of Almer in Malaysia and its continued footprint expansion in the Middle East, which has become an important contributor to growth in the region. KerryGroupAnnualReport2022 51 ## Business Review Business Review ## DAIRYIRELAND DAIRYIRELAND Overall volume growth of 0.2%¹ against ## Revenue very strong prior year comparatives Pricing of 36.0%¹ reflected significant increases ## €1.5bn in dairy prices and other input costs EBITDA margin reduction resulting from the effect of passing through input cost inflation Volume Growth DairyIrelandreportedrevenueintheyearwas€1.5billion, ## +0.2%¹ which represented an increase of 37.1% on a pro-forma basis, driven primarily by increased pricing. Overall reported revenuedecreasedby13.4%,asincreasedpricingwasmore thanoffsetbytheimpactoftheMeatsandMealsbusiness ## EBITDA disposal in the prior year. OverallvolumesinDairyIrelandweresimilartotheprioryear, ## €71m withtheheightenedinflationarycostenvironmentresultingin significantpriceincreasesacrossthebusiness. EBITDA Margin WithinDairyConsumerProducts,overallcategoryvolumesin theyearwerelower,reflectiveofsignificantpriceincreasesand ## 4.6% strong prior year comparatives. Within the spreads category, good performance was achieved across Kerry’s customer- branded ranges, while cheese snacking volumes were impacted by reduced promotional activity across the year. DairyIngredientsdeliveredvolumegrowth,whileprices remainedsignificantlyhigherasaresultofconstrainedglobal supply dynamics. 1 Pro-forma performance of represented segmental structure excluding the Consumer Foods Meats and Meals business disposal Strategic Report SustainabilityReview52 KerryGroupAnnualReport2022 ## Sustainability Review ## Beyond the Horizon ### The complex challenge of ### providing adequate nutrition ### for a growing, global population ### while reducing negative ### environmental and social ### impacts is among the most ### urgent issues for our industry. ### At Kerry, our Beyond the Horizon strategy creates ## What Guides Us ### a framework for addressing this challenge as we ### partner with customers to create healthier, great Our commitment to sustainability ### tasting and more sustainable products for more informs how we run our business. TheGroup’sBoardofDirectorsgovern ### than a billion people worldwide. our Beyond the Horizon strategy, which considers the views of internal and By focusing on how we impact People, Society and the Planet, our external stakeholders, emerging sustainability commitments guide how we source our materials, insights on sustainability, and how we innovate and create and how we produce customer various frameworks and best practice solutions that inspire food and nourish life. Core to this strategy approaches through which we create is our ambition to reach over two billion people with sustainable tangible goals, targets and the pipeline nutrition solutions by 2030, creating products and solutions that and processes to achieve these. maintain good health, while protecting people and the planet. Sustainable Development Goals TheUnitedNationsSustainable Our 2030 goal is to reach DevelopmentGoals(SDGs)providea over two billion people with global framework to unite governments, solutions that maintain good health while protecting business and communities on a people and the planet. common pathway towards more Sustainable sustainable development by 2030. Nutrition Challenges including a global pandemic, a changing economic environment and We co-create products an increasingly polarised political Better for that deliver better nutrition landscape have hampered progress, People for consumers with no requiring all stakeholders to intensify compromise on taste. effortstoensurethatthisvisionis Better for achieved by 2030. We are committed to doing Society business with integrity and | | seek to enhance the lives | The food system has a critical role to | | --- | --- | --- | | Better for | of all those with whom | playinrealisingtheSDGsand12ofthe | | Planet | we engage. | 17 goals contain indicators that are | 1 highly relevant to nutrition . Kerry’s We are reducing our integrated solutions capabilities, environmental footprint and innovation expertise and sustainability enabling our customers to commitments mean we are best placed lower their product impacts in tomakethemostsignificantcontribution areas like carbon and waste. to goals 2, 3 and 12. Kerry Group Annual Report 2022 53 Supporting the UN Sustainable Development Goals Goal 2: Goal 3: Goal 12: ZeroHunger Good Health & Well-being ResponsibleConsumption and Production Kerry helps people access sufficient Kerry supports good health and Kerry uses natural resources amounts of the right nutrition in a well-being and helps reduce the responsibly and enables our customers cost-effective way while working with risk of mortality through the co- to consume and produce more producers to sustainably intensify creation of products that improve sustainably through our innovation production and improve livelihoods. consumerdiets. expertise and technology portfolio. SDG Target Area Kerry’s Role Impact Examples TM 2.1 Wecreatecosteffectivenutrition Kerry's Puremul is an innovative Goal 2: Access to safe, solutions to ensure all consumers solutiontoreplacesunflower ZeroHunger nutritious and can access products which are safe, lecithinandovercomesunflower sufficientfood nutritious and 'better-for-you'. supply issues and associated cost challenges. | 2.2 | Our portfolio inspires the creation | Over 80% of Kerry’s portfolio | | --- | --- | --- | | Ending all forms | of healthy foods, beverages and | contributes to positive and | | of malnutrition | supplements that address the most | balanced nutrition solutions. | common consumer health needs. | 2.4 | Working with suppliers, we support | Kerry’s Evolve Dairy Programme | | --- | --- | --- | | Sustainable | the adoption of agricultural practices | incentivises close to 3,000 dairy | | production | that increase resilience, productivity | farmers to reduce emissions and | | systems | and help maintain ecosystems. | adopt more sustainable farm | practices. 3.4 We work with our customers to enhance Kerry reached 1.2 billion people Goal 3: Reducepremature thenutritionalprofileofconsumer with positive and balanced Good Health & mortality from products and help them to move along nutrition solutions in 2022. Well-being non-communicable the sustainable nutrition spectrum. diseases Formoreseepage57. 12.3 We are targeting a 50% reduction in Kerry reduced food waste from Goal 12: Halve global food waste from operations by 2030 and operations by 32% and extended Responsible food waste our food protection and preservation the shelf life of 52 billion meat Consumption ingredientscanplayasignificantroleto servings in 2022. & Production address downstream losses. | 12.5 | Our innovation and process expertise | Kerry has initiated a number of | | --- | --- | --- | | Reducewaste | helps to prevent food waste, recovering | projects in this area, for example, | | generation | by-products for ‘upcycling’ into raw | working with Upcycled Foods Inc. | | | materialsand/orfinishedproducts. | to launch a protein crisp developed | using spent brewing grains. 1 Linking nutrition and the SDGs | Scaling Up Nutrition 54 Strategic Report Sustainability Review Kerry Group Annual Report 2022 Stakeholder Groups Listening to our Stakeholders The systemic nature of the challenges facing our industry and the scale of transformation required means that we must continuously evolve our approach. We believe ongoing and inclusive stakeholder engagement is the best way to address this. We are in dialogue with expert partners, industry bodies, academic institutions and local groups as well as employees, customers and consumers, shareholders, suppliers, communities andgovernment.Formoreonouridentificationand approach to stakeholder engagement, see our 2022 SustainabilityReportonkerry.comandtheCorporate GovernanceReportonpages122-125. Identifying Areas of Impact Given the scale and complexity of challenges relating to sustainability, it is vital that we identify the most material impact areas for our business and prioritise Shareholders oureffortsaccordingly.Kerry’smaterialtopicsare definedthroughacomprehensivereviewinvolving detailed research and broad-based engagement of our internal and external stakeholders. In our most recent assessment in late 2021, we integrated the principle of dynamic materiality within the assessment process. Our assessment of outward impactusestheUNSDGsasaguidingframework andthroughexpertstakeholderinput,wedefined key areas where Kerry can have the greatest environmentalandsocio-economicinfluence. ## INDUSTRY ## RECOGNITION ## INROME Kerry’sfacilityinRome, Georgia, USA was the winner of Food Engineering magazine’s 2022 Sustainable Project of the Year. The facility recently underwent a $125 million renovation and expansion while continuing production safely and achieving sustainability goals. The Romefacilityachievedits 100% renewable electricity goal and utilised an energy-efficientdesign to align with the Group’s sustainability objectives. Kerry Group Annual Report 2022 55 Theoutputsofourmaterialityassessmentarereflected These material topics are reviewed as part of the in the matrix below. In 2022, we kept these topics broader risk assessment process and further details under internal review, seeing increasing engagement ontheGroup’sprincipalrisksareoutlinedintheRisk ontopicssuchas‘Transparency & Reporting’,‘Biodiversity ManagementReportonpages98-104.Formoreon Protection’and‘Global Events & Geopolitical Context’ materialityseeour2022SustainabilityReport. throughout the year. Materiality Matrix Better for People Better for Society Better for Planet Other (ScaledenotesKerry'spotentialimpact) Higher Climate Action & Net Zero Strategy Product Safety HumanRights & Quality Responsible Sourcing & Nutrition & Health Regenerative Food Loss Sustainable Innovation Agriculture & Waste Water Stewardship Biodiversity Clean & Efficient Energy Use Protection Sustainable Packaging Sustainable Business Model Transparency Business Ethics Waste & Affordable & Accessible Nutrition &Reporting & Integrity Circular Diversity, Economy Inclusion Animal & Belonging Welfare Global Events & Geopolitical Sustainable ESGRegulatory& Context ResponsibleInvestment Advocacy & Socio-Economic Policy Landscape Partnerships Prosperity Employee Health, & Wellbeing Responsible Consumer Behaviour Marketing & & Brand Activism Nourishing Communications Communities Digital & Increasing Impact on Stakeholders Technology EmployeeRetention Innovation & Development Increasing Impact on Kerry Group Higher ### External Recognition AtKerry,weareproudtohaveoursustainabilityeffortsacknowledgedbycredibleindependentassessment. | FTSE4GOOD: | MSCI: | Origin Green: | | --- | --- | --- | | Kerry is a constituent of the | Kerry has maintained the | Kerry is proud to be among | | FTSE4GOOD,whichmeasures | leadingMSCIESGRating | the gold members of this world- | | the performance of companies | of AAA for its performance | leading programme, recognising | | demonstrating strong | on Environmental, Social | companies who are performing | | Environmental, Social and | and Governance issues in 2022. | at a high level or excelling in their | | Governance(ESG)practices. | | sustainability performance. | ### Assurance: KPI Definitions and Scope: ManyofthemetricsinthisSustainabilityReview,includingourprogress Fordetailsofdefinition,scope towardsourNutritionalReachGoalareindependentlyassuredbyJacobs and calculation methodologies of UK Ltd to AA1000 Assurance Standard. The full assurance statement can sustainability KPIs, see our 2022 be found at kerry.com/sustainability. SustainabilityReportatkerry.com. 56 Strategic Report SustainabilityReview KerryGroupAnnualReport2022 ## Better for People ### Our goal is to provide sustainable nutrition solutions ### for over two billion people by 2030. ### Healthy and affordable diets are out of reach for more ### thanonethirdoftheglobalpopulation.In2022,theUN ### FoodandAgricultureOrganisation(FAO)reportedthat ### 3.1 billion people did not have access to safe, affordable 1 ### and nutritious food . Malnutrition spans a range of ### nutritional inadequacies from chronic hunger, protein ### and micronutrient deficiencies to obesity. Good Health and Wellbeing Consumers are increasingly mindful of the link between diet and health, and theywanttomakechoicesthatreflectthis.Wecanhelpbyensuringhealthier food and beverage options are available. For instance, poor quality diets highinsaturatedfat,sodiumandsugar(HFSS)canleadtodiseasessuchas cardiovasculardiseaseandtype2diabetes,whichaccountforonefifthof 2 all adult deaths each year . Many governments worldwide are introducing legislation to encourage healthier diets, including a ban on marketing of HFSS foods and the introduction of easy-to-read, front of pack nutrition labelling. Effortssuchastheseareinfluencingthefoodindustrytocreatehealthier products that still taste great. Helping our customers unlock new formulations to achieve this is a key way in which we can contribute to achieving the UNSustainableDevelopmentGoal3‘GoodHealthandWellbeing.’ Kerry Group Annual Report 2022 57 Creating a World of Sustainable Nutrition Kerrydefinessustainablenutritionastheabilityto ## provide positive and balanced nutrition solutions that CONSUMER help maintain good health while protecting people and the planet. ## DEMANDFOR Through our innovation expertise, portfolio of ## WELLBEING integrated taste and nutrition solutions and sustainability commitments, we partner with our customers to create sustainable products for consumers worldwide. Nutritionalconcernsforourcustomersandtheir With the acquisition of botanical consumersarereflectedonKerry’sSustainableNutrition extractcompanyNatreonin2022,we ® Spectrum below. added Sensoril ashwagandha to our portfolio. The ashwagandha plant was These concerns range from food safety and security, clean valued in ancient Ayurvedic medicine label, positive and balanced nutrition, proactive nutrition foritswellnessbenefits.Today,studies and an increasing focus on personalised nutrition. There show it can reduce stress and improve ® is also growing awareness around the environmental sleep. Sensoril is unique because it is and social impact of food and so the way in which food is made from ashwagandha leaves and produced must also be a key consideration. roots,whichsciencesuggestsoffer optimalhealthbenefits. We enable our customers to move along the sustainable nutrition spectrum, co-creating products that deliver better nutrition for consumers with no compromise on taste. Our application expertise and delivery systems allow us to bring authentic tasting, convenient and familiar food to the consumer, increasing the availability ofnutritiousoptionswithpositivehealthbenefits.Our environmental and social commitments also allow for these better-for-you products to be produced in a more sustainable way. For examples of how we support our customers, see page 61. 1  FAO,IFAD,UNICEF,WFPandWHO.2022.InBrieftoTheStateofFoodSecurityandNutritionintheWorld2022.Repurposing foodandagriculturalpoliciestomakehealthydietsmoreaffordable.Rome,FAO.https://doi.org/10.4060/cc0640en 2  GBD2017DietCollaborators.Healtheffectsofdietaryrisksin195countries,1990–2017:asystematicanalysisfortheGlobal BurdenofDiseaseStudy2017.TheLancet,April3,2019;DOI:10.1016/S0140-6736(19)30041-8 58 Strategic Report Sustainability Review Kerry Group Annual Report 2022 Changing Consumer Measuring our Impact Expectations Establishingcleardefinitions ## Health & and metrics to track the impact Throughout the year we saw of our products is essential. further evidence of increasing ## Bio-Pharma Our industry-leading nutrition consumer support for sustainable | | 1 | | profilingmethodologyassesses | | --- | --- | --- | --- | | product choices | . These studies | | | | | | Kerry’s Health & Bio-Pharma | the nutritional contribution of | reinforce Kerry’s proprietary platform is focused on our ingredients portfolio to a Sustainability in Motion research, improving the health of people finalconsumerproduct.Wehave whichinvolvedover14,000 worldwide. Our proactive health identifiedthatmorethan80%of consumers across 18 countries. portfolio of science-backed ourTaste&Nutritionportfolio branded ingredients are used delivers positive or balanced In 2022, we examined the across food, beverages and nutrition solutions. foodservice channel across Europe supplement applications. to understand how sustainability These ingredients are clinically Over the next decade, we aim to influencesconsumers’consumption supported to promote increase this positive impact through choices out of home. We found consumer health across a innovation and partnerships, that 55% of consumers claim to be range of need states, including creating sustainable solutions that eating more sustainably since the immune, digestive, joint, will reach more than two billion pandemic and that 71% believe cognitive and heart as well as people. In 2022, we expanded our sustainability is an important 2 infant and women’s health. impact and increased our reach consideration in choosing what with positive and balanced nutrition outlets to support. We shared these solutions to 1.2 billion people. This insights with customers and industry was driven by the availability of thought leaders at a specially new nutrition solutions within our convened foodservice sustainable portfolio and our geographical nutrition conference in London, expansion in developing regions. where we examined possible For more on our approach see our solutions to these consumer needs. whitepaperonnutritionalprofiling at kerry.com/sustainability. ® ### Kerry Health and Nutrition Institute : erry Health and ### Science for Healthier Food ® The Kerry Health and Nutrition Institute white papers written for those working in the (KHNI) was established to share Kerry’s food industry, by experts within the food industry. scientific expertise and thought leadership | in the science of healthier food with | To date, KHNI has welcomed more than half a | | --- | --- | | the wider industry. Supported by an | million visitors to engage with this industry- | | independent Scientific Advisory Council | leading content, leveraging our global team | | made up of recognised leaders in nutrition | of more than 1,100 experts in nutrition, food | | science and research, KHNI allows industry | science, sustainability, health, taste, sensory and | | scientists, academics and other experts | life sciences. In 2022, content themes included | | to explore challenges and opportunities | ‘sustainable nutrition’, ‘plant-based’, ‘microbiome | | shaping the future of food. This digital hub | and health’ and ‘food waste’. For information | | provides in-depth articles, webinars and | see khni.kerry.com. | K Nutrition Institute KerryGroupAnnualReport2022 59 Supporting the Industry As an industry leader, we ## CONNECTING TASTE have published a dedicated methodologyforprofilingthe ## nutritional impact of a Business- AND SUSTAINABILITY to-Business(B2B)portfolio, making it easier for others to assess and report their impacts. | In 2022, we built on this expertise | Taste is the biggest driver | with.Thenitusesartificial | | --- | --- | --- | | with the launch of the KerryNutri | of food and beverage purchases. | intelligence to predict which | | Guide, which helps companies | But these preferences change | of those emerging tastes are | | subject to Business-to-Consumer | quickly – from traditional and | most likely to have an impact | | (B2C)profilingtocreate | nostalgic to novel and exotic. | with consumers. | nutritionally-optimised products. Social listening is helping our We are also regularly The KerryNutri Guide is a digital market research teams tune tracking consumer opinions tool that helps customers navigate intothefutureofflavour. on sustainability and see front-of-pack nutritional labels. It that consumers increasingly allows for an instant assessment Our insights tool Kerry want authentic taste that is ® ofafinalproductacrosseleven Trendspotter tracks social media created with ingredients recognised labelling systems as poststoseewhichflavours that are produced in a well as national legislation from influencersareexperimenting sustainable way. Europe, UK, Brazil and Mexico. By making this information more accessible, the nutritional 1  InnovaMarketInsights:Top10FoodTrends2023. impacts are immediately visible 2 and our customers are better Our approach to calculating consumer reach was developed in partnership with independent third parties and combines the outputs from our industry-leading nutritional able to create healthier food and assessment with external market data and Kerry’s business insight. We use a bottom-up beverage products that meet model taking information by country and end use market and eliminating potential double consumer needs. counting through the application of accepted statistical methods. 60 Strategic Report Sustainability Review Kerry Group Annual Report 2022 nutrition and sustainability challenges with solutions Ensuring Product Safety and Quality that are healthier and more sustainable by design. From research and development to manufacturing and sensory, Kerry’s regulatory, quality and safety team Ourcapabilitiesspanconsumerinsights,Research, works vigilantly to create ingredients and products that DevelopmentandApplication(RD&A)andfoodcraft, customers can trust. Our strategy on food safety has with experts across a network of global and regional evolvedoverthepastfiveyears.LedbyourGlobalFood innovation and development centres. SafetyandQualityOfficer,itisbasedontheunderlying principleofSafetyFirst,QualityAlways,leveraging This year we invested a further €303m in research, our control infrastructure and relevant processes and developmentandapplication(2021:€297m)toensure procedures, and enables us to apply a consistent global we remain at the forefront of sustainable nutrition and approach that supports employee training and our continue to lead in Authentic Taste, Plant-based, preventative due diligence requirements. For further Food Waste and Health & Bio-Pharma. detailsseeourSustainabilityReport. Our approach is validated by the growing demand Leading with Sustainable Innovation among customers for new concepts that deliver healthier Innovation is critical to the transformation of our products with lower environmental impacts. In 2022, we food system. We help our customers keep pace with supported customers with market-leading sustainable consumer expectations, solving their most complex nutrition solutions across a range of end use markets. Kerry’s innovation framework has three pillars: ### INNOVATING INNOVATING INNOVATING ### FOR EVERYDAY FOR THE FUTURE TOGETHER We make disruptive Our innovation teams Through open innovation and innovative applications create new, differentiated we collaborate with external using our world-class technologies to meet future partners in academia, start-ups expertise and technology consumer needs in Food, and supply chain to future- toolkit. Beverage and Pharma. proof our technology portfolio and bring cutting-edge innovation to our customers. Kerry Group Annual Report 2022 61 ## Sustainable ## by Design Much of the environmental impact of a product can be influenced at the design stage. Therefore, in 2022, we enhanced our innovation process to further embed sustainability design within new innovations and development work across existing product lines. This processencouragesourRD&A teams to consider impacts at all stages of a product’s lifecycle and improve performance in key areas such as raw material selection, waste prevention and resource use. Here are three ways innovation is inspiring sustainability. ## 1 2 3 Sodium reduction Liquid probiotic No/low alcohol solutions delivery system | Many customers are facing | | | No and low-alcohol beverages are | | --- | --- | --- | --- | | regulatory and consumer pressures | | TM | gaining popularity due to societal | | | BC30 | , a probiotic with | | | to reformulate bakery, meat and | | | changes and the increasingly | scientifically supported immune snack products to reduce salt intake. health-conscious consumer. and digestive benefits, can be Our Kerry Tastesense® Salt solutions Kerry Tastesense® Sensations added to applications that do solve taste challenges when sodium supports beverage manufacturers not typically support traditional is low/reduced. It is one of the by replicating alcohol perception probiotics, increasing the tools from our “toolbox” approach and, when used with the Simply access to health benefits for TM to harmonising and rebalancing Nature flavour portfolio, more consumers. healthier and tastier products. contributes to the creation ofuniquebeverages. ## PARTNERINGTOCREATEHEALTHIERPRODUCTS For years, people have read Many countries are also introducing One customer recently asked us ingredientliststofigureoutwhich legislative restrictions. For example, to help them halve the amount foods are healthy. For example, the UK is restricting the marketing of sodium in a salt and vinegar in Singapore, Australia, France and of products that qualify as less potato chip – without losing the several other countries, the process healthy when assessed through a mouthwateringtaste.OurRD&A is getting easier, due to new front- specifiednutritionalprofilemodel. teams created several variations, of-pack health labels and ratings. then used our KerryNutri Guide tool These new ratings and regulations, to ensure the new recipes met the The scores, which are often plus the general shift toward better- customer’sfinalproductnutrition displayedasasum-total‘grade’ for-you products, are driving brands target. The winning chip recipe, for the nutritional quality of a to make more nutritious foods which met the brand’s ambitious product, make it easy to tell, and beverages. goal, reduced the sodium to record for instance, which cereals on a low levels while keeping all the shelf rate as healthiest. originalflavourintact. Many countries are also introducing 62 Strategic Report Sustainability Review Kerry Group Annual Report 2022 ## Better for Society ### We want to contribute to a just society, where people ### are treated with dignity and respect and have the ### opportunity and the means to flourish. ### To achieve this, we are committed to doing business ### with integrity and seek to enhance the lives of all those ### with whom we engage, including our employees, workers ### across our broader value chain and those within the ### communities around us. Because of our global reach, we have a key role to play in promoting human rights, supporting education and training and creating more resilient and inclusive communities. In this section, we outline some of the important areas where Kerry can make a positive contribution to the societies we operate in (seeourmaterialitymatrixonpage55). Embracing a broader responsibility has also inspired many of our community projects and programmes. For example, through our partnerships with NGOs,weoffercommunitiesinneedbothshort-termandlong-termnutrition benefits,applyingouragriculturalexpertisebyworkingwithlocalfarmersto help improve yields and contribute to nutrition of school meal programmes. Kerry Group Annual Report 2022 63 Upholding the Highest Standards Protecting Human Rights Kerry Group’s comprehensive Code of Conduct clearly Kerry is fully committed to upholding internationally- definesthestandardsandexpectationsforallKerry recognised human rights. Our Code of Conduct and colleagues. It serves as a guide for those who work with HumanRightsPolicyapplytoallemployeesandsets and for Kerry, outlining the standards and policies that expectations for our business and supply chain partners. must be upheld in important areas including human rights, business integrity and environmental compliance. In 2022, Kerry’s work on human rights continued to The Code of Conduct is available in 26 languages and be led by the Social Sustainability Council, chaired by offersinsightonhowcertainworkplacesituations theGroup’sChiefHumanResourcesOfficer.Allour should be handled, while providing direction on points manufacturing facilities are required to complete a of contact for those who may require additional support. self-assessment which provides visibility of potential For example, it describes our zero-tolerance approach human rights impacts within our business. In addition, and provides guidance to all employees regarding independent reviews by platforms such as EcoVadis potential situations involving bribery and corruption. provide an additional evaluation of our approach. The Business Integrity Committee provides oversight on Across our supply chain, our Supplier Code of Conduct all areas of ethical compliance across the Group and all is explicit in setting out our expectations of suppliers, colleagues are required to be familiar and comply with particularly regarding our most salient human rights our Code of Conduct. We have communicated broadly issues. We continue to monitor supplier compliance, on these requirements across the organisation since taking a risk-based approach to this evaluation. In 2022, refreshing the content of our Code in 2021. we adopted a more targeted approach based on risk at manufacturing locations and 71% of our high-risk 1 We are focused on ensuring that everyone at Kerry suppliers wereenrolledonSedex(Supplierethicaldata understands the requirements within the Code of exchange)andmorethanhalfofthesehadundergone Conduct and their universal application regardless of aSedexMembersEthicalTradeAudit(SMETA).We role, seniority or location. Our dedicated training and continue to engage the remaining high-risk suppliers, certificationprogrammehelpsustomonitorthis,andin along with any qualifying new suppliers to our business. 2022, over 88% of required colleagues achieved Code of Conductcertification(2021:>90%). To enhance our approach on human rights, we have engaged with an expert partner to help review our We encourage anyone with a concern about a breach of current processes and identify opportunities for further our Code of Conduct to raise this through the available improvement. This project will continue into 2023 and channels. Our Speak Up Policy provides guidance for considers current best practice and proposed legislative individuals on how to raise a concern, including through changes, such as the EU Corporate Sustainability our dedicated Speak Up facility available to colleagues DueDiligenceDirective.Thisworkwillguidethe and external parties who wish to do so anonymously. For further development of our human rights and social more on our approach to business ethics and reporting sustainabilityefforts. ofpotentialissues,seeour2022SustainabilityReport. 1 As measured by spend 64 Strategic Report Sustainability Review Kerry Group Annual Report 2022 Prioritising Workplace Health and Safety A safe and healthy workplace is a basic principle and right at work. ## Utrecht Itisessentialtoensuringpersonalwellbeing,withbenefitsfor individualemployees,societyandourbusiness. In November, our facility in Utrecht, Netherlands, We recognise our duty to provide and maintain a safe working celebrated 1,000 days without environment for everyone at Kerry, and we are committed arecordableincidentandfive to the ongoing improvement of our safety performance. years without a lost time injury. WeplaceaSafetyFirst,QualityAlwaysmindsetatthecoreofour This safety milestone is in line businessandourHealthandSafetyPolicydefinesconsistentways with our journey towards Safety of working and establishes standard requirements across our First, Quality Always, as we business. These standards are non-negotiable and are a required continuously strive to ensure performance expectation of everyone who works at Kerry. the safety of our people. This was accomplished through We strive for a culture of zero safety incidents however, we valuable cross-functional understand manufacturing processes carry certain risks and that collaboration between workplace accidents and work-related illnesses can occur for a engineering, manufacturing, number of reasons. As we work to ensure safety is at the centre of procurement, food safety and everything we do, we are pleased to report a further 11% year on quality and health, safety and yearimprovementinourperformancefor2022(2021:8%). environment teams. For more detail on our health and safety performance, seeour2022SustainabilityReport. Kerry Group Annual Report 2022 65 Embracing Diversity, Inclusion and Belonging Evidence shows that a diverse workforce leads to a range 1 of better outcomes for organisations and new talent is increasingly seeking out roles in organisations where differencesarecelebrated.Aroundtheworld,manypeople still struggle to access employment and equal opportunities because of their race, gender, sexual orientation or other ## Sustainability perceiveddifferences.AtKerry,wetreateachemployeeasan individual.Thisisreflectedinseveraldedicatedpolicieswithin ## Essentials ourCodeofConduct,includingourDiversity,Inclusionand Belonging Policy, which requires that employees treat fellow Our people are a key enabler workers and applicants fairly and never engage in any form of our Beyond the Horizon ofunlawfuldiscrimination. strategy. To support them, we have launched a dedicated Kerry has 118 nationalities represented in our overall workforce, development programme called and we believe our senior leadership and management levels ‘Sustainability Essentials.’ This shouldreflectthis.In2022,84%ofseniormanagementatour online training is designed significantlocationswerehiredfromwithinthelocalcommunity to elevate company-wide (2021:86%). knowledge, capability and engagement in this crucial area, We continue to focus on our gender diversity targets, with allowing our workforce to speak female representation at senior management level at 36% in the same language as we work 2022,versusourtargetofgenderparityby2030(2021:36%).We towards our common goals. The aim to have 35% of senior leadership positions held by women by programme includes modules 2025,andatyearendhadreached33%(2021:29%).Oureffortsto on Nutrition and Health, deliver on this ambition for inclusive leadership include the 2022 ClimateChange,Responsible launch of a dedicated toolkit to equip our leaders with the skills Sourcing, Circular Economy and required to lead conversations on the topic of diversity, inclusion Social Impact, which are being and belonging with their teams and to better understand and launched across the Group on eliminate unconscious bias. Available in 11 languages, the toolkit a phased basis. provides practical guidance, templates and tools in the areas of Psychological Safety, Inclusion, Belonging, Fair Treatment and IntegratingDifference. Importantly, in 2022, employee perception of Kerry as an inclusive organisation increased by two percentage points, as measured by our Inclusion Index. For more details, see our Peoplesectiononpage22andour2022SustainabilityReport. 1 The Business Case For Diversity is Now Overwhelming. Here’s Why | World Economic Forum (weforum.org) 66 Strategic Report Sustainability Review Kerry Group Annual Report 2022 Florence and her friends enjoying their UHT milk as part of the WFP School Meals programme in Gitega, Burundi.Photo:©WFP/IreneeNduwayezu In support of this project, we share dairy farming, Improving Community Access to Nutrition processing and nutritional expertise and provide We believe that healthy diets should be accessible to directfinancialsupportinordertoachievethe everyone. To support communities that cannot access followingobjectives: products made with our sustainable nutrition solutions, wepartnerwithleadingNGOstodevelopself-sustaining Empower small-scale farmers to improve milk programmes to promote wellbeing amongst some of quality and quantity and, therefore, reducing waste the world’s poorest people. and increasing their income. Enhancing School Meals in Burundi Increase access to, and consumption of, milk In Burundi, over 70% of people live below the poverty line inschoolmealsandthewidercommunity. and many are malnourished, an issue that is exacerbated by spiraling food prices and increasing food scarcity.  Raiseawarenessoftheimportanceofdairy Agriculture is the backbone of Burundi’s economy, inourdiets. however, productivity and access to arable land are low and it remains a net importer of food, leaving it exposed These objectives continue to assist WFP Burundi to rising international food prices. The country is also with improving nutrition, food security and building extremely vulnerable to the impacts of climate change, resilience in the local milk supply chain. facing the burden of rising global temperatures resulting indevastatingimpactssuchasdrought. In 2022, Kerry provided a range of equipment to support the project, including milk testing kits and unique animal In 2020, Kerry extended its partnership with the identifierswiththeaimofimplementingthefirstanimal UNWorldFoodProgramme(WFP),withthegoalof registration system on farms involved in phase two of improving dairy farming and the availability of milk the project. Kerry’s expert team also visited the Gitega in school meals in the Gitega province in Burundi province to better understand local challenges and through Project Amata. share onsite technical expertise concerning farming, dairy transportation, quality, safety, processing and nutrition. From this, Kerry proposed further improvementstotheproject. Kerry Group Annual Report 2022 67 Improving Food Security in Kenya Duringtheyear,Kerrywasproudtoannounceanewfour-year ## Lishe Poa partnership with Irish humanitarian organisation Concern Worldwide toimprovethelivesof46,000Kenyansbyimprovingfoodsecurity, boosting household income and reducing malnutrition levels in the Utilising our expertise and innovation TanaRiverCounty. in the nutrition space, Kerry was proud to support Concern Worldwide ManyTanaRiverfarmersarereliantonlivestockfarming,butclimate on an innovative urban nutrition change has led to water insecurity and pasture deterioration, causing project in Kenya. The Lishe Poa the death of livestock and declining productivity, which has eroded project has developed a healthy householdincomeandfoodsecurity.ConcernWorldwidehasidentified alternative to commonly consumed an opportunity to tackle these challenges. snack foods in the informal settlements of Nairobi. Kerry facilities WithfinancialsupportfromKerry,theAgriculturalLivelihoodsImproving in Kenya and South Africa provided ValueChainsandtheEnvironment(ALIVE)projectwillcreatearegional technical support in the product valuechainformangoproductionthatbenefitsfemalegrowersand development and inputs to further createsanewincomestreamfortheirfamilies. accentuate the product and enhance its shelf life and nutrient-content. Mango production is more resilient to the impact of climate change andharnessestheresourcesoftheTanaRiver,whichissusceptibleto flooding.Astheprogrammeprogresses,participantswillreceivetraining on post-harvest handling, support for mango processing at a community level and the introduction of post-harvest processing equipment. ## MyCommunity Kerry has a proud history of supporting local communities where we operate. Our MyCommunity programme offers colleagues the opportunity to give back to the causes that matter most to them. The programme provides direct financial support for projects nominated by our sites, and all 23,000+ colleagues have access to paid volunteer leave to help them become more directly involved in supporting these initiatives. Examples of projects supported in 2022 include providing volunteers and monetary support to Eat Up, a charity in Murrarie, Australia, that makes and delivers lunches directly to schools for vulnerable children, donating food and personal hygiene supplies to low-income children in Panama while encouraging them to continue their studies, hosting blood drives at various Kerry locations including in the Philippines, Mexico and India, and product donations to various groups around the world. Mwanajuma Ghamaharo winnows mung beansinMakerevillageinTanaRiverCounty. Photo:LisaMurray/ConcernWorldwide 68 Strategic Report Sustainability Review Kerry Group Annual Report 2022 ## Better for Planet ### Given the environmental footprint of food, we must ### find ways to transform our industry and work in ### greater harmony with nature. Despitethegrowingcallsforactiontoaddressenvironmentalconcerns,change has been slow and there has been an alarming deterioration in the earth’s vital ecosystems. However, there is an increasing awareness among stakeholders on the interconnected challenges of climate, pollution and biodiversity. Kerry’s Beyond the Horizon sustainability strategy sets out our environmental objectives andoutlineshowtheysupporttheUNSustainableDevelopmentGoalsandourvision for a world of sustainable nutrition. In this section we highlight our efforts on material environmentaltopicsfortheGroup(seeourmaterialitymatrixonpage55). ### Committing to Sustainable Practices Producing food is resource intensive, and current practices need to be reimagined to support healthy people and a healthy planet. Kerry touches every stage of food production, from family farmers to manufacturing and distribution. This holistic view of the industry makes us uniquely positioned to identify challenges and innovate solutions at scale, from supporting improved agricultural practices to developingproductsthatcreateprocessingefficienciesandreducefoodwasteand environmental impact. The Group’s Environmental Policy outlines our commitment to carrying out activities in a responsible manner and implementing good environmental practice that continuously improves our performance. Kerry Group Annual Report 2022 69 ### Taking Action on Climate Change Despitemountingevidenceoftheimpactofclimatechange,global ## CDP emissions continue to rise. As a society, we have a short window in whichtoacttoavoidtheworsteffectsofclimatechange.Urgentand systemic transformation is needed to deliver the scale of reductions In 2022, Kerry once again achieved requiredtomeetthegoaloflimitingglobalwarmingto1.5⁰Cbythe a CDP score of A-, placing us at end of the century. leadership level for our action and reporting on climate change. KerryiscommittedtoachievingNetZerobefore2050andcontinues to lower emissions across our operations and value chain. We have set a science-based target for emissions reduction by 2030, which commitsustoa55%absolutereductioninouroperational(Scope1 and2)emissionsanda30%reductioninintensityofotheremissions withinourvaluechain(Scope3). ## SBTi In 2022, we made strong progress towards this target, driven by Kerry’s Scope 1, 2 and 3 our shift to renewable energy. 100% of our purchased electricity carbon targets are approved by across the Group now comes from renewable sources or is backed the Science Based Targets initiative byrenewableenergycertificatesandtheassociatedreductioninour (SBTi). Our Scope 1 and 2 targets are Scope2emissionshasmadeasignificantcontributiontoouroverall alignedwitha1.5⁰Cpathwayand carbonperformance.Byyearend,weachieveda48%reductionin we continue to engage with SBTi Scope1and2emissionsoverour2017baseline(2021:33%). on changes to Scope 3, considering their recent guidance on emissions We also continue to focus on Scope 1 emissions through improving relating to Forest, Land and energyefficiencyandswitchingtocleanerfuels,however,manyof Agriculture (FLAG), which is these initiatives will take longer to implement and the scale and speed applicable for our business. of reduction in any given year may vary. ## DELIVERINGACLEANER ## SMOKE TASTE ® Some of the most authentic and WemakeourKerryRedArrow distinct tastes come from cooking smoke range by capturing foodoverfire.Thesmokefrom and condensing real smoke hickorywood–commontoNorth from various types of wood, American barbecue – imparts a utilising byproduct from the flavourquitedifferentfromthe timberindustry.Wethenfilter searing hot coals used in South and decant the smoke making African braai. it better for the consumer and theenvironment.Indefining Unfortunately, cooking with smokeflavours,theEuropean fireandconsumingfoodsthat Commission noted that have been traditionally smoked smokeflavoursareahealthier comes with health concerns alternative to conventional and environmental risks. Kerry smoking. In addition, compared ® | RedArrow | condensed natural | to conventional smoking, the use | | | --- | --- | --- | --- | | smoke helps brands bring | | ofsmokeflavourshasprovento | | | moreconsistent,efficient, | | reduce CO | 2 emissions by 83%, | | and sustainable products to | | water consumption by 92%, | | | the market. | | wastewater by 83% and cleaning | | 1 detergents consumption by 68% . 1  BestAvailableTechniques(BAT)ReferenceDocumentfortheFood,DrinkandMilkIndustries(europa.eu) 70 Strategic Report Sustainability Review Kerry Group Annual Report 2022 Carbon Performance (Scope 1 & 2) Carbon Intensity 2022 2021 2020 100 150 200 250 300 kgCO e/tonne 2017 Baseline 2 Tonnes of CO 2 e (000's) 100 150 200 250 300 100 200 300 400 500 600 700 800 900 100 150 200 250 300 100 200 300 400 500 600 700 800 900 2022 2021 2021 2021 2021 2021 2020 100 250 400 550 700 850 1000 2020 2020 2020 2020 Scope 1 2017 BaselineScope 2 | 2019 | | | 2019 2019 | | | | 2019 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 100 150 200 250 300 | | | 100 300 500 700 900 100 150 200 250 300 | | | | 100 300 500 700 900 | | | | | KgCO2e tonne Baseline | | | Scope 1 BaselineScope 2 | KgCO2e tonne Baseline | | | Scope 1 BaselineScope 2 | to reduce the volume of virgin plastic and increase ### Our Value Chain recycled content, while evaluating alternative packaging Themostsignificantpartofourcarbonfootprint formats that can maintain product integrity. Examples comes from indirect Scope 3 emissions, most notably includeincorporatingrecycledplasticcontentinDaVinci our supply chain. Within this, dairy is the single largest Gourmet bottles used within the foodservice channel contributor and a focus area for engagement with our and the use of 100% recyclable packaging for our supply base. Dairygoldbrand.In2022,74%oftheplasticpackaging used across our business was reusable, recyclable or Our EvolveDairySustainabilityProgramme,which compostable(2021:57%). launched in 2022, incentivises farmers to implement science-based measures that lower carbon emissions, ### Halving Food Loss and Waste protect nature and improve the resilience of their operations. By supporting close to 3,000 farmers in Given the environmental impacts of food production, south-westIreland,thisprogrammealsooffersa tackling food loss and waste represents a way to template for engagement with other dairy ingredient addressclimatechangeaswellasasignificant suppliers to our business. Uptake of the programme has business opportunity. beenstronginitsfirstyear,particularlyintheareaof lower emissions fertiliser, which will contribute to a lower Our portfolio of clean label and conventional food footprint across this supply base. For more on Evolve protectionandpreservationtechnologiessignificantly see page 73. impact food waste in the value chain, particularly downstream. This is a growth platform for our business Category-wide, our total Scope 3 intensity has reduced with a key focus on the bakery and meat end use by4%in2022comparedtoour2017baseline(2021: markets.Thesemarketsrepresentthemostsignificant 0%).Reductionsin2022havebeendriven,inpart, categories where food is lost or wasted by volume and by lower emissions from dairy and changes in our value, respectively. The opportunity for impact is clear | 100 150 200 250 300 | 100 150 200 250 300 | | | | | --- | --- | --- | --- | --- | | | 100 250 400 550 700 850 1000 | portfolio mix. For more details on Scope 3 see our | when we consider that in 2022, Kerry products were | 100 250 400 550 700 850 1000 | | | | 2022SustainabilityReport. | used to extend the shelf life of over 52 billion servings | | of meat. ### Tackling Plastic Waste 2022 2022 To help our customers understand the impact of food We fully support a more circular approach to plastics loss and waste on their business and the environment, and have committed to making all our plastic packaging 2021 2021 we developed and launched the KerryFood Waste reusable, recyclable or compostable by 2025. We work Estimator in 2022. | 2020 | | | | 2020 | | | | --- | --- | --- | --- | --- | --- | --- | | | 100 150 200 250 300 | | | | 100 250 400 550 700 850 1000 | | | | | kgCO | e/tonne 2017 Baseline | | | Scope 1 2017 BaselineScope 2 | 2 KerryGroupAnnualReport2022 71 This tool provides a quick and easy way for customers and consumerstomodelthepotentialbenefitsoffoodwastereduction ## through shelf-life extension and is available on kerry.com. Upcycling ## To tackle food waste within our own organisation, we are Ingredients committed to a 50% reduction across our operations by 2030, aligningwiththefoodwastetargetunderUNSustainable Given our innovation and process DevelopmentGoal12,‘ResponsibleConsumptionandProduction.’ capabilities, Kerry is ideally Given the diverse nature of our portfolio, the achievement of this positioned to support customers goal involves working across sites to understand the key drivers of in their use of ‘upcycled’ food waste locally and implementing the most appropriate actions ingredients. For example, cheese to deliver on our target. For example, some waste streams can be waste occurs across the industry recovered as an input to other processes, others can be turned due to manufacturing constraints, intobiofertilisersoranimalfeed,andsomefinishedproducts spoilage and supply chain can be distributed to local charities and food banks. In 2022, limitations. Our cheese powders we continued to make progress against this goal with a 32% facility in Denmark is unique reductioncomparedtoour2017baseline(2021:17%). because it upcycles this material into high quality and shelf stable ### Adopting a More Circular Approach cheese powders that deliver an To lower our environmental impact, we are targeting a more authentic cheese taste. In doing circular approach to resource use within our business. This keeps so, we maximise the potential of materials in productive use for longer and captures additional the food source and the resources value from what were previously considered waste streams. used to produce it, whilst simultaneously minimising food Within our operations, we seek to ensure our own waste streams waste. A detailed carbon footprint are put to productive uses, with 93% going towards recycling or study undertaken in 2022 shows recoveryand95%ofallwastevolumesdivertedfromlandfill these products are on average, (2021:94%). 45% lower in carbon emissions than conventional alternatives. 2022 Waste Recovery 2022 Waste by Destination 5% 2% 93% | | | | 5% | | Recycling/Recovery | 5% | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 5% | 5% | | | | | | | | 5% | | | | 2% | Landfill | | 2% | | | | | 5% | | | | | | 5% | Incineration (energy recovery) 2% Landfillvolumesincludewastesentforincinerationwithoutenergyrecovery 95% 93% 95% 93% Diverted Waste Diverted Waste Recycling/Recovery Landfill 95% 95% 93% Landfill Landfill Incineration (energy recovery) Diverted Waste Recycling/Recovery Diverted Waste Recycling/Recovery Landfill Landfill Landfill Landfill Incineration (energy recovery) Incineration (energy recovery) 72 Strategic Report Sustainability Review Kerry Group Annual Report 2022 ## Protecting Water Resources Water is vital for our business. It is a shared resource, and we have a responsibility to use it carefully, minimising our withdrawals, protecting water sources and ensuring adequate access for other water users. Across our operations we are targeting a 15% reduction in water intensity by 2025. We initiated several projects in 2022 that will contribute to this goal. For example, we are investing approximately two million euro to improve water efficiency at our site in Plant City, Florida, USA. This will significantly reduce the water intake at this facility upon completion in 2023. In Anneyron, France, we updated our cooling systems, leading to a reduction of over 25% in water use. The Group's water efficiency has already improved by 5% compared to our 2017 base (2021: 3%) with an expected acceleration in future years on the completion of several planned projects. 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. For more details on our water use, see our 2022 Sustainability Report. ## Water Risk Using the World Resources Institute's Aqueduct Tool, we identified nine priority manufacturing facilities that may be more vulnerable to water risk. Average water intensity across these sites exceeds that for the Group and was 12% lower in 2022 versus our 2017 base year (2021: 9%). We maintain a focus on water at these locations and in 2022 we undertook a programme of metering, monitoring and targeting to help drive ongoing improvements. The outcomes of this programme will inform water reduction activities across these sites. ## Protecting Biodiversity Amid the alarming rate of species and habitat loss, the preservation of biodiversity is an increasingly material topic for our business. Kerry has potential to impact biodiversity directly through our operations and indirectly through the raw materials we source. Our most significant impacts are linked to our supply chain and we are working towards the preservation of tropical forests and the rich biodiversity they contain. We are committed to eliminating deforestation across targeted supply chains by 2025, focusing on those that are the leading drivers of forest loss, including cocoa, coffee, soy, palm oil and paper packaging. We are members of several multi-stakeholder initiatives focused on this area including the Roundtable on Sustainable Palm Oil (RSPO), SAI Platform (including their deforestation workstream within the Sustainable Dairy Partnership) and others. For more on our evolving approach to preserving biodiversity, see our 2022 Sustainability Report. ## Responsible Sourcing Given our from-food-for-food heritage, the greatest impacts associated with our products often lie with agricultural production. While it can present social and environmental challenges, agriculture can help reduce poverty, raise incomes and improve food security for 80% of the world's poor¹. As part of our vision to create a world of sustainable nutrition, we are engaging our suppliers to drive more sustainable practices, ensuring that 100% of priority raw materials are responsibly sourced by 2030. In 2022, we set out and communicated our requirements for suppliers across categories linked to deforestation and we continue to work directly with supply partners and other third parties on programmes deployed at farm level. ## 2022 Water Withdrawal by Source (Megalitres) ![img-4.jpeg](img-4.jpeg) ## Water Intensity at Higher Risk Sites ![img-5.jpeg](img-5.jpeg) ### Notes: Our target for water is a relative measure of metros 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. Kerry Group Annual Report 2022 73 This past year, with a shared goal of helping the planet and improving the livelihoods of our farmers, we launched the EvolveDairySustainabilityProgramme. Farm by farm, we share techniques to help reduce carbon and ammonia production and improve water quality. These include better grazing and water management practices, innovations in animal health and welfareandinsightsintothebenefitsofbiodiversity. Oneofthemorevisiblebenefitsistheadditionoftrees to farmland around Ireland. As part of the programme, we are committed to plant 200,000 new trees by 2025. Formoredetailsseeour2022SustainabilityReport. Palm Oil In 2022, we updated our Palm Oil Policy and We prioritise categories linked to our commitments requirementsforsuppliers.Alongsideverification, on carbon reduction and no deforestation and certificationremainsanimportantelementofour continue to engage these suppliers on traceability of sourcing approach for palm oil and 39% of our volume the volumes supplied to Kerry Group. For more detail isRSPOcertified(20%MassBalance;19%Segregated on our responsible sourcing categories see our 2022 orIdentityPreserved).Wecontinuetomapoursupply SustainabilityReport. chain and seek traceability to both mill and plantation with our leading suppliers. For more, see our palm Dairy progress report on kerry.com. Wemaintained100%certificationofourIrishmilk volumesundertheSustainableDairyAssuranceScheme. Coffee This programme, operated independently through Bord Our approach to this category was outlined as we Bia(theIrishFoodBoard),meansallfarmersareaudited developedandcommunicatedourCoffeePolicyin every 18 months and this allows for carbon footprinting 2022, supported by a requirements guide, which of all individual farms. We work directly with farmers to clearly outlines our expectations of suppliers. Through support them on measures that improve the sustainability direct engagement we have made progress in mapping of their enterprise and reduce their carbon footprint. our supply to country of origin for more than 90% of our volumes. Given the fragmentation in this supply For the dairy ingredients we purchase, our goal is for chain,certificationwillplayakeyroleinachieving 80%ofvolumestobeatSustainableDairyPartnership our category target. (SDP)level3orhigherby2025.Currently,15%ofour volumes come from suppliers who are members of the ### SDPandwecontinuetoengageoursuppliersonthis Non-Financial Reporting Statement new platform and our requirements. Wecomplywithregulationsonnon-financialreporting and provide information on required topics across Evolve Dairy Sustainability Programme thisreportandwithinour2022SustainabilityReport. We still work with many of the Irish dairy farming Relevantinformationoneachtopiccanbefoundbelow. families that helped us launch our business 50 years Inaddition,non-financialrisksareevaluatedaspartof ago. While their natural, grass-based approach to the broader enterprise risk management framework farming has not changed, on-farm practices continue andmoredetailcanbefoundinourRiskManagement to evolve and there is growing pressure for more Reportonpages94-105. sustainable agriculture. Reporting Requirements Our Policies Page Reference Environmental Matters Environmental Policy Page 68 Social and Employee Matters Health and Safety Policy; Group Code of Conduct; Pages 18-25, Diversity,InclusionandBelongingPolicy;SpeakUpPolicy 63-65 and 120 Respect for Human Rights HumanRightsPolicy Page 63 Anti-Bribery and Corruption Anti-Bribery Policy; Page 63 Group Code of Conduct Business Model Pages 26-27 Non-financial KPIs Pages 38-39 and 52-73 1 AgricultureOverview:Developmentnews,research,data|WorldBank 74 Strategic Report Sustainability Review Strategic Report SustainabilityReview74 Kerry Group Annual Report 2022 KerryGroupAnnualReport2022 ## Climate-Related Risk ## and Opportunity ### Climate change represents one of the most significant ### global challenges and its impacts have implications for ### governments, economies and civil society across the world. ### It is a challenge that requires all parts of society to come ### together and address in a collaborative and increasingly ### urgent way. Kerry is committed to playing its part through ### the achievement of its Beyond the Horizon commitments ### and the integration of climate as a key consideration for ### all aspects of our business. The following statement sets out the progress we are making and is consistent with the recommendations of the Task Force on Climate-related Financial Disclosures(TCFD)andtheexpectationssetoutintheUKFinancialConduct Authority'sListingRule9.8.6R(8). Governance To deliver on our Purpose, Inspiring Food, Nourishing Life, we have a comprehensive strategy that puts sustainable nutrition at the core of what we do every day. The Group’sBoardhasoverseenthecontinuedevolutionofourbusinesstofulfilthis purpose, including the review and approval of the Group’s Beyond the Horizon sustainability strategy and commitments. These commitments encompass a clear focus on climate action and the Board has ongoing oversight of performance and strategies to deliver on these. The Board and its Committees also assess how the Group is responding to climate-related risks and opportunities, as part of the overall risk management process. Kerry Group Annual Report 2022 75 TheGovernance,NominationandSustainability financialperformanceandreturns. Committee(GNS)wasestablishedin2021andisledby The Audit Committee engaged with Executive the Group’s Chairman. This Committee takes a lead role Management on climate-related risks and assessed in Board guidance and oversight of the Group’s actions how these have been reviewed and accounted for as on climate change, as part of its role in governing part of the overall risk management process in 2022. Kerry’s broader sustainability strategy. Membership The Audit Committee also reviewed and approved the of this Committee includes Board members with deep Group’s climate-related disclosures for this period. experience across food and beverage, as well as other sectors heavily impacted by climate change, including In addition, following their introduction in 2021, the energy and agriculture. Further details of Board RemunerationCommitteecontinuedtoincorporate members experience can be found on pages 108-110. climate-related metrics and targets into the reward structureforExecutiveDirectorsandseniorleaders. Board Oversight of Climate Change Impact The Board is supported by the Global Sustainability TheBoardand/oritsrelevantCommitteesreceivedfive Council, which is led by the CEO and comprises dedicated updates from senior executives including the executive and functional leadership from across GroupHeadofSustainability,theChiefCorporateAffairs the Group. This Council is the key forum at which andBrandOfficerandtheSustainabilityReportingteam climate-related risks and opportunities impacting the on matters including the Group’s performance on its organisation are addressed with senior management, climate goals and strategy, climate-related risks and and the Council has ultimate responsibility for the opportunities and our climate-related disclosures. In assessment and management of these issues as part addition, details relating to climate change are provided of its broader sustainability remit. by other leaders as part of their functional updates, ensuring that it is increasingly integrated into the Given the interdependent nature of climate-related broader strategic decision-making process. risks and opportunities, additional governance councils are in place at functional and regional levels In 2022, the potential climate impacts were considered across the organisation to support the work of the by the Board across a range of areas including decisions Global Sustainability Council. These include dedicated on major capital expenditure and business acquisitions. fora related to our operations, product portfolio The Board also considered climate-related metrics as and responsible sourcing. Led by a relevant senior partoftheGroup’sfinancialandbusinessplanningcycle, executive, each Council meets at least quarterly and with climate-related metrics incorporated within the provides a platform for addressing various elements budget review process, alongside indicators on growth, of the risks and opportunities facing our business. ### Board Level ### Governance Board of Directors Remuneration Audit GNS Committee Committee Committee ### Executive ### Level Global Sustainability Council ### Governance ### Functional Climate Portfolio Responsible Commercial ESG ### and Regional Council Council Sourcing Council Council ### Execution Council Implementation Teams 76 Strategic Report Sustainability Review Kerry Group Annual Report 2022 For example, the Environmental Council is led by Plant-basedofferings,whichprovidelowercarbon theChiefOperatingOfficer(COO)andmeetsona food and beverage alternatives. Kerry has a portfolio bi-monthly basis to review the Group’s performance that supports our customers in their innovation versusouroperationaltargets,identifyspecific journey across all end use markets challenges or opportunities across our regions, including process improvements, potential capital requirements Food Waste solutions, such as food protection and reviewing the implementation of approved projects. and preservation, which help our customers and These projects are implemented by cross-functional consumers lessen their impact in this critical area, teams, working collaboratively to ensure we maximise and the sustainability impact with no disruption to our business. Each functional Council provides an update on Health & Bio-Pharma, which supports our progress for their area and escalates issues as required customers in delivering better nutrition and to the Global Sustainability Council throughout the year. wellbeing for consumers at all life stages. Linking Climate and Remuneration We recognise the role that climate change can play in influencingthedeliveryofourbusinessstrategy.Physical Kerry’s remuneration philosophy ensures that executive impacts will arise as global average temperatures increase remuneration is aligned to the Group’s purpose, culture and socio-economic changes are inevitable as part of and values, supports strategy and promotes the long- the transition to a low carbon economy. As we prepare term success of the company. The Long-Term Incentive for these changes, we continue to assess the potential Plan(LTIP)forExecutiveDirectorsandseniorleaders risks and opportunities for our business, ensuring that reflectsthisthroughthethreekeyareasofgrowth, we maintain a focus on reducing our emissions while return and sustainability. adapting to these changing external conditions. The incentive plan considers core sustainability metrics We are also embedding our Beyond the Horizon linked to our Beyond the Horizon sustainability strategy. commitmentsintoourfinancingstrategy.In2021,Kerry The metrics used include food waste and carbon issued a €750 million, ten-year Sustainability-Linked reduction,specificallytheprogresstowardsourscience- Bond(SLB)whichcouldresultinaninterestcoupon based targets on Scope 1 and 2 emissions. More details step-up if certain sustainability performance indicators, onthiscanbefoundintheRemunerationCommittee including our Scope 1 and 2 climate targets, are not met. Reportonpages151-152. Identifying Climate-Related Risks and Opportunities For further details on Group Governance, see our CorporateGovernanceReportonpages117-130. To establish the climate-related impacts that are most material for the organisation, we convened a dedicated working group to evolve our existing climate risk Strategy assessment and conducted a detailed qualitative and Kerry’s Vision is to be our customers’ most valued quantitative assessment of potential climate-related risks partner, creating a world of sustainable nutrition. Our and opportunities. Over the last two years, this work has businessstrategyisalignedtofulfillingthisambitionand been guided by an Executive-led steering committee and Kerry’s Beyond the Horizon sustainability strategy helps through a process of stakeholder engagement, regulatory us to accelerate our actions and integrate sustainability guidance, risk management and expert judgement, we within our business. The two critical elements of this havedefinedanextensivelistofpotentialclimateimpacts programmeare: forourbusiness.Thislonglistwassubsequentlyrefined based on an appraisal of risk severity and likelihood, the focus on commitments that will support a method aligned with our overall risk management the transformation of our business into a more framework, and this has provided us with a focused set sustainable enterprise; of risks and opportunities for more detailed analysis. our innovation capability enabling customers to create more sustainable products, supported by Assessing Climate-Related Risk our technology portfolio. Modelling the potential impacts of climate-related risk to our business is complex. As the climate crisis We keep our climate commitments under ongoing unfolds, climate-related impacts and policy responses review, aligning with a science-based approach and willmanifestindifferentwaysandoverdifferenttime- responding to evolving best practice. The importance of horizons. We typically consider business risk over a our role as an enabler of sustainable nutrition for our periodofuptofiveyears.Indoingso,weconsiderhow customersisclearlyreflectedinourmedium-termplan, climate-related impacts may contribute to other key risk which was presented at the end of 2021 with a focus on areas in that timeframe, however, the physical impacts of growth platforms that support a transition to healthier, climate risk require a longer-term view. As a result, our lowerimpactdiets.Theseinclude: approach to assessing climate as a discrete risk uses an extended time horizon. To account for the more gradual Authentic Taste, which recognises that taste impacts of certain physical climate-related events, we is a critical driver of purchase behaviour and a have chosen to examine the potential impact of climate fundamental requirement for any sustainable food changeonourbusinessusing2030(medium-term) and beverage innovation and2050(long-term)asourreferencetimeframes.For more on how we integrate climate-related risks into our broader risk management framework, see page 82-83. Kerry Group Annual Report 2022 77 Climate Risk Risk Type No. Description Timeframe Physical Acute 1 Impact of extreme weather events on key operational sites. Medium – Long-term 2 Impact of extreme weather on transport network. Chronic 3 Impact of rising sea levels on key operational sites. Medium – Long-term 4 Impact of water stress on key operational sites. 5 Impact of weather pattern variability on raw material supply. Transition Policy 6 Impact of emissions pricing on operational costs. Short – Medium-term Technology 7 Impact of decarbonisation on operational costs. Short – Medium-term Market 8 Impact of shifting consumer demand for low-carbon Short – Medium-term alternatives. Reputation 9 Damagetobrandand/orstakeholderrelationships Short – Medium – Long-term due to action on climate. Physical Risk basket of seven important agricultural inputs in use across our business, including dairy, wheat and maize. We began a detailed assessment of physical climate 1 Using the land suitability index , we assessed changes risk in 2021 and with the help of external partners we in land considered commercially viable for producing have now deepened our analysis. Our assessment will cropsunderrainfedconditionsfordifferenttemperature continuetoevolveasscientificunderstandingimproves scenarios. The assessment indicated the potential and as we build our internal knowledge and expertise. for some impact to agricultural output, with impacts InlinewithTCFDguidanceweconsidertwotypesof varying by commodity and geography, however, overall physicalrisk: land suitability for the selected raw materials does not indicateasignificantriskforthecommoditiesinscope Acute:Acutephysicalrisksrefertothoserisksthatare over the period examined. When we look at additional event-driven, including increased severity of extreme variables, including the projected demand for these weather events. raw materials and climate related price impacts, we see upward price pressure on these commodities over the Chronic:Chronicphysicalrisksrefertolonger-term medium to longer-term. shifts in climate patterns that may lead to impacts such as sea level rise or chronic heat waves. Transition Risk Aspartofourassessment,wefirstidentifiedarangeof Transitioning to a lower carbon economy may entail physical climate risks that could potentially impact on extensive policy, legal, technology and market changes. ourbusiness.Thesehazardsincludeforestfire,flooding, Dependingonthenature,speedandfocusofthese drought, extreme wind, and sea level rise. We screened changes, transition risks may pose varying levels of our global manufacturing footprint for exposure to financialandreputationalrisktoorganisations. thesespecificclimatehazardsandthroughthisexercise, The risk of current and emerging regulation is a key prioritised a smaller number of locations for more climate consideration for the Group. This includes detailed review. This deep dive focused on a longer time forthcoming disclosure requirements linked to non- horizonandidentifiedfivelocationsacrossEurope,North financialreporting.Givenitsglobalfootprint,Kerry America and our APMEA region with a higher exposure, willbesubjecttodifferentrequirementsinanumber drivenprimarilybyanincreasedriskofflooding. of jurisdictions and the scope, scale and speed of implementation will pose challenges for all organisations. Our distribution network, which brings in raw materials Among the most prominent policy risks for our business to our sites and delivers product to our customers, is is the expansion of carbon pricing by Governments also subject to potential risk from these climate hazards, as they seek to curtail emissions and meet their primarily extreme weather events impacting the transport commitments under the Paris Agreement. Three of our of goods by sea, road and rail. The assessment of our manufacturing facilities are currently subject to the EU supply chain shows good resilience, albeit there is some and UK emissions trading schemes and the broadening concentration of risk in key locations. The assessment was of their scope, or the introduction of similar pricing completed at a national scale and while this provides a mechanisms in other jurisdictions, could result in a high-levelestimateofpotentialrisk,wecontinuetorefine significantcosttoourbusiness.Inourriskassessment, theapproachandenhancethisquantification. we have modelled carbon price increases to 2030 and considered how direct costs may be impacted if all We also examined how future physical climate changes manufacturing sites were subject to a carbon price by may impact on raw material availability, selecting a this date. 1 International Institute for Applied Systems Analysis (IIASA) and the Food and Agriculture Organization of the United Nations (FAO) GlobalAgro-Ecological Zoning version 4 (GAEZ v4) databases for the period range 1990 –2050 78 Strategic Report Sustainability Review Kerry Group Annual Report 2022 Our assessment of technology risk focuses on the We realise that climate change also represents a transition to clean energy and decarbonisation of significantreputational risk for organisations. Kerry our operations. As industry shifts towards the use of works with the world’s leading food and beverage cleaner technology, it is important that we invest to brands, many of whom have made their own avoid additional costs or reputational impacts that commitments on climate change. They increasingly seek couldaffecttheGroup’scompetitiveness.Aspartof out partners that are aligned with their own objectives ourroadmaptowardsNetZero,wehaveidentifiedkey and who can support them in achieving their targets. levers that will provide us with a pathway to our 2030 This presents an opportunity for Kerry as we deliver on targetsandlonger-termNetZeroambition.Inourrisk our Beyond the Horizon commitments. Conversely, failure assessment, we examined the potential costs associated to take adequate action on climate change could mean with a targeted energy mix and the expected level of a loss of reputation and damage to commercial and investment required to achieve this. other important stakeholder relationships. Given the difficultyinquantifyingreputationalrisk,wehavenot Finally, for market-based risk, we looked at how modelled a quantitative assessment of impact. consumer sentiment may drive a shift towards lower carbon alternatives across food and beverage. From Climate-Related Opportunities our own proprietary research, Sustainability in Motion, Whileclimatechangeposespotentiallysignificantrisks we understand that consumers are seeking out healthier for our industry it also presents potential opportunities products that have a lower, environmental impact. for Kerry Group, particularly as customers seek to 1 Using external data sources and demographic insights, transition to a lower-carbon economy. The climate- we have looked at how this consumer sentiment may related opportunities outlined in the table below shift over time and the potential implications for our representkeyareaswhereweseepotentialbenefitsfor product portfolio. our business, while supporting our customers in their transitionefforts. Opportunity No. Description Time horizon Potential impact | Resource | 1 Impact of energy | | Short - Medium A key lever in the achievement of our 2030 targets | | | --- | --- | --- | --- | --- | | Efficiency | | efficiencyon | | isanongoingfocusonenergyefficiency.Asenergy | | | | operational costs. | | pricevolatilitycontinues,thisincreaseinefficiency | provides an opportunity for reduced energy costs and lower emissions, which helps reduce our exposure to carbon pricing. | Energy Source 2 Impact of | | Medium - Long As we transition to renewable energy sources we can | | | --- | --- | --- | --- | | | decarbonisation | | potentiallybenefitfromlowerenergycostsasfossilfuel | | | on operational costs. | | prices rise due to increased carbon taxes and | non-fossil based energy scales and unit costs reduce. Markets 3 Impact from Short - Medium Kerry’s technology portfolio can also support our growth of lower- customers as they look for alternatives to higher carbon carbon alternatives. inputs. For example, our food waste technologies, liquidsmokeflavoursandplant-basedportfoliooffer emissions reduction opportunities across a range of food and beverage end use markets. Scenario Analysis Methodology We recognise the future consequences of rising We assess the most material physical and transition risks emissions and the impact this could have on the identifiedforKerryGroupundertwoclimatepathways. Group. As a result, we have examined our business Thefirstpathwaylooksatchangeswhichmayoccurif underarangeoffuturescenarios,modellingdifferent global average temperature increases are kept below 2 climate pathways to test the nature and magnitude of two degrees Celsius by 2100 . The second assumes that potential risks and opportunities. emissions continue to increase so that global average temperature increases exceed four degrees Celsius by 3 the end of the century . 1 GreenPrint Business of Sustainability Index 2  AlignswithRepresentativeConcentrationPathway(RCP)2.6 3  AlignswithRepresentativeConcentrationPathway(RCP)8.5 Kerry Group Annual Report 2022 79 Our analysis of physical and transition risk is carried <2⁰ Celsius (RCP 2.6) >4⁰ Celsius (RCP 8.5) out in partnership with an expert third-party, drawing on proprietary risk models along with our own risk In this scenario, planned In this scenario global assessment process to understand the implications of | intervention limits global | average temperatures | | | --- | --- | --- | | average temperature | increasetoover4⁰Celsius | differentclimatescenariosforourbusiness.Forphysical | | increasetobelow2⁰ | by 2100, representing a | risks, we have employed a global climate risk analysis tool | | Celsius by 2100, which | ‘worstcase’outcome | to help assess the potential impact of site damage and | | heightens transition | and a higher degree | business interruption across our operations and transport | | risk and opportunity. | of physical risk. | | routes. For transition risks, we use a global economic model, which incorporates an assessment of the carbon emissions associated with economic activities and the impact of constraining these. Summary of Modelling Approach Extreme Weather Water Stress Physical SeaLevelRise Risk RawMaterialSupply Inputs & Climate Potential Assumptions Scenarios Impacts Carbon pricing Transition Energy Transition Risk and Lower carbon Opportunities alternatives Impact of Climate-Related Issues on Financial Potential Future Impact of Climate-Related Risks Performance and Opportunities While there have been some climate-related impacts Through the use of scenario analysis, we have modelled on supply chains and operations in 2022, these did not potentialfuturefinancialimpactsforourbusiness. haveasignificantimpactonrevenueorcostsinthe While these are helpful in exploring areas of risk, there year. As noted above, three of our manufacturing sites are limitations to the methodology and the number are subject to EU and UK emissions trading schemes, of variables with the potential to impact on future which have experienced an increasing cost of carbon. outcomes creates uncertainty. To overcome this and We continue to focus on reducing emissions at these the gaps in available data, we have made certain locations as part of our broader decarbonisation assumptions about the future of our business and the strategy. Extreme weather events in 2022 have had an context in which it will operate. Where we have done so, impact on some raw material prices, however, the direct we have sought to base these assumptions on credible impactofthisisdifficulttoseparatefromothercost third-party data and expert judgement. drivers, which include the current geopolitical landscape While climate modelling is available to support the and continuing supply chain disruptions. assessment of potential physical risks, the pathway to achieving a lower-carbon economy is highly variable, We see the potential for growth within lower carbon as governments, consumers and industry pursue alternativeproductsasthesecontinuetooffer avarietyofapproachesoverdifferingtimeframes. opportunities. Customers are increasingly seeking to As a result, the modelling of transition pathways is understand the climate impact of their products and particularly challenging, given the lack of certainty how this can be lowered in response to both consumer on the level and timing of any interventions. These demand and their public commitments relating to uncertainties increase over time, making longer emissions reduction. Energy price increases have also termmodellingespeciallydifficultandwhilewehave madecapitalprojectsrelatingtoefficiencyandtheuse examined key transition risks to our business beyond ofcleanerfuelsmorefinanciallyattractive,whichwill 2030, these are not included here, given the theoretical support our ongoing plans for emissions reduction nature of these assessments. The following table across the Group. outlinesthepotentialfinancialimpactassociated with our key climate-related risks and opportunities. The ranges used to indicate the level of impact are cumulative and have been determined with reference totheapproachusedinassessingthesignificanceof financialimpactonourincomestatementandassets. 80 Strategic Report Sustainability Review Kerry Group Annual Report 2022 Inputs and Assumptions Growth It is assumed that Kerry will achieve its medium-term growth targets and a global average growth rate is used thereafter. Manufacturing Footprint It is assumed that the current footprint remains static until 2050 with no additional mitigation measures adopted to minimise climate-related risk. Emissions It is assumed that the Group will achieve its 2030 emissions reduction targets and reachNetZerobefore2050. Climate Data We use climate and economic data provided by expert third parties to model potential physical and transition impacts. Carbon Price Assumed changes in carbon price broadly align with International Energy Agency (IEA)andIntergovernmentalPanelonClimateChange(IPCC)projectionsto2030. Lowornofurtherpolicyinterventionisassumedundera>4Cscenario. Physical Risks | Risks Risk Drivers Impact | | Cumulative | Cumulative | Details | | --- | --- | --- | --- | --- | | | Area | Impact | Impact | | | | | to 2030 | to 2050 | | <2⁰C >4⁰C <2⁰C >4⁰C Physical – The potential Assets Low Low Low Low Our assessment has highlighted a very Acute impact of acute small number of sites globally which have climate hazards higherlevelsofphysicalrisk,specifically such as extreme flooding.Similarly,ourdistribution wind,flooding,etc. network also has some exposure to on manufacturing acute hazards. A conservative approach sites and has been adopted to model risk to this distribution network and a more detailed analysis is Revenue Low Low Low Low channels. expected to evolve the assessment and improvethequantification.Whilefinancial impact is estimated to be low, the level of risks does increase with time and is greaterundera>4⁰Cscenario. Physical - The potential Assets Medium Medium Low Low Our assessment of water stress shows Chronic impact of chronic limited levels of risk across our operations climate hazards for both temperature trajectories. The such as sea sitesidentifiedarewithintheGroup’s level rise and prioritylocationsforwaterriskwithefforts water stress on already underway to manage water use manufacturing at these sites. Two locations globally were sites. identifiedthatcouldbeatincreasedrisk Revenue Low Low Low Low offloodinggivenprojectedsea-levelrise. Thepotentialfinancialimpacttoourassets is estimated to be medium to 2030 and low to 2050 given the thresholds for this extended period, albeit the level of risk increases over time and under the higher temperature scenario. | Physical – | The potential | Cost Low Low N/A N/A Our assessment shows that while there | | | --- | --- | --- | --- | | Chronic | impact of chronic | | may be impacts to yields, overall land | | | climate hazards on | | suitability for selected raw material does | | | the availability of | | notpresentasignificantchallengeby | | | key raw materials. | | 2050. However, the projected demand for | these commodities coupled with climate- related impacts is anticipated to result in upward price pressure over this period. The availability of data inhibits us in making a consistent assessment over the period from 2030 to 2050. It should be noted that this is not a forecast. Scenario analysis is subject to limitations and based on several assumptions. The information above should be viewed accordingly. Kerry Group Annual Report 2022 81 Transition Risks and Opportunities Risk / Risk Drivers Impact Cumulative Impact Details Opportunity Area to 2030 <2⁰C >4⁰C | Policy Introduction of | | Cost Low N/A The increased use of carbon pricing by | | | --- | --- | --- | --- | | | carbon pricing | | regulatorshasthepotentialtosignificantly | | | to constrain | | increase operational costs. We modelled a | | | emissions | | carbonpriceof€130pertonnetakingeffect | | | intensive activities. | | across all our operations by 2030 under the | <2⁰Cscenario(assumingnosuchintervention ina>4⁰Cworld).Theimpactofthiscostis modest compared to the potential for much greater cost increases in the event that a higher carbon price is subsequently required toachieveNetZeroby2050. | Technology Adoption of | | Cost Medium Medium Increased regulatory and stakeholder | | | --- | --- | --- | --- | | | new technology | | pressure creates widespread adoption of | | | to support our | | clean energy technology. The achievement of | | | transition to a low | | Kerry’s 2030 Scope 1 & 2 targets adequately | | | carbon business. | | meets these stakeholder demands, with deep | decarbonisation of sites commencing after this date and capital expenditure requirements rising accordingly. The model assumes a falling cost of renewables while prices increase for fossil-based energy. The rates for this fossil energy rise more substantiallyundera<2⁰Cscenario. Market The opportunity Revenue High High Increased consumer awareness and changing presented by Growth demographics leads to a sustained shift shifting consumer towards environmentally-friendly food and demand. beverage choices. This leads to reduced demand in some markets for carbon intensive productssuchasmeat,butprovidessignificant opportunity for lower carbon alternatives and solutions that help to lower product footprints. This trend is assumed to grow over timeandbecomemoresignificantundera <2⁰Cscenario.Forthequantificationofthis opportunity, we have modelled a limited number of proven lower-carbon solutions aligned with our growth platforms. It should be noted that this is not a forecast. Scenario analysis is subject to limitations and based on several assumptions. The information above should be viewed accordingly. The Impact of Climate Change on Our The useful lives of assets are based on historical Financial Statements experience with similar assets as well as anticipation of future events, which may impact their life, such as We considered the potential impacts of climate change changes in technology or the location of the asset and risks when preparing our Consolidated Financial itsclimate-relatedrisk. Statements and have determined that there is no materialimpactonthefinancialreportingjudgements Resilience of Kerry Group’s Strategy and estimates and as a result there is no impact on the valuations of the Group’s assets and liabilities from these When we review our strategy, taking into consideration risksasat31December2022. differentclimate-relatedscenarios,includinga2°Cor lower scenario, we see a strong level of resilience. Intheimpairmenttestingofgoodwillandindefinite life intangible assets, the impact of some of the Our physical risk assessment has provided valuable climate related scenarios have been considered. The insight into the longer-term risks across our operations Group performed a number of sensitivity scenarios andsupplychainandwhileitidentifiesareasforfurther to incorporate climate-related risks and opportunities focus, it also highlights how our diverse geographic includingimpactsonrevenueandprofitability,future spread of manufacturing facilities and strategy of co- capital expenditure and investments as well as location in proximity to our customers, helps to limit volatilityassociatedwithotherrisksidentified. Kerry’s operational exposure to climate risk in any one 82 Strategic Report Sustainability Review Kerry Group Annual Report 2022 specificregionorgeography.Toensurecontinued supported by an Executive-led steering committee, resilience, we have looked at ways of improving the whichhashelpedtodefineafocusedsetofrisksfor integrationofspecificclimate-relatedriskswithin detailed analysis, as outlined on page 77. business continuity planning for higher risk sites and are examining public policy and action in areas where The Audit Committee is responsible for providing adaptation requires a broader based response. structured and systematic oversight of the Group’s risk management and internal control systems. The Group’s In addition, we have accelerated our response to climate risk assessment process is a coordinated bottom-up changewitha48%reductioninoperationalemissions and top-down group-wide approach that facilitates since our 2017 base year and while water risk is deemed theidentificationandevaluationofrisks,aswellas lowimpact,wecontinuetodriveefficienciesacross assessing how the risks are monitored, managed and ouroperations.Wealsoplaceaspecificfocusonsites mitigated. This process is facilitated by our Internal in areas of water stress and look at additional ways to AuditfunctionandoverseenbytheRiskOversight reduce water withdrawals at these locations. For more Committee. For more on our principal risks and the risk seepage72ofourSustainabilityReview. assessmentprocessseeourRiskManagementReport onpages94-105. For our raw materials, our global sourcing strategy and responsible sourcing commitments will be important to Within our risk management framework, we adopt help manage potential future risks to availability of key an integrated approach to assessing and managing commoditiesasregionalclimaticimpactstakeeffect. climate-related risks across our business and wider While overall land suitability for production is expected valuechain,whichinvolvesadualapproachasfollows: to be maintained, we do acknowledge the potential i) Weinclude‘ClimateChangeandEnvironmental’ for extreme events that could impact on availability. As risk as a standalone principal risk for our business, part of our responsible sourcing programme, we will considering the longer-term systemic nature of the continue to work with our suppliers, helping to ensure risk and the requirements for shorter-term action to that carbon reduction plans are in place alongside mitigate and plan for this. programmes that can help improve the overall resilience of farmers and their communities. ii) We also consider how discrete climate-related impactscanaffectotherriskareasandintegrate Further down the value chain, the breadth and depth climate considerations within additional principal of our portfolio, our diverse customer base and range risks, for example, the potential impacts of extreme of channels helps to reduce the risk associated with weather on raw material availability. anyspecificcategoryormarketsegmentandprovides an opportunity for innovation across multiple end use As part of the Group’s enterprise risk management markets.OurResearch,DevelopmentandApplication framework,wehavedefinedparametersunderwhich strategy is focused on growth platforms that are wequantifypotentialimpact.Thesignificanceof aligned with a low carbon transition and we work as this risk is determined using a standard risk scoring a trusted partner with our customers, co-creating methodology to ensure consistency in reporting and products to meet changing consumer preferences. evaluation of risks. Ourinvestmentininnovationreflectstheimportance of climate action across our customers’ brands and our The Group's risk appetite is agreed annually with the technical capability and extensive portfolio of solutions Board and as a result we seek to minimise climate- strengthens our position as a partner of choice. related risks while ensuring the ongoing success of our business. The management of these climate-related Carbon pricing and technology shifts will continue to risks is undertaken within the function where the risk be important considerations for the Group in delivering may occur, for example, raw material risks are managed on our strategy. Our climate transition plan is critical byprocurement.Anyactionstakenmustbesufficient to managing this potential area of risk and delivering to bring climate risks within the agreed appetite for the on the decarbonisation of our operations in line with GroupandtheChiefOperatingOfficerhasexecutive Kerry’s2030targets,longer-termNetZeroambition responsibility for these mitigations on climate change. and stated climate policy across jurisdictions where we He is supported in this work by the Council structure operate. Focused on key areas of impact, this transition outlined on page 75. plan will continue to evolve for both our operations and supply chain as we make progress on target initiatives In 2022, climate considerations, particularly our key and gain additional insight on low-carbon approaches, climate risks, were also a critical area of focus during particularly across our value chain. dedicated risk reviews with the business. This allowed us to explore how climate-related issues can impact Risk Management on strategies within regions and key functional teams and further assess the controls which are in place. Theidentification,assessmentandmanagement Prioritisation of any additional action is based on of climate-related risks follow the Group’s existing materialityanddefinedbypotentialseverityand risk management framework, however, the time likelihood of the impact. horizons have been extended to allow for the longer- term impacts of climate change. This work has been Kerry Group Annual Report 2022 83 Climate Change Integration across our Principal Risks 1 Portfolio Management 2 Geopolitical, Emerging Markets 1 14 and Macroeconomic Environment 2 13 3 BusinessAcquisitionandDivestiture 4 Climate Change and Environment 3 12 5 BusinessEthicsandSocialResponsibility 6 People 411 7 FoodSafety,QualityandRegulatory 8 Health and Safety 9 Margin Management 10 5 10 Information Systems and Cybersecurity 6 11 Operational and Supply Chain Continuity 9 8 12 Intellectual Property 7 13 Taxation 14 Treasury Denotes where climate-related issues have been considered within the risk assessment. Wealsocontinuetoplanforemergingnon-financial We continue to examine how best to enhance reporting regulations across multiple jurisdictions. disclosures relating to our decarbonisation roadmap The divergence in approaches, scope and timelines andprogresstowardsourNetZeroambition.Wereport acrossdifferentframeworksposeariskforbusinesses on climate metrics to multiple platforms, including and we have engagement with our Board, executive CDPandin2022maintainedourleadershipscore. management and functional teams to ensure they We have completed further work in 2022 to help understand these forthcoming requirements and that identify and quantify our Scope 3 emissions and we the business can respond appropriately. have ongoing engagement with our value chain and expert partners on improving both the accuracy and transparency of our data. Metrics and Targets Our Beyond the Horizon sustainability strategy sets InlinewithTCFDGuidance,wedisclosethefollowing out several important target areas related to climate climate-related metrics which are relevant for our action. Key among these, is our science-based target business,outlininghowtheserelatetospecificareasof for emissions reduction across all scopes by 2030 and climate-related risk and opportunity which have been ourambitiontoachieveNetZerobefore2050.Aspart identified.Formoreinformationonourmetricsand of our transition plan, we have made strong progress targets, including Scope 3 breakdown, boundaries and againstthisgoalwitha48%reductioninabsolute calculationapproachseeour2022SustainabilityReport Scope 1 and 2 emissions in 2022 and the achievement on kerry.com. of our 100% renewable electricity objective three years ahead of our initial target timeframe. ### Denotes where climate-related issues have ### been considered within the risk assessment. 84 Strategic Report Sustainability Review Kerry Group Annual Report 2022 Impact Area Units 2022 2021 Change Key Target Areas Area of Risk / vs 2017 Opportunity Base Year | Scope 1 Tonnes of | | | 460,731 482,055 -10% We have set a science-based goal | | Physical and | | --- | --- | --- | --- | --- | --- | | | CO | 2 e | | for emissions reduction, targeting | Transition | | | | | | a 55% absolute reduction in Scope | Risks(1-7,9) | | Scope 2 Tonnes of | | | 25,415 149,362 -94% | | | 1 and 2 emissions and a 30% CO 2 e reduction in Scope 3 intensity by 2030, versus our 2017 base year. We are also committed to Scope 1 & 2 Tonnes of 486,146 631,417 -48% achievingNetZerobefore2050.We CO 2 e continue to make progress across all scopes in line with our targets. These reductions will ensure we play our part in mitigating the key Scope 3 Tonnes of 9,971,498 10,534,013 0% contributor to the risks which have CO 2 e beenidentifiedforourbusiness. Formoreonoureffortstoreduce emissions see pages 69-70. Renewable % 100% 61% N/A We have an ongoing focus on TransitionRisk Electricity energyefficiencyandincreasing (6-7) the proportion of renewables within our energy mix. We are members ofRE100underwhichweseta | Total | MWh 3,276,271 3,321,922 -2% | target for 100% of our electricity | | --- | --- | --- | | Energy | | to come from renewable sources | | Consumed | | by year end 2025. This shift to | cleaner sources of energy supports our decarbonisation pathway and helps mitigate potential impacts Energy MWh/ 0.95 0.95 -5% associated with carbon prices Intensity tonnes and the shift towards cleaner product technology. For more details on our progress towards clean energy seeour2022SustainabilityReport. Total MWh 921,736 578,097 1388% Renewable Energy Water Megalitres 21,551 22,509 -1% We are focused on increasing water PhysicalRisk Withdrawals (ML) efficiencyacrossourbusinessand (4) are targeting a 15% improvement in Water ML / tonne 6.28 6.45 -5% water intensity by 2025, versus our Intensity product 2017 baseline. We take account of water context in our target setting | Water | Megalitres 3.07 3.15 -12% | processandhaveidentifiedpriority | | --- | --- | --- | | Intensity in | | watersitesforspecificaction. | | High-Risk | | Our focus on water management | | Areas | | across these sites helps us to better | prepare for potential water risks at these locations. While we do not have a separate target across these sites, our average water intensity at these locations was 12% lower versus our 2017 baseline. For more on water use across our operations, seeour2022SustainabilityReport. Kerry Group Annual Report 2022 85 | Responsible | Certified | 100% 100% N/A Inadditiontocertificationand | | Physical and | | --- | --- | --- | --- | --- | | Sourcing: | Volumes | | independent carbon footprinting | Transition(5, | | Dairy | | | across all Irish milk volumes, we have | 8,9) | | (LiquidMilk) | | | launched the Evolve programme to | | incentivise carbon reductions at farm level and improve the resilience of farm enterprises. Targeting a 30% reduction in carbon intensity by 2030, Evolve helps to address risk in the region where it is deployed, provides an industry-leading template for supplier engagement in other regions and delivers less carbon intensive inputs that can meet consumer demand for more sustainable products. | Taste & | % 29.4% 9.2% N/A OurTaste&Nutritionrevenuehas | | Transition | | --- | --- | --- | --- | | Nutrition | | grownby29.4%in2022,supported | Opportunity(3) | | Revenue | | by our growth platforms, which | | | Growth | | include a range of lower-carbon | | solutions within our portfolio. | Remuneration % 20% 20% N/A 20% of executive variable | | Physical and | | --- | --- | --- | | | remuneration is tied to the | TransitionRisk | | | achievement of core sustainability | (1-6) | objectives, including the achievement of the Group’s climate- related targets. Inadditiontotheabovespecifictargetareas,weare Conclusion exploring carbon price mechanisms to aid decision These climate-related disclosures are intended to making within the organisation. assist readers in understanding the potential impacts of climate change on our business over the short, Further details in relation to our climate-related targets medium and long-term. canbefoundintheGroup’s2022SustainabilityReview on page 69. Table of Concordance Pillar TCFD Recommendation Kerry Disclosure (page ref) Governance DescribetheBoard’soversightofclimate-relatedrisksandopportunities 74-75 Describemanagement’sroleinassessingandmanagingclimate-relatedrisksand 75-76 opportunities Strategy Describetheclimate-relatedrisksandopportunitiestheorganisationhasidentifiedover 77-78 the short, medium, and long-term Describetheimpactofclimate-relatedrisksandopportunitiesontheorganisation’s 78-81 businesses,strategy,andfinancialplanning Describetheresilienceoftheorganisation’sstrategy,takingintoconsiderationdifferent 81-82 climate-relatedscenarios,includinga2°Corlowerscenario Risk Describetheorganisation’sprocessesforidentifyingandassessingclimate-relatedrisks 76, 82 Describetheorganisation’sprocessesformanagingclimate-relatedrisks 82 Describehowprocessesforidentifying,assessing,andmanagingclimate-relatedrisksare 82-83 integrated into the organisation’s overall risk management Metrics and Disclosethemetricsusedbytheorganisationtoassessclimate-relatedrisksand 83-85 Targets opportunities in line with its strategy and risk management process DiscloseScope1,Scope2,and,ifappropriate,Scope3greenhousegas(GHG)emissions, 84 and the related risks Describethetargetsusedbytheorganisationtomanageclimate-relatedrisksand 84-85 opportunities and performance against targets 86 Strategic Report Sustainability Review Kerry Group Annual Report 2022 ## EU Taxonomy Background To meet the EU’s climate and energy targets for 2030 and reach the objectives of theEuropeanGreenDeal,theEuropeanCommissionestablishedanactionplanto direct investments towards sustainable projects and activities. Under this action plantheEUhasdefinedataxonomyofsustainableactivities. TheEUTaxonomy(Regulation(EU)2020/852,the‘TaxonomyRegulation’)andthe supplementaryDelegatedRegulationC(2021)4987wasintroducedtoincrease the level of transparency on environmental information through a common classificationsystemforenvironmentallysustainableeconomicactivities. At present, the EU Taxonomy does not cover all industries and its sustainable classificationcriteriaisnotyetapplicabletoKerry’songoingcorebusinessactivities. In the following section, the Group has outlined the extent to which some limited activitiesareeligibleandalignedunderthefirsttwoenvironmentalobjectives; climate change mitigation and climate change adaptation as set out in Commission DelegatedRegulation(EU)2021/2139(ClimateDelegatedAct)andCommission DelegatedRegulation(EU)2022/1214(ComplementaryClimateDelegatedAct). Forthe2022financialyear,onlythesetwoenvironmentalobjectivesareinscope for reporting. An expansion in the scope of the EU Taxonomy is expected in 2023, as the remaining fourenvironmentalobjectivescomeintoscope(sustainableuseandprotectionof water and marine resources, transition to a circular economy, pollution prevention andcontrol,protectionandrestorationofbiodiversityandecosystems).Weare preparingforexpandeddisclosuresastheregulationtakeseffect. Kerry Group Annual Report 2022 87 EU Taxonomy | 6 | 1 | | --- | --- | | Protection and | Climate | | restoration of | change | | biodiversity | mitigation | and ecosystems | 5 | | 2 | | | --- | --- | --- | --- | | | Six | | Applicable for 2022 | | Pollution | | Climate | | Environmental | prevention | | change | | | --- | --- | --- | --- | | | Objectives | | 1 Climate change mitigation | | and control | | adaptation | | 2 Climate change adaptation | 4 | 3 | | --- | --- | | Transition | Sustainable use | | to a circular | and protection | | economy | of water | and marine resources for climate adaptation, we assessed against the criteria Economic Activities 1 outlined in Appendix A to the Annex including the The disclosure requirements cover Kerry’s global physical climate risk assessment of our sites. For do no activities. Our core business involves the manufacture significantharmforpollutionprevention,weassessed of food and beverage products, which is not currently 1 against the criteria in Appendix C to the Annex , as these in scope of the EU Taxonomy. were the requirements for this activity. In 2022, we assessed our activities for eligibility to see The evaluation of eligibility and alignment was whether the Group’s turnover, Operating Expenditure conducted by a cross functional working group, (OpEx)orCapitalExpenditure(CapEx)correspondto includingtheSustainabilityReportingTeam,Engineering an economic activity that is described in the Climate andResearch,Development&Application(RD&A)teams. DelegatedAct.Ourassessmentdeterminedthatour The evaluation process allocated projects to distinct Taxonomy-eligibleactivitieswereallclassifiedunder categories to avoid double counting in the numerator climatechangemitigation,reflectingactivitiesbeing across economic activities in the turnover, OpEx and taken in line with our Beyond the Horizon strategy. CapExKeyPerformanceIndicators(KPIs). As we allocated our business activities to only one environmental objective, we avoided double counting The KPIs calculated and disclosed in the tables below in the two environmental objectives that are in scope. indicate the proportion of turnover, OpEx and CapEx inthefollowingcategories: Once we determined the eligible activities, we assessed each activity for alignment. For each activity, we  Taxonomy-aligned:Activitythatisdescribedinthe considered the technical screening criteria as described ClimateDelegatedActandmeetsalloftheTechnical intheClimateDelegatedAct.Wedeterminedthe ScreeningCriteria(substantialcontributionand activities that made a substantial contribution to at least donosignificantharm)aswellascomplyingwith oneenvironmentalobjectiveandthatdidnosignificant minimum safeguards harm to any of the other environmental objectives along with compliance with minimum safeguards. The  Taxonomy-eligiblebutnotTaxonomy-aligned:Activity assessment of compliance against minimum safeguards thatisdescribedintheClimateDelegatedActand leverages policies such as our Group Code of Conduct does not meet the Technical Screening Criteria or and established processes across the Group. does not comply with minimum safeguards Using the EU Taxonomy Compass, we assessed all our  Taxonomy-non-eligible:Anactivitythatisnot Taxonomy-eligibleprojectsagainstspecificTaxonomy- describedintheClimateDelegatedAct alignment criteria for each activity. For example, for the We also assessed activities against the Complementary activity installation, maintenance and repair of energy ClimateDelegatedActandhavenotcompleted efficiencyequipment,undersubstantialcontribution templates 1 to 5 as none of the activities listed in criteria for climate mitigation, we assessed against the this Act are applicable to Kerry. energyefficiencycriteria.Fordonosignificantharm 1 CommissionDelegatedRegulation(EU)2021/2139 88 Strategic Report Sustainability Review Kerry Group Annual Report 2022 The manufacture of food and beverage products was Accounting Policies deemed non-eligible as these activities are currently not in scope under the EU Taxonomy. We conducted Turnover a deeper review of our turnover with cross functional The denominator used for the turnover KPI is based on support and input from the Group’s Chief Science and the total revenue recognised pursuant to International TechnologyOfficeragainsttheeconomicactivities AccountingStandard(IAS)1,paragraph82(a)as includedintheEUTaxonomyRegulation.This reported in the Consolidated Income Statement on page assessmentshowednoeligibleturnover(numerator) 180. For further details on Kerry's revenue accounting and therefore we established the Taxonomy-eligible policy,seeNote1oftheFinancialStatements.In turnovertobe0%in2022(0%in2021). determining the KPIs for turnover, the share that is Taxonomy-aligned(numerator)andTaxonomy-eligible As no activities were deemed Taxonomy-eligible, butnotTaxonomy-aligned(numerator)iseachdivided there is no requirement to assess alignment. by the denominator. Proportion of turnover from products or services associated with Taxonomy-aligned economic activities ### Substantial contribution criteria DNSHcriteria (‘DoesNotSignificantlyHarm’) Circulareconomy(8) | | | | | | | | | | Water and marine | | | | | | | | Water and marine | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Climate change | Climate change | | | | ecosystems(10) Biodiversity and | | Climate change | adaptation(12) | Climate change | | | | | ecosysmets(16) | Biodiversity and | safeguards(17) | | Taxonomy- | Taxonomy- | Category | Category | | | | | | | | | adaptation(6) | | | | | mitigation(11) | | | | resources(13) | | economy(14) | | | | | | | | | | | | | | | Proportion of | mitigation(5) | | | resources(7) | | | | | | | | | | | Pollution(15) | | | | | | | | | | | turnover(3) | | turnover(4) | | | | | | | Pollution(9) | | | | | | | | | | | | | | aligned | aligned | (enabling | (transitional | | Codes(2) | | Absolute | | | | | | | | | | | | | | | | | | | | | Minimum | | | | | Circular proportion proportion activityor) activity) of turnover, of turnover, (20) (21) EconomicActivities(1) yearN(18) year N-1(19) €'m % % % % % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N Percent Percent E T A. TAXONOMY-ELIGIBLE ACTIVITIES A.1 Environmentally sustainable activities (Taxonomy-aligned) Activity 1 - 0.0% 0% 0% 0.0% Turnover of environmentally sustainable activities - 0.0% 0% 0% 0.0% (Taxonomy aligned) (A.1) A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Activity 1 - 0.0% Turnover of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) - 0.0% Total (A.1 + A.2) - 0.0% 0.0% TAXONOMY-NON-ELIGIBLE ACTIVITIES TurnoverofTaxonomy-non-eligibleactivities(B) 8,771.9 100.0% Total (A+B) 8,771.9 100.0% Kerry Group Annual Report 2022 89 EU Taxonomy - Reference 2022 Turnover to Financial Statements €m Consolidated Revenue Income Statement 8,771.9 Turnover denominator 8,771.9 ### Substantial contribution criteria DNSHcriteria (‘DoesNotSignificantlyHarm’) Circulareconomy(8) | | | | | | | | | | | Water and marine | | | | | | | | | Water and marine | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Climate change | | Climate change | | | | ecosystems(10) | Biodiversity and | | Climate change | adaptation(12) | Climate change | | | | | ecosysmets(16) | Biodiversity and | safeguards(17) | | Taxonomy- | Taxonomy- | Category | Category | | | | | | | | | adaptation(6) | | | | | | | mitigation(11) | | | | resources(13) | | economy(14) | | | | | | | | | | | | | | | Proportion of | mitigation(5) | | | | resources(7) | | | | | | | | | | | | Pollution(15) | | | | | | | | | | | turnover(3) | | turnover(4) | | | | | | | | Pollution(9) | | | | | | | | | | | | | | | aligned | aligned | (enabling | (transitional | | Codes(2) | | Absolute | | | | | | | | | | | | | | | | | | | | | | | Minimum | | | | | Circular proportion proportion activityor) activity) of turnover, of turnover, (20) (21) EconomicActivities(1) yearN(18) year N-1(19) €'m % % % % % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N Percent Percent E T A. TAXONOMY-ELIGIBLE ACTIVITIES A.1 Environmentally sustainable activities (Taxonomy-aligned) Activity 1 - 0.0% 0% 0% 0.0% Turnover of environmentally sustainable activities - 0.0% 0% 0% 0.0% (Taxonomy aligned) (A.1) A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Activity 1 - 0.0% Turnover of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) - 0.0% Total (A.1 + A.2) - 0.0% 0.0% TAXONOMY-NON-ELIGIBLE ACTIVITIES TurnoverofTaxonomy-non-eligibleactivities(B) 8,771.9 100.0% Total (A+B) 8,771.9 100.0% 90 Strategic Report Sustainability Review Kerry Group Annual Report 2022 We conducted a review of our OpEx against the Operating Expenditure Taxonomy requirements with our Integrated Operations The denominator for OpEx consists of direct non- and Engineering teams. We determined that, as the capitalised costs that relate to research and development majority of our costs related to turnover, the eligibility (asrecognisedasanexpenseinourconsolidated of activities for OpEx would be low. incomestatementasstatedinNote3totheFinancial Statements),buildingrenovationmeasures,short- Forthoseactivitieswhichwereidentifiedasbeingeligible, term leases, maintenance and repair and other direct OpEx was then assessed for alignment against the expenditures relating to the day-to-day servicing of technical screening criteria and minimum safeguards. assets of property, plant and equipment which includes internal and external people cost for our engineering The Taxonomy-aligned and Taxonomy-eligible but teamswhomaintainbuildingsandequipment(as not Taxonomy-aligned numerator included OpEx includedinothergeneraloverheadsandstaffcosts 1 related to Taxonomy activities as set out in the inNote3totheFinancialStatements). OpExKPITableincluding: Proportion of operating expenditure from products or services associated with Taxonomy-aligned economic activities Substantial contribution criteria DNSHcriteria (‘DoesNotSignificantlyHarm’) Circulareconomy(8) | | | | | | | | | | | Water and marine | | | | | | | | Water and marine | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Climate change | | Climate change | | | | ecosystems(10) Biodiversity and | | Climate change | adaptation(12) | Climate change | | | | | | ecosysmets(16) | Biodiversity and | safeguards(17) | | Taxonomy- | Taxonomy- | Category | | Category | | | | | | | | | | adaptation(6) | | | | | | mitigation(11) | | | | resources(13) | | economy(14) | | | | | | | | | | | | | | | | | | Proportion of | mitigation(5) | | | | resources(7) | | | | | | | | | | | | Pollution(15) | | | | | | | | | | | | | | | | | | | | | | | Pollution(9) | | | | | | | | | | | | | | | aligned | aligned | (enabling | | (transitional | | | Codes(2) | | Absolute | | | | | | | | | | | | | | | | | | | | | | | Minimum | | | | | | | | | OpEx(3) | | OpEx(4) | | | | | | | | | | | | | | | | | Circular | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | proportion | proportion | activityor) | | activity) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | of OpEx, | of OpEx, | | (20) | | (21) | EconomicActivities(1) yearN(18) year N-1(19) €'m % % % % % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N Percent Percent E T A. TAXONOMY-ELIGIBLE ACTIVITIES A.1 Environmentally sustainable activities (Taxonomy-aligned) 7.3 Installation, maintenance and repair 7.3 0.4 0.1% 100% 0% Y - - Y - Y 0.1% E - ofenergyefficiencyequipment OpEx of environmentally sustainable activities 0.4 0.1% 100% 0% 0.1% 0.1% (Taxonomy aligned) (A.1) A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) 6.5 Transport by motorbikes, passenger cars and 6.5 1.0 0.2% light commercial vehicles 7.3 Installation, maintenance and repair of 7.3 7.1 1.1% energyefficiencyequipment OpEx of Taxonomy-eligible but not 8.1 1.3% environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) Total (A.1 + A.2) 8.5 1.4% 0.1% 0.1% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES OpExofTaxonomy-non-eligibleactivities(B) 638.7 98.6% Total (A+B) 647.2 100.0% Kerry Group Annual Report 2022 91 6.5 transport by motorbikes, passenger 2022 cars and light commercial vehicles EU Taxonomy - Operating Expenditure €m 7.3 installation, maintenance and repair Research&developmentcosts 303.2 ofenergyefficiencyequipment Short-term leases 3.7 The Taxonomy-aligned numerator all relates to 170.3 Maintenance and repairs costs captured within maintenance and repairs Other direct expenditures 170.0 in the denominator. Operating Expenditure denominator 647.2 Taking the Taxonomy-aligned and Taxonomy- eligible but not Taxonomy-aligned numerator over the denominator, we assessed Taxonomy-aligned activities at 0% and Taxonomy-eligible but not Taxonomy-aligned activities as 1%. Substantial contribution criteria DNSHcriteria (‘DoesNotSignificantlyHarm’) Circulareconomy(8) | | | | | | | | | | | Water and marine | | | | | | | | | Water and marine | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Climate change | | Climate change | | | | ecosystems(10) | Biodiversity and | | Climate change | adaptation(12) | Climate change | | | | | | ecosysmets(16) | Biodiversity and | safeguards(17) | | Taxonomy- | Taxonomy- | Category | | Category | | | | | | | | | | adaptation(6) | | | | | | | mitigation(11) | | | | resources(13) | | economy(14) | | | | | | | | | | | | | | | | | | Proportion of | mitigation(5) | | | | resources(7) | | | | | | | | | | | | | Pollution(15) | | | | | | | | | | | | | | | | | | | | | | | Pollution(9) | | | | | | | | | | | | | | | | aligned | aligned | (enabling | | (transitional | | | Codes(2) | | Absolute | | | | | | | | | | | | | | | | | | | | | | | | Minimum | | | | | | | | | OpEx(3) | | OpEx(4) | | | | | | | | | | | | | | | | | | Circular | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | proportion | proportion | activityor) | | activity) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | of OpEx, | of OpEx, | | (20) | | (21) | EconomicActivities(1) yearN(18) year N-1(19) €'m % % % % % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N Percent Percent E T A. TAXONOMY-ELIGIBLE ACTIVITIES A.1 Environmentally sustainable activities (Taxonomy-aligned) 7.3 Installation, maintenance and repair 7.3 0.4 0.1% 100% 0% Y - - Y - Y 0.1% E - ofenergyefficiencyequipment OpEx of environmentally sustainable activities 0.4 0.1% 100% 0% 0.1% 0.1% (Taxonomy aligned) (A.1) A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) 6.5 Transport by motorbikes, passenger cars and 6.5 1.0 0.2% light commercial vehicles 7.3 Installation, maintenance and repair of 7.3 7.1 1.1% energyefficiencyequipment OpEx of Taxonomy-eligible but not 8.1 1.3% environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) Total (A.1 + A.2) 8.5 1.4% 0.1% 0.1% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES OpExofTaxonomy-non-eligibleactivities(B) 638.7 98.6% Total (A+B) 647.2 100.0% 1  CommissionDelegatedRegulation(EU)2021/2139 92 Strategic Report Sustainability Review Kerry Group Annual Report 2022 7.1 construction of new buildings Capital Expenditure 7.2 renovation of existing buildings to improve The denominator used for the CapEx KPIs in 2022 is existing manufacturing facilities calculated as additions and businesses acquired for property,plantandmachinery(IAS16),leases(IFRS16) 7.3 installation, maintenance and repair of andintangibleassets(IAS38)asreportedinNotesto energyefficiencyequipment theFinancialStatements11(i),11(ii)and12onpages  7.4installation,maintenanceandrepairof 205-212.Asdefinedinthetaxonomy,Goodwillisnot charging stations for electric vehicles in buildings included in the CapEx KPI. and parking spaces attached to buildings 7.5 installation, maintenance and repair of instruments The Taxonomy-aligned and Taxonomy-eligible but and devices for measuring, regulation and controlling not Taxonomy-aligned numerator includes CapEx | | 1 | | energy performance of buildings, and | | --- | --- | --- | --- | | related to Taxonomy activities | as set out in the | | | | CapExKPItableincluding: | | 7.7 acquisition and ownership of buildings | | 6.5 transport by motorbikes, passenger cars and light commercial vehicles Proportion of capital expenditure from products or services associated with Taxonomy-aligned economic activities Substantial contribution criteria DNSHcriteria (‘DoesNotSignificantlyHarm’) Circulareconomy(8) | | | | | | | | | | | | Water and marine | | | | | | | | | Water and marine | | | | | | | | Taxonomy- | Taxonomy- | | Category | | Category | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | Climate change | | Climate change | | | | ecosystems(10) | Biodiversity and | | Climate change | adaptation(12) | Climate change | | | | | | ecosysmets(16) | Biodiversity and | safeguards(17) | | | | | | | | | | | | | | | | | | adaptation(6) | | | | | | | mitigation(11) | | | | resources(13) | | economy(14) | | | | | | | | | | | | | | | | | | | | Proportion of | mitigation(5) | | | | resources(7) | | | | | | | | | | | | | Pollution(15) | | | | | | | | | | | | | | | | | | | | | | | | | Pollution(9) | | | | | | | | | | | | | | | | aligned | | aligned | (enabling | | (transitional | | | | Codes(2) | CapEx(3) | Absolute | CapEx(4) | | | | | | | | | | | | | | | | | | | | | | | Minimum | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Circular | | | | | | proportion | proportion | | activityor) | | activity) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | of CapEx, | of CapEx, | | | (20) | | (21) | | EconomicActivities(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | yearN(18) | | year | | | | | N-1(19) €'m % % % % % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N Percent Percent E T A. TAXONOMY-ELIGIBLE ACTIVITIES A.1 Environmentally sustainable activities (Taxonomy-aligned) 7.2Renovationofexistingbuildings 7.2 1.5 0.4% 100% 0% Y Y Y Y - Y 0.4% - T 7.3 Installation, maintenance and repair of 7.3 10.1 2.3% 100% 0% Y - - Y - Y 2.3% E - energyefficiencyequipment 7.4Installation,maintenanceandrepairofcharging 7.4 0.0 0.0% 100% 0% Y - - - - Y 0.0% E - stationsforelectricvehiclesinbuildings(andparking spacesattachedtobuildings) 7.5 Installation, maintenance and repair of 7.5 0.1 0.0% 100% 0% Y - - - - Y 0.0% E - instruments and devices for measuring, regulation and controlling energy performance of buildings CapEx of environmentally sustainable activities 11.7 2.7% 100% 0% 2.7% 2.3% 0.4% (Taxonomy aligned) (A.1) A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) 6.5 Transport by motorbikes, passenger cars and 6.5 3.5 0.8% light commercial vehicles 7.1 Construction of new buildings 7.1 12.5 2.9% 7.2Renovationofexistingbuildings 7.2 6.5 1.5% 7.3 Installation, maintenance and repair of energy 7.3 19.5 4.4% efficiencyequipment 7.7 Acquisition and ownership of buildings 7.7 54.4 12.4% CapEx of Taxonomy-eligible but not 96.4 22.0% environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) Total (A.1 + A.2) 108.1 24.7% 2.7% 2.3% 0.4% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES CapExofTaxonomy-non-eligibleactivities(B) 330.6 75.3% Total (A+B) 438.7 100.0% Kerry Group Annual Report 2022 93 | The Taxonomy-aligned CapEx numerator only consists | | Reference | | | --- | --- | --- | --- | | of property, plant and equipment additions, right of | EU Taxonomy - | to Financial | 2022 | | | Capital Expenditure | Statements | €m | use asset additions and intangible asset additions. Property, plant and equipment - Additions Note11i 213.8 Comparing the Taxonomy-aligned and Taxonomy- | eligible but not Taxonomy-aligned capital additions | Property, plant and | | | --- | --- | --- | | (numerator)toouradditionsandbusinessesacquired | equipment - Businesses acquired Note11i | 46.1 | | of property, plant and equipment, right of use assets | | 43.0 | Rightofuseassets-Additions Note11ii andintangibleassets(denominator),theproportion Rightofuseassets- of Taxonomy-aligned activities is 3%, Taxonomy- Businesses acquired Note11ii 0.3 eligible but not Taxonomy-aligned is 22% in 2022. Intangible assets - Additions Note12 12.2 (Taxonomy-eligibleCapExof24%wasreportedin 2021 which excludes businesses acquired; 15% Intangible assets - Businesses acquired - includingbusinessesacquired). Brand related intangibles Note12 122.8 Intangible assets - Businesses acquired - Computer software Note12 0.5 Capital Expenditure denominator 438.7 Substantial contribution criteria DNSHcriteria (‘DoesNotSignificantlyHarm’) Circulareconomy(8) | | | | | | | | | | | | Water and marine | | | | | | | | | Water and marine | | | | | | | | Taxonomy- | Taxonomy- | | Category | | Category | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | Climate change | | Climate change | | | | ecosystems(10) | Biodiversity and | | Climate change | adaptation(12) | Climate change | | | | | | ecosysmets(16) | Biodiversity and | safeguards(17) | | | | | | | | | | | | | | | | | | adaptation(6) | | | | | | | mitigation(11) | | | | resources(13) | | economy(14) | | | | | | | | | | | | | | | | | | | | Proportion of | mitigation(5) | | | | resources(7) | | | | | | | | | | | | | Pollution(15) | | | | | | | | | | | | | | | | | | | | | | | | | Pollution(9) | | | | | | | | | | | | | | | | aligned | | aligned | (enabling | | (transitional | | | | Codes(2) | CapEx(3) | Absolute | CapEx(4) | | | | | | | | | | | | | | | | | | | | | | | Minimum | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Circular | | | | | | proportion | proportion | | activityor) | | activity) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | of CapEx, | of CapEx, | | | (20) | | (21) | | EconomicActivities(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | yearN(18) | | year | | | | | N-1(19) €'m % % % % % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N Percent Percent E T A. TAXONOMY-ELIGIBLE ACTIVITIES A.1 Environmentally sustainable activities (Taxonomy-aligned) 7.2Renovationofexistingbuildings 7.2 1.5 0.4% 100% 0% Y Y Y Y - Y 0.4% - T 7.3 Installation, maintenance and repair of 7.3 10.1 2.3% 100% 0% Y - - Y - Y 2.3% E - energyefficiencyequipment 7.4Installation,maintenanceandrepairofcharging 7.4 0.0 0.0% 100% 0% Y - - - - Y 0.0% E - stationsforelectricvehiclesinbuildings(andparking spacesattachedtobuildings) 7.5 Installation, maintenance and repair of 7.5 0.1 0.0% 100% 0% Y - - - - Y 0.0% E - instruments and devices for measuring, regulation and controlling energy performance of buildings CapEx of environmentally sustainable activities 11.7 2.7% 100% 0% 2.7% 2.3% 0.4% (Taxonomy aligned) (A.1) A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) 6.5 Transport by motorbikes, passenger cars and 6.5 3.5 0.8% light commercial vehicles 7.1 Construction of new buildings 7.1 12.5 2.9% 7.2Renovationofexistingbuildings 7.2 6.5 1.5% 7.3 Installation, maintenance and repair of energy 7.3 19.5 4.4% efficiencyequipment 7.7 Acquisition and ownership of buildings 7.7 54.4 12.4% CapEx of Taxonomy-eligible but not 96.4 22.0% environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) Total (A.1 + A.2) 108.1 24.7% 2.7% 2.3% 0.4% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES CapExofTaxonomy-non-eligibleactivities(B) 330.6 75.3% Total (A+B) 438.7 100.0% 1 CommissionDelegatedRegulation(EU)2021/2139 94 Strategic Report RiskManagementReport 94 Strategic Report Sustainability Review KerryGroupAnnualReport2022 Kerry Group Annual Report 2022 ## Risk Management Report ### Managing risk and uncertainty ### is integral to the successful delivery ### of our strategy and supports our ### desire to grow a sustainable and ### resilient business. Risk Management Approach and Governance Effectiveriskmanagementsupportsthedeliveryof The Board is ultimately responsible for the management our strategic objectives and the sustainable growth of risk and for aligning with management on the Group’s of our business. risk appetite. On an annual basis, the Board agrees the principal and emerging risks facing the Group and a We regularly face business uncertainties, and it is robust risk management governance framework is in through a structured approach to risk placewhichenablestheGrouptoeffectivelyprioritise management that we are able to proactively respond and manage risk to within our risk appetite levels. The to, mitigate and manage these risks and embrace Boardcarriesoutareviewoftheeffectivenessofthe opportunitiesastheyarise.Despiteongoingchallenges, Group’s risk management and internal control systems such as increased geopolitical uncertainty triggered by at least annually. the invasion of Ukraine and a turbulent macroeconomic environment, our performance continues to highlight The Group’s risk management governance framework the resilience of our people, our business model and our hasbeendesignedusingathreelinesofdefence(3LOD) proven track record of delivery through uncertainty. model which has been implemented to ensure there is clear ownership and delegation of responsibility for Thediversifiednatureofouroperationsand the management and oversight of risk to support the geographical footprint, together with our broad appropriateflowofinformationthroughouttheGroup. portfolio of products, customers and suppliers are important factors in mitigating the risk of a material An overview of the Group’s risk management threat to the Group’s sustainable growth and long-term governance structure along with the key responsibilities shareholder value. However, as with any business, risks within it is outlined in the diagram on page 95. and uncertainties are inherent in our business activities andmayhaveasignificantfinancial,operationalor reputational impact. Kerry Group Annual Report 2022 95 Our Risk Management Governance Framework Board of Directors The Board has overall responsibility to ensure that appropriate risk management and internal control systems, designed to identify, manage and mitigate risks which may impact the achievement of the Group’s strategic objectives are in place. The Board also ensures 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. Audit Committee ResponsibilityhasbeendelegatedtotheAuditCommitteebytheBoardtoprovidestructuredandsystematic oversight of the Group’s risk management and internal control systems. It reviews and monitors 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 131-136 for a description of the risk management activities conducted by the Audit Committee in 2022. 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.TheROCmaintainstheGroupriskregisterandprovidesregularupdates on changes in the principal or emerging risks to the Audit Committee and the Board. Executive Management Executivemanagementisresponsiblefortheeffectiveoperationofinternalcontrols,designedtomanage and mitigate the Group’s principal risks and uncertainties. The 3LOD model ensures accountability for risk management is embedded into global processes and procedures. Key management committees support risk management including the Group Finance Committee, the ICT Security Steering Committee, the Business Integrity Committee, the Global Sustainability Council, and the Quality, Safety, Health and Environment Leadership Team. | | | 1st LINE OF DEFENCE: | | | 2nd LINE OF DEFENCE: | | 3rd LINE OF DEFENCE: | | --- | --- | --- | --- | --- | --- | --- | --- | | | Operational Management is | | | Group functional teams ensure | | Group Internal Audit function | | | responsibleforriskidentification, | | | | | thefirstlineisoperatingas | | along with other external | | | managing the internal control | | | designed, manage performance | | assurance providers perform | | | | environment and monitoring | | | | reviews, internal control | | reviews which provide | | | changesintheriskprofileof | | | verificationsandfacilitaterisk | | independent assurance over | | | | | | the Group. | | assessments. This includes | the operation of the internal | | | | | | | the Quality, Health & Safety, | | | control framework, risk | | | | | | Information & Cyber Security, | | management systems and | | | | | | | | Legal and Financial Control | | governance processes. | functions. 96 Strategic Report RiskManagementReport Kerry Group Annual Report 2022 Enterprise Risk Management (ERM) Process OurERMprocessisembeddedacrosstheGroupto support the delivery of our strategic objectives, and our annual risk assessment is an integral part of this process. ### This risk assessment incorporates a group-wide top down Identify Risk and bottom up evaluation to determine the likelihood ### & Assess Appetite 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theyareidentified Monitor Manage / and assessed. A standard risk scoring methodology has ### & Report Mitigate 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theROCandtheBoardconsideredthe The annual Board and Audit Committee agendas include Group’s principal risks in the context of our risk appetite. a series of updates from executive risk owners in relation Whilst our appetite for risk will vary over time, in general to the Group’s principal risks. These deep dive updates we maintain a balanced approach to risk, considering include the history of the risk to date, key mitigating ourriskappetiteacrossfivecategoriesvaryingfrom actions and controls, an outline of the residual risk and any risk averse to risk seeking. Our approach is to minimise future actions planned to address perceived or potential exposuretoreputational,financialandoperationalrisk, control weaknesses. while accepting and recognising a risk and reward trade- offinpursuitofourstrategicandcommercialobjectives. The Audit Committee also receive regular updates on riskmanagementandinternalcontroleffectiveness As a world-leading provider of taste and nutrition solutions fromtheHeadofInternalAudit(HIA)alongwithagreed for the food, beverage and pharmaceutical markets, the mitigatingactionstoresolveanyweaknessesidentified. integrity of our business is critical and cannot be put at risk. Consequently, we have a zero tolerance for risks that The Audit Committee and Board formally approved the could harm our people, impact food safety or result in principal risks and associated risk appetites and have non-compliance with laws and regulations. Conversely, confirmedintheCorporateGovernanceReportonpage we operate in a challenging and highly competitive 130 that a robust assessment of the Group’s principal market place and as a result, recognise that strategic, and emerging risks was completed, including those commercial and investment risks will be required to risks that could threaten the business model, future seize opportunities and deliver business results. We performance, solvency or liquidity of the Group. arethereforepreparedtomakecertainfinancialand operational investments in pursuit of growth objectives, Principal and Emerging Risks acceptingtheriskthattheanticipatedbenefitsfrom Thetableonpages98-104describestheprincipalrisks these investments may not always be fully realised. Our and uncertainties, which the Board has determined acceptance of risk is subject to ensuring that potential could impact the achievement of strategic objectives benefitsandrisksarefullyunderstoodandappropriate andhavebeenidentifiedthroughtheriskassessment measures to mitigate those risks are established. process, as well as the mitigating actions in place and an updateonanychangeintheprofileofeachriskduring Each of the Group’s principal risks is assigned an the year. Additionally, each risk has been linked to our executive owner who is responsible for ensuring Value Creation Framework as outlined in the Strategic mitigatingactionsaresufficienttobringriskstowithin Reportonpages32-35.Theserisksformthebasis theagreedappetiteandthe3LODmodelensuresthat of Board and Audit Committee communications and these mitigations and internal controls are embedded discussions. andoperateeffectivelythroughouttheorganisation. Kerry Group Annual Report 2022 97 This table presents the Board’s view of the Group’s Changes to our Principal Risks principal risks and uncertainties and is not an exhaustive Whiletherehasbeennosignificantchangeinthe list of all the risks which may impact the Group. There are principal risks in the last year, the Group operates in a additional risks which are not yet considered material, dynamic environment where risks continue to evolve and or which are not yet known to the Board, which could the Group continues to develop mitigation measures to becomesignificantinthefuture.Likewise,someofthe address them. current risks may reduce in importance as management actions are implemented or changes in the operating WhilsttheworsteffectsoftheCOVID-19pandemic environment occur. The Board will continue to monitor have subsided, the Group continued to see the impacts risk in the context of relevant factors such as an increased in some markets, particularly China, where localised level of geopolitical and macroeconomic uncertainty, restrictions during the year resulted in some disruption theongoingimpactoftheCOVID-19pandemicinsome to supply chains and impacted customer demand. markets, growth through geographic expansion and As in previous years, we prioritised protecting the safety ongoing acquisitions, as well as other changes in the and wellbeing of our people at all times and worked with external environment, which may create future risks. our customers to support them as they navigated the disruption caused by the restrictions. Climate Risk TheBoardrecognisesthesignificantrisksposedby Theglobalinflationaryenvironmenthasbeenamplified climate change and in line with the Task Force on by the geopolitical volatility caused by the invasion of Climate-relatedFinancialDisclosures(TCFD)reporting Ukraine. This has resulted in macroeconomic uncertainty requirements, the Group has considered climate-related insomeofthemarketsinwhichweoperate,andinflation impactsoveranumberoftimehorizonsanddifferent has adversely impacted energy pricing, commodity temperature pathways as outlined on pages 80-81. costs and supply chains. As a result, we have extended the scope of Geopolitical/Emerging Markets risk to Overthelasttwoyearsasignificantprogrammeofwork incorporate Macroeconomic Environment risk. Our has been completed, guided by an Executive-led steering management teams are closely monitoring the situation committee, to assess the impact of climate risk for the and continue to demonstrate agility and an ability to take Group. This assessment focused on both physical risks, appropriate mitigating actions to secure raw materials, associated with either acute or chronic climate driven maintain production and provide a reliable supply to our events, and transition risks associated with the shift to a customers. We have worked closely with our customers lower carbon economy. Given the nature of these risks tomanagethesignificantinflationaryenvironmentand theywereconsideredfromashort-term(fiveyears), continuetosupportthemindevelopingtheirofferingsto medium-term(c.2030)andlonger-term(upto2050) meet the rapidly evolving marketplace. perspective. The approach is integrated with the overall GroupERMprocessandriskswereassessedonthebasis Emerging Risks of likelihood, impact and velocity. Emerging risks are considered as part of the risk assessmentprocessandareidentifiedthroughhorizon The focus in 2022 has been to evolve our understanding scanning, continual dialogue with the business and andquantificationofclimate-relatedrisksand keepingabreastofmarketandindustrychanges.Dueto opportunities. An expert external partner was engaged theinherentnatureofsuchrisks,theycanbedifficultto who, in partnership with senior executives, used various quantify given the lack of data or longer time horizons. A models and scenario analysis to identify the potential summaryofemergingriskswhichareidentifiedthrough financialimpactstoourbusiness.Furtherdetailwith this process is presented to the Audit Committee and regard to the process and scenarios examined as part the Board for assessment and these risks continue to oftheassessmentareoutlinedintheTCFDsectionon be monitored as part of our ongoing risk management pages74-85. processes. Emerging risks we are monitoring include keymaterialandenergyavailability,endemicCOVID-19, TheGovernance,NominationandSustainability(GNS) ESG regulatory changes, labour model disruption and Committee plays a lead role in both supporting and technology innovation and disruption. overseeing the Group’s actions in response to climate change. The Audit Committee also plays a role in assessing how climate-related risks have been reviewed and accounted for as part of the risk management and financialreportingprocessinadditiontoreviewingand approving the Group’s climate-related disclosures. 98 Strategic Report Risk Management Report Kerry Group Annual Report 2022 # **Link to Value Creation Framework as per the Strategic Report** | Growth | 🔧 | | --- | --- | | Return | 🔧 | | Sustainability | 🔧 | # **Risk Trend** | Risk is unchanged | 🔧 | | --- | --- | | Risk has increased | 🔧 | | Risk has decreased | 🔧 | # **Principal Risks and Uncertainties - Strategic** # **Portfolio Management** # **Description** Consumer preferences, tastes, behaviours and demand for more sustainable products are changing at an unprecedented rate. The Group's overall growth and profitability is determined by the effective management of its portfolio across technologies, end use markets, geographies, channels and customers to respond to these consumer-led dynamics. Risk Trend # **Impact** If the Group does not make optimal portfolio management decisions, then opportunities for growth and improved margin could be missed. # **How We Manage the Risk** - The Group's strategic planning process is designed to ensure that investment decisions consider both our financial ambitions and our *Beyond the Horizon* sustainability commitments. A robust portfolio management toolkit is in place to support this process which uses multiple perspectives and data. - The Group continues to enhance and define its taste and nutrition portfolio aligned to the areas where it can add most value. - Post completion 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. This is supported by a significant investment in market insight tools that help to translate global trends into actionable ideas for innovation. - The Group's refreshed mid-term plan published during 2021 outlined key growth platforms and financial targets for the period 2022-2026 and is aligned with the Group's *Beyond the Horizon* sustainability targets. # **Geopolitical, Emerging Markets & Macroeconomic Environment** # **Description** Through our substantial global footprint and acquisitive growth strategy, the Group is exposed to global market forces, fluctuations in national economies, societal unrest, geopolitical uncertainty and an increasingly complex legal and regulatory environment. Risk Trend # **Impact** Failure to monitor and respond to change and volatility across the Group's markets may have an impact on the future growth and profitability of the Group. # **How We Manage the Risk** - Rigorous due diligence is undertaken when entering or commencing business activities in new markets. - Central and local legal, regulatory and compliance teams ensure adherence to applicable laws and regulations. - The breadth of the Group's portfolio and our geographic reach help to mitigate exposure to localised risk. - The Group has appropriate crisis management and business continuity plans in place to deal with issues when they arise. EXPANDING HORIZONS Kerry Group Annual Report 2022 99 # Principal Risks and Uncertainties - Strategic (continued) # Business Acquisition and Divestiture # Description Acquisitions and divestitures continue to be a core element of the Group's growth and portfolio management strategy which presents risks around due diligence, execution and integration or separation of businesses. Risk Trend # Impact A failure to successfully execute divestments or identify, execute and efficiently integrate acquisitions and capitalise on potential synergies in a timely and effective manner could impact profitability and impede the strategic development of the Group. # How We Manage the Risk - An experienced, dedicated Mergers and Acquisitions team are in place who follow a strong governance process throughout all stages of a transaction. - All potential transactions are rigorously assessed and evaluated to ensure the Group's strategic and financial criteria are met. All transactions are fully reviewed and approved by the Board. - Robust integration and divestment processes are in place and post transaction performance is closely monitored by both divisional and Group management. - Significant focus is placed on the retention of key acquired talent and support is provided to facilitate an efficient integration process. # Climate Change and Environmental # Description The Group recognises the significant environmental challenges the world faces due to climate change and the implications that this can have for our business and supply chains. Physical climate impacts may disrupt our operations while transitioning to a low carbon economy may influence costs and/or demand for our products. Risk Trend # Impact Physical and transition climate risks including extreme weather events, water stress and increased regulation, or an inability to deliver on our climate and environmental objectives, may have a negative impact on the Group's revenue and profitability, may negatively impact our ability to raise finance and may damage the reputation of the Group. # How We Manage the Risk - An appropriate governance structure is in place with the Global Sustainability Council charged with the assessment and management of both climate and broader sustainability-related risks and opportunities. Regular updates are provided to the GNS Committee, the Audit Committee and to the Board. For further detail in relation to climate risk governance please see page 74-76 of our TCFD Report. - Ambitious targets are in place with regard to reducing the carbon footprint of our operations, our water intensity, reducing food waste and ensuring that our priority raw materials are responsibly sourced, and performance is monitored through a suite of global KPI's. In addition, sustainability and climate-related metrics are included as part of the Long-Term Incentive Plan (LTIP) for Executive Directors and senior management. - Significant work is being undertaken to improve the accuracy and transparency of our Scope 3 footprint and prioritise action areas with our suppliers. - Independent climate expertise, models and tools are used to continue to advance the Group's knowledge and understanding of climate-related risks and opportunities. - We continue to enhance our strategic planning and investment appraisal processes to ensure climate-related risks and opportunities are appropriately considered. - Appropriate business continuity and crisis management plans are in place to deal with events that arise. 100 Strategic Report RiskManagementReport Kerry Group Annual Report 2022 Principal Risks and Uncertainties - Operational People Description Impact How We Manage the Risk The ability to attract, Afailuretoeffectively – Robusttalentmanagementandsuccessionplanning develop, engage and retain manage talent, plan for processes are in place which are regularly reviewed a diverse, talented and leadership succession, bytheGroupExecutiveandoverseenbytheGNS capable workforce is critical embed our values in Committee and the Board. if the Group is to continue our culture and adapt – The Group invests in learning and development to compete and grow to evolving employee programmes to support capability building and effectively. needs may impact on leadership expertise. the Group’s ability to – Top quartile employee engagement is a key ambition Ongoing geopolitical and deliver on its strategic of the Group and various initiatives are underway to economic uncertainty as objectives. support this objective with progress measured through well as intense competition a combination of ongoing pulse surveys and an annual for talent is impacting both employee engagement survey. the supply and cost of labour – The Group continues to advance its diversity, inclusion in a number of markets in andbelongingagendawithaGlobalDiversity,Inclusion which the Group operates. and Belonging Council established during 2022. Progress towards our ambition to build a more diverse Risk Trend and inclusive culture is monitored through both KPI’s and an inclusion index which is a component of the annual employee engagement survey. – Rewardandrecognitionprogrammescontinueto be enhanced to ensure they remain competitive and aligned to delivery of the Group’s strategic objectives. Business Ethics and Social Responsibility | Description | Impact | How We Manage the Risk | | | --- | --- | --- | --- | | Acting in an ethical and | A material failure to | – The Group’s Code of Conduct, which was refreshed in | | | socially responsible manner, | comply with relevant | | 2021,clearlydefinesthestandardsandexpectationsfor | | consistent with our purpose, | legal and ethical | | all employees and third parties. This is supplemented | | the expectations of customers, | standards or best | | by more detailed policies in some areas such as Human | | consumers and other | practices could harm | | Rights,Anti-BriberyandCorruptionandDiversity, | | stakeholders, is essential | the reputation of the | | Inclusion and Belonging. | | for the protection of the | Group, its relationship | | | – A Supplier Code of Conduct is in place which outlines reputation of the Group. with key stakeholders the standards we expect from those we do business and/or result in with and our responsible sourcing programme Risk Trend financialpenalties focuses on key impact areas such as deforestation and costs. and human rights. – The Group continues to strengthen its Ethics and Compliance programme which in 2022 saw the establishment of an Executive Business Integrity Committee. –Dedicatedlegalandregulatoryteamsareinplaceto monitor laws and regulations and provide support and advice where required. – A mandatory employee training programme is in place which supports the Group’s culture of doing business with integrity. – The Group’s Speak Up programme enables employees and third parties to raise any potential issues of concern and is overseen by the Business Integrity Committee. 2021 Annual Report 2021 Annual Report 2019 Annual Report 2019 Annual Report Risk Icons Risk Icons Risk Icons Risk Icons Risk is unchanged Risk has increased Risk is unchanged Risk has increased Risk has decreased Risk has decreased Taste Nutrition Emerging Taste Nutrition Emerging Margin Margin Markets Markets Expansion Expansion Kerry Group Annual Report 2022 101 Principal Risks and Uncertainties - Operational (continued) Food Safety, Quality and Regulatory Description Impact How We Manage the Risk Adherence to stringent food Asignificantfood – Industry-leading food safety and traceability systems safety and product controls safety or regulatory are in place and all manufacturing sites comply with is critical to ensure the safety compliance issue international food safety and quality management and integrity of raw materials could result in a standards. This is supported by a strong quality and products throughout productrecall,financial culturethroughtheGroup’sSafetyFirst,Quality the Group’s supply chain. penalties and costs, Always approach. The Group must also ensure impact business – Comprehensive food safety training programmes are compliance with continuously performance and/or in place for all relevant employees. evolving legal and regulatory damage the reputation – Regularauditsofmanufacturingsitesagainst obligations in the areas of of the Group. recognised global food safety standards are conducted food safety, quality, labelling byCorporateQuality,InternalAudit,customersand and the environment. other independent agencies. – Stringent controls operate across our supply chain Risk Trend including due diligence and audits of suppliers supported by rigorous quality checking of all high-risk ingredients. – A dedicated regulatory function closely monitors the external environment and engages industry organisations to identify and understand emerging issues and address increasing compliance requirements. Health and Safety Description Impact How We Manage the Risk The nature of the Group’s Asignificantsafety – A strong health and safety culture has been driven operations can expose incident could expose by management and employees at all levels supported employees, sub-contractors, the Group to legal byourSafetyFirst,QualityAlwaysmindset.All customers and other liability, and/or employees are empowered to challenge unsafe work individuals to potential health significantcostsand conditions or practices. and safety risks. damage the Group’s – A robust health and safety management system is in reputation. place across all sites requiring employees to complete The Group is also subject formalhealthandsafetytraining(relevanttotheirrole) to local safety regulations at regular intervals. All sites are also subject to regular in multiple jurisdictions, health and safety audits by Corporate Health and Safety, compliance with which Internal Audit and external assurance providers. is paramount. – InfacilitieswhicharesubjecttocontinuedCOVID-19 restrictions, appropriate protocols continue to be in Risk Trend place to protect employees. – The health and wellbeing of employees is a core priority for the Group and a global Employee Assistance Programme(EAP)isinplacetosupportbothemployees and their families in this regard. In addition, during 2022 the Group provided multiple supports to employees and their families impacted by the invasion of Ukraine. 2021 Annual Report 2021 Annual Report 2019 Annual Report 2019 Annual Report Risk Icons Risk Icons Risk Icons Risk Icons Risk is unchanged Risk has increased Risk is unchanged Risk has increased Risk has decreased Risk has decreased Taste Nutrition Emerging Taste Nutrition Emerging Margin Margin Markets Markets Expansion Expansion 102 Strategic Report RiskManagementReport Kerry Group Annual Report 2022 Principal Risks and Uncertainties - Operational (continued) Margin Management Description Impact How We Manage the Risk The Group’s cost base and Failure to pass on cost – A strong commercial focus on procurement, pricing and margin may be impacted by increases to customers cost improvement initiatives is maintained along with fluctuationsincommodities, may have a material ongoing monitoring of the commercial implications of freight, energy, labour and impact on the Group’s commodity price and other input cost movements. other input costs. margins and ability to – Riskmanagementprocessessuchastakingpurchasing deliver target returns. cover on a back-to-back basis and exchange rate There has been ongoing hedging have been implemented where necessary. significantglobalcostinflation – Contractualmechanismstopassthroughfluctuationsin during 2022 driven by factors commodity prices are in place with many customers. such as climate change related weather events, geopolitical events including the invasion of Ukraine, a tight labour market, in addition to general market uncertainty. Risk Trend Cyber and Information Systems Security Description Impact How We Manage the Risk The Group relies on a robust A successful cyber- – An appropriate governance structure is in place ICT infrastructure for its daily attack, internal breach including an Executive Information Security business operations, internal or other systems failure ManagementCommitteeandtheROC.Cybersecurityis communications, controls, could result in theft, a major focus area for the Board and Audit Committee reporting and communications misappropriation who this year received three formal updates from the with customers and suppliers. of critical assets ChiefInformationSecurityOfficer. and/or personal – A specialist ICT Security team is in place who, in There is a constant threat of data and disruption conjunction with selected external technical specialists, significantandsophisticated to core business use industry leading tools, technology and processes cyber-attacks including operations including aligned to global best practice cybersecurity frameworks. phishing, ransomware, manufacturing and Theseincludea24/7securitymonitoringservice,a malware and social supply chain. This could vulnerability management programme, a software engineering. resultinasignificant review process, supply chain partner audits, a data loss customer,financial, prevention programme and identity governance controls The macro risk level continues reputational and/or amongst other initiatives. to rise with the number of regulatory impact for – During2022,wecontinuedourongoingprogramme attacksagainsthighprofile the Group. of investment in cybersecurity controls which included peers becoming more improvements in identity and access controls as well as frequent. enhancements in response and recovery procedures. – Business continuity, disaster recovery and crisis management plans are in place and are tested on a Risk Trend regular basis. – Employees receive regular online cybersecurity training and ongoing awareness is promoted through monthly phishing training and other initiatives to keep employees abreast of new and emerging threats. – Cybersecurity reviews are conducted by a team of internal ICT auditors in addition to the engagement of external experts on a biennial basis to conduct a cyber resilienceassessmentagainsttheNationalInstituteof StandardsandTechnology(NIST)framework. – The Group maintains a cyber insurance policy. – There were no material information or cybersecurity breaches noted over the last three years. 2021 Annual Report 2021 Annual Report 2019 Annual Report 2019 Annual Report Risk Icons Risk Icons Risk Icons Risk Icons Risk is unchanged Risk has increased Risk is unchanged Risk has increased Risk has decreased Risk has decreased Taste Nutrition Emerging Taste Nutrition Emerging Margin Margin Markets Expansion Markets Expansion Kerry Group Annual Report 2022 103 Principal Risks and Uncertainties - Operational (continued) Operational and Supply Chain Resilience Description Impact How We Manage the Risk The Group’s manufacturing Failuretoeffectively – Crisis management and business continuity operations and global supply respondtoasignificant plansareinplacetoenableeffectiverecovery chain network is potentially operational or supply from a major disruption. exposed to adverse events chain disruption could – Robustinventorymanagementprocessesarein such as physical disruptions, adverselyaffectthe place including the maintenance of appropriate environmental and industrial Group’s operations and safety stock levels. accidents, cybersecurity financialperformance. – Sourcing model includes dual supply for critical incidents, trade restrictions or raw materials. disruptions at a key supplier, – Ongoing programme of work to enhance our end- which could impact on our to-end planning processes through improved cross- ability to service customers. functional collaboration and decision making. | 2022 has seen ongoing global | – Ongoing investment in manufacturing facilities | | --- | --- | | supply chain disruption. | to increase capacity and enhance reliability and | | Extreme weather and | continuity of supply. | geopolitical events have – All facilities have insurance cover to mitigate the highlighted the need to impactofsignificantdisruption. continue to focus on building – Operational, Supply Chain and Procurement leaders a resilient supply chain which have participated in cross-functional workshops to is responsive to changing explore and gain a better understanding of the climate internal and external risks associated with our supply chain. For further pressures. informationrefertotheTCFDReportonpages74-85. – Experienced customer service teams enable a Risk Trend responsive and agile operation. Intellectual Property Description Impact How We Manage the Risk The Group’s unique mix of If IP owned by – A global centre of expertise exists to provide legal IntellectualProperty(IP)is the Group is not and technical support in the area of IP protection. created by combining carefully adequately protected – Policies, procedures and training programmes are in managed material sourcing, it may result in the place to provide guidance in relation to the capture, recipe formulation and loss of commercially exploitation and protection of IP. process technology expertise. sensitive and/or Kerry – Strong physical and system access controls are in The protection of IP is critical proprietary information place to prevent unauthorised access or download given it is a key component which may have of sensitive data. of the Group’s value creation an adverse impact – The external environment is monitored for potential model and supports its on revenue IP infringement and appropriate action is taken when uniqueanddifferentiated andprofitability. issuesareidentified. position in the marketplace. Risk Trend 2021 Annual Report 2021 Annual Report 2019 Annual Report 2019 Annual Report Risk Icons Risk Icons Risk Icons Risk Icons Risk is unchanged Risk has increased Risk is unchanged Risk has increased Risk has decreased Risk has decreased Taste Nutrition Emerging Taste Nutrition Emerging Margin Margin Markets Markets Expansion Expansion 104 Strategic Report RiskManagementReport Kerry Group Annual Report 2022 Principal Risks and Uncertainties - Financial and Compliance Taxation Description Impact How We Manage the Risk Given the Group’s global The Group’s tax – A team of dedicated tax experts responsible for network, it is exposed to an liability or reporting ensuring compliance with all taxation matters globally increasingly complex and requirements may be are employed. A programme of continuous professional evolving international tax negatively impacted by development ensures that the team is up to date on environment. local or international evolving tax law changes e.g. carbon tax. legislative changes, – In house expertise is supplemented by external Risk Trend evolving legal taxation advisors where required. interpretations, tax audits or transfer pricing judgements. Treasury Description Impact How We Manage the Risk The international nature Failure to manage – The Group Finance Committee monitors treasury risk of the Group’s operations these risks could on an ongoing basis. means that it has transactions negatively impact – The Group has a strong investment grade credit rating and activities across many onthefinancial andmaintainsaccesstoglobaldebtmarkets.Significant jurisdictions which expose performance of cash balances and long-dated debt facilities are in place it to liquidity, foreign the Group. to ensure the Group’s liquidity requirements are met. exchange, interest rate – The Treasury function actively manages treasury and counterparty risks. risksthroughcashflowforecasts,monitoringfunding requirements, foreign currency exposure netting and Risk Trend hedging, interest rate hedging and management of counterparty risk. 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 longer-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. Going Concern The Consolidated Financial Statements have been Asaresultofthisreview,theDirectorsreportthatthey prepared on the going concern basis of accounting. havesatisfiedthemselvesandconsideritappropriate that the Group and the Company is a going concern, TheDirectorsconsideredtheGroup’sbusinessactivities having adequate resources to continue in operational and how it generates value, together with the main existence for the foreseeable future and have not trendsandfactorslikelytoaffectfuturedevelopment, identifiedanymaterialuncertaintiesthatcasta business performance and position of the Group, significantdoubtontheGroup’sandtheCompany’s including the potential impact of climate-related risks on ability to continue as a going concern over a period profitabilityandliquidity,asdescribedintheBusiness of at least 12 months. Reviewsonpages47-51. The Group’s 2023 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40-46andadditionallyas describedinnote24tothefinancialstatements. 2021 Annual Report 2021 Annual Report 2019 Annual Report 2019 Annual Report Risk Icons Risk Icons Risk Icons Risk Icons Risk is unchanged Risk has increased Risk is unchanged Risk has increased Risk has decreased Risk has decreased Taste Nutrition Emerging Taste Nutrition Emerging Margin Margin Markets Markets Expansion Expansion Kerry Group Annual Report 2022 105 potentialimpactofclimate-relatedrisksonprofitability Viability Assessment andliquidity.ThefinancialpositionoftheGroup,its Assessment of Prospects cashflows,liquiditypositionandborrowingfacilitiesare In line with Provision 31 of the 2018 UK Corporate outlinedintheFinancialReviewonpages40-46. GovernanceCode,theDirectorshavecarriedouta rigorous review of the prospects of the Group over the Period of Viability Assessment medium term. In assessing the prospects of the Group The Board has considered the length of time to be and its ability to meet its liabilities as they fall due, the reviewed in the context of the viability assessment. Board has taken account of the Group’s medium term Although the Group’s strategic planning cycle covers a strategic planning cycle, capital investment plans, the periodoffiveyears,theBoardconsiderthatthreeyears business model, its diverse portfolio and the innovation is the most appropriate period to assess the longer-term pipeline.TheDirectorshavealsoconsideredtheGroup’s viability of the Group as current capital expenditure plans, strongcashgenerationanddebtmaturityprofilein commercialarrangementsandfinancialprojectionsare addition to the principal risks and uncertainties detailed considered to be more reliable and robust over this period. onpages95-104.Thisincludedaconsiderationofthe Scenario Modelled Relevant Principal Risks Scenario 1: External and – Climate Change and Environmental Macroeconomic Risks –BusinessAcquisitionandDivestiture – Geopolitical, Emerging Markets & Macroeconomic Environment Depressedeconomicperformance, ongoinginflationaryandinterestrate –OperationalandSupplyChainResilience increases, prolonged global supply –BusinessEthicsandSocialResponsibility chain disruption, political unrest – Margin Management – Portfolio Management – People – Intellectual Property – Treasury Scenario 2: Climate Change and – Climate Change and Environmental Environmental Risk* – Portfolio Management –OperationalandSupplyChainResilience Impacts of extreme weather events, water stress or other climate-related physical or transition risks – Margin Management Scenario 3: One-off Expense – Climate Change and Environmental – Cyber and Information Systems Security Impact of a catastrophic event –OperationalandSupplyChainResilience such as a large-scale cyber attack, significantproductcontamination –FoodSafety,QualityandRegulatory or disruption to operations –BusinessEthicsandSocialResponsibility – Portfolio Management – Intellectual Property – Taxation – Treasury Assessment of Viability Thisanalysisindicatedthatsignificantliquidity headroom existed in all scenarios tested. In addition, The viability of the Group has been assessed, considering the Board consider that the diverse nature of the Group’s theGroup’scurrentfinancialposition,includingexternal geographies, markets, customer base, and product funding in place over the assessment period, and after portfolioprovidesignificantmitigationagainsttheimpact modelling the impact of certain scenarios arising from the of a serious business interruption. Group’s principal risks and uncertainties as outlined on pages95-104. Viability Statement While each of the principal risks and uncertainties could Based on their assessment of prospects and viability, have an impact on the Group’s performance, three severe theDirectorshaveconcludedthattheyhaveareasonable but plausible scenarios were modelled that the Board expectation that the Group will be able to continue in assessed would have the most direct and material impact operation and meet its liabilities as they fall due over the on the Group. The three scenarios as outlined above three-year period of the assessment. were stress tested both individually and in combination * Thisscenariowasmodelledbasedonathree-yeartimehorizon. to assess their potential impact on the Group’s solvency, For a longer-term assessment of climate risk please see the liquidityandcashflow. TCFDsectionofthisreportonpages74-85. 106 Directors’ Report KerryGroupAnnualReport2022 ## DIRECTORS’ ## REPORT KerryGroupAnnualReport2022 107 Directors’ Report 108 Board of Directors 111 ReportoftheDirectors  GovernanceReport 117 CorporateGovernanceReport 131 AuditCommitteeReport 137 Governance, Nomination and   SustainabilityCommitteeReport 143 RemunerationCommitteeReport 108 Directors’ Report Board of Directors Kerry Group Annual Report 2022 ## Board of Directors ### Chairman & Executive Directors Mr. Tom Moran(67)(M) Mr. Edmond Scanlon(49)(M) Ms. Marguerite Larkin(51)(F) Mr. Gerry Behan(58)(M) Executive Director Executive Director Executive Director Chairman of the Board Chief Executive Officer Chief Financial Officer President and CEO Kerry Taste & Nutrition | Experience: | Experience: | Experience: | Experience: | | --- | --- | --- | --- | | Tom is an experienced | Edmond is a highly | Marguerite brings extensive | Gerry has over 35 years’ | | leader who brings extensive | experienced leader in the | financialknowledgeandrisk | experience in the Group and | | knowledge of the food | global food and beverage | management expertise as well | has extensive knowledge of | | and agriculture industries, | industry having spent over | as being a highly experienced | the global food and beverage | | combined with a broad range | 20 years in senior roles | business leader. | industry. | | of international diplomacy | across the Group. Edmond | | | | | | Marguerite has almost 30 | He has a wealth of business | | skills. He has been a member | brings a strategic mindset | | | | | | years international experience | leadership experience, | | of numerous Irish Government | to drive Group performance | | | | | | having served as lead client | financialandoperational | | food strategy committees | and growth as well as | | | | | | partneratDeloitteIrelandfor | expertise and brings a | | including the most recent | significantfinancialand | | | | | | a number of multinationals | strategic mindset to the | | Agri-Food 2030 Strategy Group. | operational expertise. | | | | | | operating in a broad range | advancement of Kerry’s | | Tom had a long and | Edmond joined Kerry’s | of industries including food | leading taste and nutrition | | distinguished career within | graduate programme in | and beverage, pharma and | capabilities and unique | | the Irish Public Sector where | Ireland in 1996. Over his | technology. | positioning. | | he served as Secretary General | career he has held leadership | | | | | | Duringhercareerwith | Gerry joined Kerry’s graduate | | oftheIrishDepartmentof | roles in the Group’s Flavours | | | | | | Deloitte,Margueriteserved | programme in 1986 and | | Agriculture, Food and the | and Applied Health and | | | | | | as a senior partner and held | has held a number of senior | | Marine and also held a | Nutritionbusinessesaswell | | | | | | a number of leadership roles | financialandbusiness | | number of international | as heading up the Group’s | | | | | | withinDeloitteIreland. | management roles, primarily | | policy and trade negotiation | activities in China and the | | | in the Americas region, leadership roles. AsiaPacificregion. Marguerite is a Fellow of including regional Chief Chartered Accountants Tom is currently a Board Edmond was appointed OperatingOfficerandregional Ireland and holds a Bachelor member of Bord Bia, the ExecutiveDirectorand ChiefExecutiveOfficer. of Commerce degree and | Irish Food Board, and chairs | GroupChiefExecutiveOfficer | | | | --- | --- | --- | --- | | | | Masters in Accountancy. | He was appointed President | | itsDairySubsidiaryBoard. | in October 2017. | | | andChiefExecutiveOfficer | He is Vice Chair of the Origin | | Marguerite was appointed | | | --- | --- | --- | --- | | | Appointed: | | of Kerry’s Global Taste & | | Green Global Sustainability | | ExecutiveDirectorandGroup | | | | 1 October 2017 | | Nutritionbusinessin2011. | | Council. He is also Chairman | | ChiefFinancialOfficerin | | | of the Irish Government Public | | September 2018. | Gerry has served as an | | Appointments Service. Tom is a | | | ExecutiveDirectoronthe | Appointed: registeredCharteredDirector. Board since 2008. 30 September 2018 Tom joined the Board in Appointed: September 2015 and was 13 May 2008 appointed Chairman of the Board in April 2022. He is Chairman of the Governance,Nomination and Sustainability Committee having previously served as ChairmanoftheRemuneration Committee, member of the Audit Committee and as the designated Workforce EngagementDirector. Committee Membership Key Appointed: Audit Committee A 29 September 2015 and as Governance,NominationandSustainability Committee G Chairman 28 April 2022 RemunerationCommittee R Committee Membership: G Indicates Committee Chair Kerry Group Annual Report 2022 109 ### Non-Executive Directors | Dr. Hugh Brady (63) (M) | Ms. Fiona Dawson (56) (F) | Dr. Karin Dorrepaal (61) (F) | Ms. Emer Gilvarry (65) (F) | | --- | --- | --- | --- | | Senior Independent | Independent | Independent | Independent | | Non-Executive Director | Non-Executive Director | Non-Executive Director | Non-Executive Director | | Experience: | Experience: | Experience: | Experience: | | --- | --- | --- | --- | | Hugh’s biomedical research | Fiona has over 30 years of | Karin is an experienced | Emer is a highly experienced | | and academic background | experience in the consumer | business leader who | professional who brings | | brings an invaluable science, | food and beverage sector | also brings extensive | legal, business, governance | | technology and innovation | having retired after a long and | pharmaceutical market | and climate expertise to | | perspective to the Board | successful career with Mars Inc. | knowledge. She has wide | the Board. | | particularly in the areas | during which she held a variety | ranging experience as a | | Emer is a former senior of nutrition, health and of senior management roles. non-Executive Director on partner of law firm Mason wellbeing. He also brings a an international basis. She brings to the Board Hayes and Curran where broad range of international a deep knowledge of the During her career she was she served as Head of the and leadership experience. | | consumer food and beverage | an Executive Director on | Litigation group from 2001 | | --- | --- | --- | --- | | He is President of Imperial | sector, an understanding of | the Board of Schering AG | to 2008, Managing Partner | | College London, a role he took | global markets and general | in Berlin with responsibility | from 2008 to 2014 and | | up on 1 August 2022. | management experience on | for the Diagnostic Imaging | Chair from 2014 to 2017. | | | a global scale. | business as well as | | | Hugh had a successful career | | | Emer is currently the Senior | worldwide manufacturing as a physician and biomedical Fiona also has a strong track Independent Director at and procurement and was research scientist in the US record in sustainability, health Greencoat Renewables a partner at the New York where he served on the faculty and wellbeing, particularly plc and is Chair of its and Amsterdam office of an of Harvard Medical School for in the areas of women’s Remuneration Committee. international consultancy almost a decade prior entrepreneurship and human She is also a director of a firm (formerly known as to returning to his alma mater rights. In May 2021, Fiona was number of private companies. Booz Allen & Hamilton) as Professor of Medicine and awarded a CBE for services to where she specialised in the She previously served as a Therapeutics in University women and the UK economy. pharmaceutical industry. Karin non-Executive Director of Aer College Dublin (UCD). Fiona is currently a non- holds a Ph.D. and an MBA. Lingus plc from 2014 to 2015 He was previously President Executive director of Marks and as a Council Member She is currently a non- and Vice Chancellor of the and Spencer Group plc and of The Economic and Social Executive Director on the University of Bristol in the Lego Group. She is on a Research Institute from Boards of Gerresheimer AG, UK from 2015 to 2022 and number of advisory Boards 2014 to 2020. Paion AG (vice Chairperson) | was President of UCD from | including Trinity Business | | | | --- | --- | --- | --- | | | | and Almirall S.A. Karin is also | Emer brings experience on | | 2004 to 2013. | School in Dublin, and The | | | | | | a director of a number of | climate impact through her | Social Mobility Foundation. Hugh joined the Board in 2014 private companies. patronage of Chapter Zero and the Audit and Governance, Fiona joined the Board Ireland the Irish Chapter Karin joined both the Nomination and Sustainability in January 2022 and of the Climate Governance Remuneration and Committees in 2015. He was was appointed to the Initiative, developed in Governance, Nomination and appointed Senior Independent Remuneration Committee collaboration with the Sustainability Committees Director in April 2021. on 14 February 2022. World Economic Forum. in 2015 and was appointed | Appointed: | Appointed: | the designated Workforce | Emer joined the Audit | | --- | --- | --- | --- | | 24 February 2014 | 4 January 2022 | Engagement Director on | Committee in November | | | | 28 April 2022. | 2020 and the Remuneration | | Committee Membership: | Committee Membership: | | | Committee in June 2021. Appointed: A G R Emer was appointed 1 January 2015 Chairperson of the Committee Membership: Remuneration Committee G R on 28 April 2022. Appointed: 1 November 2020 Committee Membership: A R 110 Directors’ Report Board of Directors Kerry Group Annual Report 2022 ### Non-Executive Directors | Mr. Michael Kerr (63) (M) | Mr. Christopher Rogers (62) (M) | Mr. Patrick Rohan (48) (M) | Mr. Jinlong Wang (65) (M) | | --- | --- | --- | --- | | Independent | Independent | Independent | Independent | | Non-Executive Director | Non-Executive Director | Non-Executive Director | Non-Executive Director | | Experience: | Experience: | Experience: | Experience: | | --- | --- | --- | --- | | Michael has over 36 years | Christopher is an experienced | Patrick has considerable | Jinlong is an experienced | | of investment management | non-Executive Director with | experience in the food | leader with more than 30 | | experience having retired | a broad business leadership | industry, in particular the dairy | years experience in global | | after a long and successful | background who also brings | and agribusiness sectors. He | business development, | | career with Capital Group, | extensive knowledge of the | has held a number of local | consumer branding and general | | one of the world’s oldest | foodservice industry together | and national roles in a leading | management. His in-depth | | and largest investment | with financial and risk | Irish dairy representation | understanding of Asian markets, | | management organisations. | management expertise. | body through which he has | coupled with his extensive | | | | knowledge in dealing with | knowledge of the food and | | He brings to the Board a | He was formerly an Executive | | | | | | environmental sustainability | beverage industry, brings a | | detailed knowledge of global | Director of Whitbread plc for | | | | | | matters relevant to the dairy | key set of skills to the Board. | | equity capital markets, | 11 years, serving as Finance | | | sector. He brings insights to finance knowledge, extensive Director for 7 years and then Jinlong holds a Bachelor’s the Board that are reflective business leadership skills as Global Managing Director degree in international of the Group’s heritage. and insights into the North of Costa Coffee. economics and trade from American market. Patrick joined the Board on the University of International Christopher is currently 16 January 2023. Economics and Trade in Beijing Michael is currently a Chairman of Wickes plc and and a Juris Doctor degree from non-Executive director with a non-Executive Director at Appointed: Columbia University School EOG Resources Inc, which Sanderson Design Group plc. 16 January 2023 of Law. is listed on the New York Christopher is a Fellow of Stock Exchange. He was formerly President of Chartered Accountants Starbucks Coffee Asia Pacific Michael joined the Audit England and Wales. having served as Chairman Committee in November He was appointed Chairman and President of Starbucks 2021and was appointed to of the Audit Committee in China. He also served as the Governance, Nomination May 2018 and joined the Operating Partner of Hony and Sustainability Committee Remuneration Committee Capital Limited and as Group on 2 August 2022. in April 2020. Chairman and Chief Executive Appointed: Appointed: Officer of PizzaExpress. 3 May 2021 8 May 2018 He is currently a non-Executive Committee Membership: Director on the Boards of Committee Membership: A G Sonova Holdings AG A R and Swire Properties Limited. Jinlong joined the Audit Committee in May 2021. Appointed: 5 January 2021 Committee Membership: A Kerry Group Annual Report 2022 111 ## Report of the Directors ### Directors and Other Information Directors Tom Moran, Chairman Edmond Scanlon, Chief Executive Officer* Marguerite Larkin, Chief Financial Officer* Gerry Behan, President & CEO Kerry Taste & Nutrition* Hugh Brady Fiona Dawson Karin Dorrepaal Emer Gilvarry Michael Kerr Christopher Rogers Patrick Rohan 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 kerry.com 112 Directors' Report Report of the Directors Kerry Group Annual Report 2022 The Directors submit their Annual Report together with the audited Consolidated Financial Statements for the year ended 31 December 2022. ### Principal Activities Kerry is a world-leading global provider of taste and nutrition solutions for the food, beverage and pharmaceutical markets and a leading Irish provider of value-add dairy ingredients and consumer products. At Kerry, we are driven to be our customers' most valued partner, creating a world of sustainable nutrition. Listed on the Euronext Dublin and London Stock Exchanges, Kerry has an international presence with 147 manufacturing facilities across the world. ### Results and Review of the Business The Directors are pleased to report a year of strong growth and good performance across our financial metrics and non-financial measures for 2022. Reported revenue increased by 19.3% to €8.8bn (2021: €7.4bn), EBITDA increased 12.9% to €1.2bn (2021: €1.1bn), reflecting an EBITDA margin of 13.9% (2021: 14.7%). This resulted in growth in adjusted EPS on a constant currency basis of 7.3% (2021: 12.1%). The Basic EPS at 341.9c (2021: 430.6c) has decreased year on year as the Basic EPS in 2021 benefited from the profit earned on the sale of the Consumer Foods Meats and Meals business. The free cash flow generated was €640m (2021: €566m) and from a balance sheet perspective Shareholders equity increased to €6.2bn (2021: €5.6bn) and Return on Average Capital Employed (ROACE) was 10.3% (2021: 10.5%). Our main non-financial measures showed our nutritional reach increased to 1.2bn (2021: 1.1bn). The absolute carbon reduction was 48% (2021: 33%) and the food waste reduction was 32% (2021: 17%). Further details of the financial results for the year are set out in the Consolidated Financial Statements and further details of the non-financial results are set out in the Sustainability Review on pages 52-93. The Group's financial and non-financial key performance indicators are discussed on pages 38-39. 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 12-51, report on the assets and liabilities and financial position as well as the performance of the Group's business, including M&A activity during the year and on future developments. ### Dividends On 15 February 2023, the Directors recommended a final dividend totaling 73.4 cent per share in respect of the year ended 31 December 2022 (see note 10 to the financial statements). This final dividend per share is an increase of 10.0% over the final 2021 dividend per share paid on 6 May 2022. This dividend is in addition to the interim dividend paid to shareholders on 11 November 2022, which amounted to 31.4 cent per share. The payment date for the final dividend is 12 May 2023 to shareholders registered on the record date 14 April 2023. ### Principal Risks and Uncertainties In accordance with Section 327(1)(b) of the Companies Act 2014 and the Central Bank (Investment Market Conduct) Rules, a description of the principal risks and uncertainties facing the Group are outlined in the Risk Management Report on pages 98-104. ### Research and Development The Group is fully committed to ongoing technological innovation in all sectors of its business, providing technology and integrated customer focused product development and application support by leveraging our global technology capabilities and expertise. To facilitate this, the Group has invested in leading 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 €303.2m in 2022 (2021: €297.2m). ### Sustainability The Group's *Beyond the Horizon* sustainability strategy, underpins Kerry's future growth as we continue to partner with our customers across the globe to create a world of sustainable nutrition. As part of our *Beyond the Horizon* sustainability strategy Kerry works 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. The Board, through the Governance, Nomination and Sustainability Committee, is responsible for governance and oversight of the Group's sustainability strategy and its implementation. Details regarding the Group's sustainability strategy, targets, performance, policies and programmes are outlined in the Sustainability Review on pages 52-93. Details of our climate-related risks, opportunities and other climate-related disclosures relating to the Task Force on Climate-related Financial Disclosures (TCFD) are outlined on pages 74-85. The 2022 Sustainability Report details the Group's progress against its sustainability strategy and targets, in line with Global Reporting Initiative (GRI) standards and is available for review on kerry.com. ### Share Capital Details of the share capital are shown in note 27 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 176,986,481 shares were in issue at 31 December 2022. The A ordinary shares rank equally in all respects. There are no limitations on the holding of securities in the Company. FORWARDING SERVICES Kerry Group Annual Report 2022 113 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 aggregate nominal value of €2,500,000. This authority will expire on the earlier of the conclusion of the 2023 Annual General Meeting (AGM) and close of business on 27 July 2023 and it is intended to seek shareholder approval to renew the authority at the AGM to be held on 27 April 2023. Shareholders approved the authority for the Directors to allot shares for cash on a non-pro rata basis up to an aggregate nominal amount of €1,105,313 at the AGM held on 28 April 2022, representing 5% of the A Ordinary Shares in issue on 28 February 2022. Shareholders also approved an authority to allot additional shares up to an aggregate nominal amount of €1,105,313 (representing 5% of the A Ordinary Shares in issue on 28 February 2022) 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 2023 AGM and close of business on 27 July 2023. It is intended to seek shareholder approval for their renewal at the 2023 AGM. During 2022, 138,030 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 28 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 2022 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 2023 AGM and close of business on 27 July 2023 and it is intended to seek shareholder approval for its renewal at the 2023 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 | 20,085,195 | 11.3% | | Blackrock Investment Management | 9,029,003 | 5.1% | | Royal Bank of Canada | 5,380,232 | 3.0% | | Amundi Asset Management | 5,368,147 | 3.0% | 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 eight Independent Non Executive Directors. The names and biographical details of the Directors are set out on pages 108-110. Following the individual performance evaluation of all Directors, as outlined in the Corporate Governance Report on page 129, 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 166. ## Board and Committee Changes Ms. Fiona Dawson was appointed to the Board on 4 January 2022 and joined the Remuneration Committee on 14 February 2022. Mr. Philip Toomey retired as Chairman and from the Board at the conclusion of the AGM on 28 April 2022. Mr. Tom Moran was appointed Chairman of the Board on 28 April 2022. He stepped down as Chairperson of the Remuneration Committee and as designated Workforce Engagement Director on the same date. Mr. Gerard Culligan and Mr. Con Murphy retired from the Board following the conclusion of the AGM on 28 April 2022. Ms. Emer Gilvarry was appointed as Chairperson of the Remuneration Committee on 28 April 2022. Dr. Karin Dorrepaal was appointed as the designated Workforce Engagement Director on 28 April 2022. Mr. Michael Kerr joined the Governance, Nomination and Sustainability Committee on 2 August 2022. Mr. Patrick Rohan was appointed to the Board on 16 January 2023. 114 Directors' Report Report of the Directors Kerry Group Annual Report 2022 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 117-130 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 anti-bribery and anti-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 52-93, Our Business Model on pages 26-27, the Risk Management Report on pages 94-105. Information on diversity can be found in the Governance, Nomination and Sustainability Committee Report on pages 137-142, Our People on page 22 and the Sustainability Review on page 65. ### Going Concern and Long-Term Viability Statements The going concern and longer-term viability statements in the Risk Management Report on pages 104-105 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. 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 kerry.com. Irish legislation governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. In accordance with the Central Bank (Investment Market Conduct) Rules, 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. EXPANDING HORIZONS Kerry Group Annual Report 2022 115 Each of the Directors, whose names and functions are listed on page 111, confirms that, to the best of their knowledge and belief: - the Consolidated Financial Statements for the year ended 31 December 2022 have been prepared in accordance with IFRSs and IFRSs as adopted by the European Union and as applied in accordance with the Companies Act 2014. They 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 2022; - the Financial and Business Reviews on pages 40-51 include a fair review of the development and performance of the business for the year ended 31 December 2022 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 sections 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 114-115 with the responsibilities of the Company's external Auditors outlined on pages 178-179. The Financial Statements on pages 180-254 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 kerry.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. 116 Directors’ Report Report of the Directors Kerry Group Annual Report 2022 Public senior bond notes issued by the Group contain a Cross References provision that may require the Group to repurchase the All information cross referenced in this report forms part notes in the event that a change of control occurs which of the Report of the Directors. leads to a downgrading of the rating assigned to the notes to below investment grade. Signed on behalf of the Board: 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. Events After the Balance Sheet Date Tom Moran Edmond Scanlon Since the financial year end, the Group has proposed Chairman Chief Executive Officer a final dividend of 73.4 cent per A ordinary share and has 15 February 2023 15 February 2023 announced the potential sale of its Sweet Ingredients Portfolio which is expected to close in the first half of 2023. 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 36 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 24 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) Interest capitalised Statement of accounting policies | (2) Publication of unaudited | | Supplementary | | --- | --- | --- | | | financial information | information | | (3) Details of small related | | Note 33 to the | | | party transactions | financial statements | | (4) Details of long-term | | Remuneration | | | incentive schemes | Committee Report | | (5)- (14) Section 5 - 14 of Listing | | Not applicable | Rule 6.1.77 Kerry Group Annual Report 2022 117 GOVERNANCE REPORT ## Corporate Governance Report | and decision making. Details of | Committee also monitored the | | --- | --- | | stakeholder engagement activities | progress made against the diversity | | during the year, including the | targets at senior management level | | work of the designated Workforce | to ensure the appropriate level of | | Engagement Director, are outlined | skills and diversity exists to support | | on pages 122-126. | the delivery of the Group’s strategy | and financial targets. Diversity at | The Board, in conjunction with | Board level in terms of gender, | | --- | --- | | the Governance, Nomination and | nationality and ethnic background | | Sustainability Committee, ensures | have all improved in recent years. | | that there are robust plans in place | The Board now has a 33% female | | to facilitate Board, executive and | representation and plans to increase | | senior management succession. | this further in the future. | During 2022, the Board appointed me as Chairman and undertook a The Group has committed to formal process to recruit a new non- achieving equal gender Tom Moran Executive Director, who brings skills representation across all senior Chairman of the Board | and experience that are reflective of | management roles by 2030. | | --- | --- | | the Group’s dairy heritage. Details | Improving and monitoring diversity | | of the Chairman, non-Executive | beyond gender and below Board | Dear Shareholder, Director and Committee changes level will continue to be a key area that occurred during the year, of focus for the Board and Executive I am pleased to are set out in the Governance, Management in 2023. present the Kerry Group Nomination and Sustainability | Corporate Governance | Committee Report on page 141. | Each year the Board undertakes a | | --- | --- | --- | | Report for the year ended | | formal evaluation of its effectiveness | | | The Board recognises its role | and that of its Committees. In | 31 December 2022. | | in providing guidance and | 2022, the evaluation was externally | | --- | --- | --- | | The Corporate Governance Report | strategic oversight in relation | facilitated and the outcome of this | | describes how we apply the main | to the implementation of the | review is that the Board and its | | Principles of good governance as | Group’s Beyond the Horizon 2030 | Committees consider that they are | | set out in the 2018 UK Corporate | sustainability strategy. During the | performing effectively. Details of the | | Governance Code and the Irish | year the Governance, Nomination | process and the resulting actions | | Annex (the Code). On behalf of | and Sustainability Committee | from this review are outlined on | | the Board, I can confirm that for | monitored how the implementation | page 129. | | the year under review the Group | of the 2030 sustainability strategy | | | has complied with all Provisions of | was progressing, reviewed | Details of the Group’s activities | | the Code other than Provision 38 | performance achieved versus agreed | and the operations of the Board, | | (alignment of pension contributions) | sustainability-related commitments | contained in the following report, | | and Provision 19 (chair tenure). For | and targets, and considered the | outline the manner in which the | | further information refer to the | enhanced environmental, social | Group has achieved compliance | | Compliance Statement on page 121. | and governance (ESG) reporting | with the Code through the activities | | | disclosures included in the 2022 | and operations of the Board and its | | The Board sets the tone and shared | Annual Report and the separate | Committees during the year. | | values for the way in which the | 2022 Sustainability Report available | | | Group operates and recognises the | for review on kerry.com. The | | | importance of culture to the success | Committee also considered the | | | of the business model. During 2022, | increasing stakeholder expectations | | | the Board continued to assess and | and enhanced reporting | | | monitor the Group’s culture to | requirements relating to ESG | | | ensure that it is aligned with the | matters that need to be addressed | Tom Moran | | Group’s strategy and values and | now and into the future. | Chairman of the Board | is adequately embedded across the Group. Diversity at Board level has been a focus for the Governance, | As a Board, we recognise the | Nomination and Sustainability | | --- | --- | | benefits of understanding the views | Committee for a number of years | | of all our stakeholders and we | and also continues to be a key | | ensure that their interests are taken | factor when considering Board | | into account in Board discussions | refreshment. During 2022, the | 118 Directors’ Report Corporate Governance Report Kerry Group Annual Report 2022 ### 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. Audit Shareholders Committee (page 131) Governance, Nomination and Sustainability Board of Directors Committee (page 137) Remuneration Executive Management Committee (page 143) | Finance | Risk Oversight | | Sustainability | | Business Integrity | | | --- | --- | --- | --- | --- | --- | --- | | Committee | | Committee | | Council | | Committee | | (page 45) | | (page 95) | (pages 74-75) | | | (page 63) | Board Role and Operations Schedule of Matters Reserved for the Board The Board currently comprises 12 members; a non- Executive Chairman, Chief Executive Officer, Chief – Appointments to the Board; Financial Officer, one other Executive Director, and – Ensuring compliance with corporate governance, eight non-Executive Directors. legal, statutory and regulatory requirements; The Directors are of the opinion that the composition – Approval of the overall Group strategic and of the Board provides the extensive relevant business operating plans; experience needed to oversee the effective operation of the Group’s activities and that the individual – Monitoring and reviewing risk management Directors bring a diverse range of skills, knowledge and and internal control systems; experience, including financial as well as industry and – Monitoring and assessing culture; international experience, necessary to provide effective governance and oversight of the Group. – Reviewing and assessing the adequacy of the Group’s whistleblowing arrangements; The Board’s role is to promote the long-term sustainable success of the Company, generating value for all its – Approval of acquisitions and divestitures; stakeholders, including shareholders, employees, – Approval of significant capital expenditure; customers, suppliers and the communities in which it operates, while developing and monitoring strategy, – Approval of Treasury policy including changes and ensuring that the risks that face the organisation to the Group’s capital structure; are appropriately managed. It is also responsible for – Approval of dividend policy and dividends; embedding the Company’s purpose, instilling the appropriate values and behaviours and monitoring and – Approval of annual budgets; assessing culture across the organisation. – Approval of preliminary results, interim The Board oversaw the Group’s management of management statements and interim financial the significant inflationary environment which was statements; exacerbated by the invasion of Ukraine. The Board was – Assessment of the long-term viability of the provided with regular updates on progress, in relation Group and the going concern assumption; and to mitigating actions taken to counteract the impact of input cost inflation on Group performance and actions – The preparation of, and confirmation that, taken to support employees (especially those in lower- the annual report and financial statements paid positions) through the cost of living crisis. The present a fair, balanced and understandable Board also requested and received regular updates on assessment of the Company’s position, the actions taken to safeguard the health and safety performance and prospects. of our Ukrainian employees and their families during a time of considerable stress and upheaval in their lives. Kerry Group Annual Report 2022 119 Presentations were received from the Company’s Information Flow advisors throughout the year on matters such as the The Chairman ensures that all Directors have full general economic outlook, the impact of the energy and timely access to the information they require to crisis, the outlook for emerging and developed discharge their responsibilities fully and effectively. markets, Corporate Governance developments, the Board papers are issued to each Director at least one general M&A landscape as well as corporate defence week in advance of Board meetings and include the and shareholder activism. Through these reviews and meeting agenda, minutes of the previous Board meeting ongoing discussions on strategy, the Board is confident and all papers relevant to the agenda. The Chairman, in that Kerry’s strategic priorities and key growth platforms conjunction with the Company Secretary, has primary will continue to be the key drivers of organic growth and responsibility for setting the agenda for each meeting. acquisition investment in the future. All Directors continually receive comprehensive reports and documentation on all matters for which they have The Board ensures that the decisions it makes are responsibility to allow them to fulfil their duties as a aligned with the achievement of the Group’s strategy, Director. All Directors participate in strategy discussion, are made in the long-term interest of the Group and trading updates, financial performance, significant risks its stakeholders and are aligned with the Group’s and operational activities in addition to discussion on sustainability strategy. This is particularly the case when the Group’s purpose, vision, values and culture. Board deciding how to prioritise the allocation of resources meetings are of sufficient duration to ensure that all (human and financial capital) across competing research agenda items and any other material non-agenda items and development activities, acquisition opportunities that may arise are adequately addressed. In addition and major capital expenditure projects. to formal meetings, the Chairman and Chief Executive Officer maintain regular contact with all Directors. The During the year, the Board also reviewed the business Chairman holds informal meetings or calls with non model and how it is executed. The Board is satisfied Executive Directors without the Executive Directors to that the business model is both sustainable in the discuss issues affecting the Group. long-term and optimally structured to enable delivery of the Group’s strategy. Details of the Group’s strategy All Directors have access to the advice and services of are outlined in Strategy and Financial Targets on pages the Company Secretary, who is responsible for advising 34-35. the Board on governance matters. In accordance with an agreed procedure, in the furtherance of their duties, Purpose, Values and Culture each Director has the authority to engage independent professional advice at the Company’s expense. Our Purpose, Inspiring Food, Nourishing Life underpins our culture and is reflected in our values. Strategy The Group’s purpose is guided by the Group’s Vision to In 2021, the Board collaborated with Executive be our customers’ most valued partner, creating a world Management in the development of the Group’s of sustainable nutrition. The Board is satisfied that the updated strategy and associated mid-term financial current strategy is aligned to the Group’s targets. During 2022, the Board monitored progress purpose which is also guided by our Values of Courage, implementing the strategies for volume growth, margin Enterprising Spirit, Inclusiveness, Open-mindedness and expansion and return on investment that underpin the Ownership. The Board is led by the Group’s purpose strategic plan. during its discussions and when making decisions on the matters that are reserved for its consideration. The The Board also oversaw and approved the strategic M&A Group’s Values of Ownership, Inclusiveness and Courage transactions during the year including the potential were very much in mind when we made the decision sale of the Sweet Ingredients portfolio. The Board also to exit all Group operations in Russia and Belarus as a oversaw and approved the decision to exit all Group result of Russia’s invasion of Ukraine. Our Purpose of activities in Russia and Belarus as a result of Russia’s Nourishing Life guided our actions as we supported our invasion of Ukraine. Ukrainian colleagues and their families in the immediate aftermath of the invasion and beyond. Further details of the Group’s purpose and values are outlined on pages 8 and 19. 120 Directors’ Report Corporate Governance Report Kerry Group Annual Report 2022 The Group’s culture is based on a common Operational/Commercial understanding of our values, underpinned by our – received regular updates from the Executive practices of Safety First, Quality Always and a robust Directors on the mitigating actions taken to counter risk management framework consisting of policies and unprecedented input cost inflation; procedures, including a Code of Conduct which defines – received regular updates from the Executive Directors business conduct standards for anyone working for, or on how the invasion of Ukraine was impacting the on behalf of the Group. The Board is satisfied that the Group’s operations with a particular focus on employee Group’s purpose, values and strategy are aligned to the safety; Group’s culture. – approved M&A transactions (including the potential sale of the Sweet Ingredients Portfolio and to exit all The Board recognises the importance of its role in activities in Russia and Belarus) and considered the setting the tone for Kerry’s culture and embedding learnings from completed acquisitions; and it across the Group. In addition to the Board, the – approved significant capital expenditure projects, Executive Team have responsibility to ensure that the considering impacts on financial and sustainability policies and behaviours set at Board level are effectively performance criteria. communicated and implemented throughout the Group. The Group’s Code of Conduct aligns with the Group’s Financial/Non-Financial purpose and values and the MyKerry internal website – received reports from the Chief Financial Officer provides a platform for employees to access the at each meeting in respect of the Group’s financial Group’s policies. performance including how the Group was navigating through the significant inflationary environment; The Board monitors and assesses the culture of the – monitored the progress against the targets included in Group through a number of mechanisms including the Beyond the Horizon sustainability strategy; compliance with Group policies, internal audit, formal – received regular reports from the Chief Financial and informal channels for employees to raise concerns, Officer on Investor Relations activities; including the Leader Pulse Check, town halls, the – approved the Group’s Preliminary Results, Annual OurVoice employee engagement survey, the Group’s Report and Accounts, Interim Financial Statements and Speak Up arrangements and feedback from the Interim Management Statements; designated Workforce Engagement Director. Arising – approved the payment of an interim dividend and from the assessment completed in 2022, the Board recommended the payment of a final dividend; agreed to the establishment of an executive Business – approved the going concern basis of accounting and Integrity Committee which will oversee compliance the long-term viability statement; and with the Group’s Code of Conduct. The Board also – approved the Group Budget for the 2023 financial year determined that the enhanced Speak Up procedures including both financial and non-financial targets. and functionality, introduced in the previous year, are operating effectively. Internal Controls and Risk Management – confirmed that a robust assessment of the Group’s Board Activities principal risks and uncertainties, including emerging The Board’s activities during the year included the items risks was completed and approved the risk appetite set out below: for each of the principal risks; – received regular reports from the Chairman of the Strategy Audit Committee on its oversight of internal controls, risks and risk management; – monitored progress against the Group’s strategic – received regular reports from business and functional plan and the mid-term financial targets; leaders on the Group’s key risks; and – reviewed and approved the Group’s strategy relating – confirmed the effectiveness of the internal control to mergers, acquisitions and divestitures; and and risk management framework. – monitored the implementation of the Group’s 2030 Beyond the Horizon sustainability strategy. Kerry Group Annual Report 2022 121 Governance and Stakeholders The UK Corporate Governance Code – received regular reports from the Chairman of the Governance, Nomination and Sustainability 2018 and the Irish Annex – Committee on its activities; Compliance Statement – approved the appointment of Mr. Tom Moran as Kerry applied the main Principles of the UK Chairman; Corporate Governance Code 2018 and the Irish – approved the appointment of Ms. Fiona Dawson, and Annex (the “Code”) and complied with all its Mr. Patrick Rohan as non-Executive Directors as well as Provisions throughout FY22, with the exception of: changes to the composition of Board Committees; – conducted an externally facilitated Board evaluation – Provision 38 (alignment of Executive Directors’ | and considered its outcome; | pension contributions with those of the wider | | --- | --- | | – considered compliance with the 2018 UK Corporate | workforce). This Provision has been complied with | | Governance Code; | from 1 January 2023 when Executive Directors’ | | – reviewed and approved the Corporate Governance | pension contributions were aligned with those | | Policy and the Board Diversity Policy; | available to the wider workforce in Ireland. This | | – confirmed that appropriate arrangements and | timeline was agreed as part of the overall policy | | structures are in place to ensure material compliance | review completed in 2021 and is a timeline | | with the relevant obligations under Section 225 of the | acceptable to the investment community as well | | Companies Act 2014; | as proxy advisers; and | – confirmed that appropriate structures are in place – Provision 19 (chair tenure). Mr. Philip Toomey was for the proportionate and independent investigation appointed as Chair in 2018 after having served and follow-up of matters raised through the Group’s over six years as a non-Executive Director. Philip whistleblowing arrangements; and retired from the Board at the AGM in April 2022 – received updates on a range of corporate governance after having served over ten years. Provision 19 and regulatory matters from external advisors. requires the Chair to serve no longer than nine years and therefore for a period during the year People and Culture up to April 2022 Kerry did not comply with this – received regular reports from the Chairperson of the provision. However the Provision also notes that Remuneration Committee on its activities; to facilitate effective succession planning this – reviewed the results of the employee engagement period can be extended, particularly where the survey and the Leader Pulse Check conducted in 2022; Chair was an existing non-Executive Director on – received and considered reports from the designated appointment. Within the 2021 Annual Report Kerry Workforce Engagement Director on her activities explained why Philip was to remain on the Board during the year. Details are outlined in Governance in for longer than nine years and also stated when his Action on page 126; tenure would end. Following the 2022 AGM, Philip – received and considered presentations from the Chief was succeeded by Mr. Tom Moran in line with the Executive Officer and the Chief Human Resources timeline disclosed. Officer on talent and succession planning; – received regular updates on the actions taken to The Board recognises the importance of good support lower paid employees through the cost of corporate governance in providing confidence in living crisis; and our ability to deliver our strategic goals and also – monitored and assessed the culture of the Group to in building trust with our key stakeholders both of ensure it promotes integrity and openness, values which are essential for the long-term sustainable diversity and is responsive to the views of shareholders success of the Group. The table below outlines and wider stakeholders. the main Principles of the Code and where in the Annual Report there is further information on the application of the Principles. Main Principles Pages Board leadership and company purpose 118-121 Division of responsibilities 108-110 and 127 Composition, succession and evaluation 128-130 and 137-142 Audit, risk and internal control 130-136 Remuneration 143-169 122 Directors’ Report Corporate Governance Report Kerry Group Annual Report 2022 ### Stakeholder Engagement The Board acknowledges the need to have regard for the interests of all stakeholders in their discussions and decision making. Enhanced engagement with stakeholders enables better informed decision making, thereby increasing the likelihood of long-term sustainable success for the Company. The Board also recognises the need to maintain high standards of business conduct in its actions and decisions. Details of our stakeholder engagement are set out below. ### Shareholders Why we Engage Our Actions and their Impacts Active engagement with shareholders ensures they are Regular updates are provided by the Chief Financial aware of the Group’s business environment, strategy, Officer and Head of Investor Relations to the Board on business model, performance and sustainability matters raised by the investment community during commitments. The views of our shareholders help to the year, as well as updates on the composition of the inform the strategic decision making of the Board. Group’s share register. During the year our Chairman, Tom Moran consulted How we Engage with a number of large institutional shareholders The Board ensures it has an effective channel of and with the major proxy advisors. When necessary, communication with existing and potential shareholders. Committee Chairs engage with shareholders on specific topics. Arising from the matters discussed, feedback is The Investor Relations team and Executive Management provided to the Directors to inform decision making. maintain ongoing engagement with the investment community, through a variety of different mediums The 2022 AGM was held in person for the first time including investor meetings and conferences, investor in two years following the lifting of restrictions. All events, ongoing investor calls and correspondence. Committee Chairs attended the AGM. At the meeting shareholders were able to engage with the Directors During 2022, meetings were held with approximately in person, ask questions, provide feedback and raise 1,000 investors. Kerry’s Investor Relations team and matters of interest. Executives participated at nineteen investor conferences and external investor events as well as hosting seven In order to give shareholders a greater understanding of investor events at Kerry facilities. Kerry’s business model, as well as its unique positioning within the industry, it was agreed to hold seven tailored In addition, a significant amount of published material investor events during 2022 at Group facilities in each including results releases, presentations, share price of the three geographic regions. The Board participated information and news releases are accessible to all in a customer immersion experience in advance of one shareholders on the Group’s website kerry.com. such event. Following their participation, Board members Shareholder presentations are made at the time of provided feedback and input which informed the content release of the Group’s full year, half year and interim and approach for the following investor events. management statements, following which the Chief The Board continues to monitor the industry landscape Executive Officer and Chief Financial Officer provide the and the Group’s positioning within the industry. The Board with an update on feedback received. Board also monitors the progress made in the execution The Company’s Annual General Meeting (AGM) provides of the Group’s strategy. All capital allocation decisions an opportunity for the Directors to deliver presentations made by the Board are aligned to strategy and the and to answer questions from shareholders, both Group’s strategic priorities of Taste, Nutrition and institutional and private. Emerging Markets. Successful delivery of the Group’s strategy promotes the long-term success of the Group and will also benefit shareholders, employees and the Key Outputs from the Engagement communities in which it operates. When approving Key topics for shareholders included progress on the potential sale of the Sweet Ingredients Portfolio, the execution of the Group’s strategic plan and the Board agreed it would support the Group’s strategy related portfolio developments, Group performance of focusing on opportunities where Kerry can add the and outlook, managing the elevated inflationary most value. environment, the implications of the invasion of Ukraine on the Group and the actions taken, marketplace dynamics and industry consolidation, in addition to sustainability strategy, climate change transition and ESG disclosures. 50^{}[] EXPANDING^{}[] ^{}[] HORIZONS Kerry Group Annual Report 2022 123 ## Employees ### Why we Engage Regular and ongoing engagement with employees is key to attracting, developing and retaining a talented, dedicated and motivated workforce, which ensures the successful delivery of our strategy and achieving our purpose. ### How we Engage The designated Workforce Engagement Director Dr. Karin Dorrepaal engaged directly with employees through various channels, including site visits and attendance at organised events. Details of these activities are outlined on page 126. Throughout the year, the Group undertakes regular two-way listening activities with our 23,000+ employees including Town Hall meetings and career development discussions. The Group also has a Speak Up facility to enable employees and other stakeholders to confidentially report matters of concern so that timely and appropriate action can be taken. Each year the Group runs an employee engagement survey. This year, 92% of our employees participated in the survey which was followed by leader-led listening sessions to discuss strengths, opportunities for continued improvement and to agree action plans for 2023. In addition, two interim Leader Pulse Checks were completed, one targeting our plant leadership and a second targeting senior leadership across the Group. In line with our engagement strategy, the Group continued its focus on building the effectiveness and impact of our leaders through our Learning and Leadership Academies and manager effectiveness programmes in 2022. Through the provision of coaching to leaders and sharing access to thought leadership content, we have continued to build a positive and inclusive environment at Kerry. Our Health and Wellbeing framework is underpinned by a balanced set of programmes accessible to our employees across our four wellbeing pillars; Emotional, Physical, Nutritional and Financial. In 2022, the Group continued to build improved communication channels with employees through a dedicated digital employee communication platform. ### Key Outputs from the Engagement Key topics for employees included Diversity, Inclusion and Belonging (DI&B), learning and development, understanding how employees' roles contribute to the Group's success and the simplification of our ways of working. ### Our Actions and their Impacts In appointing Dr. Karin Dorrepaal as the new designated Workforce Engagement Director, the Board sought to select a director with a keen interest in employee matters, particularly in relation to gender diversity and equality. Karin provided regular feedback to the Board on employee engagement activities and general employee sentiment which informed decisions made. The Board provided feedback on the global priorities and plans to address the matters raised by employees as part of the employee engagement survey and the two Leader Pulse Checks. The Board also received regular updates from the Chief Executive Officer and Chief Human Resources Officer on the health, safety and wellbeing of employees. In line with our Safety First, Quality Always ethos, the Board ensured that the Group prioritised the safety and wellbeing of our Ukrainian employees and their families following the invasion of their country as well as our Chinese employees as they managed through the ongoing impact of Covid-19. The Board also considered the implications for Kerry employees in Russia and Belarus when deciding to exit all Group activities in those countries. In approving the potential sale of the Group's Sweet Ingredients Portfolio, the Board considered the implications for the employees working in the business and ensured that appropriate actions were taken to mitigate the impact on the employees involved. The Board contributed to and participated in many of the 50$^{th}$ anniversary celebrations that took place throughout 2022. This was a unique opportunity to celebrate the Group's evolution by highlighting the significant contributions to Kerry's success by our employees. The Board requested and received feedback on how the Group is supporting employees, in particular those in lower-paid positions or based in hyperinflationary countries, through the cost of living crisis and took this into account when approving the 2023 budget. The Board continues to prioritise DI&B and in 2022, the Group established a Global DI&B Council which includes representatives from our Leadership Team and confirmed the appointment of a dedicated role in 2023 to build on the momentum created to date and increase the impact of this agenda going forward – for our people, our business, our customers and our communities. The Board also ensured that appropriate resources were available for training and development, internal communications and initiatives that help to simplify the Group's ways of working. Finally, the Group's Inclusion Index is a measure of how employees feel connected, valued and recognised within the organisation. In 2022, we saw an overall increase of 2 percentage points reflecting our continued focus on improving in this area. Details of employee engagement activities are outlined in Our People on pages 18-25, the Sustainability Review on pages 52-93 and the separate Sustainability Report which can be found on the Group's website. 124 Directors’ Report Corporate Governance Report Kerry Group Annual Report 2022 ### Customers and Consumers Why we Engage Our Actions and their Impacts Strong engagement with customers and consumers Feedback from customer engagement activities was enables Kerry to operate a customer-centric business discussed at each Board meeting as part of the business model and helps Kerry achieve our Vision to become updates provided by the Executive Directors and our customers’ most valued partner, creating a world informed the decisions made by the Board. of sustainable nutrition. The Board approved the Group’s expenditure of €303m on research and development applications and How we Engage technical support. Together with the management Kerry operates a proven customer-centric business team, the Board ensures that this resource is focused model that enables us to work side-by-side with on those projects that can best meet customers’ customers as their co-creation partner of choice. needs and thereby enable the Group to achieve its purpose and strategic objectives in relation to revenue The Group interacts with customers on a daily basis at growth, margin expansion and return on investment. multiple levels from dedicated relationship and account A strategically resourced Kerry R&D team helps managers, customer and industry conferences as well customers to create healthier more nutritious products as tailored innovation forums. Our market research and that taste great, assists them to navigate through the consumer insight teams study consumer behaviours and current period of significantly heightened inflation perceptions and share these insights with our customers. and enables them to produce food products in a more By way of example, in September 2022, the Group environmentally-sustainable manner. Arising from this hosted a foodservice sustainable nutrition conference in investment in research and development, during the London during which we worked with our customers to year, the Group launched two tools to enable customers identify how we can help them to develop solutions to to calculate both the nutritional profile of their products meet evolving consumer needs in relation to nutrition. (KerryNutri Guide) as well as to model the potential This cross-functional and multi-level engagement is benefits of food waste reduction through shelf-life central to how we evolve and maintain holistic innovation extension (KerryFood Waste Estimator), both of which partnerships with our customers. heighten our customers’ understanding of the financial, Through collaboration and innovation, the Group helped environmental and social impact of their products. customers to make healthier and more sustainable During 2022, the Board approved four acquisitions with products in response to changing consumer needs. This a total cost of €392m and gross capital expenditure of includes assisting customers to enhance the nutritional €255m. The Board also approved the potential sale of profile of their products and to reduce food waste. the Group’s Sweet Ingredients Portfolio. All of these The Group also partnered with customers to reduce decisions are aligned to the Group’s strategic priorities complexity and preparation times in the face of labour and key growth platforms and support the development and water shortages and carbon challenges. of our business to best meet our customer’s needs. ® The Kerry Health and Nutrition Institute (KHNI) The Board also considers customer engagement matters shares Kerry’s scientific expertise and advances as part of the overall Group sustainability strategy awareness of the science of healthier food. Supported and together with the Governance, Nomination and by an independent Scientific Advisory Council, KHNI is Sustainability Committee, receives updates on these providing access to those within the sector to scientific matters from the Group Head of Sustainability. With knowledge and nutrition insights from the Group’s the increasing importance of environmental and social scientists, academics and other experts, as they explore issues for our customers, the Board ensures that the challenges in the food and beverage industry. Group’s sustainability strategy is appropriately funded, resourced and integrated into our value proposition. Key Outputs from the Engagement Further details are outlined in Our Business Model Rapidly evolving, consumer dynamics and the changing on pages 26-27, Strategy and Financial Targets on marketplace set a backdrop for ongoing customer pages 34-35, the Sustainability Review on pages 52- engagement. Increased demand for innovative, 93 and the separate 2022 Sustainability Report on the sustainable nutrition solutions, including those that Group’s website. enhance health and wellbeing, plant protein options, and products addressing a diverse range of environmental and sustainability criteria. Consideration of Stakeholder Views in Key topics for customers and consumers included the Decision-Making Process the management of the elevated inflationary cost By understanding the matters of importance to our environment, the ongoing impact of global end-to-end stakeholders, the Board can consider their needs supply chain challenges as well as changing consumer and concerns in its decision making. The Board needs and preferences. ensures that material decisions, which could impact Our customers want innovative sustainable nutrition on stakeholder groups, are taken with due regard solutions that enhance health and wellbeing while to their interests. reducing the impact that their production activities has on the planet and in particular on climate change and reducing food waste. Kerry Group Annual Report 2022 125 ### Suppliers Why we Engage Our Actions and their Impacts By engaging with suppliers, we can ensure they The Board ensures that long-term sustainable continue to meet Kerry’s high standards in product relationships are established with key suppliers on safety, quality, and business ethics, whilst respecting mutually agreed and acceptable terms. human rights and the environment. Through the Group’s Beyond the Horizon sustainability strategy, the Board also ensures that the organisation How we Engage works with suppliers who provide raw materials to the Kerry engages with suppliers on a daily basis to required safety and quality standards, produced on a manage commercial and operational activities through sustainable basis and with the proper regard for the fair a dedicated procurement and supply chain function, treatment of workers across the supply chain. two-way communication, supplier meetings, multi- During 2022, the Board approved the funding for the stakeholder forums and participation at industry launch of the Evolve Dairy Sustainability Programme conferences. Suppliers can also raise matters of concern which supports the accelerated adoption of science- via the Group’s Speak Up whistleblowing service. based, sustainable actions and best practice on the The Group takes a risk-based approach to supplier farms of our suppliers in Ireland. The impact of this assessments to ensure ongoing safety, quality and initiative will be to assist our dairy suppliers in Ireland to responsible sourcing. achieve a reduction in their Carbon Intensity footprint in line with targets set by the Irish Government. The Board receives updates from the CEO, Chief Procurement Officer and the Group Head of Sustainability Further details on our responsible sourcing strategy are in relation to the quality and reliability of the Group’s outlined in the Sustainability Review on pages 52-93 and supply chain and on matters of interest to suppliers. the 2022 Sustainability Report on the Group’s website. During the year the Board also approved the Key Outputs from the Engagement establishment of an executive Business Integrity Key topics for suppliers included human rights, Committee which will oversee compliance with the quality and food safety, service levels, business Group’s Code of Conduct, thereby further ensuring continuity, capacity, cost, innovation and responsible sound decision making in line with the highest sourcing requirements such as aligning with Kerry’s ethical standards including in relation to responsible Scope 3 carbon target. sourcing. This Committee will also oversee the Group’s preparation for compliance with the EU Directive During 2022, the ability to supply and the cost of on Corporate Sustainability Due Diligence when it is various inputs increased for many suppliers due to transposed into Irish Law. a number of factors including the Russian invasion of Ukraine, extreme weather events, global shipping challenges, labour availability and supply and demand volatility challenges. ### Community Why we Engage Our Actions and their Impacts By fostering strong relationships with the communities The Board considers local community engagements as in which we operate, we can help support livelihoods part of the overall Group sustainability strategy. and create a better society whilst protecting the As a leader in the food and beverage industry, the Board environment. ensures that the Group is in a position to play a vital role in the global supply chain, providing sustainable How we Engage nutrition solutions for over a billion consumers in a way Kerry engages with community representative bodies, that protects people and the environment around us. The charities and leading non-governmental organisations in Board also prioritises the approval of capital expenditure all regions in which it operates. projects that have a positive environmental impact. The Group directly supports a range of community During 2022, the Board approved a new four-year projects through its MyCommunity programme and partnership with Concern Worldwide to improve food encourages employees to participate in local initiatives security in Kenya as well as supporting an innovative through paid volunteer hours. urban nutrition project in the same country while continuing to support the UN World Food Programme in Burundi. The impact of these initiatives is to enable the Key Outputs from the Engagement development of self-sustaining programmes to promote Outputs include employment and local economic wellbeing amongst some of the worlds’ poorest people. development, social inclusion, access to nutrition, food security and sustainable food production, as well as the Further details of these engagements and the Group’s opportunity for organisations like Kerry to play a lead MyCommunity programme are outlined in the role in environmental protection and community support. Sustainability Review on pages 52-93. 126 Directors' Report Corporate Governance Report Kerry Group Annual Report 2022 ## Governance in Action: ### Designated Workforce Engagement Director - Activities in 2022 Dr. Karin Dorrepaal assumed the role of designated Workforce Engagement Director in April 2022, succeeding Mr. Tom Moran. When appointing her to the role, the Board was mindful of Karin's keen interest in employee-related matters, including gender diversity and equality. Due to the timing of this transition, we reduced the number of pre-planned activities during 2022 to provide Karin with an opportunity to shape the agenda in line with her new role and own interests. As a result, Karin participated in fewer focused engagements in 2022. She will however take part in a broader range of employee engagement activities in 2023 in order to assess employee sentiment at various employee levels, across group-wide locations and in different workplace contexts. Details of the employee engagement activities undertaken by Karin during 2022 are outlined below: - attendance and participation at regional and global events on the topic of Diversity, Inclusion and Belonging, including 'Womxn's Perspectives' an event held in June 2022 highlighting the Group's commitment to the womxn that identify as part of our LGBTQI+ community and Kerry's commitment to equal gender representation in senior management roles by 2030; - site visit to Utrecht, the Netherlands as part of 'Engagement through the lens of a Kerry Manufacturing Plant' where senior site leaders presented on the core business of the site along with site strategies, employee engagement and potential improvements; - participation in briefings on employee engagement strategies and progress for businesses and functions across all regions; and - participation in briefings on employee career development and succession planning for executives as part of the Governance, Nomination and Sustainability Committee agenda. ### Global Priorities for Employee Engagement in 2022 This year we aligned our engagement focus areas under three pillars: 'Making it Better, Making it Clearer and Making it Easier'. These three pillars will guide how we approach our engagement action planning across Kerry and focus our efforts on improving the working experience for our people. - Making it Better encompasses the actions that impact the working life of everyone at Kerry. Learning and development opportunities, our Diversity, Inclusion and Belonging agenda, as well as wellbeing, reward and recognition initiatives all fall under this pillar. Through the survey feedback in 2022, our people shared that they have experienced positive developments in all these areas. - Making it Clearer covers aspects relating to Kerry's vision, brand and strategy. Following our strategy refresh in 2021, Kerry's senior leadership team invested considerable time and effort throughout 2022 in ensuring that every individual at Kerry understands our strategic objectives and how their role contributes to Kerry's longer-term goals. - Making it Easier is a hugely important pillar for Kerry. Our relentless drive to work smarter is core to the culture at Kerry. We are realising the benefits of our continued business transformation activities. Dr. Karin Dorrepaal held regular meetings with the Chief Human Resources Officer and the Group Human Resources Team to provide her feedback from the engagement activities. Formal updates were provided by the designated Workforce Engagement Director to the Board at three Board meetings during the year on the activities undertaken and the feedback received from employees. In addition, the Workforce Engagement Director provided input from the employee perspective during all Board discussions and when the Board made key decisions. ## 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 28 April 2022, there were no material votes cast against any resolutions. ## Whistleblowing Arrangements The Group's whistleblowing arrangement includes an externally-facilitated multi-lingual hotline Speak Up 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 Legal and Ethical Compliance team and formally investigated by the relevant functional heads depending on the nature of the concern raised. In 2022, 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. Kerry Group Annual Report 2022 127 ### Division of Responsibilities All Directors must seek prior approval of the Board Chairman and Chief Executive Officer in advance of undertaking any additional external The roles of the Chairman and Chief Executive Officer appointments. Before approving any additional external are separate and the division of duties between them appointment, the Board considers the time commitment is formally established, set out in writing and agreed by required for the role. Each proposed external the Board. The Chairman is responsible for leadership of appointment is reviewed independently. the Board and ensuring its effectiveness in all respects. The Executive Directors, led by the Chief Executive Independence Officer, are responsible for the management of the The Board, as a whole, has assessed the non-Executive Group’s business and the implementation of Group Directors’ independence and confirmed that, in its strategy and policy. opinion, all non-Executive Directors are independent in accordance with the Code. Senior Independent Director The principal role of the Senior Independent Director Conflicts of Interest (SID) is to provide a sounding board for the Chairman Under the terms of their appointment all Directors have and to act as an intermediary for other Directors as continuing obligations to update the Chairman as soon required. The SID is responsible for the appraisal of the as they become aware of a situation that could give rise Chairman’s performance throughout the year. The SID to a conflict or a potential conflict of interest. is also responsible for leading a formal succession process for the role of Chairman. The SID is available to Board Committees meet shareholders upon request, in particular if they have concerns that cannot be resolved through the The Board has three Committees, the Audit Committee, Chairman or the Chief Executive Officer. the Governance, Nomination and Sustainability Committee and the Remuneration Committee, which Non-Executive Directors support the operation of the Board through their focus on specific areas of governance. The non-Executive Directors’ main responsibilities are to review the performance of management and Each Committee is governed by its Terms of Reference, the Group’s financial information, assist in strategy available from the Group’s website kerry.com or upon development, and ensure that appropriate and effective request, which sets out how it should operate including systems of internal control and risk management its role, membership, authority and duties. are in place. The non-Executive Directors review the relationship with external auditors through the Audit Reports on the activities of the individual Committees Committee and monitor the remuneration structures are presented to the Board by the respective Committee and policy through the Remuneration Committee. Chairs. The non-Executive Directors bring a valuable breadth Further details on the duties, operation and activities of experience and independent judgement to Board of all Board Committees can be found in their respective discussions. reports on pages 131-169 and these reports form part of the Governance Report. Company Secretary Each Director has access to the advice and services of Meetings and Attendance the Company Secretary, whose responsibilities include The Board meets regularly to ensure that all its duties ensuring that Board procedures are followed, assisting are discharged effectively. All Directors are expected the Chairman in relation to corporate governance to prepare for and attend meetings of the Board, the matters, ensuring the Company complies with its legal Committees of which they are members and the AGM. and regulatory obligations and facilitating appropriate quality information flows between the business and In the event that a Board member cannot attend or the Board. participate in the meeting, the Director may discuss and share opinions on agenda items with the Chairman, Commitments Chief Executive Officer, Senior Independent Director or Under the terms of their appointment all Directors Company Secretary in advance of the meeting. agreed to the time commitment schedule which requires A total of eight meetings were held in 2022. Individual them to allocate sufficient time to discharge their attendance at the Board and Committee meetings is set responsibilities effectively. This matter is considered out in the following table. by the Governance, Nomination and Sustainability Committee on an ongoing basis in accordance with its Terms of Reference. 128 Directors’ Report Corporate Governance Report Kerry Group Annual Report 2022 Directors Board Audit Governance, Nomination and Remuneration Committee Sustainability Committee Committee Tom Moran 8/8 4/4 3/3 2 Philip Toomey 3/3 2/2 1 Edmond Scanlon 8/8 1 Marguerite Larkin 8/8 1 Gerry Behan 8/8 5 Hugh Brady 8/8 5/6 4/4 3 Gerard Culligan 3/3 Fiona Dawson 8/8 3/3 Karin Dorrepaal 8/8 4/4 5/5 Emer Gilvarry 8/8 6/6 5/5 Michael Kerr 8/8 6/6 1/1 4 Con Murphy 3/3 Christopher Rogers 8/8 6/6 5/5 Jinlong Wang 8/8 6/6 1 Executive Directors. 2 Mr.Philip Toomey retired from the Board following the conclusion of the AGM on 28 April 2022. 3 Mr. Gerard Culligan retired from the Board following the conclusion of the AGM on 28 April 2022. 4 Mr. Con Murphy retired from the Board following the conclusion of the AGM on 28 April 2022. 5 Dr. Hugh Brady was unable to attend one committee meeting due to a diary conflict. 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. ### Composition, Succession and Evaluation Board Induction and Development On appointment to the Board, each new non-Executive Director undergoes a full formal induction programme organised by the Chairman and supported by the Company Secretary. The purpose of the induction programme is to enable new Directors to gain a full understanding of the Group, governance related matters and Directors’ duties and responsibilities. The induction programme includes 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. Fiona Dawson are outlined in the Governance in Action below. ### Governance in Action (Example): New Director Induction Ms. Fiona Dawson was appointed to the Board on 4 January 2022. Following her appointment, Ms. Dawson underwent a formal induction programme which was tailored to her individual requirements and included the following induction activities. 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 Dairy Ireland businesses to obtain an overview of each business; and – meetings with external auditors and other advisors; Future Induction Activities – site visits to see first-hand the Group’s operations while engaging with employees and senior management. Kerry Group Annual Report 2022 129 Mr. Patrick Rohan who was appointed to the Board with Independent Audit and through interviews held effect from 16 January 2023, will complete a full formal between Independent Audit and the Chair, the Chief induction programme tailored to his requirements over Executive Officer, the Chief Financial Officer, the Senior the coming months. Independent Director, a further four Board members and the Company Secretary. Independent Audit also Throughout the year, the Board as a whole engages reviewed Board papers pertaining to the year and in development through a series of consultations with observed meetings of the Board and Committees. The subject matter experts on a range of topics including topics covered during the Board Performance Evaluation corporate governance and strategy. Presentations included Board composition and succession planning, are also made by Executive Directors and senior board meetings and papers, strategy and financial management on various topics throughout the year in oversight, mergers and acquisitions, people and relation to their areas of responsibility. culture, stakeholder engagement, ESG considerations and risk management. A thorough discussion followed On an annual basis, an ‘off-site’ Board meeting is a presentation of the findings made to the Board by scheduled at a Group location and is combined with a Independent Audit at the December Board meeting. comprehensive schedule of activities over a week-long Each committee also considered the observations period, to allow non-Executive Directors further develop specific to their work. their understanding of the Group’s activities and meet with local senior management and emerging talent. The Chairman appraised the performance of each The ‘off-site’ Board meeting took place during June 2022 of the non-Executive Directors by meeting each in the US at the Group’s Technology and Innovation Director individually. The key areas reviewed were Centre in Beloit, Wisconsin. During the visit to the US the independence, contribution and attendance at Board Board had the opportunity to meet and engage with the meetings, interaction with Executive Directors, the North American Leadership team and emerging talent Company Secretary and senior management, ability to in both a formal and informal setting. The Board visited communicate issues of importance and concern, their two manufacturing sites, during which Board members knowledge and effectiveness at meetings and the overall met with the site leadership teams and saw first-hand time and commitment to their role on the Board. the positive impact of the capital investments at both sites which they had approved. During the visit, the In addition, the Senior Independent Director formally Board also received presentations on the dynamics and appraised the performance of the Chairman. This priorities of the North American market and participated appraisal was similar to the non-Executive Director in a customer immersion experience at the Technology evaluation process which included feedback from all and Innovation Centre which showcased the Group’s Directors on the Chairman’s performance during the year. capabilities in helping customers to solve industry challenges with differentiated solutions. During the year, the non-Executive Directors met without the presence of the Executive Directors and, As part of their personal development plans, led by the Chairman, undertook a formal review of the individual non-Executive Directors are also afforded performance of the individual Executive Directors. the opportunity to visit a number of the Group’s international facilities and operations. The number of Overall, the Board concluded that the outcomes of visits during 2022 continued to be constrained due to the evaluation process have been positive and have the ongoing impact of COVID-19 related restrictions. confirmed to the Chairman that the Board and its Individual Board members training requirements are Committees operate effectively and that each Director reviewed with the Chairman and Company Secretary and contributes to the overall effectiveness and success training is provided to address these needs. of the Group. The actions identified from the 2022 performance evaluation included recommendations Board Performance Evaluation relating to Board and executive succession planning, oversight of the transition plan to Net Zero and the In accordance with provisions of the Code, a appropriate time allocation between strategic priorities performance evaluation of the Board is carried out and other matters at Board meetings. annually and facilitated externally every third year. Progress against recommendations from the previous In 2022, the Board engaged Independent Audit Limited internal evaluation were also considered and the Board (Independent Audit) to facilitate the performance is satisfied that improvements have been made which evaluation. Independent Audit, based in the UK, is have enhanced the operation and effectiveness of both recognised as a leading firm of board reviewers, and has the Board and its Committees. no other connections to the Group. The Chairman, along with the Company Secretary, will The review, performed during October and November ensure that areas for improvement identified from the 2022, considered the effectiveness of the Board and its 2022 evaluation report and areas for consideration Committees. The evaluation was carried out through the arising from the Directors’ appraisal, where identified, use of an online questionnaire tool hosted by will be considered during 2023. 130 Directors’ Report Corporate Governance Report Kerry Group Annual Report 2022 ### Audit, Risk and Internal Control Risk Management and Internal Controls Features of Internal Control in Relation The internal control framework in Kerry Group to the Financial Reporting Process encompasses the policies, processes, tasks and The main features of the internal control and risk behaviours, which together facilitate the Group’s management systems of the Group in relation to the effective and efficient operation by enabling it to financial reporting process include: respond appropriately to significant business, operational, financial, compliance and other risks to – the Board review and approve a detailed annual achieve its business objectives. budget and monitor performance against the budget through periodic Board reporting; The systems which operate in Kerry Group provide – prior to submission to the Board with a reasonable, but not absolute, assurance on: recommendation to approve, the Audit Committee review the Interim Management Statements, the – the safeguarding of assets against unauthorised use or Interim and Annual Consolidated Financial Statements disposition; and and all formal announcements relating to these – the maintenance of proper accounting records and the statements; reliability of the financial information produced. – adherence to the Group Code of Conduct and Group policies published on the Group’s intranet ensures The Board has delegated certain duties to the Audit the key controls in the internal control system are Committee in relation to the ongoing monitoring and complied with; review of risk management and internal control – monthly reporting and financial review meetings are systems. The work performed by the Audit Committee is held to review performance at business level ensuring described in its report on pages 131-136. that significant variances between the budget and detailed management accounts are investigated and Full details of the risk management systems are that remedial action is taken as necessary; described in the Risk Management Report on – the Group has a Financial Compliance function to pages 94-105. establish compliance policies and monitor compliance across the countries in which the Group operates; The principal risks and uncertainties facing the Group, – the Group operates an internal control self-assessment including those that could threaten the business model, process covering material finance, operational and future performance, solvency or liquidity are described compliance controls across the Group; on pages 98-104. Emerging risks are also identified, – a well-resourced and appropriately skilled Finance analysed and managed as part of the same process as function is in place throughout the Group; the Group’s other principal risks as described on pages – completion of key account reconciliations at reporting 96-97. The Directors confirm that they have carried out a unit and Group level; robust assessment of these risks and the actions that are – centralised Taxation and Treasury functions and in place to mitigate them. regional Shared Service Centres established to facilitate appropriate segregation of duties; The Directors confirm that they have also reviewed – the Group Finance Committee has responsibility for the effectiveness of the systems of risk management raising finance, reviewing foreign currency risk, making and internal control which operated during the period decisions on foreign currency and interest rate hedging covered by these financial statements and and managing the Group’s relationship with its finance up to the date of this report. Based on the review providers; performed, the Directors concluded that for the year – the Board, through the Audit Committee, completes an ended 31 December 2022, the Group’s systems of risk annual review of the effectiveness of risk management management and internal control were effective. The and control systems; procedures adopted comply with the guidance contained – appropriate ICT security environment; and in Guidance on Risk Management, Internal Control and – the Internal Audit function continually reviews Related Financial and Business Reporting as published the internal controls and systems and makes by the Financial Reporting Council in the UK. 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, provide 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 133. Kerry Group Annual Report 2022 131 GOVERNANCE REPORT ## Audit Committee Report | Committee we have overseen | Following a detailed planning | | --- | --- | | ongoing enhancements in reporting | process, PwC conducted a hybrid | | against the Task Force on Climate- | working model for the 2022 audit, | | related Financial Disclosures | working both on site and virtually, | | (TCFD) recommendations and | and the Committee reviewed the | | the EU Taxonomy on pages 74- | scope and results of the audit and | | 93. The Committee also reviewed | the effectiveness of the process. | | the Group’s risk management | The work completed in this regard is | | and internal control systems and | outlined on page 135. | oversaw the operation of the Internal Audit function. As outlined on page 136, the Committee considered the | Each regular meeting included | requirements of the Companies Act | | --- | --- | | updates on risk and compliance | 2014 in relation to the Directors’ | | related activities and further details | Compliance Statement and is | | with regard to these matters are set | satisfied that appropriate steps have | Christopher Rogers out on page 134. been undertaken by the Company to Chairman of the ensure that it is materially compliant Audit Committee The Committee focused on with its relevant obligations. monitoring the integrity of the Group’s Financial Statements and An external review of the Committee “The Committee announcements relating to the was conducted by Independent plays a key role in the | | Group’s financial and non-financial | Audit Limited (Independent Audit) | | --- | --- | --- | | governance of the Group’s | performance. It reviewed the work | during 2022 and the outcome of | | financial reporting, risk | completed by management in | this review was that the Committee | | | respect of the Going Concern and | was satisfied that it is operating | management, internal Viability Statements, including a effectively. Further details are set control and external audit | | consideration of uncertainty in the | out on page 132. | | --- | --- | --- | | processes. Maintaining | geopolitical and macroeconomic | | | | environment, as well as the potential | Looking ahead to 2023, the | robust internal controls impact of climate-related risks and Committee’s primary focus will remained a key focus for concluded that there was no threat remain as providing effective the Committee, particularly | | to the Group’s prospects or viability. | oversight of the Group’s financial | | --- | --- | --- | | given the volatile external | Further details are set out on pages | reporting, risk management | | | 104-105. The significant issues | and internal control processes. | environment.” | | that the Committee considered in | The Committee will also take a | | --- | --- | --- | | | relation to the financial statements | proactive approach in anticipating | | Dear Shareholder, | and how these issues were | and preparing for upcoming | | | addressed are set out on page 133. | legislative and regulatory changes, | | On behalf of the Audit Committee, | | particularly in the area of climate | | I am pleased to present my report | The Committee has satisfied itself, | change and sustainability. | | for the year ended 31 December | and advised the Board accordingly, | | | 2022. The report outlines how | that the Annual Report and | I trust you will find this report | | the Committee discharged its | Consolidated Financial Statements, | useful in understanding the | | responsibilities during the year in | when taken as a whole, is fair, | operation and activities of the | | relation to oversight of financial and | balanced and understandable | Committee during the year and | | other reporting, internal controls | and provides the information | I welcome any comments from | | and the risk management process, | necessary for shareholders to | shareholders on the report. | | the Internal Audit function and our | assess the Group’s and the | | | relationship and interaction with the | Company’s position, performance, | | | external auditor. | business model and strategy. | | | The Committee supported the | The Committee oversaw the | | | Board in assessing the principal | relationship with the external | | | and emerging risks facing the | auditor, including monitoring | Christopher Rogers | | Group. This included consideration | all matters associated with their | Chairman of the Audit Committee | | of the climate change risk and | appointment, remuneration, | | | together with the Governance, | performance and independence. | | Nomination and Sustainability 132 Directors’ Report Audit Committee Report Kerry Group Annual Report 2022 Roles and Responsibilities Committee Meetings The main roles and responsibilities of the Committee, The Committee met six times during the year and which reflect the UK Corporate Governance Code and attendance at these meetings is outlined on page 128. the Irish Annex and the Guidance on Audit Committees, Typically, the Chief Executive Officer, the Chief Financial are set out in its written Terms of Reference which Officer, the Group Financial Controller, the Company are available in the governance section of the Group’s Secretary and the Head of Internal Audit, as well as website kerry.com or upon request. representatives of the external auditor are invited to attend meetings of the Committee. In addition, The primary responsibilities outlined in the terms of the Chairman of the Board attends meetings at the reference are included in the table below: 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 Primary Responsibilities of the Audit Committee as are required by the Committee to discharge its duties. – Monitoring the integrity of the Group’s financial The external auditor and the Head of Internal Audit have statements, including reviewing significant financial direct access to the Committee Chairman at all times reporting judgements contained in them; and meet with the Committee, without other Executive – Reviewing the Interim Management Statements, the Management being present, on a formal basis at least Interim and Annual Consolidated Financial Statements annually in order to provide an additional opportunity and considering the appropriateness of accounting for open dialogue and feedback. policies and practices; – Advising the Board on whether it believes there are any Meetings are scheduled to align with the Group’s material uncertainties which may impact the Group’s reporting cycle and after each Committee meeting, the ability to continue as a going concern or the Group’s Chairman of the Committee reports to the Board on the long-term viability; key issues which have been discussed. – Advising the Board on whether the Annual Report and Consolidated Financial Statements, when taken as a Committee Evaluation whole is fair, balanced and understandable; As outlined in detail on page 129, Independent Audit, – Assisting the Board in its responsibilities in regard to the an external consultancy firm, conducted a review of the assessment of the principal and emerging risks facing the Committee as part of the Board’s external performance Group, the monitoring of risk management and internal review. The evaluation was carried out through the control systems, including a review of effectiveness; use of an online questionnaire and through interviews – Reviewing the operation and effectiveness of the Group held between Independent Audit and the Chair, two Internal Audit function; Committee members and the Company Secretary. In – Making recommendations to the Board in relation to addition, as part of the evaluation process, Independent the appointment, re-appointment and removal of the Audit observed the October Committee meeting and Group’s external auditor as well as monitoring their corresponding papers. The output of the review was effectiveness and independence; discussed at the December meeting following which – Reviewing, on behalf of the Board, the Group’s the Committee concluded that it continued to operate whistleblowing arrangements for its employees and effectively and efficiently throughout the year and has third parties to raise concerns in confidence about the skills and expertise required to perform its role possible wrongdoings in financial reporting or other appropriately. The review also identified a number of matters; and ongoing areas of focus for the 2023 financial year. – Advising the Board in relation to compliance with stock exchange and other legal or regulatory requirements. Financial Reporting and Significant Areas of Focus The Audit Committee reviewed the Interim Management Committee Membership Statements, the Interim and Annual Consolidated The Audit Committee currently comprises five Financial Statements and all formal announcements independent non-Executive Directors; Dr. Hugh Brady, relating to these statements before submitting them Ms. Emer Gilvarry, Mr. Jinlong Wang, Mr. Michael Kerr to the Board of Directors with a recommendation to and is chaired by Mr. Christopher Rogers. approve. These reviews focused on, but were not limited to: The Board is satisfied that both Mr. Christopher Rogers and Mr. Michael Kerr meet the specific requirements – the appropriateness and consistency of accounting for recent and relevant financial experience as set out policies and practices; in the Code. – the going concern assumption; – compliance with applicable financial reporting The Board is also satisfied that together, the members standards and corporate governance and regulatory of the Committee, as set out in their biographical details requirements as well as the clarity and completeness on pages 108-110, bring a broad range of relevant skills, of disclosures; and experience and expertise, from a wide variety of industries – considering the significant areas of complexity, and backgrounds, and as a whole have competence management judgement and estimation that had been relevant to the sectors in which the Group operates. The applied in the preparation of the Consolidated Financial Company Secretary is the Secretary of the Committee. Statements in accordance with the accounting policies. Kerry Group Annual Report 2022 133 The Committee has been regularly briefed by Group Task Force on Climate-related Financial Disclosures management on interaction with the Irish Auditing and and the EU Taxonomy are appropriate and that the Accounting Supervisory Authority (‘IAASA’) in respect of assumptions used in the financial statements as outlined their review of the 2021 Annual Report and Consolidated in note 1 are consistent with these disclosures. Financial Statements in line with their statutory functions and normal practice. All matters arising from this review The Committee has, with the support of PwC as external have been concluded satisfactorily. auditor, reviewed the suitability of the accounting policies which have been adopted and whether management The Committee considered the impact of climate change have made appropriate judgements and disclosures. The on the Group’s Consolidated Financial Statements and table below sets out the significant matters considered by agreed that the disclosures outlined on pages 74-85 the Committee in relation to the Consolidated Financial made in response to the recommendations of the Statements for the year ended 31 December 2022. Significant Areas of Focus Impairment Goodwill and indefinite life intangible assets, as disclosed in note 12 to the Consolidated Financial of Goodwill Statements, represents the largest number on the Group balance sheet at €4.9 billion. The and Indefinite 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 Life Intangible cash flows, discount rates, terminal values and growth rates. This included consideration of the Assets impact of climate change and other external and macroeconomic risks 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 is appropriate and no impairment was identified. Going Concern The Committee assessed the effectiveness of the process undertaken by management to and Viability evaluate going concern and longer-term viability, which included reviewing and challenging Statement management’s assumptions and modelling of projected cash flows and in particular, those related to the potential impact of climate-related risks on profitability and liquidity 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. 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. – a detailed report from senior finance management Fair, Balanced and Understandable outlining the process through, which they assessed At the request of the Board, the Audit Committee the narrative and financial sections of the 2022 Annual reviewed the content of the Annual Report and Report to ensure that the criteria of fair, balanced and Consolidated Financial Statements to ensure that it is understandable has been achieved. fair, balanced and understandable, and provides the information necessary for shareholders to assess the Management ensured that the draft Annual Report Group’s and the Company’s position, performance, and Consolidated Financial Statements were available business model and strategy. to the Audit Committee in sufficient time for review in advance of the Committee meeting to facilitate adequate In fulfilling this responsibility, the Committee considered discussion at the meeting. the following: Having considered the above, in conjunction with the – the timetable for the co-ordination and preparation consistency of the various elements of the reports, of the Annual Report and Consolidated Financial the narrative reporting and the language used, the Statements, including key milestones as presented at Committee confirmed to the Board that the Annual the December Audit Committee meeting; Report and Consolidated Financial Statements, taken – the systematic approach to review and sign-off carried as a whole, is fair, balanced and understandable and out by senior management with a focus on consistency provides the information necessary for shareholders and balance; and to assess the Group’s and the Company’s position, performance, business model and strategy. 134 Directors’ Report Audit Committee Report Kerry Group Annual Report 2022 The Audit Committee, having assessed the above Internal Control and Risk Management information, is satisfied that the internal control and risk The Audit Committee supports the Board in its duties management framework is operating effectively and has to review and monitor, on an ongoing basis, the reported this opinion to the Board. effectiveness of the Group’s risk management and internal control systems. A detailed overview of the Internal Audit Group’s risk management framework is set out in the Risk Management Report on pages 94-97. The Audit Committee is responsible for monitoring and reviewing the operation and effectiveness of the Throughout the year, the Committee: Group Internal Audit function including its focus, plans, activities and resources. To fulfil these duties the – reviewed and approved the assessment of the Committee: principal risks and uncertainties, including climate change and other emerging risks, that could impact – reviewed and approved the Group Internal Audit the achievement of the Group’s strategic objectives as function’s charter, updated strategy and annual plan; described on pages 98-104; – considered and were satisfied that the competencies, – reviewed and approved the risk appetite for each of experience and level of resources within the Internal the Group’s principal risks and recommended the risk Audit team were adequate to achieve the proposed appetites as outlined for approval by the Board; plan; – received presentations from senior executives on – considered the role and effectiveness of Internal Audit a selection of principal risks, which included two in the overall context of the Group’s risk management cybersecurity updates as well as an update on the framework and was satisfied that the function has Group’s processes to manage sourcing and pricing risk appropriate standing within the Group; in a period of record inflation and significant supply – received quarterly updates from the Head of Internal chain disruption; Audit on the delivery of the 2022 plan and on the – reviewed quarterly reports from the Head of Internal principal findings from the work of Internal Audit and Audit based on internal audits completed outlining non- management’s actions to remediate issues identified; compliances with Group controls and managements’ – received updates on the nature and extent of non-audit action plans to address them; activity performed by Internal Audit; – considered reports from the Head of Internal Audit on – ensured that the Head of Internal Audit had regular fraud investigations or other significant control matters meetings with the Chairman of the Audit Committee which occurred during the year and approved plans to and the Committee met with the Head of Internal Audit address and remediate the issues identified; without the presence of Executive Management; – received updates from the Group Financial Controller – ensured that the Head of Internal Audit had access to on any control weaknesses identified through monthly the Chairman of the Board if required; and financial review meetings; – ensured co-ordination between Group Internal Audit – received updates from the sustainability team on and the external auditor to maximise the benefits from ongoing progress related to the assessment of clear communication and co-ordinated activities. climate-related risks and disclosures; – engaged with management on the Group’s response In order to comply with the Chartered Institute of to the unfolding crisis in the Ukraine both in relation to Internal Auditors (CIIA) requirements, Deloitte were supporting employees and their families based there engaged to conduct an independent external quality and managing other risks arising as a result of the assessment of the Internal Audit function during 2022. conflict; The objectives of this assessment were to independently – considered the results of the Kerry Control Self- assess the effectiveness of the function in line with the Assessment (the internal control self-assessment International Standards for the Professional Practice review of material finance, operational and compliance Framework (IPPF) of the CIIA and to benchmark it controls) and concluded that the controls are operating against best practice and peer organisations. The output effectively; from the review was presented by Deloitte to the Audit – received a detailed report from the Head of Internal Committee at the July meeting. Audit outlining the Group’s risk management and internal control framework in line with the FRC The assessment concluded that Internal Audit is a Guidance on Risk Management, Internal Control professional function, incorporating expected industry and Related Financial and Business Reporting and good practice in line with its peers and conforms with incorporating all material financial, operational and the vast majority of the CIIA standards. In addition, the compliance controls; and assessment contained a number of recommendations – reviewed the report from the external auditor in respect to be considered to further evolve and strengthen the of significant financial accounting and reporting issues, function’s effectiveness. together with internal control weakness observations. On the basis of the above, the Committee concluded that In addition to the above, the Board also received an for 2022 the Internal Audit function operated effectively update from ICT management with regard to the Group’s and is satisfied that the quality, experience and expertise ICT governance and information security programme of the function is appropriate for the Group. and its ability to address cybersecurity threats particularly in the context of its criticality to the business and an increase in the global risk level. Further detail with regard to the Group’s information systems and cybersecurity controls are outlined on page 102 of the Risk Report. Kerry Group Annual Report 2022 135 Effectiveness External Auditor Post completion of the 2021 audit, in conjunction with On behalf of the Board, the Audit Committee has PwC, review meetings were held with senior finance primary responsibility for overseeing the relationship management across all regions and it was confirmed with, and performance of, the external auditor. This by both parties that no issues had arisen during the includes making recommendations to the Board on audit process. This review considered the process and the appointment, re-appointment and removal of the technology changes which were implemented to support external auditor, assessing their independence and conducting the audit remotely and they were satisfied effectiveness and approving the audit fee. that it did not compromise the quality of the audit. During the year, the Committee met with the external At the October Audit Committee meeting, PwC outlined auditor without management present to discuss any to the Committee in detail the 2022 external audit plan, issues that may have arisen during the audit of the which would be conducted on a hybrid basis with a Group’s Consolidated Financial Statements. blend of staff working both on site and virtually. The Committee discussed the significant audit risks and Independence and Provision of Non-Audit Services key audit matters, audit scope and materiality amongst The Committee is responsible for ensuring that the other matters. The Audit Committee agreed that the external auditor is independent and for implementing plan and the materiality at which any misstatements appropriate safeguards where the external auditor also should be reported by PwC to the Committee was provides non-audit services to the Group. appropriate. PwC confirmed to the Audit Committee that they are Prior to the finalisation of the 2022 Consolidated independent from the Group under the requirements of Financial Statements, the Audit Committee received a the Irish Auditing and Accounting Supervisory Authority’s detailed presentation and final report from PwC. The Ethical Standards for Auditors. PwC were appointed as Committee also considered feedback from the lead the Group’s external auditor in 2016 and the Committee partner and senior executives in concluding that PwC will ensure that in accordance with EU legislation in effectively delivered against the objectives of the agreed relation to Audit Reform as adopted in Irish legislation, audit plan. the external auditor is rotated at least once every ten years. The audit lead engagement partner is rotated In assessing the effectiveness of the external auditor, the every five years and for the financial year ended 31 Audit Committee also considered the following: December 2022 is Enda McDonagh who was appointed in 2021 following the rotation of the previous partner. – the quality of presentations to the Board and Audit Committee; In accordance with the Group’s policy on the hiring of – the technical insights provided, relevant to the Group; former employees of the current external auditor, the – key audit findings, including their robustness and Committee reviews and approves any appointment of an perceptiveness in handling of key accounting and audit individual, within three years of having previously been judgements; and employed by the current external auditor, to a senior – their demonstration of a clear understanding of the managerial position in the Group. Group’s business and key risks. A formal policy governing the provision of non- On the basis of the above the Committee is satisfied with audit services by the external auditor is in place and the effectiveness of the external auditors. is reviewed and approved by the Audit Committee annually. This policy is in accordance with applicable Appointment laws and takes into account the relevant ethical guidance Following a comprehensive tender process overseen for auditors. This policy is designed to safeguard the by the Audit Committee, PwC were appointed as objectivity and independence of the external auditor and external auditor in March 2016 and commenced as to prevent the provision of services which could result statutory auditors for the Group for the financial year in a potential conflict of auditor independence. The ended 31 December 2016. On an annual basis, the policy outlines the services which can be provided by the Committee reviews the appointment of the external external auditor, the relevant approval process for these auditor, taking into account the auditor’s effectiveness services, and those services which the external auditor is and independence. On that basis, the Committee prohibited from providing. recommended to the Board that PwC should continue in office as the auditor to the Group in respect of the year In 2022, all non-audit services and fees were approved ending 31 December 2023. by the Audit Committee in line with policy. The Committee is satisfied that the non-audit fees paid to The Audit Committee approved the remuneration of the PwC, which were minimal, did not compromise their external auditor, details of which are set out in note 3 to independence or objectivity. Full details of the fees the Consolidated Financial Statements. 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. 136 Directors’ Report Audit Committee Report Kerry Group Annual Report 2022 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 2022, 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 126. 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 2022 137 GOVERNANCE REPORT ## Governance, Nomination and Sustainability Committee Report During the year under review, science, technology and innovation the Committee continued to lead expertise. the Board refreshment process ensuring that the composition of The Committee also reviewed the Board and its Committees has senior management development the appropriate balance of skills, and succession plans with regard knowledge, experience, diversity and to business growth, geographic independence. To ensure that the expansion and diversity goals below Board has a director that reflects the Board level. Group’s dairy heritage we engaged | with an executive recruitment | During 2022, the Committee | | --- | --- | | consulting firm to conduct a | reviewed the Company’s corporate | | search for a new independent | governance policy and processes | | non-Executive Director. Potential | and monitored developments in | | candidates were considered by the | corporate governance best practice. | Committee and a shortlist were Tom Moran interviewed after assessing their The Committee also continued to Chairman of the qualifications against agreed criteria provide guidance and oversight to Governance, Nomination and and their other time commitments. the Group on the implementation of Sustainability Committee | | This culminated in the appointment | the Beyond the Horizon sustainability | | --- | --- | --- | | | of Patrick Rohan to the Board on 16 | strategy, including monitoring | | Dear Shareholder, | January 2023. He brings to the Board | progress against agreed targets | | | a detailed knowledge of the dairy | and considering the enhanced | | On behalf of the | and agribusiness industry. | reporting requirements and | stakeholder expectations in relation Governance, Nomination The Committee also recommended to sustainability matters. and Sustainability changes to the composition of the Committee, I am pleased Board Committees as outlined on An externally facilitated review of to present our report | | page 141. | the effectiveness of the Board and | | --- | --- | --- | | for the year ended | | its Committees was conducted | | 31 December 2022. | Dr. Hugh Brady will have served | during 2022 and the outcome of | | | nine years as a director on 23 | this review is that the Board and its | | | February 2023. Over this tenure | Committees consider that they are | | The Committee is responsible | his biomedical research and | operating effectively. | | for evaluating the structure, size, | academic background has brought | | | composition and successional needs | an invaluable perspective to the | The Committee’s priorities for | | of the Board and its Committees | Board, as the Group has significantly | 2023 will continue to focus on | | and for making recommendations | evolved its science and technology | Board and Committee refreshment, | | on same, with due regard for Board | capabilities over the same period. | senior management development | | diversity. The Committee also reviews | The Committee and the Board | and succession planning as well | | the results of the annual Board | have reviewed and considered the | as ongoing oversight of the | | evaluation process as it relates to the | provisions of the Code in relation to | implementation of the Group’s | | Board and Committee performance | Directors’ tenure and nonetheless | sustainability strategy. In this regard, | | and composition. Additionally, | having conducted a rigorous review | the Committee is considering | | the Committee is responsible for | of his independence, unanimously | recommending to the Board, that a | | monitoring Corporate Governance | agree that Dr. Brady should, subject | standalone Sustainability Committee | | developments and for providing | to shareholder approval, remain on | is established, to focus efforts on this | | guidance and oversight on the | the Board and as SID until the AGM | area of significant importance and | | implementation of the Group’s | in April 2024. The Committee and | fast-evolving change. | | sustainability strategy. | Board are satisfied that Dr. Brady, | | given his personal attributes and | On 28 April 2022 I was appointed | the challenge he continues to bring | | | --- | --- | --- | | Chairman succeeding Mr. Philip | to Board discussions, will continue | | | Toomey who retired from the Board | to apply objective and independent | | | on the same date. On behalf of the | judgement to act in the best interest | | | Board, I wish to pay tribute to Philip | of the Company. The Committee is | Tom Moran | | for his commitment and dedication | actively engaged in the challenging | Chairman of the Governance, | | to the success of the Group | process to identify and recruit | Nomination and Sustainability | | throughout his years of service. | an experienced and high-calibre | Committee | successor with a similar level of 138 Directors’ Report Governance, Nomination and Sustainability Committee Report Kerry Group Annual Report 2022 The quorum for Committee meetings is two and only Roles and Responsibilities Committee members are entitled to attend. The The main roles and responsibilities of the Committee, Governance, Nomination and Sustainability Committee which were reviewed and updated during 2022, are set may extend an invitation to other persons to attend out in written terms of reference, which are available meetings or to be present for particular agenda items from the Group’s website kerry.com or upon request. as required. The Company Secretary acts as Secretary of the Committee. The key responsibilities outlined in the Terms of Reference are included in the following table: During 2022, the Committee continued to work with Korn Ferry, an executive recruitment consulting firm, to assist with Board refreshment. Korn Ferry acts as Primary Responsibilities of the Governance, the advisor to the Remuneration Committee and has Nomination and Sustainability Committee also provided leadership and talent consulting services to the Group during the year through a separate part of – evaluating the balance of skills, experience, their business. independence, knowledge and diversity of the Board to ensure optimum size and composition; Committee Meetings – ensuring an appropriate nomination process is The Committee met four times during the year and in place for Board appointments; attendance at these meetings is outlined on page 128. – reviewing a candidate’s other commitments to ensure that on appointment, a candidate has Board Refreshment Policy sufficient time to undertake the role; On an ongoing basis, the Governance, Nomination – making recommendations to the Board on the and Sustainability Committee reviews and assesses the appointment and re-appointment of both structure, size, composition, diversity and overall balance Executive and non-Executive Directors; of the Board and makes recommendations to the Board – ensuring a formal induction plan is in place for with regard to refreshment. each new Director on appointment; Appointments to the Board are for a three-year period, – making recommendations to the Board concerning subject to shareholder approval and annual re-election, membership of Board Committees in consultation after consideration of annual performance evaluation with the Chairs of the Committees; and statutory provisions relating to the removal of a – ensuring plans and processes are in place for Director. The Board may appoint such Directors for succession planning for Directors, including the a further term not exceeding three years and may Chairperson, Senior Independent Director, consider an additional term if deemed appropriate. non- Executive Directors and senior management positions; During the year, the Chairman conducted a rigorous review of all other non-Executive Directors as part of the – reviewing the Board diversity policy; Board evaluation process, taking into account the need – overseeing the conduct of the annual evaluation for progressive refreshment of the Board. The Board of the Board and its Committees; explains to shareholders, in the papers accompanying – monitoring and reviewing developments in law, the resolutions to elect and re-elect the non-Executive regulation and best practice relating to corporate Directors, why it believes the individual should be re- | governance and making recommendations to the | elected based on the results of the formal performance | | --- | --- | | Board and Committees on changes or additional | evaluation. Details of Board refreshment activities during | | actions as appropriate; and | the year are outlined on pages 141-142. | – providing guidance and oversight on the Nomination Process implementation of the Group’s sustainability strategy. 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. Committee Membership The Committee also makes recommendations to the The Governance, Nomination and Sustainability Board concerning the re-appointment of any non- Committee currently comprises three independent non - Executive Director at the conclusion of their specified Executive Directors; Dr. Hugh Brady, Dr. Karin Dorrepaal, term and the re-election of all Directors who are the Mr. Michael Kerr and is chaired by Mr. Tom Moran. subject of annual rotation. The terms and conditions of Biographical details for the members of the Committee appointment of non-Executive Directors are set out in are outlined on pages 108-110. 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. Kerry Group Annual Report 2022 139 This process is fully documented and monitored Governance in Action (example) throughout the year in conjunction with the Committee. Non-Executive Director Appointment Details of succession planning activities during the year Mr. Patrick Rohan was appointed to the Board with effect are outlined in Our People on page 23. from 16 January 2023. The key stages of the nomination process are outlined below. Sustainability During 2022, the Committee continued to provide The Committee assessed the skill set, guidance and oversight on the implementation of the experience and diversity on the Board, the Group’s 2030 Beyond the Horizon sustainability strategy. 1. Assessment requirements to meet the Group’s future growth The Committee is supported in this work by the Global plans, together with the planned retirements Sustainability Council whose members are invited to from the Board over the coming years. Committee meetings to share their expertise on key sustainability topics and to update the Committee on the implementation of the sustainability strategy. The Committee prepared a detailed role profile; identifying the need for a new non- Executive During the year, the Committee monitored progress Director with food industry experience, against the enhanced climate and gender diversity particularly in the dairy and agribusiness 2. Requirement targets and the broader commitments included sectors and the capabilities to align with the Group’s purpose, values and culture, while also in the Beyond the Horizon strategy. In addition, the representing the Group’s dairy heritage. Committee also considered and approved the risks and opportunities and the additional disclosures in line with the Task Force on Climate-Related Financial Disclosures (TCFD) and the EU Taxonomy included in the The Committee, with Korn Ferry’s assistance, 2022 Annual Report as well as the enhanced disclosures conducted a search for appropriate candidates 3. Search included in the other sustainability reports which follows for appointment to the Board based on the profile and skillset agreed by the Committee. the framework set out by the Global Reporting Initiative (GRI) standards. The Committee assessed a list of candidates Details of the Group’s sustainability strategy, targets and 4. Screening performance, policies and programmes are outlined in identified as having met the criteria. the Sustainability Review on pages 52-93 and in the 2022 Sustainability Report that has been published alongside the Annual Report and available for review on kerry.com. A shortlist of potential candidates was 5. Interview interviewed by Korn Ferry, the Chairman, the Diversity, Inclusion and Belonging Policy Committee and the Chief Executive Officer. Diversity, Inclusion and Belonging is fully embraced at Kerry and the Group is committed to having a work A formal recommendation was made by environment that is respectful of everyone. We recognise the Committee to the Board proposing the the value that different perspectives and cultures bring appointment of Mr. Patrick Rohan as a to the organisation. Valuing differences creates a work non-Executive Director. The Board approved environment which is positive and productive, where 6. Approval the appointment of Mr. Patrick Rohan noting people can and want to do their best and where each that he had a balance of skills, knowledge individual can bring something unique to contribute to and experience that matched the requirements set. Appointment terms the overall success of Kerry. were drafted and agreed with him. The Group’s Diversity, Inclusion and Belonging Policy is an integral part of the Group’s Code of Conduct ensuring that Succession Planning diversity and inclusion are embedded in Kerry Group’s The Governance, Nomination and Sustainability core values. Within this, the Group seeks to recruit, hire Committee reviews the succession plans for the Board and and retain the best talent from a diverse mix of gender, its Committees on an ongoing basis to ensure an orderly background, nationality, ethnicity and other attributes refreshment of membership, taking into account Group with the skills and experiences to drive innovative thinking strategy, the challenges and opportunities facing the to enable a sustained competitive advantage. Group and the skills, knowledge and experience required. The Board believes in the benefits of having a diverse The Committee also reviews succession plans for senior Board and the value that it can bring to its effective management, which form part of the Group’s overall operation. In accordance with the Board Diversity Policy, annual approach to succession planning and agrees differences in background, gender, skills, experiences, these with the Chief Executive Officer before being nationality, ethnicity and other attributes are considered presented to the Board. The succession planning process in determining the optimum composition of the Board includes defining success criteria for prioritised key with the aim to balance it appropriately. All Board roles, identifying and evaluating candidate pools and appointments are made on merit, with due regard aligning successor development activities with individual to diversity. The Board currently has a 33% female and business needs to ensure leadership continuity and representation. Diversity at Board level in terms of gender, improve the depth of the leadership succession pipeline. nationality and ethnic background have all improved 140 Directors’ Report Governance, Nomination and Sustainability Committee Report Kerry Group Annual Report 2022 Non-Executive in recent years. In line with its diversity policy, and In 2021, diversity targets were agreed for senior 75% recommended best practice, the Board is committed to management succession pools with the Executive maintaining a minimum of 33% female representation on Directors and approved by the Board to improve the the Board and plans to increase this representation level diversity profile of senior leadership teams and ensure further in line with developing best practice and regulatory internal candidate pools better reflect the broader cultural requirements. It also has an ambition to increase the mix of people within the Group. The Group is committed Executive representation of members with diverse backgrounds to achieving the highest levels of inclusion, diversity, 25% such as nationality, ethnicity and other attributes. engagement and belonging and is targeting equal gender representation at senior management level by 2030. The In reviewing Board composition and agreeing a Committee reviews progress against these diversity goals job specification for new non-Executive Director each year, whilst taking account of business growth and appointments, the Committee considers the benefits of geographic expansion within the organisation. all aspects of diversity including, but not limited to, those Male described above, in order to complement the range 67% Further details of the Group’s approach to Diversity, and balance of skills, knowledge and experience on the Inclusion and Belonging, including our broader Board. As part of the identification process executive organisational goals focused on building an inclusive recruitment consultants are required to present a list of and diverse workplace are outlined in our Sustainability potential candidates, who meet the stated specification Report and in Our People on page 22. Female and requirements comprising candidates of diverse 33% backgrounds, for consideration by the Committee. A summary of the Group’s current position relating to Board and senior management diversity is provided below: | | Male | Non-Executive | | | | 1 | | --- | --- | --- | --- | --- | --- | --- | | Executive / | | | | Board Gender Diversity Senior Leadership | | | | | 67% | | 75% | | | | | Non-Executive Directors | | | | | Gender Diversity | | Non-Executive Male Male 75% 67% 67% Female Executive 33% 25% Executive Female Female 25% 33% 33% 56-60 | | 61-68 | Non-Executive | | | --- | --- | --- | --- | | 17% | | Male | | | | 58% | | 75% | 1 67% Senior Leadership above aligns to Senior Management definition per Corporate Governance Code Board Age Profile Board Tenure (years) (years) Executive Female 25% | 40-55 | 33% | 56-60 | | | | | --- | --- | --- | --- | --- | --- | | | | | 61-68 | | 3-5 | | 25% | | 17% | | | | | | | | 58% | 0-2 | 26% | 33% Male Non-Executive 75% Male Male 6-10 67% 75% 67% 33% 40-55 11-15 25% 8% Female Executive Female 25% Female 25% 33% 33% Male 56-60 61-68 Male 75% 17% Male 58% 67% 67% Female Female 25% Female 33% 40-55 33% 25% Male 56-60 | | 61-68 | | 75% | | --- | --- | --- | --- | | 17% | | Male | | | | 58% | | 3-5 | 67% 0-2 26% 33% Female 25% 6-10 Female 40-55 33% 33% 25% 11-15 8% Male 56-60 61-68 75% 17% 3-5 58% 0-2 26% 33% Female 25% 6-10 33% 40-55 25% 11-15 8% Male 75% 3-5 0-2 26% 33% Female 25% 6-10 33% 11-15 8% 3-5 0-2 26% 33% 6-10 33% 11-15 8% SEPARATING HORIZONS Kerry Group Annual Report 2022 141 ## Changes to the composition of the Board and its Committees for the year ended 31 December 2022 ### Mr. Philip Toomey Retired from the Board, the Governance, Nomination and Sustainability Committee and as Chairman of the Board on 28 April 2022. ### Mr. Tom Moran Appointed Chairman of the Board and Chair of the Governance, Nomination and Sustainability Committee on 28 April 2022. ### Ms. Fiona Dawson Appointed to the Board on 4 January 2022 and to the Remuneration Committee on 14 February 2022. ### Mr. Con Murphy Retired from the Board on 28 April 2022. ### Mr. Gerard Culligan Retired from the Board on 28 April 2022. ### Mr. Michael Kerr Appointed to the Governance, Nomination and Sustainability Committee on 2 August 2022. ### Ms. Emer Gilvarry Appointed Chair of the Remuneration Committee on 28 April 2022. ### Dr. Karin Dorrepaal Appointed designated Workforce Engagement Director on 28 April 2022. ### Mr. Patrick Rohan Appointed to the Board on 16 January 2023. ## Key Activities The key activities of the Committee throughout the year are detailed below: | Subject | Committee Activity | | --- | --- | | Board Size and Composition | In 2022, as part of its remit, the Committee considered the size and composition of the Board. At 31 December 2022, the Board comprised 11 members following the retirements of Mr. Philip Toomey, Mr. Con Murphy and Mr. Gerard Culligan on 28 April 2022. The Board size increased to 12 on 16 January 2023 following the appointment of Mr. Patrick Rohan. The Committee will continue to consider both Board size and composition during 2023. | | Chairman Succession | Mr. Philip Toomey retired from the Board on 28 April 2022. A separate sub-committee of the Board chaired by Dr. Hugh Brady conducted a formal process to identify and recommend a candidate to succeed Mr. Toomey. The Committee engaged external consultants to assist in the process to identify a candidate. Following the conclusion of this process, the sub-committee recommended the appointment of Mr. Tom Moran as Chairman and this was endorsed by the Board at its meeting in February 2022. He assumed the role of Chairman at the conclusion of the AGM on 28 April 2022 and was independent on appointment. On appointment, Mr. Tom Moran stepped down as a member and Chair of the Remuneration Committee and as the designated Workforce Engagement Director. | | Board Refreshment | New non-Executive Directors, Ms. Fiona Dawson and Mr. Patrick Rohan were appointed to the Board on 4 January 2022 and 16 January 2023 respectively, following searches conducted by the Committee in conjunction with an executive recruitment consulting firm. The Committee and the Board agreed that Ms. Dawson and Mr. Rohan had a balance of skills, knowledge, experience and diversity that matched the requirements set. | | Committee Refreshment | On appointment as Chairman of the Board, Mr. Tom Moran was also appointed as Chair of the Governance, Nomination and Sustainability Committee on 28 April 2022. Ms. Emer Gilvarry was appointed Chair of the Remuneration Committee on 28 April 2022, Ms. Fiona Dawson was appointed to the Remuneration Committee on 14 February 2022 and Mr. Michael Kerr was appointed to the Governance, Nomination and Sustainability Committee on 2 August 2022. There were no other changes to the composition of the Board Committees during the year. The Committee will continue to consider Committee refreshment in 2023. | 142 Directors' Report Governance, Nomination and Sustainability Committee Report Kerry Group Annual Report 2022 # **Key Activities (continued)** | Subject | Committee Activity | | --- | --- | | Designated Workforce Engagement Director | Mr. Tom Moran retired as the designated Workforce Engagement Director at the conclusion of the AGM on 28 April 2022. The Governance, Nomination and Sustainability Committee completed a formal process and recommended to the Board the appointment of Dr. Karin Dorrepaal as the designated Workforce Engagement Director effective from the conclusion of the 2022 AGM. | | Remuneration Committee Chairperson | Mr. Tom Moran retired as Chairperson of the Remuneration Committee on his appointment as Chairman of the Board at the conclusion of the AGM on 28 April 2022. The Governance, Nomination and Sustainability Committee completed a formal process and recommended to the Board the appointment of Ms. Emer Gilvarry as Chairperson of the Remuneration Committee, effective from the conclusion of the 2022 AGM. Ms. Emer Gilvarry had been a member of the Remuneration Committee since June 2021 and is also Chair of the Remuneration Committee of another listed plc. | | Re-appointment of non-Executive Directors | During the year, Mr. Tom Moran, Dr. Hugh Brady, and Dr. Karin Dorrepaal, each completed terms 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 they continue to be effective and independent and make a valuable contribution to the Board, and re-appointed them to serve additional terms. | | Board and Committee Effectiveness | As outlined in detail on page 129, an evaluation of the Board and its Committees took place in 2022. This process was externally facilitated by Independent Audit Limited. The evaluation was carried out through the use of an online questionnaire hosted by Independent Audit, interviews held with selected Board members and the Company Secretary, review of Board papers pertaining to the year and the observation of Board and Committee meetings. A thorough discussion followed a presentation of the findings made to the Board by Independent Audit at the December Board meeting. The Committee considered the outcome of this review. 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 2023. The conclusion from the evaluation process is that the Board and its Committees consider that they have operated effectively during the period under review. | | 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 2022, the Committee reviewed the Company's corporate governance policy in the context of the 2018 UK Corporate Governance Code and the Irish Annex and monitored developments in corporate governance best practice. | | Sustainability Strategy | The Committee provided guidance and oversight on the implementation of the Group's *Beyond the Horizon* sustainability strategy during the year and monitored progress against targets. The Committee also considered the additional climate-related disclosures in line with TCFD and the EU Taxonomy as well as the additional ESG disclosures the Group is reporting in its separate 2022 Sustainability Report. | | 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 kerry.com. | Kerry Group Annual Report 2022 143 GOVERNANCE REPORT ## Remuneration Committee Report 2022 has been a milestone year – Salary increases for the wider for Kerry as we celebrated our workforce in 2023 will be aligned th | 50 | anniversary and reconnected | to market movements on a | | --- | --- | --- | | in person with many of our | | country-by-country basis and | | stakeholders as borders and | | will be greater than those awarded | | economies reopened. In the face | | last year; | | of a challenging macro-economic | | – Greater flexibility has been | | and geopolitical backdrop, and | | introduced in the Group’s pay | | through continued COVID-19 | | review process to facilitate higher | | lockdowns in key geographies, | | increases for lower-paid positions | | the Group again delivered a good | | and to give managers greater | | financial performance for the | | flexibility to differentiate where | | year and made further significant | | pay levels are materially impacted | | strategic developments to enhance | | by inflation; | | and solidify Kerry’s position as a | | – More frequent salary increases | | world-leading provider of taste and | | are and will be made in countries | Emer Gilvarry nutrition solutions for the food, experiencing hyperinflation; Chairperson of the beverage and pharmaceutical – A new online, global wellbeing Remuneration Committee markets. centre hosting high quality resources supporting emotional We could not have achieved wellbeing, physical wellbeing, ### Section A: this without the continued and nutritional wellbeing and financial ### Chairperson’s excellent leadership of our Executive wellbeing has been made available Directors, our leadership teams to all employees; ### Annual Statement and our entire global workforce – Renewed promotion of the Group’s who continue to demonstrate Global Employee Assistance tremendous commitment and Programme (EAP) service across agility. I would also like to pay all our Group locations. This Dear Shareholder, special tribute to our Ukrainian programme provides a wide range colleagues and to our leadership of confidential services including On behalf of the teams who ensured a rapid and budgeting and addressing stress Remuneration Committee, coordinated response to keep our to build financial confidence; and I am pleased to present the colleagues and their families safe as – Employee benefit and discount Directors’ Remuneration they deal with the consequences of platforms are actively promoted Report for the year ended the invasion of their country. where available. 31 December 2022. This Supporting our People In a period of significantly higher is my first Remuneration inflation, the Committee is aware We continue to prioritise the health Committee Report, having that restraint should be exercised and wellbeing of our people and taken over as Chairperson when reviewing Executive Director throughout 2022, the Committee following Tom Moran’s remuneration. Having considered was particularly cognisant of the the holistic actions and responses appointment as Chairman of volatile economic environment, taken for our wider workforce, the the Board on 28 April 2022. global inflationary challenges Committee is satisfied that the and the associated impact on our executive remuneration outturns I would like to thank Tom for people. The Committee is also for 2022 and the implementation his significant contribution aware that the current inflationary of our Remuneration Policy for environment is disproportionally to this Committee over the the Executive and non-Executive affecting lower-paid workers and past number of years, firstly Directors in 2023, are appropriate. therefore, a number of targeted as a member and more actions have been taken to support recently as the Chairman. our people where required: 144 Directors' Report Remuneration Committee Report Kerry Group Annual Report 2022 ## Remuneration Policy The Group's Remuneration Policy is summarised in Section C on pages 149-155. This current Policy was approved by shareholders in 2021 and provides the framework for remuneration decisions made by the Committee until the next Policy review. The Committee is confident that the Group's Remuneration Policy is aligned with shareholder interests, promotes long-term sustainable success and is in line with applicable best market practice. Furthermore, it ensures that Executive Director remuneration is aligned to the Group's purpose, values and culture and can be clearly linked to the successful delivery of the Group's strategy and mid-term financial targets. The Committee is satisfied that the Policy has operated as intended for 2022 and the remuneration outturns are appropriate, however some minor changes have been made to the operation of the Policy for 2023 following a review of operation in 2022 in the context of the key focus areas for 2023. Consistent with our three-year review cycle, the Committee will undertake a full review of the Policy in 2023 to ensure it remains appropriate and continues to attract, retain and motivate individuals of the highest quality on an international basis. Ahead of bringing a new Policy to shareholders at the 2024 AGM, we will engage with a range of key stakeholders on any material changes proposed. ### 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, values and culture, 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. #### Stakeholder 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 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. ## Remuneration Policy Outturn 2022 In determining the Executive Directors' remuneration outturns for the financial year, the Committee maintained a clear and rigorous focus on aligning pay with performance in the context of another challenging year, due to heightened levels of inflation and uncertain economic conditions globally. In 2022, the Group delivered good overall growth with Group revenues reaching a record level of €8.8 billion, constant currency adjusted earnings per share growth of 7.3% and free cash flow generation of €640 million. We achieved strong progress in evolving the Group's portfolio aligned to our strategic priorities of Taste, Nutrition and Emerging Markets as well as advancing further along our *Beyond the Horizon* sustainability journey. ## 2022 Short-Term Incentive Plan Outturn For Executive Directors, the 2022 STIP was based on financial metrics aligned to the Group's strategy with 35% based on Volume Growth, 27% on EBITDA Margin Expansion and 18% on Cash Conversion. Performance against key Strategic Objectives formed the remaining 20% of the overall STIP weighting. The calculated outturn on the STIP for 2022 was 78% of the maximum available opportunity. The outturn was driven by achieving maximum vesting level for the Volume Growth metric on the back of a year of record growth, on target or slightly above vesting levels for the Margin Expansion and Cash Conversion metrics, and strong performance against Strategic Objectives. The Committee reviewed the formulaic outturn of the quantitative metrics and is satisfied that the overall outturn is reflective of the Group's and the Executive Directors' very strong performance during the year, against the backdrop of the challenging macro-economic environment and the stretching nature of the targets set. In line with the Directors' Remuneration Policy, one-third of the STIP payout will be deferred into shares/options to be held for two years. ## Long-Term Incentive Plan 2020-2022 Outturn The three-year performance period in respect of the 2020-2022 LTIP award ended on 31 December 2022. The 2020 LTIP award was subject to growth in Adjusted Earnings per Share (EPS), Total Shareholder Return (TSR) and Return on Average Capital Employed (ROACE) performance metrics with a weighting of 50%, 30% and 20% respectively. The final outturn of the 2020-2022 LTIP award was 21.3% of maximum opportunity as outlined in further detail on page 164. EXPANDING^{}[] CONSCIENCE Kerry Group Annual Report 2022 145 While we have seen a strong recovery in our EPS performance over the past two years, the COVID-19 impact on the 2020 EPS performance largely offset the EPS growth achieved for the remaining two years of the award, resulting in a low vesting level for this metric. This is the third year in which the impact of the pandemic in 2020 has had a very significant negative effect on the LTIP outturn. Our TSR performance was below median compared to our TSR peer group and has therefore not achieved the threshold level for vesting. ROACE performance was above threshold and vested accordingly. No discretion will be applied to the formulaic vesting of the 2020 LTIP award for Executive Directors despite their strong performance over the performance period. However, consistent with the discretion previously exercised, we adjusted the formulaic vesting of the EPS metric of the 2020 LTIP for the Executive Directors' extended leadership teams. The vesting of the 2020 LTIP will be adjusted for approximately 400 leaders from 21.3% to 40%, in recognition of their sustained commitment, agility and performance against a very challenging backdrop. ## Remuneration Policy Implementation 2023 ### Basic Salary In reviewing the basic salaries for the Executive Directors, the Committee was mindful of the broader external environment, the strong performance of our Executive team, and in particular our wider workforce experience as outlined previously. For 2023 the basic salaries of the Executive Directors will be increased by 3.2% (Ireland based) and 4% (US based). These increases are below the 2023 average increases available for the wider workforce population in Ireland (3.5%) and the US (4.5%), with higher increases available for lower-paid employees or where market adjustments are required. ### Pension Alignment As detailed on page 151, Executive Directors' pension contribution rates have been aligned to those of Kerry's wider workforce in Ireland with effect from 1 January 2023. ### Incentive Plans We have consistently ensured that there is very strong alignment between our short-term and long-term incentive metrics and the Group's business strategy and financial targets. During 2022, the Remuneration Committee reviewed the incentive plan metrics and weightings again to ensure full alignment with the Group's purpose, values, culture, strategy and mid-term targets. ## 2023 Short-Term Incentive Plan The STIP performance metrics, weightings and target calibrations were reviewed in 2022 and the Committee concluded that, while no changes are required to the metrics, the weighting attributable to the Cash Conversion metric should be increased to reflect the greater emphasis on cash generation management during 2023. Other metrics will be reweighted accordingly with Volume Growth retaining the highest weighting. Annual STIP maximum opportunity will remain unchanged for 2023. ## 2023 Long-Term Incentive Plan The LTIP performance metrics, weightings and target calibrations were also reviewed in 2022. The Committee decided to adjust the target ranges for the EPS and ROACE metrics, given the current uncertain, volatile and inflationary economic environment, and to adjust the target range for the sustainability metrics as the Group moves another year closer to the targets included in the 2030 *Beyond the Horizon* sustainability strategy. The target for the TSR metric remains unchanged and there are no changes to the weightings of the metrics or to the LTIP maximum opportunity levels. The Committee considers the revised targets similarly challenging to the targets set in prior years allowing for global economic conditions. ### Pay for Performance Kerry has a strong track record of demonstrating appropriate rigour and discipline when setting stretching targets. The Committee is satisfied that the targets set for the 2023 STIP and LTIP awards are appropriately stretching, particularly given the current uncertain economic environment, significant inflationary pressures, overall market growth rates and the level of capital expenditure required to support future growth ambitions. ### Non-Executive Director Fees for 2023 For 2023, no substantive increases are proposed and, in line with the Remuneration Policy, an annual increase will again be applied to the base fee paid to Directors in 2023. An increase of 3.2% will be applied to the base fee paid to the Chairman and non-Executive Directors. This increase is lower than the increase available to the wider workforce in Ireland. No increases will be applied to Committee membership fees, Committee chair fees or any other fees. 146 Directors’ Report Remuneration Committee Report Kerry Group Annual Report 2022 Other Matters Conclusion All Employee Share Plan The Committee has again faced difficult decisions in appropriately recognising the contributions of our During 2022, a detailed review was undertaken to leadership teams in very challenging circumstances. design Kerry’s first global All Employee Share Plan which While the 2020 LTIP outturn for our Executive Directors will provide employees globally with the opportunity is disappointing in the context of their sustained and to become shareholders and allow them to share in focused leadership over the three-year performance the success of the Group. The Committee and the period, the Committee is satisfied that the overall Board believe that share ownership is a powerful and remuneration outturn for 2022 is reflective of underlying important way of creating an ownership culture and business performance and the wider stakeholder mindset and as such we will seek shareholder approval experience. The Committee is also satisfied that the for the plan at the 2023 AGM. Subject to shareholder remuneration set for 2023 for the Executive Directors approval, implementation will commence on a phased and our wider workforce is appropriate and reflective of basis from 2023 onwards. the general economic environment. Committee Refreshment The Committee continues to review the Group’s Following Tom Moran’s appointment to Chairman of Remuneration Policy to ensure that it remains aligned the Board in April 2022, I was appointed to chair the to shareholders’ long-term interests and provides the Committee. Ms. Fiona Dawson was appointed to the right framework to attract, retain and motivate Executive Committee in February 2022, and she has brought with Directors in line with the pay for performance principle. her a valuable new perspective. As in previous years, the Remuneration Report is being Committee Performance put to shareholders for an advisory vote. Last year 97% An external review of the Remuneration Committee’s of our shareholders who voted, voted in favour of the performance was undertaken by Independent Audit Remuneration Report and I hope our shareholders Limited during 2022 and the outcome of this review continue to provide their support at this year’s AGM. is that the Committee concluded that it is operating effectively. Finally, I would like to take this opportunity to thank the members of the Remuneration Committee for their commitment and support during the year. Emer Gilvarry Chairperson of the Remuneration Committee EXPANDING HORIZONS Kerry Group Annual Report 2022 147 ## Section B: Remuneration Committee and Key Activities ### Committee Membership During 2022, the Remuneration Committee initially comprised four independent non-Executive Directors; Dr. Karin Dorrepaal, Ms. Emer Gilvarry, Mr. Christopher Rogers and was chaired by Mr. Tom Moran. Ms. Fiona Dawson was appointed to the Committee in February 2022 and following Mr. Tom Moran's appointment to Chairman in April 2022, Ms. Emer Gilvarry was appointed to chair the Committee. Details of the skills and experience of the Directors are contained in the Directors' biographies on pages 108-110. ### 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, other stakeholders and the performance of the Group. The main responsibilities of the Committee, which were reviewed during 2022, are set out in written terms of reference which are available from the Group's website www.kerry.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 2022 The Committee held five meetings during 2022. Attendance at these meetings is outlined on page 128. The key activities undertaken by the Committee in discharging its duties during 2022 are set out below: | Subject | Remuneration Committee Activity | | --- | --- | | **Remuneration Report** | A review of best practice remuneration reporting was completed during 2022 to ensure ongoing compliance with relevant legislation and reporting requirements. | | **Remuneration Policy Review** | The Committee reviewed the Policy and concluded that it has operated as intended. The only significant adjustment is the reduction in the Executive Directors' Employer's Pension contribution to 10% in line with the wider workforce. | | **Basic salary** | The Committee continued to monitor the level of basic salaries of the CEO and Executive Directors in line with market practice. | | **STIP** | The STIP was reviewed during 2022 to ensure that the metrics are aligned with Group strategy, purpose and values, the weightings are appropriate and that the associated targets are appropriately stretching. | | **LTIP** | The Committee considered the overall effectiveness of the LTIP in 2022 to ensure that it is structured appropriately to incentivise Executive Directors and senior managers across the Group and that there were no windfall gains due to share price movements at the date of grant in 2020. | | **Chairman & Non-Executive Directors fees** | As provided in the Remuneration Policy, the Chairman's and non-Executive Director base fees are reviewed annually. | 148 Directors' Report Remuneration Committee Report Kerry Group Annual Report 2022 | Subject | Remuneration Committee Activity | | --- | --- | | Executive Directors Service Contracts | Following the 2020 Executive Remuneration Policy review, the service contracts for the Executive Directors were reviewed and updated to ensure they reflect the changes introduced in the most recent Policy and continue to be appropriately aligned with current best practice. | | 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 regular updates on pay policies and procedures for the wider workforce to ensure alignment with the Executive Directors' Remuneration Policy. Updates included an overview of the approach for the annual pay reviews in all the countries in which the Group operates including measures taken in response to the cost-of-living crisis. Other agenda items included updates on gender pay gap reporting, the design and deployment of an All Employee Share Plan, the timeline for UK living wage accreditation and enhancements and additions to family leave policies. | | Workforce Engagement Activity | The Committee was updated by the Chief Human Resources Officer and the designated Workforce Engagement Director (who is also a member of the Committee) in relation to the dialogue with the workforce concerning executive and workforce remuneration policies. The feedback received informed the Committees decision making in relation to executive remuneration outcomes for 2022, as well as the level of salary increases for Executive Directors and fee increase for non-Executive Directors applicable in 2023. It also influenced the Committee's decision to seek shareholder approval for an All Employee Share Plan at the AGM in 2023. | | Shareholder Consultation | The Committee reviewed the results of the shareholder vote on the Remuneration Report at the 2022 AGM noting that 97% of shareholders supported the Report. The Committee also reviewed the additional feedback received from the proxy advisors. In early 2022, the Chairperson of the Committee consulted with a number of the Company's major institutional shareholders and with proxy advisors in relation to Executive Director remuneration and other matters. The Committee welcomed the engagement and the shareholders consulted provided input and commentary which the Committee took into account particularly when determining the outturn for the 2019 LTIP award which vested in 2022. | | Committee Evaluation | As outlined on page 129 an external review of the Board and its Committees was conducted by Independent Audit Limited during 2022. The outcome of the review is that the Remuneration Committee concluded that it 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 kerry.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. ### 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 also supported the Governance, Nomination and Sustainability Committee and provided other leadership and talent consulting services to the Group during the year through separate parts 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 2022 were €62,588 (2021: €84,990). ### Statement on Shareholder Voting Below is an overview of the voting which took place at the most recent AGM to approve the Directors' Remuneration Policy and the Directors Remuneration Report. ### Votes on Remuneration | Total Votes Cast | Votes For | Votes Against | Votes Withheld/Abstained | | --- | --- | --- | --- | | *Directors' Remuneration Policy (2021 AGM)* | | | | | 108,924,838 | 105,041,472 | 3,883,366 | 1,242,809 | | | 96.4% | 3.6% | | | *Directors' Remuneration Report (2022 AGM)* | | | | | 109,497,080 | 105,969,195 | 3,527,885 | 607,563 | | | 96.8% | 3.2% | | The Committee appreciates the level of support shown by the shareholders for the Remuneration Policy and Report and is committed to continued consultation with shareholders with regard to the Remuneration Policy. Kerry Group Annual Report 2022 149 Volume Growth ### Section C: Growth Share EPS Price Total ### Remuneration Policy Margin Shareholder Expansion Return Return ROACE Dividend Remuneration Principles Cash Conversion The Group’s Executive Director remuneration philosophy is to ensure that executive remuneration is aligned to the Underpinned by Sustainability Measures Group’s purpose, values and culture, supports strategy, promotes the long-term success of the Company, properly reflects the duties and responsibilities of Remuneration Policy the Executives, and is structured to attract, retain Kerry’s current Remuneration Policy was submitted to a and motivate individuals of the highest quality on an non-binding advisory vote at the 2021 Annual General international basis. Remuneration includes performance- meeting, one year earlier than required under the related elements designed to align Directors’ interests Shareholders Rights Directive as enacted in Ireland. with those of shareholders and to promote long-term sustainable growth and performance at the highest As an Irish incorporated Company Kerry Group plc is not levels in line with the Group’s strategy. obliged to comply with the UK legislation which requires UK companies to submit their remuneration policies to A high proportion of Executive Directors’ potential a binding shareholder vote every three years or earlier if remuneration is based on short-term and long- changes are required prior to this. term performance-related incentive programmes. By incorporating these elements, the Remuneration Similarly, Kerry Group plc is not required to comply with Committee believes that the interest and risk appetite the remuneration reporting regulation contained in the of the Executive Directors is properly aligned with the UK Companies (Miscellaneous Reporting) Regulations interests of the shareholders and other stakeholders. 2018 but follows the requirements as a matter of best When authorising remuneration outturns, the practice unless they conflict with Irish or other legal Committee exercises independent judgement and requirements or there are other reasons where it is discretion, taking account of Group and individual considered not practical to do so. performance as well as the shareholder experience, environmental, governance and social matters and wider In setting remuneration levels, the Committee has workforce pay conditions to ensure that it is fair and regard to UK, USA and European companies which are appropriate for the role, experience of the individual, comparable to the Group in terms of size, geographical responsibilities and performance delivered. spread and complexity of business, and operate in the food and beverage and other sectors. It also considers Drivers of Shareholder Return workforce remuneration and related policies and As outlined in the Strategic Report on page 35, Volume employment conditions elsewhere in the Group. Growth and Margin Expansion are the main drivers of Adjusted Earnings Per Share (EPS) which is the key performance metric for measuring growth. Return on Average Capital Employed (ROACE) is a key measure of how efficiently the Group employs its available capital. Cash Conversion is an important indicator of the cash the Group generates for reinvestment or for return to shareholders. These are the main Group metrics which drive the Executive Director’s Short-Term Incentive Plan (STIP) and Long-Term Incentive Plan (LTIP) underpinned by the Group’s Sustainability metrics. Together these metrics deliver Total Shareholder Return which aligns the interest of the Executive Directors with that of the shareholders. Our remuneration philosophy also supports our long-term approach by deferring a significant part of annual and long-term variable remuneration into share awards, which provides clear alignment with the long-term interests of shareholders, together with requiring Executive Directors to acquire and maintain significant shareholdings in the Group. In line with best market practice, malus and clawback provisions apply to the Executive Director’s STIP and LTIP awards. 150 Directors’ Report Remuneration Committee Report Kerry Group Annual Report 2022 In designing the Remuneration Policy, the Committee considered the best practice features detailed in the 2018 UK Corporate Governance Code as follows: Matters Examples Clarity The Committee is committed to having a transparent approach to pay, by engaging regularly with Executives, shareholders and their representative bodies in order to explain the approach to executive pay and how it links to the Kerry strategy. We are also committed to clear and transparent disclosure on all aspects of executive remuneration. The Committee is informed of the feedback from the workforce in relation to executive and workforce remuneration matters through regular updates provided by the Chief Human Resources Officer and the designated Workforce Engagement Director. Simplicity The Committee considers that the 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 outturns. 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 (iii) malus and clawback provisions and (iv) the ability of the Committee to utilise discretion to adjust formulaic outturns to ensure outturns 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 155 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 Kerry has a relentless focus on delivering for our shareholders and other stakeholders and this is fully aligned Culture 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, Enterprising Spirit, Inclusiveness, Open-mindedness and Ownership. The Company is operating its remuneration arrangements in line with the approved Remuneration Policy, which came into effect in 2021 and will apply for up to three years. The Committee is comfortable that the Policy remains appropriate supporting the Group’s strategy and that no changes are required prior to the triennial vote at the 2024 AGM. The current Policy is reproduced below for ease of reference. Remuneration Policy Table The following table details the Remuneration Policy for the Executive Directors for the period 2021 to 2023: Purpose and Operation Opportunity Performance Link to Strategy Metrics Basic Salary Reflects the value of the – Remuneration Committee sets the basic salary – Set at a level to attract, – Not individual, their skills and and benefits of each Executive Director retain and motivate applicable experience Executive Directors – Determined after taking into account a number Competitive salaries are set of elements including the Executive Directors’ – Reviewed annually to promote the long-term performance, experience and level – Full review undertaken success of the Company and of responsibility every three years attract, retain and motivate – Paid monthly in Ireland and bi-weekly Executive Directors to in the US deliver strong performance – Salary is referenced to job responsibility and for the Group in line with internal/external market data the Group’s strategic objectives Kerry Group Annual Report 2022 151 Purpose and Operation Opportunity Performance Link to Strategy Metrics Benefits To provide a competitive – These benefits primarily relate to the use of a – Not applicable – Not benefit package aligned company car or a car allowance applicable with the role and responsibilities of Executive Directors Pension | To provide competitive | – Pension arrangements may vary based on the | – Pension values prior to 1 | – Not | | --- | --- | --- | --- | | retirement benefits to | Executive Director’s location | January 2023 varied based | applicable | | attract and retain | | on local practice | | – Irish resident Executive Directors participate Executive Directors | in the general employee defined contribution | – The pension contribution | | --- | --- | | pension scheme or receive a contribution to an | rates for incumbent Executive | | after-tax savings scheme (where the lifetime | Directors have been reduced | | earnings cap has been reached) or receive a | to 10% of basic salary, in | | taxable cash alternative based on a percentage | line with Kerry’s Irish wider | | of basic salary | workforce rate, with effect | from 1 January 2023 – The existing Executive Director in the US participates in the Group’s defined benefit and – The maximum company defined contribution pension schemes pension contribution rate for new Executive Director appointments is aligned to that of the wider workforce rate Short-term Incentive Plan (STIP) To incentivise the – Achievement of predetermined performance – Maximum opportunity is For FY 2023 achievement, on an annual targets set by the Remuneration Committee 175%-200% of basic salary – Volume basis, of key performance – Performance targets aligned to the Group’s – Target opportunity is 50% of Growth metrics and short-term published strategic targets with the targets maximum opportunity for on- – Margin goals beneficial to the and weightings for financial metrics subject target performance Expansion Group, the delivery of the to annual review – Threshold performance Group’s strategy and value – Cash – Two thirds of the award is payable in cash results in a STIP payable at creation for all stakeholders Conversion 0% of maximum – One third of the award is awarded by way of One third of the award is – Strategic shares/options to be issued two years after deferred in shares/options Objectives vesting following a deferral period providing a two-year retention element and – Malus and clawback provisions are in place aligns Executive Directors’ for awards under the STIP (see page 153) interests with shareholders’ interests Long-term Incentive Plan (LTIP) Retention of key personnel – The awards vest depending on a number – Maximum opportunity is For FY 2023 and incentivisation of of performance metrics being met over a 250% - 300% of basic salary – Adjusted sustained performance three-year performance period Earnings Per against key Group strategic – Conditional awards over shares or share Share ‘EPS’ metrics over a longer options – Total period of time – Following vesting, 100% of the earned award Shareholder Share-based to provide is deferred for a period of two years (i.e. giving Return ‘TSR’ alignment with shareholder a combined performance period and deferral – Return on interests period of five years) Average A two-year post vesting – Malus and clawback provisions are in place Capital deferral requirement aligns for awards under LTIP (see page 153) Employed Executive Directors’ interests ‘ROACE’ with shareholders’ interests - Sustainability Metrics 152 Directors’ Report Remuneration Committee Report Kerry Group Annual Report 2022 Purpose and Operation Opportunity Performance Link to Strategy Metrics Shareholding Requirement | Maintain alignment of the | – Executive Directors are required to build and to | – 250%-300% of basic salary – Not | | | --- | --- | --- | --- | | interests of the shareholders | hold shares in the Company to a minimum level | | applicable | | and the Executive Directors | of 250%-300% of their basic salary | | | and commitment over the – Shareholding requirement to be satisfied long-term through retention of a minimum of 50% of vested STIP 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 awards granted after 2021 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 including relevant sustainability priorities. 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. How Remuneration Links with Strategy Performance Measure Strategic Priority Incentive Scheme Volume growth Key driver of revenue growth STIP Margin expansion Key driver of profit growth STIP Cash conversion Cash generation for reinvestment or return to shareholders STIP Strategic objectives Development and execution of business strategies STIP Adjusted EPS growth Delivery of the Group’s long-term growth strategy LTIP TSR Delivery of shareholder value LTIP ROACE Balance growth and return LTIP Sustainability Core to our strategy and long-term sustainable performance LTIP Kerry Group Annual Report 2022 153 Malus/Clawback Remuneration Policy for Recruitment of The Committee has the discretion to reduce or impose New Executive Directors further conditions on the STIP and LTIP awards prior The Remuneration Committee will determine the to vesting (malus). The Committee further has the contractual terms for new Executive Directors, subject discretion to recover incentives paid within a period of to appropriate professional advice to ensure that these two years from vesting (clawback). reflect best practice and are subject to the limits specified in the Group’s approved Policy as set out in this report. The key trigger events for the use of malus and clawback provisions include material misstatement Salary levels for new Executive Directors will take into of the Company’s audited financial results, serious account the experience and calibre of the individual wrongdoing, payment made on the basis of erroneous and his/her remuneration expectations. Where it is data, gross misconduct, serious reputational damage appropriate to offer a lower salary initially, a series and corporate failure. of increases to the desired salary positioning may be made over subsequent years, subject to individual Any recalculation of the award shall be effected in such performance and development in the role. manner and subject to such procedures as the Group determines to be measured and appropriate, including Pension and benefits will be provided in line with repayment of any excess incentive or offset against any the approved policy, with relocation, travel or other amounts due or potentially due to the participant under expenses provided if necessary. any vested or unvested incentive awards. The structure of the variable pay element will be in The Company retains the right to apply the malus and accordance with and subject to the limits set out in clawback provisions to former directors STIP and LTIP the Group’s approved Policy detailed above. Different awards. Other elements of remuneration are not subject performance metrics may be set initially for STIP in the to malus or clawback provisions. year an Executive Director joins the Group taking into account the responsibilities of the individual and the Committee Discretion point in the financial year that he/she joins the Board. Subject to the rules of the scheme, an LTIP award may The Committee has discretion to adjust the formulaic be granted after joining the Group. outturns under STIP and LTIP to ensure outturns are aligned to and are reflective of the underlying business If it is necessary to buyout incentive pay or benefit performance of the Group. arrangements (which would be forfeited on leaving the previous employer) in the case of an external In line with plan rules, the Committee may, at its appointment, this would be provided for taking discretion, amend or vary the performance metrics of into account the form (cash or shares), timing and the STIP and LTIP related incentives, the calculation expected value (i.e. likelihood of meeting any existing methodology for those performance metrics and the performance criteria) of the remuneration being composition of the TSR peer group when appropriate, forfeited. The general policy is that payment should be in the interest of alignment and fairness. no more than the Committee considers is required to provide reasonable compensation for remuneration Service Contracts being forfeited. The Group’s policy is that the period of The CEO and Executive Directors have service contracts notice for new Executive Directors should not exceed 12 in place which can be terminated by either party giving months and should include pay in lieu of notice, non- 12 month’s notice. In addition, all service contracts compete and non-solicitation provisions to protect the include pay in lieu of notice, non-compete and Group. non-solicitation provisions of up to 12 months post departure, (accompanied by such payments as are The Committee will ensure that any arrangements considered necessary or appropriate to sustain such agreed will be in the best interests of the Group and provisions) in order to protect the Group’s customer shareholders. base, employees and intellectual property. No ex-gratia severance payments are provided for in respect of the CEO or Executive Directors. 154 Directors’ Report Remuneration Committee Report Kerry Group Annual Report 2022 To further strengthen the alignment between Executive Payments for Loss of Office Directors and wider workforce, we will be seeking In the event of a Director’s departure, the Group’s policy shareholder approval for a new All Employee Share Plan on termination is as follows: at the 2023 AGM. During 2022, a detailed review was undertaken to design Kerry’s first global All Employee – the Group will pay any amounts it is required to make Share Plan which will provide employees with the in accordance with or in settlement of a Director’s opportunity to become shareholders and allow them statutory employment rights and in line with their to share in the success of the Group. The Committee employment agreement; and the Board believe that share ownership is a – the Group will seek to ensure that no more is paid than powerful and important way of creating an ownership is warranted in each individual case; culture and mindset. Subject to shareholder approval – STIP and LTIP awards will be paid out in line with plan implementation will commence on a phased basis from rules on exit (i.e. for good leavers as defined in the 2023 onwards. LTIP rules), with awards prorated to normal vesting date, subject to performance and a two year holding Consultation with Employees requirement and prorated to reflect the proportion of the performance period that has elapsed on the date Our approach to employee engagement is set out of cessation; and in detail on page 123 including the approach to – other payments, such as legal or other professional understanding the views of our wider workforce. fees, repatriation or relocation costs and/or Dr. Karin Dorrepaal, a member of the Remuneration outplacement fees, may be paid if it is considered Committee, is our current designated Workforce appropriate and at the discretion of the Committee. Engagement Director, and she works closely with our Chief Human Resources Officer (CHRO) to provide A Director’s service contract may be terminated the Committee with regular updates on engagement without notice and without any further payment or with, and feedback from, employees. When setting compensation, except for sums accrued up to the date remuneration for Executive Directors the Committee of termination, on the occurrence of certain events such takes into account the remuneration structures, policies as gross misconduct. and practices in the Group as a whole, the feedback from employee engagement activities and the information provided by our external advisors. The Group has a Change of Control number of different channels for engagement including Outstanding STIP and LTIP awards/options would an annual engagement survey, targeted pulse checks normally vest and become exercisable on a change of with specific employee groups, regular town halls, a control, subject to plan rules, including the satisfaction dedicated digital employee communication platform and of any performance conditions and pro-rating. The our Speak Up facility. The Committee continually reviews Committee may exercise its discretion to vary the level of and enhances these channels to enable the Committee vesting having regard to the circumstances and reasons to engage more effectively with the workforce to for the events giving rise to the change of control. explain the alignment between Executive Directors’ Remuneration Policy and the pay policy and practices Alignment with Workforce Pay and Policies applicable to the wider workforce. There is strong alignment between how we set pay for our Executive Directors and the wider workforce, Consultation with Shareholders as well as clear alignment in the mechanics of how we The Committee considers the guidelines issued by operate our pay review process and design our benefit the major institutional shareholders and the bodies and incentive plans. The key difference in remuneration representing them, the guidelines and feedback structures is that, overall, the Remuneration Policy for provided by proxy advisors and direct feedback from the Executive Directors is more heavily weighted towards shareholders, when completing its annual and triennial variable pay compared to other employees. review of the Group’s Executive Remuneration policies and practices. An update on wider workforce remuneration is tabled as a specific agenda item at every Remuneration The Committee is committed to continued consultation Committee meeting to enable the Committee to with shareholders regarding its Remuneration Policy. consider the wider workforce experience when setting the Remuneration Policy for Executive Directors and making executive remuneration decisions. 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. 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. Kerry Group Annual Report 2022 155 Non-Executive Directors’ Remuneration Edmond Scanlon Policy 59% 13% Basic Salary Non-Executive Directors’ fees, which are determined by Pension & Benefits the Executive Directors, fairly reflect the responsibilities 48% 16% and time spent by the non-Executive Directors on STIP 2% | | 41% | 27% | | | | --- | --- | --- | --- | --- | | the Group’s affairs. In determining the fees, which | | | | LTIP | | are set within the limits approved by shareholders, | | 86%14% | 3% | | 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 4% on an annual basis and the base fee is usually increased in line with the increase available to the wider workforce in Ireland. A detailed benchmark review is carried out 28% on a three-year basis and any recommendations are presented to the Executive Directors for approval. 33% 26% 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 Marguerite Larkin travel and accommodation expenses (and any personal tax that may be due on those expenses). Non-Executive 57% 15% Basic Salary Directors are encouraged to build up a shareholding in Pension & Benefits 46% 19% the Company. STIP 38% 31% 2% LTIP Illustration of Remuneration Policy 87%13% The following diagrams show the minimum, target, 3% maximum and maximum +50% share appreciation, composition balance between the fixed and variable remuneration components for each Executive Director, 4% effective for 2023. For illustration purposes, target performance for LTIP is reflected as 50% of maximum 27% opportunity. The inner most circle represents the minimum potential scenario for remuneration, with 32% 26% 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. Gerry Behan Basic Salary 56% 15% Pension & Benefits 46% 19% STIP 38% 30% LTIP 3% 86%14% 3% 5% 27% 32% 26% The charts above exclude the effect of any Company share price appreciation except in the ‘maximum +50%’ scenario. 156 Directors' Report Remuneration Committee Report Kerry Group Annual Report 2022 ## Section D: Remuneration Policy Implementation ### Part I: Remuneration Policy Implementation 2023 This part of the report sets out how the proposed Remuneration Policy as described on pages 149-150 will operate in 2023. #### Basic Salary and Benefits The salaries of the Executive Directors effective for the year commencing on 1 March 2023, together with the comparative figures, are as follows: | Directors | 2023 €'000* | 2022 €'000* | % Increase | | --- | --- | --- | --- | | Edmond Scanlon | 1,289 | 1,249 | 3.2% | | Marguerite Larkin | 797 | 773 | 3.2% | | | **$'000*** | **$'000*** | **% Increase** | | Gerry Behan | 1,060 | 1,019 | 4.0% | \* The numbers above reflect rounding. For 2023 the basic salaries of the Executive Directors will be increased by 3.2% (Ireland based) and 4% (US based). These increases are below the 2023 average increases available for the wider workforce population in Ireland (3.5%) and the US (4.5%), with higher increases available for lower-paid employees or where market adjustments are required. 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. The pension contribution rate for Executive Directors has been aligned to that of Kerry's wider workforce in Ireland (currently a rate of 10%) with effect from 1 January 2023. #### Short-Term Incentive Plan (STIP) A review of the STIP metrics was completed in 2022 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 metrics for 2023, the weighting attributable to the Cash Conversion metric should be increased to 25% (previously 18%) to reflect the increased focus on cash generation management. The weighting attributable to the Volume Growth and the Margin Expansion metrics will be adjusted to 30% (previously 35%) and 25% (previously 27%) respectively. Strategic Objectives will continue to be weighted at 20%. All metrics continue 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 maximum STIP opportunity remains the same as 2022, 200% of salary for the CEO and 175% of salary for the CFO and CEO Taste & Nutrition. | 2023 STIP – Performance Metrics and Weightings for Executive Directors | | | | --- | --- | --- | | | % of award | | | Group Metrics | Target | Max | | Volume growth | 15% | 30% | | Margin expansion | 12.5% | 25% | | Cash conversion | 12.5% | 25% | | Strategic objectives | 10% | 20% | | Total | 50% | 100% | The Committee is of the view that a 50% of maximum award payout for on target performance is appropriate, taking into account the level of stretch in the targets set. 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. SPA WASHING WORKS Kerry Group Annual Report 2022 157 ## Long-Term Incentive Plan (LTIP) A review of the LTIP metrics was completed in 2022 to ensure that they remain appropriate, linked to strategy and that targets are appropriately stretching. The Committee decided to adjust the target ranges for the EPS and ROACE metrics, given the current uncertain, volatile and inflationary economic environment, and to adjust the target range for the sustainability metrics as the Group moves another year closer to the targets included in the 2030 *Beyond the Horizon* sustainability strategy. The target for the TSR metric remains unchanged as do the weightings for all metrics. | LTIP Award Year | 2023 | | | --- | --- | --- | | Performance Metrics | Threshold | Maximum | | EPS (40% weighting) ^{1} | | | | Kerry's EPS growth per annum | 4% | 10% | | % of award which vests | 25% | 100% | | ROACE (15% weighting) | | | | ROACE achieved | 9% | 12% | | % of award which vests | 25% | 100% | | Relative TSR (25% weighting) | | | | Position of Kerry in peer group ^{2} | Median | Above 75th percentile | | % of award which vests | 25% | 100% | | Sustainability (20% weighting) ^{3} | | | | Nutrition Reach Goal | 1.2bn | 1.4bn | | Carbon Reduction | 48% | 50% | | Food Waste Reduction | 35% | 40% | | % of award which vests | 25% | 100% | Note 1: Adjusted EPS growth is measured on a constant currency basis. Note 2: The TSR Peer Group companies are listed on page 163. Note 3: Please see pages 38-39 for further details in relation to sustainability metrics. The Committee is satisfied that the target ranges above are appropriately stretching particularly given the current macro-economic environment, challenging trading conditions, 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 34-35). Each Executive Director will be awarded their maximum LTIP opportunity in 2023 as follows, CEO 300% of basic salary, CFO 250% of basic salary and CEO Taste & Nutrition 250% of basic salary. These maximum opportunities are unchanged versus the previous year. See Group Key Performance Indicators (KPIs) on pages 38-39 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 For 2023, no substantial increases are proposed and in line with the Remuneration Policy, an annual increase will again be applied to the base fee paid to non-Executive Directors. An increase of 3.2% will be applied to the base fee paid to the Chairman and non-Executive Directors. This increase is lower than the increase available to the wider workforce in Ireland. The following increases will be applied effective 1 March 2023. | Fee Type^{1} | 2023 Fees €'000 | 2022 Fees €'000 | | --- | --- | --- | | Chairman's fee | 407 | 395 | | Non-Executive Director Base fee | 89 | 86 | Note 1: There are no changes to the Committee membership, Committee chair fees or any other fees. The numbers above reflect rounding. 158 Directors’ Report Remuneration Committee Report Kerry Group Annual Report 2022 Part II: Remuneration Policy Outturn 2022 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 188. 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 2022 (Audited) Irish Based Directors US Based Director Euros US Dollars 6 | Edmond Scanlon | | | | Marguerite Larkin | | | | Gerry Behan | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | CEO | | | | CFO | | | CEO T&N | | | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | 2021 | | | €’000 | | €’000 | | €’000 | | €’000 | $’000 | | $’000 | 1 Basic Salary 1,244 1,217 770 752 1,014 984 2 Benefits 74 62 35 34 81 72 3 Pensions 224 219 139 135 226 207 Total Fixed Remuneration 1,542 1,498 944 921 1,321 1,263 % Fixed v Total 40% 39% 42% 42% 44% 42% 4 STIP 1,941 1,752 1,050 948 1,384 1,240 5 LTIP 416 605 231 337 307 513 Total Variable Remuneration 2,357 2,357 1,281 1,285 1,691 1,753 % Variable v Total 60% 61% 58% 58% 56% 58% Total Remuneration 3,899 3,855 2,225 2,206 3,012 3,016 €’000 €’000 2,869 2,534 Note 1: Annual pay increases are effective from 1st March each year Note 2: These benefits primarily relate to the use of a company car or a car allowance Note 3: 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 in 2022 for both Edmond Scanlon and Marguerite Larkin was 18% of their basic salaries. The pension figure for Gerry Behan includes both defined benefit and defined contribution retirement benefits. Note 4: The 2022 STIP amount represents two thirds delivered in cash with one third delivered by way of shares/share options which are deferred for two years. Note 5: 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. The negative share price movement versus that applicable at the date the conditional awards were granted has decreased the valuation of the awards (that will vest in 2023) over the three years by (€91k) for Edmond Scanlon, (€51k) for Marguerite Larkin and by (€64k) for Gerry Behan. The LTIP included in this table was awarded in 2020. Note 6: 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 7: The total remuneration for Executive Directors was €8,993k (2021: €8,595k) using a US dollar exchange rate of 1.05 (2021: 1.19). Kerry Group Annual Report 2022 159 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 3.3% respectively, effective from 1 March 2022, in line with increases for the wider workforce in Ireland and the US respectively. Annual Incentive Outturns (STIP) Table 2: STIP Achievement Against Targets Financial Metrics (CEO, CFO, and CEO T&N – 80% weighting) | | | 1. Volume | 2. EBITDA Margin | | | | 3. Cash | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Growth | | Expansion* | | Conversion | | | Metric | (35% weighting) | | (27% weighting) | | (18% weighting) | | | Group Group Group Threshold 0% 40 bps 70% Target 4% 80 bps 80% Targets Max 6% 100 bps 90% Actual performance 6.1% 80 bps 82% Bonus outturn 35% 14% 11% Link to strategy Volume Growth is a key EBITDA Margin Expansion Cash Conversion is key performance metric as it is a key performance to ensuring there are is one of the main drivers metric as it is also a main sufficient funds available of Adjusted EPS Growth driver of Adjusted for reinvestment or for EPS Growth return to shareholders * The targets and actual performance for the EBITDA Margin Expansion metric exclude the dilution resulting from the mathematical effect of implementing selling price increases to maintain cash margin in light of unprecedented input cost inflation. The dilutive impact on reported EBITDA margin resulting from the price increases implemented in 2022 was 160bps. When setting the targets above, the Committee considered them to be appropriate as they are aligned with the Group’s Strategic Plan, and were reflective of overall market conditions in 2022, including the anticipated significant inflationary environment. The targets also took account of planned investments (both capital and operational) that the Group is making to enable revenue growth and margin expansion, as well as necessary working capital investments to mitigate ongoing global supply chain challenges. Strategic Objectives – 20% weighting The Executive Directors are also measured against 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. The table below sets out the performance outturn for the strategic element of the STIP. Metric 4. Strategic Objectives (All – 20% weighting) CEO CFO CEO T&N Threshold 0 0 0 Targets Target 10 10 10 Max 20 20 20 Actual performance 18 18 18 Metric outturn 18% 18% 18% Link to strategy Specific to the Executive Directors, responsibility, linked to strategic plan implementation and talent management. 160 Directors’ Report Remuneration Committee Report Kerry Group Annual Report 2022 Details of Strategic Objectives The Committee reviewed progress against these objectives and concluded that strong progress was made by the Executive Directors against the objectives outlined below, which resulted in an award that was close to maximum opportunity. Strategic Performance Assessment Objective CEO Achievement: 18% (90%) Portfolio & Significant strategic portfolio developments to enhance and further solidify Kerry’s position as a world- Strategy leading Taste & Nutrition Company: – Rigorous integration of Niacet and other strategic acquisitions across all regions of Kerry to enhance the Group’s capability in Authentic Taste, Plant-based, Food Waste and Health & Bio-Pharma. – Following a strategic portfolio review, reached agreement for the potential sale of Kerry’s Sweet Ingredients Portfolio – External innovation partnerships significantly evolved and c-LEcta, a technology and innovation-led investment, now integrated in to Kerry Operating Strong progress in driving further alignment of Kerry’s Operating Model to build and embed capability for Model & excellent execution of the refreshed strategy Digital – Continued to build Group commercial capability to accelerate growth in priority areas of focus including: Enablement enhanced global account management capability, refreshed global commercial academy and sales incentive plan as well as enhanced digital cross and upselling capability – Further embedded the newly established Global Business Services organisation, with portfolio, scope and capabilities expanded significantly on a global scale in 2022 – Significant progress in driving operational effectiveness; focused uplift in manufacturing and process capability, coupled with enhanced supply-chain agility. Enhancement of operations leadership capability, through a global Plant Leader development programme and targeted recruitment for key specialist capability Stakeholder Significant personal focus, upon re-opening of economies and borders, on stakeholder engagement Engagement globally vis-a-vis Kerry’s sustainable nutrition ambition and capability – Fully leveraged Kerry’s 50th anniversary celebrations globally to showcase and motivate employees, customers, and communities around Kerry’s purpose, vision, strategy, and capability – Extended next generation of Kerry’s World Food Programme (Burundi) and Concern Partnership (Kenya). Continued and expanded Kerry MyCommunity programme, enabling employee-led sustainability initiatives in local communities, through a combination of funding and paid volunteering Leadership Strong progress in building strength, depth and diversity of the leadership team and talent pipeline: Team and – Seamless succession into key Executive Leadership roles, in particular CEO North America Succession – Ongoing ownership of the Executive Leadership Team development, complemented by externally Planning facilitated team development and mentoring interventions – Championed continued rigour in executive succession planning and development – Significant progress in gender diversity in senior leadership (now 33% v 2025 ambition of 35%) – Global DI&B Executive Council established, and Global Head of DI&B appointed. DI&B 2030 roadmap refreshed and enhanced, with key 2022 milestones achieved CFO Achievement: 18% (90%) Portfolio & Significant strategic portfolio developments to enhance and further solidify Kerry’s position as a Strategy world-leading Taste & Nutrition company: – Rigorous integration of Niacet and other strategic acquisitions across all regions of Kerry to enhance the Group’s capability in Authentic Taste, Plant-based, Food Waste and Health & Bio-Pharma – Following a strategic portfolio review, reached agreement for the Potential sale of Kerry’s Sweet Ingredients Portfolio – External innovation partnerships significantly evolved and c-LEcta, a technology and innovation-led investment, now integrated in to Kerry Operating Strong progress in driving further alignment of Kerry’s Operating Model to build and embed capability for Model & excellent execution of the refreshed strategy: Digital – Further embedded the newly established Global Business Services (GBS) organisation, with portfolio, Enablement scope and capabilities expanded significantly on a global scale in 2022 – Significant progress in operational and commercial effectiveness through disciplined performance management and capital allocation, enabled by strengthened analytics and digital capability – Seamless execution of global finance function transformation; delivering performance-focused finance business partnering in regions, supported by deep expertise in global specialist functions, and consistent scalable finance services, delivered through GBS finance teams in two global centres Kerry Group Annual Report 2022 161 Stakeholder Significant personal focus upon re-opening of economies and borders, on stakeholder engagement Engagement globally, vis-a-vis Kerry’s sustainable nutrition ambition and capability: – Fully leveraged Kerry’s 50th anniversary celebrations globally to showcase and motivate employees, customers and communities around Kerry’s purpose, vision, strategy, and capability – Extensive external engagement with investors, financial institutions, business schools and communities around Kerry’s purpose, vision, strategy, and capability – Strengthened Group Sustainability reporting and oversaw Kerry’s first standalone Sustainability Report, in reference to GRI standards Leadership Strong progress in building strength, depth and diversity of the Finance leadership team and talent Team and pipeline: Succession – Strength and diversity of global Finance Leadership Team further enhanced through internal promotions Planning and accelerated development programmes – Ongoing ownership of Finance Leadership Team development, complemented by externally-facilitated team development and mentoring interventions – Championed Diversity, Inclusion and Belonging as a key business priority – Multiple internal and external engagements on Kerry’s DI&B priorities and progress – Sponsored Kerry’s International Women’s Day programmes CEO T&N Achievement: 18% (90%) Portfolio & Significant strategic portfolio developments to enhance and further solidify Kerry’s position as a world- Strategy leading Taste & Nutrition company: – Rigorous integration of Niacet and other strategic acquisitions across all regions of Kerry to enhance the Group’s capability in key growth platforms of Authentic Taste, Plant-based, Food Waste and Health & Bio-Pharma – Following a strategic portfolio review, reached agreement for the potential sale of Kerry’s Sweet Ingredients Portfolio – External innovation partnerships significantly evolved and c-LEcta, a technology and innovation-led investment, now integrated in Kerry Operating Strong progress in driving further alignment of Kerry’s Operating Model to build and embed capability for Model & excellent execution of the refreshed strategy: Digital – Foundational Technology capability further enhanced through focused global portfolio and product Enablement management teams, complemented by regional technology business development teams – Significant progress on building process technology capability, in particular in food waste reduction and authentic taste – Strategic raw material sourcing strategy refreshed, with a particular focus on sustainability Stakeholder Significant personal focus, upon re-opening of economies and borders, on stakeholder engagement Engagement globally vis-a-vis Kerry’s sustainable nutrition ambition and capability: – Extensive external engagement, focused on Kerry’s technology leadership and deep specialism in key growth platforms – Significant progress in positioning Kerry as an externally recognised specialist in the industry through participation at key external forums and events and appointment of Kerry Executives to external boards and councils. Committed to continuation of multiple academic partnerships and collaborations in the food research space – Technology innovation elevated and showcased as a key value driver for customers and current and future talent. Technology leadership extended to Kerry’s World Food Programme partnership in Burundi Leadership Strong progress in building strength, depth and diversity of Foundational Technology leadership team and Team and talent pipeline: Succession – Global Portfolio and Product Management leadership, and Regional Business Development leadership, Planning further strengthened through strategic hires, acquisition integration and internal promotions – Significant progress in Foundational Technology capability building for technology teams, end-use market teams and commercial teams – Championed rigour in executive succession planning and development – Significant progress in gender diversity in senior leadership (now 33% v 2025 ambition of 35%) 162 Directors' Report Remuneration Committee Report Kerry Group Annual Report 2022 ## Discretion The Committee concluded that there was no requirement to exercise discretion as the 2022 STIP outturns reflected the underlying performance of the business, the broader stakeholder experience and the strong performance of the Executive Directors against strategic objectives. ## Final Outturn for 2022 The targets for the Executive Directors, which were set by the Remuneration Committee, were challenging and stretching in the context of the uncertain and volatile economic and inflationary environment. For 2022 a pay-out of 78% of maximum opportunity was achieved by each Director. Under the Policy, one third of the STIP is awarded by way of shares or options which are issued following the end of the two-year deferral period. ## Long-Term Incentive Plan (LTIP) ### LTIP Approved in 2021 (2021 LTIP) A new LTIP plan was approved by shareholders at the 2021 AGM. The first conditional awards under this plan were made to Executive Directors in 2021. Subject to performance metrics being met over a three-year performance period, the first awards under this plan will potentially vest in March 2024, 100% of which will be subject to a two year deferral period. ### LTIP Approved in 2013 (LTIP 2013) 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 28 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. ## 2020 LTIP Awards Set out below is the performance against targets for the 2020 LTIP award where the three-year performance period ended on 31 December 2022 and the award vests in 2023. ## 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 Group's adjusted EPS growth 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 | 6% | 25% | | Target | 10% | 50% | | Maximum | 12% | 100% | Below 6% none of the award vests. Vesting between target points is on a straight line basis. The COVID-19 pandemic had a particularly adverse impact on the EPS metric in 2020 (-9.4%), which largely offset the strong adjusted EPS growth (pre dilutive effect of disposals) achieved in 2021 (+15.3%) and 2022 (+14.9%) respectively. Accordingly, the outturn of the EPS performance test, calculated on a constant currency basis over the three-year period, is an annual average adjusted EPS growth of 6.9% which results in an award outturn of 15.3% out of a possible maximum of 50%. When calculating the outturn for this metric, the adjusted EPS growth % used for both 2021 and 2022 excludes the dilutive effect which the significant business disposals (Consumer Foods' Meats and Meals business and the Russian business completed during those years), had on the reported result for the adjusted EPS growth metric as the disposals were not anticipated when the targets were originally set three years ago. The reported adjusted EPS growth for 2021 at 12.1% and 2022 at 7.3% recognised a dilution of 3.2% and 7.6% respectively. ## Vesting Level for EPS Metric The outturn of the EPS performance test is an average adjusted EPS growth of 6.9% which results in an award outcome of 15.3% out of a possible maximum of 50%. Kerry Group Annual Report 2022 163 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 Givaudan Kellogg’s Sensient Technologies Barry Callebaut Glanbia McCormick & Co. Symrise Corbion Greencore Nestlé Tate & Lyle Aryzta/Ingredion* Danone Novozymes Unilever General Mills IFF Premier Foods * Aryzta was replaced by Ingredion for awards granted in 2021 and subsequent years. The awards vest in line with the following table: Position of Kerry in the Peer Group Percentage of the Award Which Vests Below median 0% Median 30% Between median and 75th percentile Straight line between 30% and 100% Greater than 75th percentile 100% Vesting Level for TSR Metric The outturn of the measurement of the TSR metric in relation to the 2020 awards is in the 4th quartile, resulting in an award outturn of 0% out of a possible maximum of 30% as the threshold performance level for this metric was not achieved. 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 10% 25% Target 12% 50% Maximum 14% 100% Below 10% none of the award vests. Vesting between target points is on a straight line basis. Vesting Level for ROACE Metric The outturn of the measurement of the ROACE metric in relation to the 2020 award is a ROACE of 10.4% resulting in an award outturn of 6% out of a maximum of 20%. 164 Directors’ Report Remuneration Committee Report Kerry Group Annual Report 2022 Table 3: Overall Outturn of the 2020 LTIP Award Vesting in 2023 LTIP Metric Weighting % Actual Vesting % EPS 50% 15.3% TSR 30% 0% ROACE 20% 6% 21.3% The Committee was satisfied that the Executive Directors did not benefit from a windfall gain taking into account the share price at grant and share price performance over the performance period. 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 2022 relate to awards made in 2019, 2020 and 2021 which have a three year performance period. The 2019 awards vested in 2022. The 2020 and 2021 awards will potentially vest in 2023 and 2024 respectively. The market price of the shares on the date of each award is disclosed in note 28 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 | | LTIP | Conditional | | | | Share | Share Option | | Share/Option | | Conditional | | Conditional | | | | Share Price | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Schemes | | | Awards at | | Awards | | | Awards | | Awards | | Awards | | Awards | | | at Date of | | | | | 1 January | | | Vested | | Vested | | Lapsed | | Made | | | at 31 | | Conditional | | | | | | 2022 | | During | | During | | During | | During | December | | | | Award Made | | | | | | | the Year | | | the Year | | the Year | | the Year | | | 2022 | During the Year | | Directors 1 Edmond Scanlon 2013/21 83,561 _ (9,723) (18,973) 38,739 93,604 €96.76 Marguerite Larkin 2013/21 41,417 _ (2,978) (10,560) 19,964 47,843 €96.76 Gerry Behan 2013/21 49,796 (3,817) _ (13,535) 23,567 56,011 €96.76 Company Secretary Ronan Deasy 2013/21 11,772 _ (638) (2,263) 3,366 12,237 €96.76 Note 1: In the case of Edmond Scanlon the share options vested includes 4,372 Career Share options granted prior to his appointment as an Executive Director. Conditional LTIP awards made on 11 March 2022, under the 2021 LTIP Plan, have a three-year performance period and will potentially vest in March 2025. Under the 2021 plan, 100% of the shares/share options which potentially vest under the LTIP are issued to participants following a two-year deferral period in March 2027. For awards made prior to 2021, 50% of the shares/share options which potentially vest under the LTIP, are issued immediately upon vesting with the remaining 50% of the award issued to participants following a two-year deferral period. Kerry Group Annual Report 2022 165 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 Share Options Share Options Share Options Exercise Outstanding at Exercised Vested During Outstanding at Price Per 1 1 January 2022 During the Year the Year 31 December 2022 Share Directors 2 Edmond Scanlon 38,683 – 15,697 54,380 €0.125 Marguerite Larkin 4,541 – 6,211 10,752 €0.125 Company Secretary Ronan Deasy 2,955 – 638 3,593 €0.125 Note 1: Share Options which vested in March 2022 related to 2019 LTIP awards and 33% of the 2021 STIP (paid in March 2022). 50% of share options vested under the LTIP are subject to a two-year deferral period and 33% of the STIP payments which are delivered in share options are subject to a two year deferral period. Note 2: In the case of Edmond Scanlon the share options vested includes 4,372 Career Share options granted prior to his appointment as an Executive Director. 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. Executive Directors’ Pensions The pension benefits under defined benefit pension plan 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 | Annual Pension Accrued | | | | | Total Annual | | | Transfer Value | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | During the Year | | Accrued Pension | | | | of Increase in | | | | (Excluding Inflation) | | | | at End of Year | | Accrued Pension | | | | | | | $’000 | | | $’000 | | | $’000 | Gerry Behan 2022 117 717 1,752 2021 17 599 229 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 158. Payments to Former Directors No payments were made to former Directors during 2022 (2021: €nil) in respect of their duties as Directors. Vested 2017 LTIP awards which were subject to a two-year deferral period and delivered in 2022 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 2022 (2021: €nil). 166 Directors’ Report Remuneration Committee Report Kerry Group Annual Report 2022 Non-Executive Director Remuneration and Shareholdings Table 7: Remuneration paid to non-Executive Directors in 2022 and Shareholdings (Audited) Fees 2022 Fees 2021 31 Dec 2022 31 Dec 2021 1 €’000 €’000 Ordinary Shares Ordinary Shares 1 Number Number Hugh Brady 121 114 6,850 1,700 Gerard Culligan 28 84 - - Fiona Dawson 95 - 167 - Karin Dorrepaal 114 104 - - Joan Garahy - 45 - 1,050 Emer Gilvarry 116 100 850 850 Michael Kerr 130 78 10,000 10,000 Tom Moran 307 126 1,029 539 Con Murphy 28 84 7,728 7,728 Christopher Rogers 121 119 1,640 640 Philip Toomey 130 385 9,000 9,000 Jinlong Wang 126 120 - - 1,316 1,359 Note 1: Non-Executive Directors fees are reflective of when the individuals were appointed to or retired from the Board (see page 141). Year-on-year fee level variances arise due to annual fee increases in line with the wider workforce and additional fees paid for appointment to different Committees/Chair roles. Shareholdings for retired non-Executive Directors are reflected as of their date of retirement. 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 €19k. 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: Executive Directors and Company Secretary Shareholdings | 31 December | | | | 31 December | | | 31 December | | | 31 December | | | | 31 December | | | 31 December | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 2022 | | | 2022 | | | 2022 | | | | 2021 | | | 2021 | | | 2021 | | | Ordinary | | | | | Share | | | Total | | Ordinary | | | | | Share | | | Total | | | | Shares | | | Options | | | Number | | | | Shares | | | Options | | | Number | | | | Number | | | | Number | | | | | | Number | | | | Number | | | | | Directors Edmond Scanlon 19,611 41,566 61,177 19,611 25,749 45,360 1 - Deferred – 12,814 12,814 – 12,934 12,934 Marguerite Larkin 4,335 4,887 9,222 1,500 1,838 3,338 1 - Deferred – 5,865 5,865 – 2,703 2,703 Gerry Behan 69,147 – 69,147 61,346 – 61,346 1 - Deferred 8,604 – 8,604 11,405 – 11,405 Company Secretary Ronan Deasy 3,230 2,518 5,748 3,230 1,093 4,323 1 - Deferred – 1,075 1,075 – 1,862 1,862 Note 1: The deferred shares and share options above, relate to 33% of the awarded amount of the Executive Directors 2021 STIP award and 50% of the 2018 and 2019 LTIP awards (vested in March 2021 and 2022 respectively). These awards are subject to a two year deferral period and will be delivered in shares/share options in March 2023 and March 2024 respectively. Shareholding Guidelines The table below sets out the Executive Directors’ shareholding at 31 December 2022 shown as a multiple of basic salary. Refer to the Remuneration Policy Table on page 152 in Section C for details of the Executive Director shareholding requirements. EXPANDING WORCING Kerry Group Annual Report 2022 167 **Table 9: Individual Shareholding as a Multiple of Basic Salary** | Executive Director | As a Multiple of Basic Salary^{1} | | --- | --- | | Edmond Scanlon | 5x | | Marguerite Larkin^{2} | 2x | | Gerry Behan | 7x | **Note 1:** The share price used to calculate the above is the share price as at 31 December 2022 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 current policy, has to increase her shareholding to at least the minimum 2.5x basic salary through the retention of 50% of vested annual STIP and LTIP shares/options (after sales to meet taxes). ### 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 of €100 invested in Group's shares from 31 December 2012 to 31 December 2022. Also outlined in the table on page 168, the remuneration of the Chief Executive Officer is calculated in line with the methodology captured under legislation which was enacted for UK incorporated companies. #### 10 Year Total Shareholder Return (Value of €100 Invested on 31/12/2012) ![img-6.jpeg](img-6.jpeg) **Table 10: Remuneration Paid to the CEO 2013 – 2022** 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 achieved as a % of maximum | LTIP achieved as a % of maximum | | --- | --- | --- | --- | | **CEO – Stan McCarthy** | | | | | 2013 | 3,592 | 70% | 100% | | 2014 | 3,283 | 57% | 91.9% | | 2015 | 4,161 | 58% | 61.8% | | 2016 | 3,625 | 62% | 29.4% | | 2017 | 5,285 | 75% | 62.3% | | **CEO – Edmond Scanlon** | | | | | 2017^{1} | 808 | 75% | 62.3% | | 2018 | 2,577 | 60% | 63.7% | | 2019 | 3,991 | 76% | 62.8% | | 2020 | 2,323 | 0% | 32.5% | | 2021 | 3,855 | 72% | 22.0% | | 2022 | 3,899 | 78% | 21.3% | **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. 168 Directors' Report Remuneration Committee Report Kerry Group Annual Report 2022 **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 2021 to the year ended 31 December 2022. | Year-on-year change in pay for Directors compared to the global average employee | | | | | | | --- | --- | --- | --- | --- | --- | | Executive Directors | 2022 €'000 | 2021 €'000 | 2021 to 2022 Change % | 2020 to 2021 Change % | 2019 to 2020 Change % | | Edmond Scanlon * | 3,899 | 3,855 | 1% | 66% | (42%) | | Marguerite Larkin * | 2,225 | 2,206 | 1% | 98% | (28%) | | | $'000 | $'000 | | | | | Gerry Behan * | 3,012 | 3,016 | (0.1%) | 44% | (47%) | | Non-Executive Directors ^{1} | €'000 | €'000 | | | | | Hugh Brady | 121 | 114 | 6% | 24% | (6%) | | Gerard Culligan | 28 | 84 | (67%) | 15% | (6%) | | Fiona Dawson | 95 | - | 100% | - | - | | Karin Dorrepaal | 114 | 104 | 10% | 13% | (6%) | | Joan Garahy | - | 45 | (100%) | (63%) | (6%) | | Emer Gilvarry | 116 | 100 | 16% | 581% | 100% | | Michael Kerr | 130 | 78 | 67% | - | - | | Tom Moran | 307 | 126 | 144% | 22% | (2%) | | Con Murphy | 28 | 84 | (67%) | 15% | (6%) | | Christopher Rogers | 121 | 119 | 2% | 17% | (1%) | | Philip Toomey | 130 | 385 | (66%) | 15% | (6%) | | Jinlong Wang | 126 | 120 | 5% | - | - | | All Group Employees ^{2} | 56 | 47 | 19% | 2.3% | 1.2% | \* 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 1: Non-Executive Directors fees are reflective of when the individuals were appointed to or retired from the Board (see page 141). Year-on-year fee level variances arise due to annual increases in line with the wider workforce and additional fees paid for appointment to different Committees/Chair roles. Note 2: Calculated by dividing the aggregate payroll costs of employees in 2022 (excluding social welfare costs and costs related to Executive Directors) by the average number of employees in 2022, as disclosed in note 4 to the consolidated financial statements. Note 3: The Company performance can be seen in the 10 Year Total Shareholder Return graph on page 167. Kerry Group Annual Report 2022 169 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. | 2022 | 2021 | | --- | --- | | Director Remuneration (0.4%) | Director Remuneration (0.5%) | | Profit after tax | Profit after tax | | before NTIs (29.3%) | before NTIs (28.3%) | | Dividends Paid (7%) | Dividends Paid (7.1%) | | Taxation Paid (10.3%) | Taxation Paid (9.8%) | | Employee Costs (53%) | Employee Costs (54.3%) | 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 2022 is 1.1%. 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 0.8%. 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. 2022 2021 €’000* €’000* Chief Executive Officer’s: Total remuneration €3,899 €3,855 Median Irish employee: Total remuneration €50 €43 Median Irish employee: Salary only €47 €41 Median pay ratio – Total remuneration 77x 89x Median pay ratio – excluding all variable short and long-term incentive 31x 37 x * The numbers above reflect rounding. 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 for 2022 is lower than 2021 which is primarily due to a change in the profile of our median Irish employee following the divestment of our Consumer Foods Meats and Meals business during 2021. The equivalent total remuneration figure for the CEO is largely unchanged in 2022 as compared to 2021. The combined performance outturn under both the short-term and long-term incentive plans is broadly similar year- on-year. 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 2022 and this ratio has also decreased year-on-year. 170 170 Financial Statements Kerry Group Annual Report 2022 ## FINANCIAL ## STATEMENTS Kerry Group Annual Report 2022 Kerry Group Annual Report 2022 171 171 Financial Statements 172 Independent Auditors’ Report 180 Financial Statements 188 Notes to the Financial Statements Supplementary Information 255 FinancialDefinitions 172 Financial Statements Independent Auditors’ Report Kerry Group Annual Report 2022 INDEPENDENT AUDITORS’ REPORT ## Independent auditors’ report ## to the members of Kerry Group plc Report on the audit of Separate opinion in relation to IFRSs as issued by the IASB the financial statements As explained in note 1 to the financial statements, the Opinion Group, in addition to applying IFRSs as adopted by the In our opinion, Kerry Group plc’s Consolidated financial European Union, has also applied IFRSs as issued by the statements and Company financial statements (the International Accounting Standards Board (IASB). ‘financial statements’): In our opinion, the Consolidated financial statements – give a true and fair view of the Group’s and the comply with IFRSs as issued by the IASB. Company’s assets, liabilities and financial position as at 31 December 2022 and of the Group’s profit and Basis for opinion the Group’s and the Company’s cash flows for the year We conducted our audit in accordance with International then ended; Standards on Auditing (Ireland) (‘ISAs (Ireland)’) and – have been properly prepared in accordance with applicable law. Our responsibilities under ISAs (Ireland) International Financial Reporting Standards (‘IFRSs’) are further described in the Auditors’ responsibilities as adopted by the European Union and, as regards for the audit of the financial statements section of our the Company’s financial statements, as applied in report. We believe that the audit evidence we have accordance with the provisions of the Companies Act obtained is sufficient and appropriate to provide a basis 2014; and for our opinion. – 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 Independence IAS Regulation. We remained independent of the Group in accordance with the ethical requirements that are relevant to our We have audited the financial statements, included audit of the financial statements in Ireland, which within the Annual Report, which comprise: includes IAASA’s Ethical Standard as applicable to listed public interest entities, and we have fulfilled – the Consolidated and Company Balance Sheets as at our other ethical responsibilities in accordance with 31 December 2022; these requirements. – the Consolidated Income Statement and Consolidated Statement of Comprehensive Income for the year To the best of our knowledge and belief, we declare that then ended; non-audit services prohibited by IAASA’s Ethical Standard – the Consolidated and Company Statements of Cash were not provided to the Group or the Company. Flows for the year then ended; – the Consolidated and Company Statements of Other than those disclosed in note 3 to the financial Changes in Equity for the year then ended; and statements, we have provided no non-audit services to – the notes to the financial statements, which include a the Group or the Company in the period from 1 January description of the significant accounting policies. 2022 to 31 December 2022. Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements. 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 2022 173 Our audit approach Overview Overall materiality – €42 million (2021: €35 million) - Consolidated financial statements. – Based on approximately 5% of profit before taxation and non-trading items. – €10.6 million (2021: €10.5 million) - Company financial statements. – Based on approximately 1% of net assets. Performance materiality – €31.5 million (2021: €26 million) - Consolidated financial statements. – €7.9 million (2021: €7.9 million) - Company financial statements. Audit scope – We conducted audit work in 36 reporting components. We selected these components due to their size or characteristics and to ensure appropriate audit coverage. An audit of the complete financial information of 23 components was performed. Specific audit procedures on certain balances and transactions were also performed at a further 13 components. We also performed audit work at each of the principal shared service centres. – The reporting components where an audit of the complete financial information was performed accounted for in excess of 80% of Consolidated revenues and in excess of 80% of Consolidated profit before taxation and non-trading items. Key audit matters – Goodwill and indefinite life intangible assets impairment assessment (Group). – Income taxes (Group). – Recoverability of Investments in Subsidiaries (Company). 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. 174 Financial Statements Independent Auditors’ Report Kerry Group Annual Report 2022 Key audit matter How our audit addressed the key audit matter Goodwill and indefinite life intangible assets Our audit team, assisted by our in-house valuation experts, impairment assessment (Group) considered the Group’s impairment models and evaluated the methodology followed and key assumptions used. We Refer to note 1 ‘Statement of accounting policies’ - tested the mathematical accuracy of the underlying ‘Intangible assets’ and ‘Critical accounting estimates calculations in the models. and judgements’ and note 12 ‘Intangible assets’. We assessed management’s future cash flow forecasts, The Group has goodwill and indefinite life and the process by which they were drawn up, including intangible assets of €4,900 million at 31 December comparing them to the latest board approved budgets. In 2022 representing approximately 40% of the evaluating these forecasts we considered the Group’s historic Group’s total assets at year end. performance and its past record of achieving strategic Goodwill and indefinite life intangible assets objectives, and management’s assessment of the likely are subject to impairment testing on an annual impact the current macro-economic environment and climate basis or more frequently if there are indicators related risks may have on financial performance. of impairment. Management carried out an We assessed the appropriateness of the Group’s forecast impairment test as at 31 December 2022 and growth rate assumptions used to calculate terminal values concluded there was no impairment. at year five, by comparing them to independent sources (for We determined this to be a key audit matter example OECD statistics) of projected growth rates for each given the scale of the assets and because the region. determination of whether an impairment charge We used our in-house valuation experts in assessing for goodwill or indefinite life intangible assets management’s calculation of the discount rate. Our experts was necessary involves significant judgement in developed a range of discount rates (adjusted to reflect risks estimating the future results of the business and associated with each group of CGUs) using observable inputs determining the appropriate discount rate to use. from independent external sources. We also considered management’s sensitivity analysis which included the potential impact of climate related events 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. Based on our procedures we determined that management’s conclusion that there was no goodwill or indefinite life intangible assets impairment was reasonable. We assessed the appropriateness of the related disclosures within the financial statements and consider the disclosures, including the assessed impact of climate change on the impairment assessment to be reasonable. Income taxes (Group) We obtained an understanding of the Group tax strategy through discussions with management and the Group’s in- Refer to note 1 ‘Statement of accounting policies’ house tax specialists. - ‘Income taxes’ and ‘Critical accounting estimates and judgements’, note 7 ‘Income taxes’ and note 17 The team, assisted by PwC International and Irish taxation ‘Deferred tax assets and liabilities’. specialists, challenged judgements used and estimates made by management to measure uncertain tax positions in the The global nature of the Group means that it context of the recognition of current and deferred tax assets/ operates across many jurisdictions and is subject liabilities. This included obtaining explanations regarding the to periodic challenges by local tax authorities on tax treatment applied to material transactions and evidence a range of tax matters during the normal course to corroborate management’s explanations. Such evidence, of business. Tax legislation is open to different where appropriate, included management’s communications interpretations and the tax treatments of many items with local tax authorities and copies of the tax advice are uncertain. Tax audits can require several years obtained by management from its external tax advisors to conclude, and transfer pricing judgements by tax including transfer pricing studies. authorities may impact the Group’s tax liabilities. Management judgement and estimation is required Based on the evidence obtained, while noting the inherent in the measurement of uncertain tax positions in the uncertainty with such tax matters, we determined the context of the recognition of current and deferred measurement of uncertain tax positions in the context of tax assets/liabilities. the recognition of current and deferred tax assets/liabilities as at 31 December 2022 to be within an acceptable range of We determined this to be a key audit matter due reasonable estimates. 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. Kerry Group Annual Report 2022 175 Key audit matter How our audit addressed the key audit matter Recoverability of Investments in Subsidiaries We considered management’s assessment as to (Company) whether there were any indicators of impairment at year end taking into account the market capitalisation Refer to note 1 ‘Statement of accounting policies’ - of the Company and the procedures performed ‘Investments in subsidiaries’ and note 15 ‘Investments in on the future cash flow forecasts prepared for the subsidiaries’. purposes of the impairment assessment as described The Company has investments in subsidiaries of €843.5 in the ‘Goodwill and indefinite life intangible assets million at 31 December 2022. The carrying value of the impairment assessment’ key audit matter above. Based investment in subsidiaries needs to be considered for on our procedures we determined that management’s impairment where any indicators arise that suggest that conclusion that there are no impairment indicators was the carrying value of these investments would not be reasonable. recoverable. We determined this to be a key audit matter as investments in subsidiaries are the principal assets held by the Company. How we tailored the audit scope In the current year, the Group team resumed site visits We tailored the scope of our audit to ensure that we which are designed so that senior team members visit performed enough work to be able to give an opinion on the full scope audit locations regularly on a rotational the financial statements as a whole, taking into account basis. During 2022, the Group team visited component the structure of the Group, the accounting processes locations in Ireland, the USA, Mexico and Malaysia. In and controls, including those performed at the Group’s addition to site visits, senior members of the Group shared service centres and the industry in which the engagement team used video conferencing to facilitate Group operates. our oversight of the component auditor work and had video meetings and discussions with certain The Group is structured along two operating segments: management and component audit teams in locations Taste & Nutrition and Dairy Ireland. The majority of which we did not visit in the current year. the Group’s components are supported by one of the Group’s principal shared service centres in Malaysia, The meetings, both physical and virtual, with our Mexico and the United States. component teams confirmed their audit approach. The meetings also involved discussing and understanding We determined that an audit of the complete financial the significant audit risk areas and obtaining updates information (a ‘full scope’ audit) should be performed at on local laws and regulations and other relevant matters. 23 components due to their size or risk characteristics In addition to the meetings noted above, the Group and to ensure appropriate coverage. These 23 team interacted regularly with the component teams components included components that control central during all stages of the audit. We received a detailed Group functions such as Treasury and Employee memorandum of examination on work performed and Benefits. Specific audit procedures on certain balances relevant findings in addition to an audit report that and transactions were also performed at a further 13 supplemented our understanding of the individual components. The reporting components where an audit components. The Group engagement team also of the complete financial information was performed reviewed certain audit working papers in component accounted for in excess of 80% of Consolidated revenues audit files. Post audit conference calls were held with all and in excess of 80% of Consolidated profit before full scope audit teams to discuss their audit findings. taxation and non-trading items. This, together with audit procedures performed by the The Group team performed the audit of certain central Group team gave us the evidence we needed for our functions. Component auditors within PwC ROI and from opinion on the consolidated financial statements as a other PwC network firms, operating under our instruction, whole. These procedures included, amongst others, performed the audit on all other in scope components and procedures over IT systems, treasury, post-retirement the required supporting audit work at each of the Group’s benefits, the consolidation process and key audit matters principal shared service centres. including uncertain tax positions and impairment testing of goodwill and indefinite life intangible assets. The Group team was responsible for the scope and direction of the audit. Where the work was performed Materiality by component auditors, we determined the level of The scope of our audit was influenced by our application involvement the Group team needed to have to be of materiality. We set certain quantitative thresholds able to conclude whether sufficient appropriate audit for materiality. These, together with qualitative evidence had been obtained as a basis for our opinion considerations, helped us to determine the scope of on the consolidated financial statements as a whole. 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. 176 Financial Statements Independent Auditors’ Report Kerry Group Annual Report 2022 Based on our professional judgement, we determined related risks may have on financial performance and materiality for the financial statements as a whole liquidity for a period of 12 months from the date on as follows: which the financial statements are authorised for issue; – testing the mathematical integrity of the forecasts Consolidated Company and the models and reconciling these to board financial financial approved budgets; statements statements – considering whether the assumptions underlying the | Overall | €42 million | €10.6 million | base case were consistent with related assumptions | | --- | --- | --- | --- | | materiality | (2021: €35 million). | (2021: €10.5 | used in other areas of the entity’s business activities, for | | | | million). | example in testing for non-financial asset impairment; | – performing our own independent sensitivity analysis How we Approximately 5% Approximately to assess further appropriate downside scenarios; and determined of profit before taxation 1% of net – considering the Group’s available liquidity, financing it and non-trading items. assets. and maturity profile to assess liquidity through the going concern assessment period. Rationale We applied this benchmark The entity for because in our view is a holding Based on the work we have performed, we have not benchmark this is a metric against Company identified any material uncertainties relating to events applied which the recurring whose main or conditions that, individually or collectively, may cast performance of the Group is activity is the significant doubt on the Group’s or the Company’s ability commonly measured by its management to continue as a going concern for a period of at least stakeholders and it results in of investments twelve months from the date on which the financial using a materiality level that in subsidiaries. statements are authorised for issue. excludes the impact of non- recurring items which are In auditing the financial statements, we have concluded not reflective of the Group’s that the directors’ use of the going concern basis of ongoing trading activity. accounting in the preparation of the financial statements is appropriate. We use performance materiality to reduce to an appropriately low level the probability that the However, because not all future events or conditions aggregate of uncorrected and undetected can be predicted, this conclusion is not a guarantee as misstatements exceeds overall materiality. Specifically, to the Group’s or the Company’s ability to continue as a we use performance materiality in determining the going concern. scope of our audit and the nature and extent of our testing of account balances, classes of transactions In relation to the Company’s reporting on how they have and disclosures, for example in determining sample applied the UK Corporate Governance Code, we have sizes. Our performance materiality was 75% of overall nothing material to add or draw attention to in relation materiality, amounting to €31.5 million (Group audit) and to the directors’ statement in the financial statements €7.9 million (Company audit). about whether the directors considered it appropriate to adopt the going concern basis of accounting. In determining the performance materiality, we considered a number of factors - the history of We are required to report if the directors’ statement misstatements, risk assessment and aggregation relating to going concern in accordance with Rule 6.1.82 risk and the effectiveness of controls - and concluded (3) (a) of the Listing Rules for Euronext Dublin and Rule that an amount at the upper end of our normal range 9.8.6R(3) of the Listing Rules of the UK Financial Conduct was appropriate. Authority is materially inconsistent with our knowledge obtained in the audit. We have nothing to report in We agreed with the Audit Committee that we would respect of this responsibility. report to them misstatements identified during our audit above €1.9 million (Group audit) (2021: €1.7 million) Our responsibilities and the responsibilities of the and €532,000 (Company audit) (2021: €525,000) as well directors with respect to going concern are described in as misstatements below that amount that, in our view, the relevant sections of this report. warranted reporting for qualitative reasons. Reporting on other information Conclusions relating to going concern The other information comprises all of the information Our evaluation of the directors’ assessment of the Group in the Annual Report other than the financial statements and Company’s ability to continue to adopt the going and our auditors’ report thereon. The directors are concern basis of accounting included: responsible for the other information. Our opinion on the financial statements does not cover the other – evaluating management’s going concern assessment information and, accordingly, we do not express an (being the period of 12 months from the date on audit opinion or, except to the extent otherwise explicitly which the financial statements are authorised for stated in this report, any form of assurance thereon. issue) and challenging the key assumptions. In evaluating these forecasts, we considered the Group’s historic performance and its past record of achieving strategic objectives. Additionally we have considered management’s assessment of the likely impact which the current macroeconomic environment and climate 50 YEARS EXPANDING HORIZONS Kerry Group Annual Report 2022 177 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) and the Companies Act 2014 require us to also report certain opinions and matters as described below. - 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 2022 is consistent with the financial statements and has been prepared in accordance with the applicable legal requirements. - 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). - 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. - 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. - 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 Corporate Governance Statement. ### Corporate Governance Statement The Listing Rules and ISAs (Ireland) require us to review the directors' statements in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company's compliance with the provisions of the UK Corporate Governance Code and the Irish Corporate Governance Annex (the 'Code') specified for our review. Our additional responsibilities with respect to the Corporate Governance Statement as other information are described in the Reporting on other information section of this report. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit and we have nothing material to add or draw attention to in relation to: - The directors' confirmation that they have carried out a robust assessment of the emerging and principal risks; - The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how these are being managed or mitigated; - The directors' statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the Group's and Company's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; - The directors' explanation as to their assessment of the Group's and Company's prospects, the period this assessment covers and why the period is appropriate; and - The directors' statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. Our review of the directors' statement regarding the longer-term viability of the Group was substantially less in scope than an audit and only consisted of making inquiries and considering the directors' process supporting their statement; checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial statements and our knowledge and understanding of the Group and Company and their environment obtained in the course of the audit. 178 Financial Statements Independent Auditors’ Report Kerry Group Annual Report 2022 In addition, based on the work undertaken as part of Irregularities, including fraud, are instances of non- our audit, we have concluded that each of the following compliance with laws and regulations. We design elements of the Corporate Governance Statement is procedures in line with our responsibilities, outlined materially consistent with the financial statements and above, to detect material misstatements in respect our knowledge obtained during the audit: of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, – The directors’ statement that they consider the including fraud, is detailed below. Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary Based on our understanding of the Group and industry, for the members to assess the Group’s and Company’s we identified that the principal risks of non-compliance position, performance, business model and strategy; with laws and regulations related to breaches of – The section of the Annual Report that describes the environmental regulations, food safety and hygiene review of effectiveness of risk management and internal regulations and health and safety regulations, and we control systems; and considered the extent to which non-compliance might – The section of the Annual Report describing the work of have a material effect on the financial statements. We the Audit Committee. also considered those laws and regulations that have a direct impact on the preparation of the financial We have nothing to report in respect of our responsibility statements such as tax legislation and the Irish to report when the directors’ statement relating to the Companies Act 2014. We evaluated management’s Company’s compliance with the Code does not properly incentives and opportunities for fraudulent manipulation disclose a departure from a relevant provision of the of the financial statements (including the risk of override Code specified under the Listing Rules for review by the of controls), and determined that the principal risks auditors. were related to posting inappropriate journal entries to manipulate financial results and potential management Responsibilities for the financial statements bias in accounting estimates. Audit procedures performed by the engagement team included: and the audit Responsibilities of the directors for the financial – Discussions with the Audit Committee, management, statements legal and internal audit including consideration of As explained more fully in the Directors’ Responsibility known or suspected instances of non-compliance with Statement set out on pages 114-115, the directors laws and regulations and fraud; are responsible for the preparation of the financial – Reading the meeting minutes of the Board of statements in accordance with the applicable framework Directors, Audit, Risk Oversight, Governance, and for being satisfied that they give a true and fair view. Nomination and Sustainability and Remuneration Committees; The directors are also responsible for such internal – Considered the results of reporting from component control as they determine is necessary to enable the teams relating to compliance with applicable laws and preparation of financial statements that are free from regulations and procedures performed to address material misstatement, whether due to fraud or error. assessed fraud risk; – Assessment of matters reported on the Group’s In preparing the financial statements, the directors are whistleblowing service referred to as the ‘Speak responsible for assessing the Group’s and the Company’s Up Programme’ and the results of the Ethics and ability to continue as a going concern, disclosing as Compliance Team’s investigation in so far as they applicable, matters related to going concern and using related to the financial statements; the going concern basis of accounting unless the – Inspection of internal audit reports in so far as they directors either intend to liquidate the Group or the related to the financial statements; Company or to cease operations, or have no realistic – Evaluating whether there was evidence of alternative but to do so. management bias that represents a risk of material misstatement due to fraud; Auditors’ responsibilities for the audit of the – Identifying and testing journal entries, including financial statements manual revenue entries, unusual account Our objectives are to obtain reasonable assurance combinations and consolidation journals based on our about whether the financial statements as a whole risk assessment; and are free from material misstatement, whether due to – Designing audit procedures to incorporate elements of fraud or error, and to issue an auditors’ report that unpredictability around the nature, timing or extent of includes our opinion. Reasonable assurance is a high audit procedures performed. 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. EXPANDING SERVICES Kerry Group Annual Report 2022 179 There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. 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. # 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 S(2) to S(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. # Prior financial year Remuneration Report We are required to report if the Company has not provided the information required by Section 1110N of the Companies Act 2014 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 7 years, covering the years ended 31 December 2016 to 31 December 2022. Enda McDonagh for and on behalf of PricewaterhouseCoopers Chartered Accountants and Statutory Audit Firm Dublin 15 February 2023 180 Financial Statements Kerry Group Annual Report 2022 ## Consolidated Income Statement FORTHEFINANCIALYEARENDED31DECEMBER2022 | | Before | | | | | Before | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Non- | | Non- | | | Non- | | Non- | | | | Trading | | Trading | | | Trading | | Trading | | | | | Items | | | Items | Total | Items | | | Items | Total | | | | 2022 | | 2022 | 2022 | | 2021 | | 2021 | 2021 | | Notes | | €’m | | €’m | €’m | | €’m | | €’m | €’m | Continuing operations Revenue 2 8,771.9 - 8,771.9 7,350.6 - 7,350.6 Earnings before interest, tax, depreciation 1/2/3 1,216.1 - 1,216.1 1,077.0 - 1,077.0 and amortisation Depreciation (net) and intangible asset amortisation 3 (304.3) - (304.3) (282.3) - (282.3) Non-trading items 5 - (146.2) (146.2) - 91.5 91.5 Operating profit 3 911.8 (146.2) 765.6 794.7 91.5 886.2 Finance income 6 6.6 - 6.6 0.3 - 0.3 Finance costs 6 (72.8) - (72.8) (70.2) - (70.2) Share of joint ventures’ results after taxation 14 (0.4) - (0.4) - - - Profit before taxation 845.2 (146.2) 699.0 724.8 91.5 816.3 Income taxes 7 (114.5) 22.0 (92.5) (96.2) 42.9 (53.3) Profit after taxation 730.7 (124.2) 606.5 628.6 134.4 763.0 Attributable to: Equity holders of the parent 606.4 763.0 Non-controlling interests 0.1 - 606.5 763.0 Earnings per A ordinary share Cent Cent - basic 9 341.9 430.6 - diluted 9 341.3 429.9 SEPARATING^{}[] HORIZONS Kerry Group Annual Report 2022 181 # Consolidated Statement of Comprehensive Income FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 | | Notes | 2022 €'m | 2021 €'m | | --- | --- | --- | --- | | Profit after taxation | | 606.5 | 763.0 | | **Other comprehensive income:** | | | | | **Items that are or may be reclassified subsequently to profit or loss:** | | | | | Fair value movements on cash flow hedges | | 5.9 | (0.3) | | Cash flow hedges - reclassified to profit or loss from equity | 24 | (2.8) | (0.9) | | Net change in cost of hedging | 24 | 0.8 | - | | Deferred tax effect of fair value movements on cash flow hedges | 17 | (0.2) | 0.1 | | Exchange difference on translation of foreign operations | | 152.2 | 217.7 | | Cumulative exchange difference on translation recycled on disposal | 5 | 14.9 | 16.2 | | **Items that will not be reclassified subsequently to profit or loss:** | | | | | Re-measurement on retirement benefits obligation | 26 | (13.4) | 110.2 | | Deferred tax effect of re-measurement on retirement benefits obligation | 17 | 7.6 | (20.0) | | **Net income recognised directly in total other comprehensive income** | | **165.0** | **323.0** | | **Total comprehensive income** | | **771.5** | **1,086.0** | | **Attributable to:** | | | | | Equity holders of the parent | | 771.4 | 1,086.0 | | Non-controlling interests | | 0.1 | - | | | | **771.5** | **1,086.0** | 182 Financial Statements Kerry Group Annual Report 2022 ## ConsolidatedBalanceSheet    ASAT31DECEMBER2022    | | 31 December | | 31 December | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Notes | | €’m | | €’m | Non-current assets Property, plant and equipment 11 2,099.3 2,091.3 Intangible assets 12 5,720.0 5,580.7 Financial asset investments 13 58.9 49.9 Investments in joint ventures 14 41.7 21.7 Other non-current financial instruments 23 0.3 34.8 Retirement benefits asset 26 95.6 90.3 Deferred tax assets 17 71.9 67.8 8,087.7 7,936.5 Current assets Inventories 16 1,354.4 1,204.2 Trade and other receivables 19 1,423.8 1,181.7 Cash at bank and in hand 23 970.0 1,039.1 Other current financial instruments 23 59.5 15.2 Assets classified as held for sale 18 388.0 18.7 4,195.7 3,458.9 Total assets 12,283.4 11,395.4 Current liabilities Trade and other payables 20 1,966.5 1,791.5 Borrowings and overdrafts 23/24 701.1 5.6 Other current financial instruments 23/24 18.4 40.1 Tax liabilities 190.9 141.6 Provisions 25 15.3 13.6 Deferred income 21 3.4 3.0 Total liabilities directly associated with assets classified as held for sale 18 19.7 - 2,915.3 1,995.4 Non-current liabilities Borrowings 23/24 2,432.6 3,118.0 Other non-current financial instruments 23/24 20.3 0.5 Retirement benefits obligation 26 30.2 24.1 Other non-current liabilities 22 142.6 153.9 Deferred tax liabilities 17 452.3 447.3 Provisions 25 50.5 37.1 Deferred income 21 16.0 17.9 3,144.5 3,798.8 Total liabilities 6,059.8 5,794.2 Net assets 6,223.6 5,601.2 Equity Share capital 27 22.1 22.1 Share premium 398.7 398.7 Other reserves 64.3 (129.6) Retained earnings 5,736.8 5,310.0 Equity attributable to equity holders of the parent 6,221.9 5,601.2 Non-controlling interests 1.7 - Total equity 6,223.6 5,601.2 The financial statements were approved by the Board of Directors on 15 February 2023 and signed on its behalf by: Tom Moran, Chairman Edmond Scanlon, Chief Executive Officer Kerry Group Annual Report 2022 183 ## CompanyBalanceSheet ASAT31DECEMBER2022 | | 31 December | | 31 December | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Notes | | €’m | | €’m | Non-current assets Property, plant and equipment 11 0.1 0.2 Investments in subsidiaries 15 843.5 843.5 843.6 843.7 Current assets Cash at bank and in hand 23 - 0.1 Trade and other receivables 19 231.0 218.9 231.0 219.0 Total assets 1,074.6 1,062.7 Current liabilities Trade and other payables 20 5.9 10.0 5.9 10.0 Non-current liabilities Deferred income 21 0.1 0.1 0.1 0.1 Total liabilities 6.0 10.1 Net assets 1,068.6 1,052.6 Issued capital and reserves Share capital 27 22.1 22.1 Share premium 398.7 398.7 Other reserves 132.3 109.4 Retained earnings 515.5 522.4 Shareholders’ equity 1,068.6 1,052.6 The Company earned a profit after taxation of €166.7m for the financial year ended 31 December 2022 (2021: €319.8m). The financial statements were approved by the Board of Directors on 15 February 2023 and signed on its behalf by: Tom Moran, Chairman Edmond Scanlon, Chief Executive Officer 184 Financial Statements Kerry Group Annual Report 2022 # Consolidated Statement of Changes in Equity FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 | | Notes | Attributable to equity holders of the parent | | | | | Non-controlling interests €m | Total equity €m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Share Capital €m | Share Premium €m | Other Reserves €m | Retained Earnings €m | Total €m | | | | **Group:** | | | | | | | | | | At 1 January 2021 | | 22.1 | 398.7 | (379.5) | 4,614.2 | 4,655.5 | - | 4,655.5 | | Profit after taxation | | - | - | - | 763.0 | 763.0 | - | 763.0 | | Other comprehensive expense | | - | - | 232.7 | 90.3 | 323.0 | - | 323.0 | | Total comprehensive income | | - | - | 232.7 | 853.3 | 1,086.0 | - | 1,086.0 | | Shares issued during the financial year | 27 | - | - | - | - | - | - | - | | Dividends paid | 10 | - | - | - | (157.5) | (157.5) | - | (157.5) | | Share-based payment expense | 28 | - | - | 17.2 | - | 17.2 | - | 17.2 | | At 31 December 2021 | | 22.1 | 398.7 | (129.6) | 5,310.0 | 5,601.2 | - | 5,601.2 | | Profit after taxation | | - | - | - | 606.4 | 606.4 | 0.1 | 606.5 | | Other comprehensive income | | - | - | 171.0 | (6.0) | 165.0 | - | 165.0 | | Total comprehensive income | | - | - | 171.0 | 600.4 | 771.4 | 0.1 | 771.5 | | Shares issued during the financial year | 27 | - | - | - | - | - | - | - | | Dividends paid | 10 | - | - | - | (173.6) | (173.6) | - | (173.6) | | Share-based payment expense | 28 | - | - | 22.9 | - | 22.9 | - | 22.9 | | Non-controlling interests arising on acquisition | | - | - | - | - | - | 1.6 | 1.6 | | At 31 December 2022 | | 22.1 | 398.7 | 64.3 | 5,736.8 | 6,221.9 | 1.7 | 6,223.6 | Other Reserves comprise the following: | | 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 2021 | | 1.7 | 0.3 | 90.2 | (472.0) | 2.6 | (2.3) | (379.5) | | Other comprehensive income/(expense) | | - | - | - | 233.9 | (1.2) | - | 232.7 | | Share-based payment expense | 28 | - | - | 17.2 | - | - | - | 17.2 | | At 31 December 2021 | | 1.7 | 0.3 | 107.4 | (238.1) | 1.4 | (2.3) | (129.6) | | Other comprehensive income | | - | - | - | 167.1 | 3.1 | 0.8 | 171.0 | | Share-based payment expense | 28 | - | - | 22.9 | - | - | - | 22.9 | | At 31 December 2022 | | 1.7 | 0.3 | 130.3 | (71.0) | 4.5 | (1.5) | 64.3 | The nature and purpose of each reserve within shareholders' equity are described in note 35. SEF LEARNING MORIZONS Kerry Group Annual Report 2022 185 # Company Statement of Changes in Equity FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 | | Notes | Share Capital €'m | Share Premium €'m | Other Reserves €'m | Retained Earnings €'m | Total €'m | | --- | --- | --- | --- | --- | --- | --- | | **Company:** | | | | | | | | At 1 January 2021 | | 22.1 | 398.7 | 92.2 | 360.1 | 873.1 | | Profit after taxation | 8 | - | - | - | 319.8 | 319.8 | | Other comprehensive income | | - | - | - | - | - | | Total comprehensive income | | - | - | - | 319.8 | 319.8 | | Shares issued during the financial year | 27 | - | - | - | - | - | | Dividends paid | 10 | - | - | - | (157.5) | (157.5) | | Share-based payment expense | 28 | - | - | 17.2 | - | 17.2 | | At 31 December 2021 | | 22.1 | 398.7 | 109.4 | 522.4 | 1,052.6 | | Profit after taxation | 8 | - | - | - | 166.7 | 166.7 | | Other comprehensive income | | - | - | - | - | - | | Total comprehensive income | | - | - | - | 166.7 | 166.7 | | Shares issued during the financial year | 27 | - | - | - | - | - | | Dividends paid | 10 | - | - | - | (173.6) | (173.6) | | Share-based payment expense | 28 | - | - | 22.9 | - | 22.9 | | At 31 December 2022 | | 22.1 | 398.7 | 132.3 | 515.5 | 1,068.6 | Other Reserves comprise the following: | | Note | Capital Redemption Reserve €'m | Other Undenominated Capital €'m | Share-Based Payment Reserve €'m | Total €'m | | --- | --- | --- | --- | --- | --- | | At 1 January 2021 | | 1.7 | 0.3 | 90.2 | 92.2 | | Share-based payment expense | 28 | - | - | 17.2 | 17.2 | | At 31 December 2021 | | 1.7 | 0.3 | 107.4 | 109.4 | | Share-based payment expense | 28 | - | - | 22.9 | 22.9 | | At 31 December 2022 | | 1.7 | 0.3 | 130.3 | 132.3 | The nature and purpose of each reserve within shareholders' equity are described in note 35. 186 Financial Statements Kerry Group Annual Report 2022 # Consolidated Statement of Cash Flows FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 | | Notes | 2022 €m | 2021 €m | | --- | --- | --- | --- | | **Cash flows from operating activities** | | | | | Profit before taxation | | 699.0 | 816.3 | | *Adjustments for:* | | | | | Depreciation (net) | | 221.6 | 201.5 | | Intangible asset amortisation | | 82.7 | 80.8 | | Share of joint ventures' results after taxation | 14 | 0.4 | (3.9) | | Non-trading items income statement charge/(income) | 5 | 146.2 | (91.5) | | Finance costs (net) | 6 | 66.2 | 69.9 | | Change in working capital | 29 | (224.0) | (184.3) | | Pension contributions paid less pension expense | | (15.7) | (14.7) | | Payments on non-trading items | | (85.4) | (76.1) | | Exchange translation adjustment | | (27.2) | (0.7) | | **Cash generated from operations** | | 863.8 | 797.3 | | Income taxes paid | | (80.0) | (72.0) | | Finance income received | | 5.4 | 0.4 | | Finance costs paid | | (67.4) | (71.7) | | **Net cash from operating activities** | | 721.8 | 654.0 | | **Investing activities** | | | | | Purchase of assets (net) | 29 | (221.0) | (300.4) | | Proceeds from the sale of assets (net of disposal expenses) | 5 | 38.1 | 4.0 | | Capital grants received | | 1.4 | 0.7 | | Purchase of businesses (net of cash acquired) | 30 | (353.8) | (1,084.9) | | Payments relating to previous acquisitions | | (1.8) | (18.9) | | Purchase of investments | 13 | (10.4) | (4.4) | | Purchase of share in joint ventures | 14 | (20.4) | - | | Disposal of businesses (net of disposal expenses) | 5 | (15.2) | 775.2 | | **Net cash used in investing activities** | | (583.1) | (626.7) | | **Financing activities** | | | | | Dividends paid | 10 | (173.6) | (157.5) | | Payment of lease liabilities | 29 | (35.1) | (34.9) | | Issue of share capital | 27 | - | - | | Repayment of borrowings (net of swaps) | | (3.0) | (1,093.3) | | Proceeds from borrowings | | 2.0 | 1,705.0 | | **Net cash movement due to financing activities** | | (209.7) | 419.3 | | **Net (decrease)/increase in cash and cash equivalents** | | (71.0) | 444.6 | | Cash and cash equivalents at beginning of the financial year | | 1,033.8 | 560.3 | | Exchange translation adjustment on cash and cash equivalents | | 7.0 | 28.9 | | **Cash and cash equivalents at end of the financial year** | 29 | 969.8 | 1,033.8 | | **Reconciliation of Net Cash Flow to Movement in Net Debt** | | | | | Net (decrease)/increase in cash and cash equivalents | | (71.0) | 444.6 | | Cash flow from debt financing | | 1.0 | (611.7) | | Changes in net debt resulting from cash flows | | (70.0) | (167.1) | | Fair value movement on interest rate swaps (net of adjustment to borrowings) | 29 | 1.4 | (0.1) | | Exchange translation adjustment on net debt | 29 | (29.7) | (19.1) | | Movement in net debt in the financial year | | (98.3) | (186.3) | | Net debt at beginning of the financial year | | (2,049.9) | (1,863.6) | | **Net debt at end of the financial year - pre lease liabilities** | 23 | (2,148.2) | (2,049.9) | | Lease liabilities | 11/29 | (69.2) | (74.2) | | **Net debt at end of the financial year** | 23/29 | (2,217.4) | (2,124.1) | SEPARATING MORIZONS Kerry Group Annual Report 2022 187 # Company Statement of Cash Flows FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 | | Notes | 2022 €'m | 2021 €'m | | --- | --- | --- | --- | | **Cash flows from operating activities** | | | | | Profit before taxation | | 162.1 | 317.5 | | *Adjustments for:* | | | | | Depreciation (net) | | 0.1 | 0.1 | | Non-trading items income statement income | | - | - | | Finance income | | (0.6) | (0.5) | | Change in working capital | 29 | 11.3 | (29.2) | | **Cash generated from operations** | | 172.9 | 287.9 | | Finance income received | | 0.6 | 0.5 | | **Net cash from operating activities** | | 173.5 | 288.4 | | **Investing activities** | | | | | Investments in subsidiary undertakings | 15 | - | (129.1) | | Payments relating to previous acquisitions | | - | (1.7) | | **Net cash from investing activities** | | - | (130.8) | | **Financing activities** | | | | | Dividends paid | 10 | (173.6) | (157.5) | | Issue of share capital | 27 | - | - | | **Net cash movement due to financing activities** | | (173.6) | (157.5) | | **Net (decrease)/increase in cash and cash equivalents** | | (0.1) | 0.1 | | Cash and cash equivalents at beginning of the financial year | | 0.1 | - | | **Cash and cash equivalents at end of the financial year** | 29 | - | 0.1 | 188 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 Notes to the Financial Statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 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 36 ‘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 and liabilities classified as held for sale are stated at the lower of carrying value and fair value less costs to sell. The investments in 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. The Group has determined that earnings before interest, tax, depreciation (net) and amortisation (EBITDA) is a key performance metric used by the Group’s Chief Operating Decision Maker (the Executive Directors). From 1 January 2022 EBITDA replaces trading profit as one of the key measures utilised in assessing the performance of the Group. EBITDA represents profit before finance income and costs, income taxes, depreciation (net of capital grant amortisation), intangible asset amortisation, non- trading items and share of joint ventures’ results after taxation and is a widely used measure in the evaluation of profitability and performance. This has been reflected in the presentation of the Group’s Consolidated Income Statement and note 2 ‘Analysis of results’, as permitted under IAS 1 ‘Presentation of Financial Statements’. The Group has updated its ‘Basis of consolidation’ in respect of a new non-controlling interests policy. In the 2022 consolidated financial statements, the Group has re-presented corresponding 2021 balances to align with current year presentation in the Consolidated Income Statement, note 2 ‘Analysis of results’, note 3 ‘Operating profit’, note 4 ‘Total staff numbers and costs’, note 12 ‘Intangible assets’, note 24 ‘Financial instruments’ and note 28 ‘Share-based payments’. Certain income statement headings and other financial measures included in the consolidated financial statements are not defined by IFRS. The Group makes this distinction to enhance the understanding of the financial performance of the business as outlined in the Supplementary Information section pages 255-259. 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 and position of the Group, including liquidity and access to financing as outlined in note 24 and the potential impacts of climate, geopolitical and macroeconomic environment related risks on profitability. There are no material uncertainties that cast significant doubt on the Group’s ability to continue as a going concern over a period of at least 12 months from the date of approval of these financial statements. The Directors report that they have satisfied themselves that the Group is a going concern, having adequate resources to continue in operational existence for the foreseeable future. In forming this view, the Directors have reviewed the Group’s forecast for a period not less than 12 months, the medium term plan, and have taken into account the cash flow implications of the plans, including proposed capital expenditure, and compared these with the Group’s committed borrowing facilities and projected gearing ratios. 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 gained control until the date the Company ceased to control the subsidiary. All inter-group transactions and balances are eliminated on consolidation. Kerry Group Annual Report 2022 189 1. Statement of accounting policies (continued) Basis of consolidation (continued) Non-controlling interests Non-controlling interests represent the portion of the equity of a subsidiary not attributable either directly or indirectly to the Group and are presented separately in the Consolidated Income Statement and within equity in the Consolidated Balance Sheet, distinguished from the Group’s shareholders’ equity. Where not all of the equity of a subsidiary is acquired, the non-controlling interests are recognised at the non-controlling interest’s share of the acquiree’s net identifiable assets. 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 joint ventures’ results after taxation’ 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 both segments 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. 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 & other which affect the nature, amount, timing and uncertainty of revenue and cash flows are similar. 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. EBITDA 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, are reported along with the elimination of inter-group activities under the heading ‘Group Eliminations and Unallocated’. 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 Dairy Ireland. The Taste & Nutrition segment is a world leading provider of taste and nutrition solutions for the food, beverage and pharmaceutical markets. Utilising a broad range of ingredient solutions to innovate with our customers to create great tasting products, with improved nutrition and functionality, while ensuring a better impact for the planet. Kerry is driven to be our customers’ most valued partner, creating a world of sustainable nutrition through solving our customers’ most complex challenges with differentiated solutions. The Taste & Nutrition segment supplies industries across Europe, Americas and APMEA (Asia Pacific, Middle East and Africa). The Dairy Ireland segment is a leading Irish provider of value-add dairy ingredients and consumer products. Our dairy ingredients product portfolio includes functional proteins and nutritional bases, while our dairy consumer brands can be found in chilled cabinets in retailers across Ireland and the UK. 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: - Buildings 2% - 5% - Plant, machinery and equipment 7% - 25% - Motor vehicles 20% The charge in respect of periodic depreciation is calculated after establishing an estimate of the asset’s useful economic life and the expected residual value at the end of its useful economic life. Increasing/(decreasing) an asset’s expected useful economic 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 economic lives of Group assets are determined by management at the time the assets are acquired and reviewed annually for appropriateness. These useful economic lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their useful economic life, such as changes in technology or the location of the asset and its climate related risk. Historically, changes in useful economic lives or residual values have not resulted in material changes to the Group’s depreciation charge. Kerry Group Annual Report 2022 Financial Statements Notes to the Financial Statements 190 1. Statement of accounting policies (continued) Property, plant and equipment (continued) 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 economic 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 nil. 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 and liabilities classified as held for sale Assets and related liabilities 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 assets and related liabilities are available for immediate sale in their 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 and related liabilities classified as held for sale are measured at the lower of carrying value or 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 acquired. 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. 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 economic 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 economic life. In arriving at the conclusion that these brand related intangibles have an indefinite useful economic 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. The future expectation of potential market disruption due to changing consumer preferences or changes in supply chain of raw materials linked to sustainability and climate change were assessed as part of this review and were deemed to have no material impact. Finite life brand related intangible assets are amortised over the period of their expected useful economic lives, which predominantly range from 2 to 20 years, by charging equal annual instalments to the Consolidated Income Statement. The useful economic 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 economic 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. Kerry Group Annual Report 2022 191 1. Statement of accounting policies (continued) Intangible assets (continued) Computer software (continued) 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; - the cost of the asset can be measured reliably; and - the Group controls the asset. Computer software is amortised over its expected useful economic 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 economic 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. 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. 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 arising 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. Kerry Group Annual Report 2022 Financial Statements Notes to the Financial Statements 192 1. Statement of accounting policies (continued) Income taxes (continued) 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 schemes 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 schemes, 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 is recognised as it arises within staff costs in the Consolidated Income Statement. Net interest which is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets is recognised in interest costs in the Consolidated Income Statement. Gains or losses on the curtailment or settlement of a scheme are recognised in the Consolidated Income Statement when the curtailment or settlement occurs. Re-measurement of retirement benefits obligation, comprising actuarial gains and losses and the return on scheme 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 scheme 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 scheme. 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 25 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 predominantly 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, impairment of goodwill and intangible assets, costs relating to material restructuring or material transformation plans and material transaction, integration and restructuring costs associated with acquisitions. Non-trading items are disclosed in note 5 to the consolidated financial statements and are presented separately in the Consolidated Income Statement. 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. Kerry Group Annual Report 2022 193 1. Statement of accounting policies (continued) Share-based payments (continued) 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 28 to the consolidated financial statements. 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 businesses. 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. 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 joint ventures Investments in 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 other comprehensive income (‘OCI’) or through profit or loss); and - those to be measured at amortised cost. Kerry Group Annual Report 2022 Financial Statements Notes to the Financial Statements 194 1. Statement of accounting policies (continued) Financial instruments (continued) 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. The amount of consideration that is unconditional approximates to 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 under the heading ‘Cash at bank and in hand’. 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. 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 19. 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. Kerry Group Annual Report 2022 195 1. Statement of accounting policies (continued) Financial instruments (continued) Derivative financial instruments and hedge accounting (continued) 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. 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 OCI 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 OCI 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 OCI 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. 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 The preparation of the Group 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 and judgement 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. Impairment of goodwill and intangible assets (Estimation) 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. Kerry Group Annual Report 2022 Financial Statements Notes to the Financial Statements 196 1. Statement of accounting policies (continued) Critical accounting estimates and judgements (continued) Impairment of goodwill and intangible assets (Estimation) (continued) 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. The impact of climate change has also been considered, specifically on the timing and the extent of costs and cash outflows and is based on a critical evaluation of the facts currently available to the Group taking into account factors such as, existing technology, currently enacted laws and regulations and knowledge and expertise within the Group. Changes to legislation and government policy relating to climate change have been considered in the assessment of the impact of climate change. The measurement of the impact of climate change is based on reasonable and supportable assumptions that represent management’s current best estimate of the range of conditions that will exist in the foreseeable future. The potential impact of climate related events considered as part of the sensitivity analysis had no impact on our conclusions. 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 accelerating inflationary cost pressures, disruption of global supply chains and the challenges presented in China with localised restrictions. 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 and the likelihood of impairment is not considered likely to occur in the next financial year. Business combinations (Estimation) 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 climate related risk and 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 economic life of the intangible asset acquired. 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’. The useful economic lives of intangible assets are determined by management at the time the assets are acquired and reviewed annually for appropriateness, including assessment as finite or indefinite. These useful economic lives are based on historical experience with similar assets as well as anticipation of future events, such as changes in technology, the location of the asset and its climate related risk. Intangible assets are disclosed in note 12 and business combinations in note 30 to the consolidated financial statements. Non-trading items (Judgement) The Group considers 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’. Determining which transactions are to be disclosed separately is often a subjective matter. Circumstances that the Group believes would give rise to non-trading items for separate disclosure are outlined in the accounting policy on non-trading items. For clarity, separate disclosure is made of all items in one column on the face of the Group Consolidated Income Statement. Income tax charge and income/deferred tax assets and liabilities (Estimation and Judgement) 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 2022 197 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 2022 but do not have a material effect on the results or financial position of the Group: Effective Date - IAS 16 (Amendments) Property, Plant and Equipment 1 January 2022 - IAS 37 (Amendments) Provisions, Contingent Liabilities and Contingent Assets 1 January 2022 - IFRS 9 (Amendments) Financial Instruments 1 January 2022 - IFRS 3 (Amendments) Business Combinations 1 January 2022 - IAS 41 (Amendments) Agriculture 1 January 2022 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: Effective Date - IAS 1 (Amendments) Presentation of Financial Statements 1 January 2023 - IFRS 17 Insurance Contracts 1 January 2023 - IAS 8 (Amendments) Accounting Policies, Changes in Accounting Estimates and Errors 1 January 2023 - IAS 12 (Amendments) Income Taxes 1 January 2023 - IFRS 16 (Amendments) Leases 1 January 2024 198 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 2. Analysis of results The Group has determined it has two reportable segments: Taste & Nutrition and Dairy Ireland. The Taste & Nutrition segment is a world leading provider of taste and nutrition solutions for the food, beverage and pharmaceutical markets. Utilising a broad range of ingredient solutions to innovate with our customers to create great tasting products, with improved nutrition and functionality, while ensuring a better impact for the planet. Kerry is driven to be our customers' most valued partner, creating a world of sustainable nutrition through solving our customers' most complex challenges with differentiated solutions. The Taste & Nutrition segment supplies industries across Europe, Americas and APMEA (Asia Pacific, Middle East and Africa). The Dairy Ireland segment is a leading Irish provider of value-add dairy ingredients and consumer products. Our dairy ingredients product portfolio includes functional proteins and nutritional bases, while our dairy consumer brands can be found in chilled cabinets in retailers across Ireland and the UK. Prior year 31 December 2021 has been re-presented to reflect the changes in our reporting segments in line with how the Chief Operating Decision Maker (the Executive Directors) assesses the Group's performance from 1 January 2022. The Irish dairy processing activities, previously reported in Taste & Nutrition, have been combined with the remaining dairy activities of the Consumer Foods business and this segment is named Dairy Ireland. Included within the Dairy Ireland 31 December 2021 comparatives are the results of the Consumer Foods Meats and Meals business which was disposed by the Group on 27 September 2021. | | Taste & Nutrition 2022 €m | Dairy Ireland 2022 €m | Group Eliminations and Unallocated 2022 €m | Total 2022 €m | Taste & Nutrition 2021 €m | Dairy Ireland 2021 €m | Group Eliminations and Unallocated 2021 €m | Total 2021 €m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | External revenue | 7,387.0 | 1,384.9 | - | 8,771.9 | 5,689.3 | 1,661.3 | - | 7,350.6 | | Inter-segment revenue | 29.6 | 154.0 | (183.6) | - | 40.1 | 116.3 | (156.4) | - | | **Revenue** | **7,416.6** | **1,538.9** | **(183.6)** | **8,771.9** | **5,729.4** | **1,777.6** | **(156.4)** | **7,350.6** | | **EBITDA*** | **1,220.1** | **70.7** | **(74.7)** | **1,216.1** | **1,013.5** | **136.0** | **(72.5)** | **1,077.0** | | Depreciation (net) | | | | (221.6) | | | | (201.5) | | Intangible asset amortisation | | | | (82.7) | | | | (80.8) | | Non-trading items | | | | (146.2) | | | | 91.5 | | **Operating profit** | | | | **765.6** | | | | **886.2** | | Finance income | | | | 6.6 | | | | 0.3 | | Finance costs | | | | (72.8) | | | | (70.2) | | Share of joint ventures' results after taxation | | | | (0.4) | | | | - | | **Profit before taxation** | | | | **699.0** | | | | **816.3** | | Income taxes | | | | (92.5) | | | | (53.3) | | **Profit after taxation** | | | | **606.5** | | | | **763.0** | | Attributable to: | | | | | | | | | | Equity holders of the parent | | | | 606.4 | | | | 763.0 | | Non-controlling interests | | | | 0.1 | | | | - | | | | | | **606.5** | | | | **763.0** | \* EBITDA represents profit before finance income and costs, income taxes, depreciation (net of capital grant amortisation), intangible asset amortisation, non-trading items and share of joint ventures' results after taxation. ### Segment assets and liabilities | Assets | 8,583.1 | 766.2 | 2,934.1 | 12,283.4 | 7,801.9 | 661.9 | 2,931.6 | 11,395.4 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Liabilities | (1,897.0) | (289.4) | (3,873.4) | (6,059.8) | (1,534.1) | (306.4) | (3,953.7) | (5,794.2) | | **Net assets** | **6,686.1** | **476.8** | **(939.3)** | **6,223.6** | **6,267.8** | **355.5** | **(1,022.1)** | **5,601.2** | ### Other segmental information | Property, plant and equipment additions | 238.9 | 17.6 | 0.3 | 256.8 | 264.4 | 28.2 | 0.2 | 292.8 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Depreciation (net) | 200.1 | 20.5 | 1.0 | 221.6 | 169.4 | 31.5 | 0.6 | 201.5 | | Intangible asset additions | 0.4 | 0.1 | 11.7 | 12.2 | 1.3 | 0.2 | 32.6 | 34.1 | | Intangible asset amortisation | 43.0 | 0.2 | 39.5 | 82.7 | 28.9 | 3.9 | 48.0 | 80.8 | | Share of joint ventures' results after taxation | 0.4 | - | - | 0.4 | - | - | - | - | FUNDERING ADVISORS Kerry Group Annual Report 2022 199 ## 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 & other and within the primary geographic markets which affect the nature, amount, timing and uncertainty of revenue and cash flows are similar. ### Analysis by EUM | | Taste & Nutrition 2022 €m | Dairy Ireland 2022 €m | Total 2022 €m | Taste & Nutrition 2021 €m | Dairy Ireland 2021 €m | Total 2021 €m | | --- | --- | --- | --- | --- | --- | --- | | Food | 4,925.2 | 1,286.2 | 6,211.4 | 3,837.5 | 1,587.4 | 5,424.9 | | Beverage | 1,959.1 | 98.7 | 2,057.8 | 1,515.2 | 73.9 | 1,589.1 | | Pharma & other | 502.7 | - | 502.7 | 336.6 | - | 336.6 | | **External revenue** | **7,387.0** | **1,384.9** | **8,771.9** | **5,689.3** | **1,661.3** | **7,350.6** | ### Analysis by primary geographic market Disaggregation of revenue from external customers is analysed by geographical split: | | Taste & Nutrition 2022 €m | Dairy Ireland 2022 €m | Total 2022 €m | Taste & Nutrition 2021 €m | Dairy Ireland 2021 €m | Total 2021 €m | | --- | --- | --- | --- | --- | --- | --- | | Republic of Ireland | 82.2 | 458.2 | 540.4 | 64.1 | 394.6 | 458.7 | | Rest of Europe | 1,459.8 | 768.8 | 2,228.6 | 1,168.7 | 1,089.6 | 2,258.3 | | Americas | 4,172.2 | 84.0 | 4,256.2 | 3,137.5 | 97.7 | 3,235.2 | | APMEA | 1,672.8 | 73.9 | 1,746.7 | 1,319.0 | 79.4 | 1,398.4 | | **External revenue** | **7,387.0** | **1,384.9** | **8,771.9** | **5,689.3** | **1,661.3** | **7,350.6** | ### Information about geographical areas | | Europe 2022 €m | Americas 2022 €m | APMEA 2022 €m | Total 2022 €m | Europe 2021 €m | Americas 2021 €m | APMEA 2021 €m | Total 2021 €m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Assets by location | 5,357.9 | 5,486.3 | 1,439.2 | 12,283.4 | 5,205.1 | 4,959.2 | 1,231.1 | 11,395.4 | | Property, plant and equipment additions | 55.8 | 147.4 | 53.6 | 256.8 | 83.7 | 152.5 | 56.6 | 292.8 | | Intangible asset additions | 12.1 | 0.1 | - | 12.2 | 33.1 | 1.0 | - | 34.1 | The revenue and non-current assets (as defined in IFRS 8 'Operating Segments') attributable to the country of domicile and all foreign countries of operation, for which revenue exceeds 10% of total external Group revenue, are set out below. Kerry Group plc is domiciled in the Republic of Ireland and the revenues from external customers in the Republic of Ireland were €540.4m (2021: €458.7m). The non-current assets located in the Republic of Ireland are €1,503.6m (2021: €1,598.4m). Revenues from external customers include €958.9m (2021: €1,379.5m) in the UK and €3,399.8m (2021: €2,610.7m) in the USA. The non-current assets in the UK are €353.3m (2021: €391.9m) and in the USA are €3,267.1m (2021: €3,166.1m). For clarity the UK is included within Europe in the tables above. 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. 200 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ### 3. Operating profit #### (i) Analysis of costs by nature | | Notes | Continuing Operations 2022 €'m | Continuing Operations 2021 €'m | | --- | --- | --- | --- | | **Revenue** | | **8,771.9** | **7,350.6** | | *Less operating costs:* | | | | | Raw materials and consumables | | 4,940.0 | 4,023.2 | | Other general overheads | | 1,186.1 | 1,000.8 | | Staff costs | 4 | 1,495.0 | 1,349.3 | | Loss allowances on trade receivables | 19 | 11.4 | 9.8 | | Foreign exchange gains | | (0.9) | (8.6) | | Change in inventories of finished goods | 16 | (75.8) | (97.0) | | Share of joint ventures' results after taxation* | 14 | - | (3.9) | | **Earnings before interest, tax, depreciation and amortisation** | | **1,216.1** | **1,077.0** | \* Share of joint ventures' results after taxation was not included in the Group's EBITDA, but as a separate line item on the face of the Consolidated Income Statement for the year end 31 December 2022. #### Depreciation (net): | - property, plant and equipment | 11(i) | 190.9 | 172.0 | | --- | --- | --- | --- | | - right-of-use assets | 11(ii) | 32.7 | 31.4 | | - capital grants amortisation | 21 | (2.0) | (1.9) | | Intangible asset amortisation | 12 | 82.7 | 80.8 | | Non-trading items | 5 | 146.2 | (91.5) | | **Operating profit** | | **765.6** | **886.2** | #### And is stated after charging: | Research and development costs | | **303.2** | **297.2** | | --- | --- | --- | --- | #### (ii) Auditors' remuneration | | PwC Ireland 2022 €'m | PwC Other 2022 €'m | PwC Worldwide 2022 €'m | PwC Ireland 2021 €'m | PwC Other 2021 €'m | PwC Worldwide 2021 €'m | | --- | --- | --- | --- | --- | --- | --- | | *Statutory disclosure:* | | | | | | | | Group audit | 1.4 | 2.1 | 3.5 | 1.4 | 1.8 | 3.2 | | Other assurance services | 0.1 | - | 0.1 | 0.1 | - | 0.1 | | **Total assurance services** | **1.5** | **2.1** | **3.6** | **1.5** | **1.8** | **3.3** | | Tax advisory services | - | - | - | - | - | - | | Other non-audit services | - | 0.2 | 0.2 | - | 0.1 | 0.1 | | **Total non-audit services** | **-** | **0.2** | **0.2** | **-** | **0.1** | **0.1** | | **Total auditors' remuneration** | **1.5** | **2.3** | **3.8** | **1.5** | **1.9** | **3.4** | | Assurance services | | | 95% | | | 97% | | Non-audit services | | | 5% | | | 3% | | **Total** | | | **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 €4,838 (2021: €4,720) which are due to the Group's auditor in respect of the Parent Company. Reimbursement of auditors' expenses amounted to €0.2m (2021: €0.2m). EXPANDING^{}[] NATIONS Kerry Group Annual Report 2022 201 #### 4. Total staff numbers and costs The average number of people employed by the Group was: | | Taste & Nutrition 2022 Number | Dairy Ireland 2022 Number | Total 2022 Number | Taste & Nutrition 2021 Number | Dairy Ireland 2021 Number | Total 2021 Number | | --- | --- | --- | --- | --- | --- | --- | | Europe | 4,688 | 1,628 | 6,316 | 4,513 | 5,427 | 9,940 | | Americas | 11,037 | - | 11,037 | 10,034 | - | 10,034 | | APMEA | 5,998 | - | 5,998 | 5,221 | - | 5,221 | | | 21,723 | 1,628 | 23,351 | 19,768 | 5,427 | 25,195 | The aggregate payroll costs of employees (including Executive Directors) was: | | Taste & Nutrition 2022 €m | Dairy Ireland 2022 €m | Total 2022 €m | Taste & Nutrition 2021 €m | Dairy Ireland 2021 €m | Total 2021 €m | | --- | --- | --- | --- | --- | --- | --- | | Europe | 337.3 | 108.1 | 445.4 | 281.8 | 264.1 | 545.9 | | Americas | 806.3 | - | 806.3 | 615.0 | - | 615.0 | | APMEA | 243.3 | - | 243.3 | 188.4 | - | 188.4 | | | 1,386.9 | 108.1 | 1,495.0 | 1,085.2 | 264.1 | 1,349.3 | Social welfare costs of €175.9m (2021: €145.6m) and share-based payment expense of €22.9m (2021: €17.2m) are included in payroll costs. Pension costs included in the payroll costs are disclosed in note 26. Prior year 31 December 2021 has been re-presented to reflect the changes in our reporting segments in line with how the Chief Operating Decision Maker (the Executive Directors) assesses the Group's performance from 1 January 2022. The Irish dairy processing activities, previously reported in Taste & Nutrition, have been combined with the remaining dairy activities of the Consumer Foods business and this segment is named Dairy Ireland. Included within the Dairy Ireland 31 December 2021 comparatives are the results of the Consumer Foods Meats and Meals business which was disposed by the Group on 27 September 2021. 202 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 5. Non-trading items | | Notes | 2022 €m | 2021 €m | | --- | --- | --- | --- | | (Loss)/profit on disposal of businesses and assets | (i) | (63.1) | 179.7 | | Global Business Services expansion | (ii) | (13.6) | (33.3) | | Acquisition integration costs | (iii) | (20.3) | (54.9) | | Accelerate Operational Excellence | (iv) | (49.2) | - | | | | (146.2) | 91.5 | | Tax on above | 7 | 22.0 | 26.3 | | Tax on inter-group transfer | (v)/7 | - | 16.6 | | **Non-trading items (net of related tax)** | | **(124.2)** | **134.4** | ### (i) Loss on disposal of businesses and assets | | Notes | Businesses 2022 €m | *Assets 2022 €m | Total 2022 €m | | --- | --- | --- | --- | --- | | Property, plant and equipment - disposed | 11 | (16.0) | (28.6) | (44.6) | | Goodwill | 12 | (9.6) | (0.3) | (9.9) | | Brand related intangible assets | 12 | (2.1) | (0.4) | (2.5) | | Computer software | 12 | (0.2) | (0.3) | (0.5) | | Deferred tax assets | | - | - | - | | Cash disposed | | (4.6) | - | (4.6) | | Inventories | | (21.0) | - | (21.0) | | Assets classified as held for sale - disposed | | - | (3.0) | (3.0) | | Assets classified as held for sale - impaired | 18 | - | (5.6) | (5.6) | | Trade and other receivables | | (9.0) | - | (9.0) | | Tax receivables | | (0.4) | - | (0.4) | | Trade and other payables | | 20.0 | - | 20.0 | | Other non-current liabilities | | 3.0 | - | 3.0 | | | | (39.9) | (38.2) | (78.1) | ### Consideration | Cash received | 1.8 | 51.7 | 53.5 | | --- | --- | --- | --- | | Deferred consideration | 8.5 | - | 8.5 | | Disposal related costs | (18.5) | (13.6) | (32.1) | | | (8.2) | 38.1 | 29.9 | | Cumulative exchange difference on translation recycled on disposal | (14.9) | - | (14.9) | | --- | --- | --- | --- | | **Loss on disposal of businesses and assets** | **(63.0)** | **(0.1)** | **(63.1)** | | | Businesses 2022 €m | *Assets 2022 €m | Total 2022 €m | | --- | --- | --- | --- | | **Net cash inflow on disposal:** | | | | | Cash received | 1.8 | 51.7 | 53.5 | | Less: cash disposed | (4.6) | - | (4.6) | | Less: disposal related costs paid | (12.4) | (13.6) | (26.0) | | | (15.2) | 38.1 | 22.9 | \* Assets represent non-current assets and assets classified as held for sale. ### (Loss)/profit of disposal of businesses As previously announced on 4 April 2022, the Group suspended its operations in Russia and Belarus. This suspension was managed in an orderly manner, during which the Group continued to pay employees, fulfilled its legal obligations and a decision was made to classify these businesses as held for sale during H1 2022. On 7 July 2022, the Group reached agreement to sell 100% of the share capital of Unitary Manufacturing Enterprise 'Vitella', a Taste & Nutrition entity based in Belarus. FORWARDING^{}[] ADVISORS Kerry Group Annual Report 2022 203 ## 5. Non-trading items (continued) ### (i) (Loss)/profit on disposal of businesses and assets (continued) #### (Loss)/profit of disposal of businesses (continued) On 22 July 2022, the Group reached agreement to divest 100% of the share capital of Kerry Limited Liability Company, its subsidiary in Russia, to local management. These businesses were not deemed to be discontinued operations and goodwill was allocated to these disposed businesses using an appropriate allocation methodology aligned with IAS 36 'Impairment of Assets'. During the year the Group also disposed of a small cereal operation in North America. The loss on disposal of these businesses was **€63.0m** (2021: €nil). A tax credit of **€4.3m** (2021: a tax credit of €nil) arose on the disposal of these businesses. In 2021 the Group disposed of its Meats and Meals business operating in Ireland and the UK from the Consumer Foods (now Dairy Ireland) division and during the year also disposed of a small operation in Taste & Nutrition Europe for a consideration of €813.6m resulting in a gain of €230.9m. A tax credit of €0.5m arose on the disposal of these businesses. #### Profit/(loss) on disposal of assets During the year, the Group disposed of property, plant and equipment (note 11) primarily in North America and APMEA for a combined consideration of **€51.7m** resulting in a gain of **€6.2m**. In 2021, the Group disposed of property, plant and equipment and computer software in North America, Europe and APMEA for a combined consideration of €19.4m resulting in a loss of €2.6m. A tax charge of **€1.9m** (2021: a tax credit of €nil) arose on the disposal of assets. In 2022, certain assets classified as held for sale (note 18) based in the USA and APMEA were impaired to their fair value less costs to sell by **€5.6m** (2021: €48.6m), consisting of **€1.2m** (2021: €17.1m) of property, plant and equipment impairment, **€2.7m** (2021: €nil) of goodwill impairment, **€1.7m** (2021: €nil) of brand related intangibles impairment and **€nil** (2021: €31.5m) of estimated costs to sell including marketing, legal, site rectification, environmental and other related expenses necessary to complete the disposals. These assets held for sale are expected to sell in 2023. The related tax credit was **€0.5m** (2021: €12.2m). In 2022, there was a specific impairment charge of **€0.3m** and **€0.4m** (2021: €nil) in relation to goodwill and brand related intangibles respectively recorded in intangible assets (note 12). ### (ii) Global Business Services expansion In 2020, the Group commenced a programme to evolve, migrate and expand its Global Business Services model to better enable the business and support further growth. For the year ended 31 December 2022, the Group incurred costs of **€13.6m** (2021: €33.3m) reflecting relocation of resources, advisory fees, redundancies and the streamlining of operations. The associated tax credit was **€3.0m** (2021: €1.2m). ### (iii) Acquisition integration costs These costs of **€20.3m** (2021: €54.9m) 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. A tax credit of **€4.5m** (2021: €12.4m) arose due to tax deductions available on acquisition related costs. ### (iv) Accelerate Operational Excellence These costs of **€49.2m** (2021: nil) predominantly reflect consultancy fees, project management costs and costs of streamlining operations incurred in the period relating to our Accelerate Operational Excellence transformation programme, which will run until 2024. This material transformation project deploying next generation manufacturing processes, including advanced process controls, is combined with building capabilities within the Group to enhance continuous improvement in manufacturing processes which will deliver step change manufacturing excellence across the organisation. This project will also focus on supply chain excellence, optimising the Group's warehousing and distribution network. A tax credit of **€11.6m** (2021: €nil) arose due to tax deductions available on accelerated operational excellence costs. ### (v) Tax on inter-group transfer During 2021, a net tax credit of €16.6m arose as a result of the transfer of intangible assets between two wholly owned subsidiaries based in two different tax jurisdictions. ## 6. Finance income and costs | | Notes | 2022 €m | 2021 €m | | --- | --- | --- | --- | | **Finance income:** | | | | | Interest income on deposits | | 6.6 | 0.3 | | **Finance costs:** | | | | | Interest payable and finance charges | | (70.9) | (66.7) | | Interest on lease liabilities | 11(iii) | (3.4) | (4.4) | | Interest rate derivative | | 0.4 | 1.6 | | | | (73.9) | (69.5) | | Net interest income/(cost) on retirement benefits obligation | 26 | 1.1 | (0.7) | | **Finance costs** | | **(72.8)** | **(70.2)** | 204 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 7. Income taxes | | Notes | 2022 €m | 2021 €m | | --- | --- | --- | --- | | **Recognition in the Consolidated Income Statement (before credit on non-trading items)** | | | | | Current tax expense in the financial year | | 125.4 | 79.5 | | Adjustments in respect of prior years | | (1.3) | (2.9) | | | | 124.1 | 76.6 | | Deferred tax in the financial year | | (9.6) | 19.6 | | **Income tax expense (before credit on non-trading items)** | | **114.5** | **96.2** | On non-trading items: | Current tax | | 0.2 | (1.3) | | --- | --- | --- | --- | | Deferred tax | | (22.2) | (41.6) | | | 5 | (22.0) | (42.9) | Recognition in the Consolidated Income Statement (after credit on non-trading items) | Current tax expense in the financial year | | 125.6 | 78.2 | | --- | --- | --- | --- | | Adjustments in respect of prior years | | (1.3) | (2.9) | | | | 124.3 | 75.3 | | Deferred tax in the financial year | 17 | (31.8) | (22.0) | | **Income tax expense (after credit on non-trading items)** | | **92.5** | **53.3** | 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: | | 2022 €m | 2021 €m | | --- | --- | --- | | **Profit before taxation** | **699.0** | **816.3** | | Taxed at Irish Standard Rate of Tax (12.5%) | 87.4 | 102.0 | | Adjustments to current tax and deferred tax in respect of prior years | 0.3 | (0.9) | | Net effect of differing tax rates | 9.6 | 4.2 | | Changes in standard rates of taxes | 0.6 | 5.2 | | Income not subject to tax | (3.6) | (42.7) | | Net credit arising on inter-group intangible asset transfer | - | (16.6) | | Other adjusting items | (1.8) | 2.1 | | **Income tax expense** | **92.5** | **53.3** | An increase in the Group's applicable tax rate of 1% would reduce profit after taxation by €7.0m (2021: €8.2m). Factors that may affect the Group's future tax change include the effects of restructuring, acquisitions and disposals, changes in tax legislation and rates and the use of brought forward losses. In 2021, political agreement was reached by the OECD Inclusive Framework on a two-pillar approach to international tax reform, which aims to address the tax challenges arising from digitalisation and globalisation of the economy. In addition, the EU Directive on Pillar Two Global Minimum Tax was approved in December 2022. In the absence of any finalised or substantively enacted legislation, the Group continues to monitor developments as they may apply to the Group. EXPANDING^{}[] ADVISORS Kerry Group Annual Report 2022 205 ## 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 €166.7m (2021: €319.8m). ## 9. Earnings per A ordinary share | | EPS cent | 2022 €'m | EPS cent | 2021 €'m | | --- | --- | --- | --- | --- | | **Basic earnings per share** | | | | | | Profit after taxation attributable to equity holders of the parent | 341.9 | 606.4 | 430.6 | 763.0 | | **Diluted earnings per share** | | | | | | Profit after taxation attributable to equity holders of the parent | 341.3 | 606.4 | 429.9 | 763.0 | | | | | | | | Number of Shares | Note | 2022 m's | | 2021 m's | | Basic weighted average number of shares | | 177.4 | | 177.2 | | Impact of share options outstanding | | 0.3 | | 0.3 | | Diluted weighted average number of shares | | 177.7 | | 177.5 | | Actual number of shares in issue as at 31 December | 27 | 177.0 | | 176.8 | ## 10. Dividends | | 2022 €'m | 2021 €'m | | --- | --- | --- | | **Group and Company:** | | | | **Amounts recognised as distributions to equity shareholders in the financial year** | | | | Final 2021 dividend of 66.70 cent per A ordinary share paid 6 May 2022 (Final 2020 dividend of 60.60 cent per A ordinary share paid 14 May 2021) | 118.0 | 107.1 | | Interim 2022 dividend of 31.40 cent per A ordinary share paid 11 November 2022 (Interim 2021 dividend of 28.50 cent per A ordinary share paid 12 November 2021) | 55.6 | 50.4 | | | 173.6 | 157.5 | Since the financial year end the Board has proposed a final 2022 dividend of 73.40 cent per A ordinary share which amounts to €129.9m. The payment date for the final dividend will be 12 May 2023 to shareholders registered on the record date as at 14 April 2023. The consolidated financial statements do not reflect this dividend. ## 11. Property, plant and equipment | | Notes | 2022 €'m | 2021 €'m | | --- | --- | --- | --- | | **Group:** | | | | | Property, plant and equipment | (i) | 2,037.2 | 2,026.1 | | Right-of-use assets | (ii) | 62.1 | 65.2 | | | | 2,099.3 | 2,091.3 | 206 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 11. Property, plant and equipment (continued) ### (i) Property, plant and equipment analysis | | Notes | Land and Buildings €m | Plant, Machinery and Equipment €m | Construction in Progress €m | Motor Vehicles €m | Total €m | | --- | --- | --- | --- | --- | --- | --- | | **Group:** | | | | | | | | **Cost** | | | | | | | | At 1 January 2021 | | 1,298.7 | 2,177.3 | 238.4 | 13.8 | 3,728.2 | | Businesses acquired | | 47.7 | 23.9 | 17.6 | - | 89.2 | | Additions | | 20.4 | 80.2 | 158.4 | 1.0 | 260.0 | | Purchase adjustments | | (0.9) | (0.6) | - | - | (1.5) | | Transfer from construction in progress | | 36.1 | 138.5 | (174.6) | - | - | | Businesses disposed | | (143.6) | (243.4) | (15.0) | (0.8) | (402.8) | | Disposals | | - | (45.9) | - | (0.9) | (46.8) | | Transfer to held for sale | | (33.2) | (18.7) | - | - | (51.9) | | Exchange translation adjustment | | 83.1 | 101.5 | 15.8 | 0.7 | 201.1 | | At 31 December 2021 | | 1,308.3 | 2,212.8 | 240.6 | 13.8 | 3,775.5 | | Businesses acquired | 30 | 21.0 | 22.1 | 3.0 | - | 46.1 | | Additions | | 34.9 | 41.3 | 136.3 | 1.3 | 213.8 | | Purchase adjustments | | 5.8 | 3.2 | - | - | 9.0 | | Transfer from construction in progress | | 43.8 | 126.9 | (170.7) | - | - | | Businesses disposed | 5 | (9.5) | (16.4) | (0.6) | (0.1) | (26.6) | | Disposals | 5 | (16.9) | (100.9) | (0.8) | (1.1) | (119.7) | | Transfer to held for sale | 18 | (65.1) | (189.0) | (4.7) | - | (258.8) | | Exchange translation adjustment | | 29.0 | 52.6 | 6.2 | 0.5 | 88.3 | | At 31 December 2022 | | 1,351.3 | 2,152.6 | 209.3 | 14.4 | 3,727.6 | | **Accumulated depreciation and impairment** | | | | | | | | At 1 January 2021 | | 458.6 | 1,342.3 | - | 11.1 | 1,812.0 | | Charge during the financial year | | 36.3 | 134.7 | - | 1.0 | 172.0 | | Businesses disposed | | (90.6) | (193.0) | - | (0.4) | (284.0) | | Disposals | | - | (32.4) | - | (0.9) | (33.3) | | Transfer to held for sale | | (13.6) | (15.0) | - | (0.1) | (28.7) | | Impairments | | 2.5 | 14.6 | - | - | 17.1 | | Exchange translation adjustment | | 27.1 | 66.6 | - | 0.6 | 94.3 | | At 31 December 2021 | | 420.3 | 1,317.8 | - | 11.3 | 1,749.4 | | Charge during the financial year | 3 | 43.0 | 146.9 | - | 1.0 | 190.9 | | Businesses disposed | 5 | (4.7) | (7.2) | - | (0.1) | (12.0) | | Disposals | 5 | (8.1) | (82.2) | - | (0.8) | (91.1) | | Transfer to held for sale | 18 | (28.5) | (153.1) | - | - | (181.6) | | Exchange translation adjustment | | 8.0 | 26.4 | - | 0.4 | 34.8 | | At 31 December 2022 | | 430.0 | 1,248.6 | - | 11.8 | 1,690.4 | | **Carrying value** | | | | | | | | At 31 December 2021 | | 888.0 | 895.0 | 240.6 | 2.5 | 2,026.1 | | At 31 December 2022 | | 921.3 | 904.0 | 209.3 | 2.6 | 2,037.2 | FORWARDING^{}[] INNOVATIONS Kerry Group Annual Report 2022 207 # **11. Property, plant and equipment**(continued) # **(i) Property, plant and equipment analysis**(continued) | | Land and Buildings Total €'m | | --- | --- | | **Company:** | | | **Cost** | | | At 1 January 2021 | 4.7 | | **At 31 December 2021 and 2022** | **4.7** | | **Accumulated depreciation** | | | At 1 January 2021 | 4.4 | | Charge during the financial year | 0.1 | | At 31 December 2021 | 4.5 | | Charge during the financial year | 0.1 | | **At 31 December 2022** | **4.6** | | **Carrying value** | | | At 31 December 2021 | 0.2 | | **At 31 December 2022** | **0.1** | 208 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 11. Property, plant and equipment (continued) (ii) Right-of-use assets analysis | | Notes | Land and Buildings €'m | Plant, Machinery and Equipment €'m | Motor Vehicles €'m | Total €'m | | --- | --- | --- | --- | --- | --- | | **Group:** | | | | | | | **Cost** | | | | | | | At 1 January 2021 | | 90.6 | 19.7 | 15.0 | 125.3 | | Businesses acquired | | 0.8 | 0.5 | 1.1 | 2.4 | | Additions | | 23.7 | 6.5 | 2.6 | 32.8 | | Businesses disposed | | (16.4) | (3.4) | (0.9) | (20.7) | | Terminations | | (12.0) | (1.3) | (1.5) | (14.8) | | Exchange translation adjustment | | 5.5 | 1.1 | 0.5 | 7.1 | | At 31 December 2021 | | 92.2 | 23.1 | 16.8 | 132.1 | | Businesses acquired | 30 | 0.2 | 0.1 | - | 0.3 | | Additions | | 34.9 | 5.2 | 2.9 | 43.0 | | Businesses disposed | 5 | (3.9) | (0.1) | (1.3) | (5.3) | | Terminations | | (9.4) | (4.2) | (4.5) | (18.1) | | Transfer to held for sale | 18 | (10.8) | (2.4) | (1.0) | (14.2) | | Exchange translation adjustment | | 1.5 | - | 0.8 | 2.3 | | At 31 December 2022 | | 104.7 | 21.7 | 13.7 | 140.1 | | **Accumulated depreciation** | | | | | | | At 1 January 2021 | | 35.4 | 7.3 | 8.2 | 50.9 | | Charge during the financial year | | 21.6 | 5.8 | 4.0 | 31.4 | | Businesses disposed | | (5.4) | (1.2) | (0.4) | (7.0) | | Terminations | | (10.4) | (0.9) | (0.8) | (12.1) | | Exchange translation adjustment | | 2.6 | 0.7 | 0.4 | 3.7 | | At 31 December 2021 | | 43.8 | 11.7 | 11.4 | 66.9 | | Charge during the financial year | 3 | 23.6 | 5.8 | 3.3 | 32.7 | | Businesses disposed | 5 | (2.8) | (0.1) | (1.0) | (3.9) | | Terminations | | (7.6) | (2.7) | (4.3) | (14.6) | | Transfer to held for sale | 18 | (4.0) | (1.1) | (0.6) | (5.7) | | Exchange translation adjustment | | 1.9 | (0.1) | 0.8 | 2.6 | | At 31 December 2022 | | 54.9 | 13.5 | 9.6 | 78.0 | | **Carrying value** | | | | | | | At 31 December 2021 | | 48.4 | 11.4 | 5.4 | 65.2 | | At 31 December 2022 | | 49.8 | 8.2 | 4.1 | 62.1 | The right-of-use assets consist of: - land and buildings for warehouse space, offices and manufacturing facilities. The lease terms vary and range from 1 to 91 years for buildings and range from 1 to 88 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 2 years. EXPANDING^{}[] ADVISORS Kerry Group Annual Report 2022 209 # **11. Property, plant and equipment**(continued) # **(iii) Lease disclosures** # **(iii.i) Amounts recognised in the Consolidated Income Statement:** | | Note | 2022 €m | 2021 €m | | --- | --- | --- | --- | | Depreciation charged during the financial year | | 32.7 | 31.4 | | Expenses relating to short-term leases | | 3.7 | 2.1 | | Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets | | 0.2 | 0.1 | | Interest on lease liabilities charged during the financial year | 6 | 3.4 | 4.4 | # **(iii.ii) Amounts recognised in the Consolidated Statement of Cash Flows:** | | 2022 €m | 2021 €m | | --- | --- | --- | | Total cash outflow for leases during the year* | 42.4 | 41.5 | \* Includes interest expense and principal repayments of lease liabilities and short-term and low-value lease expenses. # **(iii.iii) Lease liabilities** | | 2022 €m | 2021 €m | | --- | --- | --- | | At beginning of the financial year | 74.2 | 81.5 | | Additions | 43.9 | 39.7 | | Terminations | (4.2) | (2.4) | | Remeasurements | - | 1.8 | | Payments | (35.1) | (34.9) | | Transfer to held for sale | (8.2) | - | | Businesses disposed | (4.0) | (16.3) | | Exchange translation adjustment | 2.6 | 4.8 | | At end of the financial year | 69.2 | 74.2 | # **Analysed as:** | | 2022 €m | 2021 €m | | --- | --- | --- | | Current liabilities | 26.9 | 28.0 | | Non-current liabilities | 42.3 | 46.2 | | At end of the financial year | 69.2 | 74.2 | # **(iii.iv) At the balance sheet date the Group had commitments under non-cancellable leases which fall due as follows:** | | Discounted 2022 €m | Undiscounted 2022 €m | Discounted 2021 €m | Undiscounted 2021 €m | | --- | --- | --- | --- | --- | | Within 1 year | 26.9 | 32.0 | 28.0 | 31.0 | | Between 1 and 2 years | 15.6 | 19.5 | 19.7 | 22.2 | | Between 2 and 5 years | 21.6 | 24.3 | 20.9 | 22.3 | | After 5 years | 5.1 | 6.4 | 5.6 | 6.9 | | | 69.2 | 82.2 | 74.2 | 82.4 | 210 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 12. Intangible assets | | Notes | Goodwill €m | Brand Related Intangibles €m | Computer Software €m | Total €m | | --- | --- | --- | --- | --- | --- | | **Cost** | | | | | | | At 1 January 2021 | | 2,666.6 | 2,188.6 | 368.4 | 5,223.6 | | Businesses acquired | | 657.1 | 440.0 | 0.5 | 1,097.6 | | Additions | | - | - | 34.1 | 34.1 | | Purchase adjustment | | 8.2 | 2.8 | - | 11.0 | | Businesses disposed | | (292.6) | (91.7) | (5.8) | (390.1) | | Disposals | | - | - | (1.0) | (1.0) | | Exchange translation adjustment | | 96.2 | 93.5 | 2.0 | 191.7 | | At 31 December 2021 | | 3,135.5 | 2,633.2 | 398.2 | 6,166.9 | | Businesses acquired | 30 | 197.8 | 122.8 | 0.5 | 321.1 | | Additions | | - | - | 12.2 | 12.2 | | Purchase adjustment | | (0.9) | 3.0 | (0.4) | 1.7 | | Businesses disposed | 5 | (9.6) | (6.6) | (0.3) | (16.5) | | Disposals | 5 | - | - | (1.2) | (1.2) | | Transfer to held for sale | 18 | (193.8) | (77.8) | - | (271.6) | | Exchange translation adjustment | | 96.1 | 51.4 | 0.8 | 148.3 | | At 31 December 2022 | | 3,225.1 | 2,726.0 | 409.8 | 6,360.9 | | **Accumulated amortisation and impairment** | | | | | | | At 1 January 2021 | | 16.6 | 296.5 | 223.4 | 536.5 | | Charge during the financial year | | - | 46.2 | 34.6 | 80.8 | | Businesses disposed | | (6.6) | (51.0) | (3.1) | (60.7) | | Disposals | | - | - | (0.5) | (0.5) | | Exchange translation adjustment | | 4.2 | 22.7 | 3.2 | 30.1 | | At 31 December 2021 | | 14.2 | 314.4 | 257.6 | 586.2 | | Charge during the financial year | 3 | - | 50.9 | 31.8 | 82.7 | | Businesses disposed | 5 | - | (4.5) | (0.1) | (4.6) | | Disposals | 5 | - | - | (0.9) | (0.9) | | Impairment | | 0.3 | 0.4 | - | 0.7 | | Transfer to held for sale | 18 | - | (33.8) | - | (33.8) | | Exchange translation adjustment | | (0.1) | 10.2 | 0.5 | 10.6 | | At 31 December 2022 | | 14.4 | 337.6 | 288.9 | 640.9 | | **Carrying value** | | | | | | | At 31 December 2021 | | 3,121.3 | 2,318.8 | 140.6 | 5,580.7 | | At 31 December 2022 | | 3,210.7 | 2,388.4 | 120.9 | 5,720.0 | 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 €1,689.6m (2021: €1,621.9m) which have indefinite lives. Approximately €3.8m (2021: €11.4m) of computer software additions during the year were internally generated, included in this are payroll costs of €2.9m (2021: €10.0m). The Group has not capitalised product development expenditure in 2022 (2021: €nil). The Group has no separate individual intangible asset that is material, as all intangibles acquired are integrated and developed within the existing business. SEPARATING 30 WARZONS Kerry Group Annual Report 2022 211 ## 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. No impairment was recognised in 2022 or 2021 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 2022, there was a specific impairment charge of €3.0m and €2.1m (2021: €nil) in relation to goodwill and brand related intangibles respectively recorded in non-trading items (note 5) in the Consolidated Income Statement. A summary of the allocation of the carrying value of goodwill and indefinite life intangible assets by CGU, is as follows: | | Goodwill 2022 €m | Goodwill 2021 €m | Indefinite Life Intangibles 2022 €m | Indefinite Life Intangibles 2021 €m | | --- | --- | --- | --- | --- | | **Taste & Nutrition** | | | | | | Europe | 634.7 | 563.1 | 168.2 | 193.9 | | Americas | 2,157.1 | 2,150.1 | 1,450.8 | 1,356.4 | | APMEA | 279.5 | 263.5 | 46.9 | 47.9 | | **Dairy Ireland** | | | | | | Europe | 139.4 | 144.6 | 23.7 | 23.7 | | | 3,210.7 | 3,121.3 | 1,689.6 | 1,621.9 | ### 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: | | Discount Rates 2022 | Discount Rates 2021 | Growth Rates 2022 | Growth Rates 2021 | | --- | --- | --- | --- | --- | | **Taste & Nutrition** | | | | | | Europe | 8.1% | 6.3% | 1.3% | 1.3% | | Americas | 8.1% | 7.1% | 1.1% | 1.1% | | APMEA | 9.4% | 8.9% | 3.6% | 3.6% | | **Dairy Ireland** | | | | | | Europe | 7.9% | 6.1% | 2.0% | 1.9% | Prior year 31 December 2021 has been re-presented to reflect the changes in our reporting segments in line with how the Chief Operating Decision Maker (the Executive Directors) assesses the Group's performance from 1 January 2022. The Irish dairy processing activities, previously reported in Taste & Nutrition, have been combined with the remaining dairy activities of the Consumer Foods business and this segment is named Dairy Ireland. Included within the Dairy Ireland 31 December 2021 comparatives are the results of the Consumer Foods Meats and Meals business which was disposed by the Group on 27 September 2021. 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. 212 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 12. Intangible assets (continued) ### Impairment testing (continued) The assumptions used by management in estimating cash flows for each CGU include future profitability and capital expenditure requirements. 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 including the Group's strategic plans. Management also considered the impact of accelerating inflationary cost pressures, disruption of global supply chains and the challenges presented in China with localised restrictions 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. ### 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 2022 or 2021. Further, a 5% increase in the discount rate would not have resulted in an impairment charge in 2022 or 2021 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 2022 or 2021. 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 2022 or 2021. 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. The potential impact of climate related events and the estimated capital expenditure required to achieve the Group's sustainability objectives in reducing carbon emissions and achieving the ambition to become net zero before 2050 was also considered as part of the sensitivity analysis and had no impact on our conclusions. ## 13. Financial asset investments | | FVOCI Investments €m | Other Investments €m | Total €m | | --- | --- | --- | --- | | At 1 January 2021 | - | 37.0 | 37.0 | | Additions | 4.4 | 4.5 | 8.9 | | Disposals | - | (2.1) | (2.1) | | Fair value movements | - | 3.1 | 3.1 | | Exchange translation adjustment | - | 3.0 | 3.0 | | At 31 December 2021 | 4.4 | 45.5 | 49.9 | | Additions | 10.4 | 2.7 | 13.1 | | Disposals | - | (3.3) | (3.3) | | Fair value movements | - | (3.8) | (3.8) | | Exchange translation adjustment | 0.3 | 2.7 | 3.0 | | At 31 December 2022 | 15.1 | 43.8 | 58.9 | ### Investments held at fair value through other comprehensive income During 2022, the Group increased its investments by €10.4m (2021: €4.4m). These investments have no fixed maturity or coupon rate. A fair value assessment was performed at 31 December 2022 and at 31 December 2021 which did not result in a change to the carrying value of these assets. ### Other investments The Group maintains Rabbi Trusts in the USA. The assets of these trusts 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 liabilities are recognised within other non-current liabilities (note 22). EXPANDING^{}[] ADVISORS Kerry Group Annual Report 2022 213 ## 14. Investments in joint ventures | | Note | 2022 €'m | 2021 €'m | | --- | --- | --- | --- | | At 1 January | | 21.7 | 17.8 | | Additions | | 20.4 | - | | Share of results after taxation during the financial year | 3 | (0.4) | 3.9 | | **At 31 December** | | **41.7** | **21.7** | The Group's investments in joint ventures represents the shareholding in Proparent B.V. (see note 36). In 2022, the Group increased its investments in joint ventures through an increase in its shareholding in Proparent B.V. from 55% to 75% for an incremental consideration of €20.4m. Proparent B.V. owns 100% of Ojah B.V., a Dutch manufacturer of texturised plant based proteins. Management performed a review of the contractual arrangements and determined it remains a joint venture. The amounts included in these Group consolidated financial statements in respect of the post acquisition profits or losses of this joint venture are taken from their latest financial statements prepared up to their financial year end together with management accounts for the intervening period to the Group's year end. ## 15. Investments in subsidiaries | | 2022 €'m | 2021 €'m | | --- | --- | --- | | **Company:** | | | | At 1 January | 843.5 | 714.4 | | Additions | - | 129.1 | | **At 31 December** | **843.5** | **843.5** | In 2021, the Company increased its investment in Kerry Holding Co. in the US in order to fund acquisitions. ## 16. Inventories | | 2022 €'m | 2021 €'m | | --- | --- | --- | | Raw materials and consumables | 598.7 | 527.2 | | Finished goods and goods for resale | 690.6 | 614.8 | | Expense inventories | 65.1 | 62.2 | | **At 31 December** | **1,354.4** | **1,204.2** | These inventory balances are valued at the lower of cost and net realisable value. Write-downs of inventories recognised as an expense approximates to 1.4% (2021: 1.4%) of raw materials and consumables in the Consolidated Income Statement. 214 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 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: | | Note | Property, Plant and Equipment €m | Intangible Assets €m | Tax Credits and NOLs €m | Retirement Benefits Obligation €m | Short-Term Temporary Differences and Other Differences €m | Total €m | | --- | --- | --- | --- | --- | --- | --- | --- | | At 1 January 2021 | | 72.4 | 288.7 | (16.4) | (11.4) | (36.9) | 296.4 | | Consolidated Income Statement movement | 7 | 18.4 | (36.2) | 0.6 | 0.9 | (5.7) | (22.0) | | Recognised in OCI during the financial year | | - | - | - | 20.0 | (0.1) | 19.9 | | Related to businesses (disposed)/acquired | | (1.8) | 96.3 | (11.1) | (0.4) | (10.4) | 72.6 | | Exchange translation adjustment | | 4.6 | 13.4 | (0.5) | (0.7) | (4.2) | 12.6 | | At 31 December 2021 | | 93.6 | 362.2 | (27.4) | 8.4 | (57.3) | 379.5 | | Consolidated Income Statement movement | 7 | 4.1 | (5.6) | 1.2 | 3.4 | (34.9) | (31.8) | | Recognised in OCI during the financial year | | - | - | - | (7.6) | 0.2 | (7.4) | | Related to businesses acquired/(disposed) | | 1.6 | 23.4 | (2.1) | - | (0.5) | 22.4 | | Exchange translation adjustment | | 3.7 | 17.8 | (1.0) | (0.7) | (2.1) | 17.7 | | At 31 December 2022 | | 103.0 | 397.8 | (29.3) | 3.5 | (94.6) | 380.4 | The short-term temporary differences and other temporary differences recognised in other comprehensive income comprise fair value movements on cash flow hedges of €0.2m (2021: (€0.1m)). 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: | | 2022 €m | 2021 €m | | --- | --- | --- | | Deferred tax assets | (71.9) | (67.8) | | Deferred tax liabilities | 452.3 | 447.3 | | | 380.4 | 379.5 | The total deductible temporary differences and unused tax losses for which deferred tax assets have not been recognised is €24.8m (2021: €26.9m). 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 €17.2m (2021: €16.7m). FORWARDING^{}[] INNOVATIONS Kerry Group Annual Report 2022 215 ## 18. Assets and liabilities classified as held for sale | | 2022 €'m | 2021 €'m | | --- | --- | --- | | Assets classified as held for sale | | | | Property, plant and equipment | 100.8 | 18.7 | | Goodwill | 191.1 | - | | Brand related intangible assets | 42.3 | - | | Inventories | 53.1 | - | | Trade and other receivables | 0.7 | - | | **Total assets classified as held for sale** | **388.0** | **18.7** | | Trade and other payables | (19.7) | - | | **Total liabilities directly associated with assets classified as held for sale** | **(19.7)** | **-** | | **Net assets classified as held for sale** | **368.3** | **18.7** | Non-current assets are transferred to assets and liabilities classified as held for sale when it is expected that their carrying amounts will be recovered principally through disposal and a sale is considered highly probable. They are held at the lower of carrying amount and fair value less costs to sell. As announced on 11 January 2023, the Group has entered into exclusive negotiations prior to the year ended 31 December 2022, to sell the trade and assets of its Sweet Ingredients Portfolio in the Taste & Nutrition segment, for a consideration of €500m comprising an initial cash consideration of €375m plus a €125m interest bearing vendor loan note. The disposal proceeds are expected to substantially exceed the carrying amount of the related net assets and accordingly no impairment losses have been recognised on the classification of this business as held for sale. The potential sale is subject to relevant regulatory approvals, employee consultation and routine closing adjustments. The associated assets and liabilities have consequently been presented separately as assets held for sale in the financial statements for the year ended 31 December 2022. There will be no material impact recognised in other comprehensive income relating to this transaction. During the year, the Group also reached agreement to sell a non-core business and its related assets in the APMEA Taste & Nutrition segment. The assets of these businesses have been impaired to their fair value less costs to sell by €2.7m (2021: €nil) of goodwill impairment and by €1.7m (2021: €nil) of brand related intangibles impairment following their transfer to assets held for sale. The fair value less costs to sell of these assets are based on offers received for this business. These businesses were not deemed to be discontinued operations and goodwill was allocated to these businesses using an appropriate allocation methodology aligned with IAS 36 'Impairment of Assets'. Estimated costs to sell including marketing, legal, site rectification, environmental and other related expenses necessary to complete the disposals incurred to date of €7.6m (2021: €31.5m). These assets held for sale are expected to sell in the first half of 2023. In 2022, assets classified as held for sale of property, plant and equipment based in the USA in the Taste & Nutrition segment, were impaired to their fair value less costs to sell by €1.2m (2021: €17.1m) following their transfer to assets held for sale. The fair value less costs to sell of these assets are based on offers received for these assets. In 2021, the Group held property, plant and equipment classified as held for sale in the Taste & Nutrition segment in North America and in the Dairy Ireland segment in the UK. 216 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 19. Trade and other receivables | | Group 2022 €'m | Group 2021 €'m | Company 2022 €'m | Company 2021 €'m | | --- | --- | --- | --- | --- | | Trade receivables | 1,369.3 | 1,131.1 | - | - | | Loss allowances | (46.3) | (42.1) | - | - | | Trade receivables due within 1 year | 1,323.0 | 1,089.0 | - | - | | Other receivables and prepayments | 51.5 | 55.7 | - | - | | Amounts due from subsidiaries | - | - | 231.0 | 218.9 | | VAT receivable | 44.5 | 31.2 | - | - | | Receivables due after 1 year | 4.8 | 5.8 | - | - | | | 1,423.8 | 1,181.7 | 231.0 | 218.9 | All receivable balances are due within 1 year except for €4.8m (2021: €5.8m) 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: | | 2022 €'m | 2021 €'m | | --- | --- | --- | | Within terms | 1,105.9 | 940.1 | | Past due not more than 1 month | 141.5 | 107.2 | | Past due more than 1 month but less than 2 months | 33.6 | 28.3 | | Past due more than 2 months but less than 3 months | 22.8 | 10.5 | | Past due more than 3 months | 19.2 | 2.9 | | **Trade receivables (net)** | **1,323.0** | **1,089.0** | The following table summarises the movement in loss allowances: | | Note | 2022 €'m | 2021 €'m | | --- | --- | --- | --- | | At beginning of financial year | | 42.1 | 37.1 | | Increase in loss allowance charged to the Consolidated Income Statement | 3 | 11.4 | 9.8 | | Written off during the financial year | | (8.4) | (6.6) | | Exchange translation adjustment | | 1.2 | 1.8 | | **At end of the financial year** | | **46.3** | **42.1** | 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 'Financial Instruments' 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 24 to the financial statements. Kerry Group Annual Report 2022 217 19. Trade and other receivables (continued) The Group considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that financial assets that meet either of the following criteria are generally not recoverable: - When there is a breach of financial covenants by the debtor; - Information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full. The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, for example when a debtor has been placed under liquidation or has entered into bankruptcy proceedings. 20. Trade and other payables Group 2022 €’m Group 2021 €’m Company 2022 €’m Company 2021 €’m Trade payables 1,705.7 1,577.9 5.3 7.7 Other payables and accruals 206.0 161.9 - - Lease liabilities 26.9 28.0 - - Deferred payments on acquisition of businesses 5.6 4.0 0.6 2.3 PAYE 15.1 13.1 - - Social security costs 7.2 6.6 - - 1,966.5 1,791.5 5.9 10.0 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. 21. Deferred income Notes Group 2022 €’m Group 2021 €’m Company 2022 €’m Company 2021 €’m Grants At beginning of the financial year 20.9 21.8 0.1 0.1 Grants received during the financial year 0.8 3.1 - - Amortised during the financial year 3 (2.0) (1.9) - - Businesses disposed - (2.3) - - Exchange translation adjustment (0.3) 0.2 - - At end of the financial year 19.4 20.9 0.1 0.1 Analysed as: Current liabilities 3.4 3.0 - - Non-current liabilities 16.0 17.9 0.1 0.1 19.4 20.9 0.1 0.1 There are no material unfulfilled conditions or other contingencies attaching to any government grants received. 22. Other non-current liabilities Group 2022 €’m Group 2021 €’m Company 2022 €’m Company 2021 €’m Other payables and accruals 78.9 96.7 - - Lease liabilities 42.3 46.2 - - Deferred payments on acquisition of businesses 21.4 11.0 - - 142.6 153.9 - - All of the above balances are due within 2 to 5 years except for €5.5m (2021: €5.6m) which is not due until after 5 years . 218 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ### 23. Analysis of financial instruments by category The following table outlines the financial assets and liabilities held by the Group at the balance sheet date: | | Notes | Financial Assets/ (Liabilities) at Amortised Cost 2022 €m | Assets/ (Liabilities) at Fair Value through Profit or Loss 2022 €m | Derivatives Designated as Hedging Instruments 2022 €m | Assets/ (Liabilities) at FVOCI 2022 €m | Total 2022 €m | | --- | --- | --- | --- | --- | --- | --- | | **Group:** | | | | | | | | Financial asset investments | 13 | - | 43.8 | - | 15.1 | 58.9 | | Forward foreign exchange contracts | 24 (ii) | - | - | 22.8 | - | 22.8 | | Interest rate swaps | 24 (iiii) | - | - | 37.0 | - | 37.0 | | Trade and other receivables | 19 | 1,423.8 | - | - | - | 1,423.8 | | Cash at bank and in hand | 24 (iii) | 970.0 | - | - | - | 970.0 | | **Total financial assets** | | **2,393.8** | **43.8** | **59.8** | **15.1** | **2,512.5** | | Current assets | | 2,393.8 | - | 59.5 | - | 2,453.3 | | Non-current assets | | - | 43.8 | 0.3 | 15.1 | 59.2 | | | | **2,393.8** | **43.8** | **59.8** | **15.1** | **2,512.5** | | Borrowings and overdrafts | 24 (iii) | (3,146.2) | 12.5 | - | - | (3,133.7) | | Forward foreign exchange contracts | 24 (ii) | - | - | (17.2) | - | (17.2) | | Interest rate swaps | 24 (iiii) | - | - | (21.5) | - | (21.5) | | Trade and other payables | 20/22 | (2,109.1) | - | - | - | (2,109.1) | | **Total financial liabilities** | | **(5,255.3)** | **12.5** | **(38.7)** | **-** | **(5,281.5)** | | Current liabilities | | (2,669.1) | 1.5 | (18.4) | - | (2,686.0) | | Non-current liabilities | | (2,586.2) | 11.0 | (20.3) | - | (2,595.5) | | | | **(5,255.3)** | **12.5** | **(38.7)** | **-** | **(5,281.5)** | | **Total net financial (liabilities)/assets** | | **(2,861.5)** | **56.3** | **21.1** | **15.1** | **(2,769.0)** | Included in the above table are the following components of net debt: #### Analysis of net debt by category | Bank overdrafts | (0.2) | - | - | - | (0.2) | | --- | --- | --- | --- | --- | --- | | Bank loans | (1.7) | - | - | - | (1.7) | | Senior Notes | (3,144.3) | 12.5 | - | - | (3,131.8) | | **Borrowings and overdrafts** | **(3,146.2)** | **12.5** | **-** | **-** | **(3,133.7)** | | Interest rate swaps | - | - | 15.5 | - | 15.5 | | Cash at bank and in hand | 970.0 | - | - | - | 970.0 | | Net debt - pre lease liabilities | (2,176.2) | 12.5 | 15.5 | - | (2,148.2) | | Lease liabilities | (69.2) | - | - | - | (69.2) | | **Net debt** | **(2,245.4)** | **12.5** | **15.5** | **-** | **(2,217.4)** | FORWARDING WORKFORMS Kerry Group Annual Report 2022 219 ## 23. 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. As at 31 December 2022, the Group's debt portfolio included: - US$750m of Senior Notes issued in 2013 maturing in 2023 (2023 Senior Notes), of which US$250m were swapped, using cross currency swaps, to euro; - €750m of Senior Notes issued in 2015 and €200m issued in April 2020 as a tap onto the original issuance (2025 Senior Notes). €175m of the issuance in 2015 were swapped, using cross currency swaps, to US dollar; - €750m of Senior Notes issued in 2019 (2029 Senior Notes). No interest rate derivatives were entered into for this issuance; and - €750m of sustainability-linked bond notes issued in 2021 (2031 SLB Senior Notes) and no interest rate derivatives were entered into for this issuance. The adjustment to Senior Notes classified under fair value through profit or loss of €12.5m of an asset (2021: liability €10.9m) 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 | Financial Assets/ (Liabilities) at Amortised Cost 2021 €m | Assets/ (Liabilities) at Fair Value through Profit or Loss 2021 €m | Derivatives Designated as Hedging Instruments 2021 €m | Assets/ (Liabilities) at FVOCI 2021 €m | Total 2021 €m | | --- | --- | --- | --- | --- | --- | --- | | **Group:** | | | | | | | | Financial asset investments | 13 | - | 45.5 | - | 4.4 | 49.9 | | Forward foreign exchange contracts | 24 (i.i) | - | - | 15.4 | - | 15.4 | | Interest rate swaps | 24 (ii.ii) | - | - | 34.6 | - | 34.6 | | Trade and other receivables | 19 | 1,181.7 | - | - | - | 1,181.7 | | Cash at bank and in hand | 24 (iii.i) | 1,039.1 | - | - | - | 1,039.1 | | **Total financial assets** | | **2,220.8** | **45.5** | **50.0** | **4.4** | **2,320.7** | | Current assets | | 2,220.8 | - | 15.2 | - | 2,236.0 | | Non-current assets | | - | 45.5 | 34.8 | 4.4 | 84.7 | | | | **2,220.8** | **45.5** | **50.0** | **4.4** | **2,320.7** | | Borrowings and overdrafts | 24 (iii.i) | (3,112.7) | (10.9) | - | - | (3,123.6) | | Forward foreign exchange contracts | 24 (i.i) | - | - | (40.6) | - | (40.6) | | Interest rate swaps | 24 (ii.ii) | - | - | - | - | - | | Trade and other payables | 20/22 | (1,945.4) | - | - | - | (1,945.4) | | **Total financial liabilities** | | **(5,058.1)** | **(10.9)** | **(40.6)** | **-** | **(5,109.6)** | | Current liabilities | | (1,797.1) | - | (40.1) | - | (1,837.2) | | Non-current liabilities | | (3,261.0) | (10.9) | (0.5) | - | (3,272.4) | | | | **(5,058.1)** | **(10.9)** | **(40.6)** | **-** | **(5,109.6)** | | **Total net financial (liabilities)/assets** | | **(2,837.3)** | **34.6** | **9.4** | **4.4** | **(2,788.9)** | 220 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ### 23. Analysis of financial instruments by category (continued) Included in the above table are the following components of net debt: | | Financial Assets/ (Liabilities) at Amortised Cost 2021 €m | Assets/ (Liabilities) at Fair Value through Profit or Loss 2021 €m | Derivatives Designated as Hedging Instruments 2021 €m | Assets/ (Liabilities) at FVOCI 2021 €m | Total 2021 €m | | --- | --- | --- | --- | --- | --- | | Analysis of net debt by category | | | | | | | Bank overdrafts | (5.3) | - | - | - | (5.3) | | Bank loans | (2.9) | - | - | - | (2.9) | | Senior Notes | (3,104.5) | (10.9) | - | - | (3,115.4) | | Borrowings and overdrafts | (3,112.7) | (10.9) | - | - | (3,123.6) | | Interest rate swaps | - | - | 34.6 | - | 34.6 | | Cash at bank and in hand | 1,039.1 | - | - | - | 1,039.1 | | Net debt - pre lease liabilities | (2,073.6) | (10.9) | 34.6 | - | (2,049.9) | | Lease liabilities | (74.2) | - | - | - | (74.2) | | Net debt | (2,147.8) | (10.9) | 34.6 | - | (2,124.1) | The following table outlines the financial assets and liabilities held by the Company at the balance sheet date: | | Notes | 2022 €m | 2021 €m | | --- | --- | --- | --- | | **Company:** | | | | | **Financial assets at amortised cost** | | | | | Cash at bank and in hand | | - | 0.1 | | Trade and other receivables | 19 | 231.0 | 218.9 | | **Total financial assets - all current** | | **231.0** | **219.0** | | **Financial liabilities at amortised cost** | | | | | Borrowings and overdrafts | | - | - | | Trade and other payables | 20 | (5.9) | (10.0) | | **Total financial liabilities - all current** | | **(5.9)** | **(10.0)** | | **Total net financial assets** | | **225.1** | **209.0** | Kerry Group Annual Report 2022 221 24. 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 strong investment grade credit rating. 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 equity holders 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: Notes 2022 €’m 2021 €’m Issued capital and reserves attributable to equity holders of the parent 6,221.9 5,601.2 Net debt - pre lease liabilities 23 2,148.2 2,049.9 Lease liabilities 20/22 69.2 74.2 Deferred payments on acquisition of businesses 20/22 27.0 15.0 8,466.3 7,740.3 In November 2022 Moody’s upgraded the credit rating of the Group to Baa1. There were no notable debt financing events in 2022. In 2021 the Group undertook four notable debt financing events, the first three of which were completed in June: - the Group entered into a dedicated bridge facility for US$1,000m for the acquisition of Niacet. This facility was drawn on the closure of the acquisition in late Q3 2021 and was repaid and cancelled in early Q4 2021, with repayment funded predominantly out of the proceeds from the sale of the Consumer Foods Meats and Meals business; - the Group exercised the second of the two ‘plus one’ extension options on its €1,100m revolving credit facility to extend the maturity date of this facility for the full €1,100m to June 2026. As part of this process the Group amended and restated the facility agreement to allow for IBOR replacement language. This amendment to immediately adopt SONIA for GBP loans and to allow for switch language for US Dollars at a future date has no commercial impact on the Group. In keeping with the Group’s commitment to sustainability, the facility incorporates a price adjustment mechanism which is linked to the Group meeting or exceeding its carbon, water and food waste reduction targets; - the Group repaid US$200m of outstanding private placement notes ahead of the scheduled maturity date, (Tranche C US$125m and Tranche D US$75m of the 2010 Senior Notes). At the time of issuance the US$200m of private placement notes were swapped from US dollar fixed rate to euro floating rate using cross currency interest rate swaps which were closed out at the time of the repayment. The net cash outflow was funded from existing cash resources of the Group. Following repayment of the US$200m of private placement notes, the Group has no borrowings that carry financial covenants; and - in December 2021 the Group issued €750m 10-year euro sustainability-linked bond notes (2031 SLB Senior Notes). The issuance is listed on the Euronext Dublin - Global Exchange Market. The proceeds of the issuance will be used for general corporate purposes including the repayment of indebtedness and the funding of acquisitions in the ordinary course of business. The SLB Senior Notes embed key ‘Beyond the Horizon’ sustainability commitments into our financing. All Senior Notes issued by the Group are rated by S&P (BBB+) and Moody’s (Baa1). Net debt is subject to seasonal fluctuations that can be up to 25% above year end debt levels, before allowance for acquisition activity undertaken during the financial year. 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 in a period of time that retains our strong investment grade credit rating, otherwise consideration would be given to issuing additional equity in the Group. 2022 Times 2021 Times Net debt: EBITDA 1.8 2.0 EBITDA: Net interest 18.1 14.9 The Net debt: EBITDA and EBITDA: Net interest ratios disclosed are calculated 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. 222 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 24. 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 fund the Group and 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 €6.8m (2021: €13.1m liability) and a sterling asset of €21.7m (2021: €36.5m). Based on these net positions, as at 31 December 2022, 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 €1.2m (2021: €1.0m). 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 2022 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 €35.1m (2021: €25.9m) and €30.2m (2021: €23.2m), respectively. ### (ii) 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: | | 2022 €'m Asset | 2022 €'m Liability | 2022 €'m Total | 2021 €'m Asset | 2021 €'m Liability | 2021 €'m Total | | --- | --- | --- | --- | --- | --- | --- | | **Designated in a hedging relationship:** | | | | | | | | - current ^{1} | 22.5 | (16.8) | 5.7 | 15.2 | (40.1) | (24.9) | | - non-current ^{2} | 0.3 | (0.4) | (0.1) | 0.2 | (0.5) | (0.3) | | **Forward foreign exchange contracts** | **22.8** | **(17.2)** | **5.6** | **15.4** | **(40.6)** | **(25.2)** | * Location of line item in the Consolidated Balance Sheet $^{1}$ Other current financial instruments $^{2}$ Other non-current financial instruments FORWARDING^{}[] INDEPENDENT Kerry Group Annual Report 2022 223 ## 24. Financial instruments (continued) ### Financial risk management objectives (continued) #### (i) Foreign exchange rate risk management (continued) ##### (i.1) 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: | | Fair Value Asset/(Liability) | | Notional Principal | | | --- | --- | --- | --- | --- | | | 2022 €m | 2021 €m | 2022 €m | 2021 €m | | **Forward foreign exchange contracts** | | | | | | less than 1 year | 5.7 | (24.9) | 1,835.6 | 2,798.0 | | 1 - 2 years | (0.1) | (0.3) | 38.2 | 50.2 | | **Forward foreign exchange contracts - cash flow hedges** | **5.6** | **(25.2)** | **1,873.8** | **2,848.2** | The following table details the impact of forward foreign exchange contracts - cash flow hedges on the Consolidated Balance Sheet as at 31 December: | | 2022 €m | 2021 €m | | --- | --- | --- | | Forward foreign exchange contracts - cash flow hedges | 5.6 | (25.2) | #### Retained earnings and other reserves: | Cash flow hedging reserve | (6.1) | (3.2) | | --- | --- | --- | | Amount reclassified from OCI to profit or loss | 0.5 | 28.4 | | | **(5.6)** | **25.2** | The fair value included in the hedging reserve will primarily be released to the Consolidated Income Statement within 11 months (2021: 9 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. 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: | | 2022 €m | 2021 €m | | --- | --- | --- | | **Movements recognised in the Consolidated Statement of Comprehensive Income** | | | | Total hedging gain recognised in OCI in the financial year | 5.1 | 0.8 | | Amount reclassified from OCI to profit or loss | (2.2) | (0.5) | | | **2.9** | **0.3** | #### Movements recognised in the Consolidated Income Statement | Income reclassified from OCI to profit or loss ^{1} | 2.2 | 0.5 | | --- | --- | --- | | Ineffectiveness recognised in profit or loss ^{1} | - | - | | | **2.2** | **0.5** | * Location of line item in the Consolidated Income Statement $^{1}$ Other general overheads There were no transactions during 2022 or 2021 which were designated as hedges that did not occur, nor are there hedges on forecast transactions that are no longer expected to occur. 224 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 24. Financial instruments (continued) ### Financial risk management objectives (continued) #### (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. #### (iii) 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 cash at bank and lease liabilities): | | Total Pre CCS €'m | Impact of CCS €'m | Total after CCS €'m | Floating Rate Net Debt €'m | Fixed Rate Debt €'m | | --- | --- | --- | --- | --- | --- | | Euro | (2,166.6) | (59.1) | (2,225.7) | 283.4 | (2,509.1) | | Sterling | 59.1 | - | 59.1 | 59.1 | - | | US Dollar | (318.4) | 59.1 | (259.3) | (25.2) | (234.1) | | Others | 180.5 | - | 180.5 | 180.5 | - | | **At 31 December 2022** | **(2,245.4)** | **-** | **(2,245.4)** | **497.8** | **(2,743.2)** | | Euro | (1,831.1) | (45.9) | (1,877.0) | 618.9 | (2,495.9) | | Sterling | 74.5 | - | 74.5 | 74.5 | - | | US Dollar | (513.5) | 45.9 | (467.6) | (246.7) | (220.9) | | Others | 122.3 | - | 122.3 | 122.3 | - | | **At 31 December 2021** | **(2,147.8)** | **-** | **(2,147.8)** | **569.0** | **(2,716.8)** | The currency profile of debt highlights the impact of the US$250m (2021: US$250m) 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 accounted for as cash flow hedges. The retranslation of the foreign currency debt of US$250m (2021: US$250m) to the balance sheet rate resulted in a foreign currency loss of €38.8m (2021: €25.5m) which is directly offset by a gain of €38.8m (2021: €25.5m) on the application of hedge accounting on the cross currency swaps. 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 a liability of €7.5m (2021: €2.9m asset) for movement in exchange rates since the date of execution which is directly offset by a gain of €7.5m (2021: €2.9m loss) 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 15% (2021: 15%) of gross debt was held at floating rates. The floating rate net debt as set out above, includes cash at bank, which attracts interest at market rates. If the interest rates applicable 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 increase by 0.6% (2021: 0.8%). FORWARDING^{}[] INNOVATIONS Kerry Group Annual Report 2022 225 # **24. Financial instruments (continued)** # **Financial risk management objectives (continued)** # **(ii) Interest rate risk management (continued)** # **(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: | | Notes | 2022 €'m Asset | 2022 €'m Liability | 2022 €'m Total | 2021 €'m Asset | 2021 €'m Liability | 2021 €'m Total | | --- | --- | --- | --- | --- | --- | --- | --- | | **Designated in a hedging relationship:** | | | | | | | | | Interest rate swap contracts - cash flow hedges | (a) | 37.0 | - | 37.0 | 23.8 | - | 23.8 | | - current^{1} | | 37.0 | - | 37.0 | - | - | - | | - non-current^{2} | | - | - | - | 23.8 | - | 23.8 | | Interest rate swap contracts - fair value hedges | (b) | - | (21.5) | (21.5) | 10.8 | - | 10.8 | | - current^{1} | | - | (1.6) | (1.6) | - | - | - | | - non-current^{2} | | - | (19.9) | (19.9) | 10.8 | - | 10.8 | | **Interest rate swap contracts** | | **37.0** | **(21.5)** | **15.5** | **34.6** | **-** | **34.6** | * Location of line item in the Consolidated Balance Sheet $^{1}$ Other current financial instruments $^{2}$ Other non-current financial instruments 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). 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 'Financial Instruments' until this date. 226 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 # **24. 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** 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 | | | --- | --- | --- | --- | --- | --- | --- | | | 2022 % | 2021 % | 2022 €m | 2021 €m | 2022 €m | 2021 €m | | **Interest rate swap contracts** | | | | | | | | less than 1 year | 2.58 | - | 37.0 | - | 234.1 | - | | 1 - 2 years | - | 2.58 | - | 23.8 | - | 220.9 | | **Interest rate swap contracts - cash flow hedges** | | | **37.0** | **23.8** | **234.1** | **220.9** | The following table details the impact of interest rate swap contracts$^{a}$ - cash flow hedges on the Consolidated Balance Sheet as at 31 December: | | 2022 €m | 2021 €m | | --- | --- | --- | | Interest rate swap contracts - cash flow hedges | 37.0 | 23.8 | # **Fixed rate borrowings:** Amount reclassified from hedge reserve to profit or loss re: foreign exchange rate fluctuations$^{1}$ (38.8) (25.5) # **Retained earnings and other reserves:** | Cash flow hedging reserve | 1.6 | 1.8 | | --- | --- | --- | | Cost of hedging reserve | 0.1 | (0.3) | | Accumulated hedge ineffectiveness | 0.1 | 0.2 | | | **(37.0)** | **(23.8)** | $^{a}$ 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: | | 2022 €m | 2021 €m | | --- | --- | --- | | Total hedging gain recognised in cash flow hedging reserve | 13.8 | 19.1 | | Total hedging gain recognised in cost of hedging reserve | 0.4 | 0.3 | | Amount reclassified from hedge reserve to profit or loss re: foreign exchange rate fluctuations | (13.3) | (17.2) | | Amount reclassified from OCI to profit or loss re: interest rate fluctuations | (0.6) | (0.4) | | Ineffectiveness recognised in profit or loss | (0.1) | - | | **Net impact** | **0.2** | **1.8** | FORWARDING^{}[] INNOVATIONS Kerry Group Annual Report 2022 227 # **24. 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: | | 2022 €'m | 2021 €'m | | --- | --- | --- | | **Interest rate swap contracts - cash flow hedges:** | | | | Foreign exchange rate fluctuations ^{1} | 13.3 | 17.2 | | Amount reclassified from OCI to profit or loss re: interest rate fluctuations ^{2} | 0.6 | 0.4 | | Ineffectiveness recognised in profit or loss ^{3} | (0.1) | - | # **Fixed rate borrowings:** | Foreign exchange rate fluctuations ^{1} | (13.3) | (17.2) | | --- | --- | --- | | **Net impact** | **0.5** | **0.4** | * 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/ (Liability) | | Notional Principal | | | --- | --- | --- | --- | --- | --- | --- | | | 2022 % | 2021 % | 2022 €'m | 2021 €'m | 2022 €'m | 2021 €'m | | **Interest rate swap contracts** | | | | | | | | less than 1 year | 3.2 | - | (1.6) | - | 234.1 | - | | 1 - 2 years | - | 3.2 | - | 3.8 | - | 220.9 | | 2 - 5 years | 2.4 | 2.4 | (19.9) | 7.0 | 175.0 | 175.0 | | **Interest rate swap contracts - fair value hedges** | | | **(21.5)** | **10.8** | **409.1** | **395.9** | 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 market interest rates for the underlying swap currency. All hedges are highly effective on a prospective and retrospective basis. 228 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 # **24. 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: | | 2022 €'m | 2021 €'m | | --- | --- | --- | | Interest rate swap contracts - fair value hedges | (21.5) | 10.8 | | **Fixed rate borrowings:** | | | | Interest rate movements^{1} | 12.5 | (10.9) | | **Receivables:** | | | | Foreign exchange rate fluctuations^{2} | 7.5 | (2.9) | | **Retained earnings and other reserves:** | | | | Hedge ineffectiveness | 0.1 | 0.4 | | Cost of hedging reserve | 1.4 | 2.6 | | | **21.5** | **(10.8)** | \* 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: | | 2022 €'m | 2021 €'m | | --- | --- | --- | | Amounts recognised in the cost of hedging reserve | (1.2) | (0.3) | The following table details the (expense)/income impact of interest rate swap contracts\*/\*\* - fair value hedges and the hedged items on the Consolidated Income Statement during the financial year: | | 2022 €'m | 2021 €'m | | --- | --- | --- | | **Interest rate swap contracts - fair value hedges:** | | | | Foreign exchange rate fluctuations^{1} | (10.4) | (12.1) | | Interest rate movements^{2} | (22.2) | (12.3) | | Ineffectiveness recognised in profit or loss^{2} | (1.5) | 1.1 | | **Fixed rate borrowings:** | | | | Foreign exchange rate fluctuations^{1} | - | (1.3) | | Interest rate movements^{2} | 22.2 | 12.3 | | **Receivables:** | | | | Foreign exchange rate fluctuations^{2} | 10.4 | 13.4 | | **Net impact** | **(1.5)** | **1.1** | \* Location of line item in the Consolidated Income Statement \*\* Location of line item in the Consolidated Balance Sheet $^{1}$ Other general overheads $^{2}$ Finance costs $^{3}$ 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 EXPANDING^{}[] HORIZONS Kerry Group Annual Report 2022 229 ## 24. 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. The Group entered 2022 with significant available liquidity and no significant loan maturities arising until April 2023. No significant financing activities were undertaken during 2022. Group funding and liquidity is managed by ensuring that sufficient facilities are available from diverse funding sources with an appropriate spread of debt maturities. 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 Both targets were met at 31 December 2022 and 2021. All Group credit facilities are arranged and managed by Group Treasury and approved by the Board of Directors. Where possible, facilities have common terms and conditions. At 31 December 2022, the Group had undrawn committed bank facilities of €1,100m (2021: €1,100m), and a portfolio of undrawn standby facilities amounting to €343m (2021: €337m). The undrawn committed facilities comprise primarily of a revolving credit facility maturing between 3 - 4 years (2021: between 4 - 5 years). #### (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 20) and other non-current liabilities (note 22), of which €1,934.0m (2021: €1,759.5m) is payable within 1 year, €78.9m (2021: €96.7m) 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. 230 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 # **24. Financial instruments** (continued) # **Financial risk management objectives** (continued) # **(iii) Liquidity risk management** (continued) # **(iii.i) Contractual maturity profile of non-derivative financial instruments** (continued) | | Note | On demand & up to 1 year €m | Up to 2 years €m | 2 - 5 years €m | > 5 years €m | Total €m | | --- | --- | --- | --- | --- | --- | --- | | Bank overdrafts | | (0.2) | - | - | - | (0.2) | | Bank loans | | - | (1.7) | - | - | (1.7) | | Senior Notes | | (702.4) | - | (950.0) | (1,500.0) | (3,152.4) | | Borrowings and overdrafts - contractual repayments | | (702.6) | (1.7) | (950.0) | (1,500.0) | (3,154.3) | | Lease liabilities (undiscounted) | 11 (iii.iv) | (32.0) | (19.5) | (24.3) | (6.4) | (82.2) | | Deferred payments on acquisition of businesses | | (5.6) | (5.2) | (16.2) | - | (27.0) | | | | (740.2) | (26.4) | (990.5) | (1,506.4) | (3,263.5) | | Interest commitments on borrowings and overdrafts | | (39.9) | (33.8) | (49.4) | (33.8) | (156.9) | | **At 31 December 2022** | | **(780.1)** | **(60.2)** | **(1,039.9)** | **(1,540.2)** | **(3,420.4)** | # **Reconciliation to net debt position:** | Borrowings and overdrafts - contractual repayments | | (702.6) | (1.7) | (950.0) | (1,500.0) | (3,154.3) | | --- | --- | --- | --- | --- | --- | --- | | Senior Notes - amortised cost adjustments | | - | - | (4.7) | 12.8 | 8.1 | | Senior Notes - fair value adjustment | | 1.5 | - | 11.0 | - | 12.5 | | Borrowings and overdrafts | | (701.1) | (1.7) | (943.7) | (1,487.2) | (3,133.7) | | Interest rate swaps | | 35.4 | - | (19.9) | - | 15.5 | | Cash at bank and in hand | | 970.0 | - | - | - | 970.0 | | Net debt - pre lease liabilities | | 304.3 | (1.7) | (963.6) | (1,487.2) | (2,148.2) | | Lease liabilities (discounted) | 11 (iii.iv) | (26.9) | (15.6) | (21.6) | (5.1) | (69.2) | | **Net debt as at 31 December 2022** | | **277.4** | **(17.3)** | **(985.2)** | **(1,492.3)** | **(2,217.4)** | | | Note | On demand & up to 1 year €m | Up to 2 years €m | 2 - 5 years €m | > 5 years €m | Total €m | | --- | --- | --- | --- | --- | --- | --- | | Bank overdrafts | | (5.3) | - | - | - | (5.3) | | Bank loans | | (0.3) | (2.6) | - | - | (2.9) | | Senior Notes | | - | (662.6) | (950.0) | (1,500.0) | (3,112.6) | | Borrowings and overdrafts - contractual repayments | | (5.6) | (665.2) | (950.0) | (1,500.0) | (3,120.8) | | Lease liabilities (undiscounted) | 11 (iii.iv) | (31.0) | (22.2) | (22.3) | (6.9) | (82.4) | | Deferred payments on acquisition of businesses | | (4.0) | (4.6) | (6.4) | - | (15.0) | | | | (40.6) | (692.0) | (978.7) | (1,506.9) | (3,218.2) | | Interest commitments on borrowings and overdrafts | | (55.0) | (39.6) | (72.0) | (45.0) | (211.6) | | **At 31 December 2021** | | **(95.6)** | **(731.6)** | **(1,050.7)** | **(1,551.9)** | **(3,429.8)** | # **Reconciliation to net debt position:** | Borrowings and overdrafts - contractual repayments | | (5.6) | (665.2) | (950.0) | (1,500.0) | (3,120.8) | | --- | --- | --- | --- | --- | --- | --- | | Senior Notes - amortised cost adjustments | | - | - | (6.4) | 14.5 | 8.1 | | Senior Notes - fair value adjustment | | - | (3.8) | (7.1) | - | (10.9) | | Borrowings and overdrafts | | (5.6) | (669.0) | (963.5) | (1,485.5) | (3,123.6) | | Interest rate swaps | | - | 27.6 | 7.0 | - | 34.6 | | Cash at bank and in hand | | 1,039.1 | - | - | - | 1,039.1 | | Net debt - pre lease liabilities | | 1,033.5 | (641.4) | (956.5) | (1,485.5) | (2,049.9) | | Lease liabilities (discounted) | 11 (iii.iv) | (28.0) | (19.7) | (20.9) | (5.6) | (74.2) | | **Net debt as at 31 December 2021** | | **1,005.5** | **(661.1)** | **(977.4)** | **(1,491.1)** | **(2,124.1)** | FORWARDING MORTGAGE Kerry Group Annual Report 2022 231 ## 24. 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. | | On demand & up to 1 year €m | Up to 2 years €m | 2 - 5 years €m | > 5 years €m | Total €m | | --- | --- | --- | --- | --- | --- | | Interest rate swaps inflow | 47.0 | 4.2 | 2.9 | - | 54.1 | | Interest rate swaps outflow | (18.4) | (12.2) | (15.6) | - | (46.2) | | Net interest rate swaps inflow/(outflow) | 28.6 | (8.0) | (12.7) | - | 7.9 | | Forward foreign exchange contracts inflow/(outflow) | 5.7 | (0.1) | - | - | 5.6 | | **At 31 December 2022** | **34.3** | **(8.1)** | **(12.7)** | **-** | **13.5** | | | On demand & up to 1 year €m | Up to 2 years €m | 2 - 5 years €m | > 5 years €m | Total €m | | --- | --- | --- | --- | --- | --- | | Interest rate swaps inflow | 18.3 | 33.5 | 9.9 | - | 61.7 | | Interest rate swaps outflow | (12.4) | (7.6) | (9.3) | - | (29.3) | | Net interest rate swaps inflow | 5.9 | 25.9 | 0.6 | - | 32.4 | | Forward foreign exchange contracts outflow | (24.9) | (0.3) | - | - | (25.2) | | **At 31 December 2021** | **(19.0)** | **25.6** | **0.6** | **-** | **7.2** | 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/(outflow) - up to 1 year - swaps inflow of €38.8m (2021: €nil) - 1 - 2 years - swaps inflow of €nil (2021: €25.5m) - 2 - 5 years - swaps (outflow)/inflow of (€7.5m) (2021: €2.9m) #### (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; - committed revolving credit facilities of €1,100m to June 2026; and - bilateral term loans with maturities ranging up to 1 year. ##### (b) 2031 Euro Senior Notes - public In 2021 the Group issued €750m of euro sustainability-linked bond notes (2031 SLB Senior Notes) at an interest rate of 0.875% with a maturity date on 01 December 2031. The Notes include targets to 1) Reduce absolute Scope 1 & 2 carbon emissions by 55% by 2030 against the 2017 baseline; 2) Reduce Food Waste by 50% by 2030 against the 2017 baseline. Should either of these targets not be met by 2030 there is a +0.5% increase in the final interest coupon. If both targets are not met there is a 1% increase in the final interest coupon. The step up in the interest coupon (if any) is payable to investors on the last interest payment date in December 2031. ##### (c) 2029 Euro Senior Notes - public (2029 Senior Notes) 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. ##### (d) 2025 Euro Senior Notes - public (2025 Senior Notes) 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 of the 2025 Euro Senior Notes. 232 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 24. Financial instruments (continued) ### Financial risk management objectives (continued) #### (iii) Liquidity risk management (continued) ##### (iii.iii) Summary of borrowing arrangements (continued) ##### (e) 2023 US dollar Senior Notes - public (2023 Senior Notes) 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. #### (f) 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 - repaid in June 2021 ahead of its scheduled maturity of 20 January 2022 - Tranche D of US$75m - repaid in June 2021 ahead of its scheduled maturity of 20 January 2025 The interest rates listed above are before the effects of related interest rate swaps. #### (g) 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 2022 and 2021 all cash, short-term deposits and other liquid investments had a maturity of less than 3 months. Cash at bank and in hand of €970.0m (2021: €1,039.1m) includes an amount of €322.1m (2021: €545.0m) held on short-term deposit of which €70.7m (2021: €100.0m) was held under a Sustainable Deposits programme. 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 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 19), cash deposits (note 23) and other financial assets (note 23), which are primarily interest rate swaps and foreign exchange contracts. There is no material provision for impairment in the Company's intercompany receivables balance of €231.0m (2021: €218.9m) as all amounts are expected to be recovered in full. #### (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). FORWARDING WORKFORMS Kerry Group Annual Report 2022 233 ## 24. 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) | | | Fair Value Hierarchy | 2022 €'m | 2021 €'m | | --- | --- | --- | --- | --- | | **Financial assets** | | | | | | Interest rate swaps: | Non-current | Level 2 | - | 34.6 | | | Current | Level 2 | 37.0 | - | | Forward foreign exchange contracts: | Non-current | Level 2 | 0.3 | 0.2 | | | Current | Level 2 | 22.5 | 15.2 | | Financial asset investments: | Fair value through profit or loss | Level 1 | 43.8 | 45.5 | | | Fair value through other comprehensive income | Level 3 | 15.1 | 4.4 | | **Financial liabilities** | | | | | | Forward foreign exchange contracts: | Non-current | Level 2 | (0.4) | (0.5) | | | Current | Level 2 | (16.8) | (40.1) | | Interest rate swaps: | Non-current | Level 2 | (19.9) | - | | | Current | Level 2 | (1.6) | - | 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. | | Fair Value Hierarchy | Carrying Amount 2022 €'m | Fair Value 2022 €'m | Carrying Amount 2021 €'m | Fair Value 2021 €'m | | --- | --- | --- | --- | --- | --- | | Financial liabilities: Senior Notes - Public | Level 2 | (3,144.3) | (2,761.4) | (3,104.5) | (3,174.7) | (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 2022 Financial Statements Notes to the Financial Statements 234 24. 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 2022 Financial assets Cash at bank and in hand 970.0 - 970.0 - 970.0 Forward foreign exchange contracts 22.8 - 22.8 (13.1) 9.7 Interest rate swaps 37.0 - 37.0 (15.2) 21.8 1,029.8 - 1,029.8 (28.3) 1,001.5 Financial liabilities Bank overdrafts - (0.2) (0.2) - (0.2) Forward foreign exchange contracts - (17.2) (17.2) 13.1 (4.1) Interest rate swaps - (21.5) (21.5) 15.2 (6.3) - (38.9) (38.9) 28.3 (10.6) At 31 December 2021 Financial assets Cash at bank and in hand 1,039.1 - 1,039.1 - 1,039.1 Forward foreign exchange contracts 15.4 - 15.4 (10.1) 5.3 Interest rate swaps 34.6 - 34.6 - 34.6 1,089.1 - 1,089.1 (10.1) 1,079.0 Financial liabilities Bank overdrafts - (5.3) (5.3) - (5.3) Forward foreign exchange contracts - (40.6) (40.6) 10.1 (30.5) Interest rate swaps - - - - - - (45.9) (45.9) 10.1 (35.8) EXPANDING HORIZONS Kerry Group Annual Report 2022 235 ## 25. Provisions | | Insurance €m | Non-Trading Items €m | Environmental €m | Total €m | | --- | --- | --- | --- | --- | | **Group:** | | | | | | At 1 January 2021 | 39.0 | 2.3 | - | 41.3 | | Provided during the financial year | 15.8 | 5.1 | - | 20.9 | | Utilised during the financial year | (8.4) | - | - | (8.4) | | Released during the financial year | (5.7) | - | - | (5.7) | | Transferred (to)/from payables and accruals | - | - | - | - | | Exchange translation adjustment | 2.6 | - | - | 2.6 | | At 31 December 2021 | 43.3 | 7.4 | - | 50.7 | | Provided during the financial year | 22.7 | - | - | 22.7 | | Utilised during the financial year | (5.7) | - | - | (5.7) | | Released during the financial year | (11.3) | - | - | (11.3) | | Transferred (to)/from payables and accruals | - | (0.9) | 12.6 | 11.7 | | Exchange translation adjustment | (2.3) | - | - | (2.3) | | **At 31 December 2022** | **46.7** | **6.5** | **12.6** | **65.8** | | | 2022 €m | 2021 €m | | --- | --- | --- | | **Analysed as:** | | | | Current liabilities | 15.3 | 13.6 | | Non-current liabilities | 50.5 | 37.1 | | | **65.8** | **50.7** | ### 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 3 years from claim date. ### Non-trading items Non-trading items relate to restructuring and acquisition integration provisions expensed in 2022 and 2021; these costs are expected to be paid within 18 months. ### Environmental This includes provisions for site remediation, restoration and environmental works stemming from established best practice for a recently acquired acquisition. The timing of utilisation of these provisions is uncertain. ## 26. Retirement benefits obligation The Group operates post-retirement benefit schemes in a number of its businesses throughout the world. These schemes are structured to accord with local conditions and practices in each country they operate in and can include both defined contribution and defined benefit schemes. The assets of the schemes are held, where relevant, in separate trustee administered funds. Defined benefit post-retirement schemes exist primarily in Ireland and the Netherlands (Eurozone), the UK and the USA (included in Rest of World). These defined benefit schemes comprise final salary pension schemes, career average salary pension schemes and post-retirement medical plans. All material defined benefit pension schemes are closed to future accrual. The post-retirement medical plans operated by the Group relate primarily to a number of USA employees and are closed to new entrants. 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 schemes including compliance with all relevant laws and regulations. 236 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 26. 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 2022 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 schemes 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 and in 2021 a number of deferred members transferred their past service benefits out of the Irish defined benefit scheme. The defined benefit schemes expose the Group to risks such as interest rate risk, investment risk, inflation risk and mortality risk. ### Interest rate risk 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 schemes. ### Investment risk The net surplus/(deficit) recognised in the Consolidated Balance Sheet represents the present value of the defined benefit obligation less the fair value of the schemes' assets. When assets generate a rate of return less than the discount rate this results in an increase/(decrease) in the net (deficit)/surplus. The schemes have a diversified portfolio of investments which include equities, bonds and other asset classes. The investment allocation for each scheme is reviewed periodically by the scheme's external investment consultants who 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 schemes' 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 schemes' participants both during and after their employment. An increase in the life expectancy of the schemes' 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 schemes: | | 2022 €'m | 2021 €'m | | --- | --- | --- | | Service cost: | | | | - Costs relating to defined contribution schemes | 71.0 | 64.9 | | - Current service cost relating to defined benefit schemes | 3.0 | 5.5 | | - Past service and settlements | (2.0) | (4.7) | | Net interest (income)/cost | (1.1) | 0.7 | | Recognised in the Consolidated Income Statement | 70.9 | 66.4 | Re-measurements of the net defined benefit liability: | - Return on scheme assets (excluding amounts included in net interest cost) | 536.1 | (129.8) | | --- | --- | --- | | - Experience losses on schemes' liabilities | 44.4 | 24.9 | | - Actuarial (gains)/losses arising from changes in demographic assumptions | (2.6) | 41.9 | | - Actuarial gains arising from changes in financial assumptions | (564.5) | (47.2) | | Recognised in the Consolidated Statement of Comprehensive Income | 13.4 | (110.2) | | Total | 84.3 | (43.8) | 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). EXPANDING^{}[] SURFIZING Kerry Group Annual Report 2022 237 # **26. Retirement benefits obligation** (continued) # **(ii) Recognition in the Consolidated Balance Sheet** The net defined benefit post-retirement schemes' surplus/(deficit) at 31 December, which has been recognised in the Consolidated Balance Sheet, was as follows: | | Schemes in Surplus 2022 €m | Schemes in Deficit 2022 €m | Total 2022 €m | Schemes in Surplus 2021 €m | Schemes in Deficit 2021 €m | Total 2021 €m | | --- | --- | --- | --- | --- | --- | --- | | Present value of defined benefit obligation | (286.6) | (677.7) | (964.3) | (1,448.6) | (111.5) | (1,560.1) | | Fair value of scheme assets | 382.2 | 647.5 | 1,029.7 | 1,538.9 | 87.4 | 1,626.3 | | Net recognised surplus/(deficit) before deferred tax | 95.6 | (30.2) | 65.4 | 90.3 | (24.1) | 66.2 | | Net related deferred tax (liability)/asset | (11.9) | 7.3 | (4.6) | (14.8) | 4.9 | (9.9) | | Net recognised surplus/(deficit) after deferred tax | 83.7 | (22.9) | 60.8 | 75.5 | (19.2) | 56.3 | Net recognised surplus/(deficit) by region: | | Eurozone 2022 €m | UK 2022 €m | Rest of World 2022 €m | Total 2022 €m | Eurozone 2021 €m | UK 2021 €m | Rest of World 2021 €m | Total 2021 €m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Present value of defined benefit obligation | (286.6) | (591.2) | (86.5) | (964.3) | (427.4) | (1,025.0) | (107.7) | (1,560.1) | | Fair value of scheme assets | 382.2 | 586.0 | 61.5 | 1,029.7 | 487.0 | 1,051.9 | 87.4 | 1,626.3 | | Net recognised surplus/(deficit) before deferred tax | 95.6 | (5.2) | (25.0) | 65.4 | 59.6 | 26.9 | (20.3) | 66.2 | | Net related deferred tax (liability)/asset | (11.9) | 1.0 | 6.3 | (4.6) | (7.9) | (6.9) | 4.9 | (9.9) | | Net recognised surplus/(deficit) after deferred tax | 83.7 | (4.2) | (18.7) | 60.8 | 51.7 | 20.0 | (15.4) | 56.3 | The surplus at 31 December 2022 relates to the Irish scheme (31 December 2021: Irish and UK Schemes) and has been recognised in accordance with IFRIC 14 'The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction' as it has been determined that the Group has an unconditional right to a refund of the surplus. # **(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: | | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Eurozone % | UK % | Rest of World % | Eurozone % | UK % | Rest of World % | | Rate used to discount schemes' liabilities | 4.20 | 4.85 | 5.00 - 5.35 | 1.50 | 1.95 | 2.25 - 2.75 | | Inflation assumption | 2.30 | 3.05 | 2.50 | 1.90 | 3.25 | 2.50 | | Rate of increase in salaries | N/A* | N/A* | 4.50 | N/A* | N/A* | 3.00 | | Rate of increase for pensions in payment and deferred pensions | 2.30 | 2.35 - 3.00 | - | 1.90 | 2.50 - 3.15 | - | \* Not applicable due to closure of the Irish, Netherlands and UK defined benefit schemes to future accrual. 238 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 26. Retirement benefits obligation (continued) ### (iii) Financial and demographic assumptions (continued) 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: | | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Eurozone Years | UK Years | Rest of World Years | Eurozone Years | UK Years | Rest of World Years | | Male - retiring now | 22 | 21 | 21 - 22 | 22 | 21 | 21 - 22 | | Female - retiring now | 24 | 24 | 23 | 24 | 24 | 23 | | Male - retiring in 20 years' time | 24 | 23 | 22 - 23 | 24 | 23 | 22 - 23 | | Female - retiring in 20 years' time | 26 | 26 | 24 - 25 | 26 | 26 | 24 - 25 | 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 table below gives an approximate indication of the impact of a change in the principal financial actuarial assumptions (discount rate, inflation rate & pension increases and salary 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 2022 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. | Change in Assumption | Impact on schemes' liabilities of changes in assumptions | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | 2022 | | | 2021 | | | | | Eurozone % | UK % | Rest of World % | Eurozone % | UK % | Rest of World % | | **Discount rate** | | | | | | | | Decrease of 0.50% | 8.0% | 8.2% | 4.0% | 10.4% | 11.0% | 5.2% | | Increase of 0.50% | (7.2%) | (7.3%) | (3.7%) | (9.0%) | (9.5%) | (4.7%) | | **Inflation Rate and Pension Increases** | | | | | | | | Increase of 0.50% | 6.4% | 3.3% | - | 7.9% | 4.3% | - | | Decrease of 0.50% | (5.8%) | (3.5%) | - | (7.1%) | (5.2%) | - | | **Salary Increase** | | | | | | | | Increase of 0.50% | - | - | 0.2% | - | - | 0.2% | | Decrease of 0.50% | - | - | (0.2%) | - | - | (0.2%) | | **Mortality** | | | | | | | | Increase in life expectancy of 1 Year | 4.1% | 3.0% | 2.0% | 3.9% | 3.0% | 2.5% | | Decrease in life expectancy of 1 Year | (4.1%) | (3.0%) | (2.0%) | (3.9%) | (3.0%) | (2.5%) | FARANDRO MORITZENS Kerry Group Annual Report 2022 239 ## 26. Retirement benefits obligation (continued) ### (iv) Reconciliations for defined benefit schemes The movements in the defined benefit schemes' obligation during the financial year were: | | 2022 €'m | 2021 €'m | | --- | --- | --- | | Present value of the defined benefit obligation at beginning of the financial year | (1,560.1) | (1,505.5) | | Current service cost | (3.0) | (5.5) | | Past service and settlements | 2.0 | 4.7 | | Contributions by employees | - | - | | Interest expense | (28.3) | (21.9) | | Benefits paid | 54.4 | 46.7 | | Re-measurements: | | | | - experience losses on schemes' liabilities | (44.4) | (24.9) | | - actuarial gains/(losses) arising from changes in demographic assumptions | 2.6 | (41.9) | | - actuarial gains arising from changes in financial assumptions | 564.5 | 47.2 | | Decrease arising on settlement | - | 17.7 | | Exchange translation adjustment | 48.0 | (76.7) | | **Present value of the defined benefit obligation at end of the financial year** | **(964.3)** | **(1,560.1)** | Present value of the defined benefit obligation at end of the financial year that relates to: | Wholly unfunded schemes | (14.2) | (16.1) | | --- | --- | --- | | Wholly or partly funded schemes | (950.1) | (1,544.0) | | | **(964.3)** | **(1,560.1)** | The weighted average duration of the defined benefit obligation at 31 December 2022 is approximately 16 years (2021: approximately 20 years). The movements in the schemes' assets during the financial year were: | | 2022 €'m | 2021 €'m | | --- | --- | --- | | Fair value of scheme assets at beginning of the financial year | 1,626.3 | 1,451.1 | | Interest income | 29.4 | 21.2 | | Contributions by employer | 15.3 | 15.4 | | Contributions by employees | - | - | | Benefits paid | (54.4) | (46.7) | | Re-measurements: | | | | - return on scheme assets (excluding amounts included in net interest cost) | (536.1) | 129.8 | | Decrease arising on settlement | - | (17.7) | | Exchange translation adjustment | (50.8) | 73.2 | | **Fair value of scheme assets at end of the financial year** | **1,029.7** | **1,626.3** | 240 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 26. Retirement benefits obligation (continued) ### (iv) Reconciliations for defined benefit schemes (continued) The fair values of each of the categories of the pension schemes' assets at 31 December were as follows: | | 2022 €'m | 2021 €'m | | --- | --- | --- | | Liability Driven Investment | 488.3 | 537.7 | | Other Fixed Income | 135.6 | 380.0 | | Equities | | | | - Global Equities | 126.2 | 308.4 | | - Emerging Market Equities | 14.6 | 24.4 | | Diversified Growth Funds | 54.2 | 185.9 | | Cash and other | 210.8 | 189.9 | | **Total fair value of pension schemes' assets** | **1,029.7** | **1,626.3** | 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 2022 and 2021 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 2022 or 2021. The Irish, UK and USA schemes have invested in Liability Driven Investment (LDI) strategies. The primary goal of this asset class is to mitigate the impact of interest rate and inflation volatility and enable better matching of investment returns with the cash outflows required to pay benefits. The LDI solutions invest in various levered and unlevered bonds and the value of the LDI assets at 31 December 2022 across the schemes was €488.3m (2021: €537.7m) 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 schemes The Group operates a number of defined benefit schemes in a number of countries and each scheme 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 scheme 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. 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 2023, the Group expects to make contributions of approximately €12.8m to its defined benefit schemes. ## 27. Share capital | | 2022 €'m | 2021 €'m | | --- | --- | --- | | **Group and Company:** | | | | **Authorised** | | | | 280,000,000 A ordinary shares of 12.50 cent each | 35.0 | 35.0 | | **Allotted, called-up and fully paid (A ordinary shares of 12.50 cent each)** | | | | At beginning of the financial year | 22.1 | 22.1 | | Shares issued during the financial year | - | - | | **At end of the financial year** | **22.1** | **22.1** | The Company has one class of ordinary share which carries no right to fixed income. EXPANDING^{}[] HORIZONS Kerry Group Annual Report 2022 241 ## 27. Share capital (continued) ### Shares issued During 2022 a total of **138,030** (2021: 148,415) 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 2022 was **176,986,481** (2021: 176,848,451). ### Share buy back programme At the 2022 Annual General Meeting, shareholders passed a resolution authorising the Company to purchase up to 5% of its own issued share capital. In 2022 and 2021, no shares were purchased under this programme. ## 28. 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 the Group's plans are outlined below and are the same as those recognised in the Company financial statements. The Group recognised an expense of **€22.9m** (2021: €17.2m) 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), Return on Average Capital Employed (ROACE) and Sustainability metrics of the Group during a three year period ('the performance period'). The invitations made in 2020, 2021 and 2022 will potentially vest in 2023, 2024 and 2025 respectively. 50% of the award will be issued at the date of vesting, with 50% being issued after a 2 year deferral period. For the 2020 awards, 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. For the 2021 and 2022 awards, the performance conditions are weighted 40% for Adjusted EPS growth calculated on a constant currency basis, 25% for TSR, 15% for ROACE and the remaining 20% of the shares/share options will vest according to the Group's Sustainability metrics 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 2017 - 2020 will potentially vest in 2023 - 2026 respectively. An invitation may lapse if a participant ceases to be employed within the Group before the vesting date. 242 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ## 28. 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: | | Number of Conditional Awards 2022 | Number of Conditional Awards 2021 | | --- | --- | --- | | Outstanding at beginning of the financial year | 1,286,342 | 1,256,255 | | Forfeited | (66,854) | (62,724) | | Shares vested | (46,137) | (50,382) | | Share options vested | (119,222) | (129,018) | | Relinquished | (224,567) | (229,909) | | New conditional awards | 590,856 | 502,120 | | **Outstanding at end of the financial year** | **1,420,418** | **1,286,342** | | | Number of Conditional Awards 2022 | | | Number of Conditional Awards 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Shares | Share Options | Total | Shares | Share Options | Total | | Outstanding at beginning of the financial year | 384,130 | 902,212 | 1,286,342 | 374,980 | 881,275 | 1,256,255 | | Forfeited | (32,601) | (34,253) | (66,854) | (18,817) | (43,907) | (62,724) | | Vested | (46,137) | (119,222) | (165,359) | (50,382) | (129,018) | (179,400) | | Relinquished | (65,261) | (159,306) | (224,567) | (64,560) | (165,349) | (229,909) | | New conditional awards | 177,833 | 413,023 | 590,856 | 142,909 | 359,211 | 502,120 | | **Outstanding at end of the financial year** | **417,964** | **1,002,454** | **1,420,418** | **384,130** | **902,212** | **1,286,342** | | | Number of Share Options 2022 | Number of Share Options 2021 | | --- | --- | --- | | Share options arising under the LTIP | | | | Outstanding at beginning of the financial year | 187,027 | 160,483 | | Options released at vesting date | 65,141 | 66,586 | | Options released from deferral | 65,125 | 48,046 | | Exercised | (77,175) | (88,088) | | **Outstanding and exercisable at end of the financial year** | **240,118** | **187,027** | Share options under the LTIP scheme have an exercise price of 12,50 cent. The remaining weighted average life for share options outstanding is **4.1 years** (2021: 4.4 years). The weighted average share price at the date of exercise was **€99.19** (2021: €113.07). **54,081** share options (2021: 62,432 share options) which vested in the financial year are deferred and therefore are not exercisable at year end. FORWARDING^{}[] INNOVATIONS Kerry Group Annual Report 2022 243 # **28. Share-based payments**(continued) # **(i) Long-Term Incentive Plan**(continued) At the invitation grant date, the fair value per conditional award and the assumptions used in the calculations are as follows: | LTIP Scheme | 2022 Conditional Award at Grant Date | 2021 Conditional Award at Grant Date | 2020 Conditional Award at Grant Date | 2019 Conditional Award at Grant Date | | --- | --- | --- | --- | --- | | Conditional Award Invitation date | March 2022 | March 2021 | March 2020 | March 2019 | | Year of potential vesting | 2025 | 2024 | 2023/2026 | 2022/2025 | | Share price at grant date | €95.46 | €107.80 | €109.00 | €95.40 | | Exercise price* | €0.125 | €0.125 | €0.125 | €0.125 | | Expected volatility | 28.6% | 25.5% | 20.8% | 19.3% | | Expected life | 3 years | 3 years | 3/7 years | 3/7 years | | Risk free rate | (0.3%) | (0.7%) | (1.0%) | (0.5%) | | Expected dividend yield | 0.8% | 0.8% | 0.7% | 0.7% | | Expected forfeiture rate | 5.0% | 5.0% | 5.0% | 5.0% | | Weighted average fair value at grant date | €77.68 | €89.78 | €92.06/€103.97 | €78.00/€95.92 | | Valuation model | Monte Carlo Pricing | Monte Carlo Pricing | Monte Carlo Pricing | Monte Carlo Pricing | \* Exercise price refers to exercise price for both shares and share options. 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 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 33% 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 9,200 share options (2021: 4,632 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 2021 and 2022 financial years will be released from deferral in 2023 and 2024 respectively. Kerry Group Annual Report 2022 Financial Statements Notes to the Financial Statements 244 29. Cash flow components (i) Cash flow analysis Notes Group 2022 €’m Group 2021 €’m Company 2022 €’m Company 2021 €’m Change in working capital Increase in inventories (156.3) (192.6) - - Increase in trade and other receivables (224.3) (98.1) (12.2) (50.0) Increase in trade and other payables 108.2 102.6 0.6 3.6 Increase/(decrease) in non-current liabilities 25.5 (13.4) - - Share-based payment expense 28 22.9 17.2 22.9 17.2 (224.0) (184.3) 11.3 (29.2) Purchase of assets Purchase of property, plant and equipment (208.8) (263.9) - - Purchase of intangible assets 12 (12.2) (34.1) - - Purchase of financial assets 13 - (2.4) - - (221.0) (300.4) - - Cash and cash equivalents Cash at bank and in hand 23 970.0 1,039.1 - 0.1 Bank overdrafts 23 (0.2) (5.3) - - 969.8 1,033.8 - 0.1 (ii) Net debt reconciliation Note 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 Net Debt €’m At 1 January 2021 563.1 81.9 (2.8) - (2,505.8) (1,863.6) (81.5) (1,945.1) Cash flows 447.0 (39.3) (2.4) (0.3) (572.1) (167.1) 34.9 (132.2) Foreign exchange adjustments 29.0 7.8 (0.1) - (55.8) (19.1) (5.1) (24.2) Other non-cash movements - (15.8) - - 15.7 (0.1) (22.5) (22.6) At 31 December 2021 23 1,039.1 34.6 (5.3) (0.3) (3,118.0) (2,049.9) (74.2) (2,124.1) Cash flows (76.0) - 5.0 0.3 0.7 (70.0) 35.1 (34.9) Foreign exchange adjustments 6.9 3.5 0.1 (39.9) (0.3) (29.7) (2.6) (32.3) Other non-cash movements - (22.6) - (661.0) 685.0 1.4 (27.5) (26.1) At 31 December 2022 23 970.0 15.5 (0.2) (700.9) (2,432.6) (2,148.2) (69.2) (2,217.4) * Liabilities from financing activities. EXPANDING MORZONS Kerry Group Annual Report 2022 245 ### 30. Business combinations The following acquisitions were completed by the Group during 2022: | Acquisition | Type | Completion date | Percentage acquired | Segment | Principal activity | Strategic rationale | | --- | --- | --- | --- | --- | --- | --- | | Almer Malaysia Sdn. Bhd. | Equity | March 2022 | 100% share acquisition | Taste & Nutrition | A producer of quality spray dried ingredients servicing the Snacks and Dairy markets based in Malaysia. | Further supports Kerry's growth initiatives in authentic taste and emerging markets. | | c-LEcta GmbH* | Equity | March 2022 | 93% share acquisition | Taste & Nutrition | A leading biotechnology innovation company based in Germany specialising in precision fermentation, optimised bio-processing and bio-transformation for the creation of high-value targeted enzymes and ingredients. | Brings leading innovation capabilities in enzyme engineering, fermentation and bio-processing to further enhance Kerry's key growth platform development. | | Natreon, Inc. | Equity | March 2022 | 100% share acquisition | Taste & Nutrition | A leader in Ayurvedic and botanical ingredients, with strong research capabilities and facilities in the USA and India. | Brings a portfolio of clinically backed branded ingredients across the need states of cognition and healthy ageing. | | Certain trade and assets of The Kraft Heinz Company | Asset | September 2022 | Carve out business acquisition | Taste & Nutrition | Kerry acquired the powdered cheese business and related assets of The Kraft Heinz Company, based in the US. | Enhances Kerry's scale, manufacturing capability and customer base in the important snacking category. | * The Group has a 93% equity shareholding in c-LEcta GmbH. It is consolidated in the Group financial statements as a 93% owned subsidiary on the basis of contractual arrangements with the remaining portion recognised as non-controlling interests. The table below provides details of the identifiable net assets, including adjustments to provisional fair values, in respect of the acquisitions completed during the year ended 31 December 2022: | | Total 2022 €m | | --- | --- | | **Recognised amounts of identifiable assets acquired and liabilities assumed:** | | | *Non-current assets* | | | Property, plant and equipment | 46.4 | | Brand related intangibles | 122.8 | | Computer software | 0.5 | | *Current assets* | | | Cash at bank and in hand | 24.8 | | Inventories | 35.1 | | Trade and other receivables | 10.2 | | *Current liabilities* | | | Trade and other payables | (20.0) | | *Non-current liabilities* | | | Deferred tax liabilities | (21.9) | | Other non-current liabilities | (2.2) | | **Total identifiable assets** | **195.7** | | Non-controlling interests | (1.6) | | Goodwill | 197.8 | | **Total consideration** | **391.9** | | **Satisfied by:** | | | Cash | 376.6 | | Deferred payment | 15.3 | | | **391.9** | 246 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ### 30. Business combinations (continued) Net cash outflow on acquisition: | | Total 2022 €m | | --- | --- | | Cash | 376.6 | | Less: cash and cash equivalents acquired | (24.8) | | Plus: debt acquired (included in other non-current liabilities above) | 2.0 | | | 353.8 | 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, primarily values relating to property, plant and equipment and liabilities (as not all information is available at this point in time). The valuation of the fair value of assets and liabilities will be completed within the measurement period. For the acquisitions completed in 2021, 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. €30.3m of goodwill recognised is expected to be deductible for income tax purposes. Transaction expenses related to these acquisitions of €6.5m were charged in the Group's Consolidated Income Statement during the financial year. The fair value of the financial assets acquired includes trade and other receivables with a fair value of €10.2m and a gross contractual value of €10.4m. Non-controlling interests represent the portion of the equity of a subsidiary not attributable either directly or indirectly to the Group and are presented separately in the Consolidated Income Statement and within equity in the Consolidated Balance Sheet, and are distinguished from the Group's shareholders' equity. Where not all of the equity of a subsidiary is acquired, the non-controlling interests are recognised at the non-controlling interest's share of the acquiree's net identifiable assets. The revenue and profit after taxation attributable to equity holders of the parent to the Group contributed from date of acquisition for all business combinations effected during the financial year is as follows: | | Total 2022 €m | | --- | --- | | Revenue | 103.2 | | Profit after taxation attributable to equity holders of the parent | 11.3 | The revenue and profit after taxation attributable to equity holders of the parent to the Group determined in accordance with IFRS as though the acquisition date for all business combinations effected during the financial year had been the beginning of that financial year would be as follows: | | 2022 acquisitions €m | Kerry Group excluding 2022 acquisitions €m | Consolidated Group including acquisitions €m | | --- | --- | --- | --- | | Revenue | 174.7 | 8,668.7 | 8,843.4 | | Profit after taxation attributable to equity holders of the parent | 15.9 | 595.1 | 611.0 | ### 31. Contingent liabilities | | 2022 €m | 2021 €m | | --- | --- | --- | | Company: | | | | (i) Guarantees in respect of borrowings of subsidiaries | 3,146.2 | 3,112.7 | (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 36, 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 2022 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 36. 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. EXPANDING^{}[] ADVISORS Kerry Group Annual Report 2022 247 ### 32. 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: | | 2022 €m | 2021 €m | | --- | --- | --- | | **Group:** | | | | Commitments in respect of contracts placed | 70.5 | 60.1 | | Expenditure authorised by the Directors but not contracted for at the financial year end | 129.5 | 111.0 | | | 200.0 | 171.1 | Included in other financial commitments are sustainability related projects of €12.5m (2021: €10.1m). ### 33. 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 Dairy Ireland reporting segment. These Directors retired from the Group's Board of Directors effective from 28 April 2022. Aggregate purchases from, and sales to, these Directors during this period amounted to €0.1m (2021: €0.3m) and €0.1m (2021: €0.1m) respectively. The trading balance outstanding to the Group at the financial year end was €nil (2021 €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: | | 2022 €m | 2021 €m | | --- | --- | --- | | Dividends received by the Parent Company | 185.0 | 331.4 | | Cost recharges from subsidiaries of the Parent Company | 26.5 | 17.6 | | Trade and other receivables to the Parent Company | 230.9 | 216.8 | #### (iii) Trading with joint ventures Details of transactions and balances outstanding with joint ventures are as follows: | | Rendering of services | | Sale of goods | | Amounts receivable/ (payable) at 31 December | | | --- | --- | --- | --- | --- | --- | --- | | | 2022 €m | 2021 €m | 2022 €m | 2021 €m | 2022 €m | 2021 €m | | Joint ventures | 0.1 | 0.1 | 0.2 | 1.1 | 3.1 | (0.1) | 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 2022, dividends of €20.0m (2021: €18.8m) 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 (2021: €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 26). The Directors also participate in the Group's Long-Term Incentive Plan (LTIP) (note 28). Remuneration cost of key management personnel is as follows: | | 2022 €m | 2021 €m | | --- | --- | --- | | Short-term benefits (salaries, fees and other short-term benefits) | 8.8 | 8.1 | | Post-retirement benefits | 0.6 | 0.5 | | LTIP accounting charge | 2.2 | 1.9 | | Other long-term benefits | - | - | | Termination benefits | - | - | | **Total** | **11.6** | **10.5** | 248 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 ### 33. Related party transactions (continued) #### (v) Transactions with key management personnel (continued) Retirement benefit charges of €0.2m (2021: €0.2m) arise under a defined benefit scheme relating to 1 Director (2021: 1 Director) and charges of €0.4m (2021: €0.3m) arise under a defined contribution scheme relating to 2 Directors (2021: 2 Directors). The LTP 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 (2021: €nil). Dividends totalling €0.1m (2021: €0.1m) were also received by key management personnel during the financial year, based on their personal interests in the shares of the company. ### 34. Events after the balance sheet date Since the financial year end, the Group has: - entered into exclusive negotiations prior to the year ended 31 December 2022 to sell the trade and assets of its Sweet Ingredients Portfolio, for a consideration of €500m comprising an initial cash consideration of €375m plus a €125m interest bearing vendor loan note as announced on 11 January 2023. The potential sale is subject to relevant regulatory approvals, employee consultation and routine closing adjustments. The associated assets and liabilities have consequently been presented separately as assets held for sale (note 18) in the financial statements for the year ended 31 December 2022; and - proposed a final dividend of 73.40 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 2022. ### 35. 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 share-based payments is set out in note 28. #### 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. #### Non-controlling interests Non-controlling interests represent the portion of the equity of a subsidiary not attributable either directly or indirectly to the Group. Kerry Group Annual Report 2022 249 36. Group entities Principal subsidiaries and joint venture undertakings Country Company Name Nature of Business Registered Office Ireland Accommodation Tralee Limited Investment 1 Ballyfree Farms Limited Dairy Ireland 1 Breeo Brands Limited Dairy Ireland 1 Breeo Foods Limited Dairy Ireland 1 Carteret Investments Unlimited Company Investment 1 Cuarto Limited Taste & Nutrition 1 Dairy Consumer Foods (Ireland) Limited Dairy Ireland 1 Dawn Dairies Limited Dairy Ireland 1 Glenealy Farms (Turkeys) Limited Dairy Ireland 1 Golden Vale Clare Limited Investment 1 Golden Vale Dairies Limited Dairy Ireland 1 Golden Vale Holdings Limited Investment 1 Golden Vale Investments Limited Investment 1 Golden Vale Limited Investment 1 Grove Farm Limited Investment 1 Helios Limited Investment 1 Kerry Dairy Consumer Foods Limited Dairy Ireland 1 Ichor Management Limited Investment 1 Ivernia Pig Developments Limited Dairy Ireland 1 Kerry Agri Business Holdings Limited Investment 1 Kerry Agri Business Trading Limited Dairy Ireland 1 Kerry Creameries Limited Dairy Ireland 1 Kerry Food Ingredients (Cork) Limited Taste & Nutrition 1 Kerry Foods Limited Dairy Ireland 1 Kerry Group Business Services Limited Services 1 Kerry Group Financial Services Unlimited Company Services 1 Kerry Group Finance International Limited Services 1 Kerry Group Services International Limited Services 1 Kerry Group Services Limited Services 1 Kerry Health and Nutrition Institute Limited Taste & Nutrition 1 Kerry Holdings International (Ireland) Limited Investment 1 Kerry Holdings (Ireland) Limited Investment 1 Kerry Ingredients & Flavours Limited Taste & Nutrition 1 Kerry Ingredients (Ireland) Limited Dairy Ireland 1 Kerry Ingredients Holdings (Ireland) Limited Investment 1 Kerry Taste & Nutrition (Ireland) Limited Taste & Nutrition 1 Kerry Treasury Services Limited Services 1 Kerrykreem Limited Dairy Ireland 1 Lifesource Foods Research Limited Investment 1 Linovale Limited Investment 1 Maddens Milk Limited Investment 1 Plassey Holdings Limited Investment 1 Kerry Group Annual Report 2022 Financial Statements Notes to the Financial Statements 250 36. Group entities (continued) Principal subsidiaries and joint venture undertakings (continued) Country Company Name Nature of Business Registered Office Ireland Princemark Holdings Designated Activity Company Services 1 Putaxy Limited Investment 1 Rye Developments Limited Services 1 Rye Investments Limited Dairy Ireland 1 Selamor Limited Dairy Ireland 1 Tacna Investments Limited Investment 1 Zenbury International Limited Services 1 Newmarket Co-operative Creameries Limited Dairy Ireland 2 UK Dairy Produce Packers Limited Dairy Ireland 3 Golden Cow Dairies Limited Dairy Ireland 3 Golden Vale (NI) Limited Investment 3 Leckpatrick Dairies Limited Dairy Ireland 3 Leckpatrick Holdings Limited Investment 3 RVF (UK) Limited Dairy Ireland 3 Driedale Limited Dairy Ireland 3 Kerry Foods Limited Dairy Ireland 4 Kerry Holdings (U.K.) Limited Investment 4 Dairy Consumer Foods (UK) Limited Dairy Ireland 5 E B I Foods Limited Taste & Nutrition 5 Gordon Jopling (Foods) Limited Taste & Nutrition 5 Kerry Ingredients (UK) Limited Taste & Nutrition 5 Kerry Ingredients Holdings (U.K.) Limited Investment 5 Titusfield Limited Taste & Nutrition 5 Kerry Flavours UK Limited Taste & Nutrition 5 Belgium Kerry Ingredients Belgium N.V. Taste & Nutrition 6 Netherlands Kerry (NL) B.V. Taste & Nutrition 7 Kerry Group B.V. Investment 7 Proparent B.V. (75% shareholding) Taste & Nutrition 8 Niacet Cooperatief U.A. Taste & Nutrition 9 Niacet B.V. Taste & Nutrition 9 Czech Republic Kerry Ingredients & Flavours S.R.O. Taste & Nutrition 10 France Kerry Ingredients France SAS Taste & Nutrition 11 Kerry Ingredients Holdings France SAS Investment 11 Kerry Savoury Ingredients France SAS Taste & Nutrition 11 Kerry Flavours France SAS Taste & Nutrition 12 Germany Kerry Food GmbH Taste & Nutrition 13 Kerry Ingredients GmbH Taste & Nutrition 13 SuCrest GmbH Taste & Nutrition 14 Vicos Nahrungsmittel GmbH Taste & Nutrition 14 Red Arrow Handels GmbH Taste & Nutrition 15 Kerry Biotech GP GmbH Taste & Nutrition 16 c-LEcta GmbH (93% shareholding) Taste & Nutrition 17 Kerry Group Annual Report 2022 251 36. Group entities (continued) Principal subsidiaries and joint venture undertakings (continued) Country Company Name Nature of Business Registered Office Denmark Cremo Ingredients A/S Taste & Nutrition 18 Italy Kerry Ingredients & Flavours Italia S.p.A. Taste & Nutrition 19 Poland Kerry Polska Sp. z o.o. Taste & Nutrition 20 Hungary Kerry Hungaria Kft Taste & Nutrition 21 Luxembourg Kerry Luxembourg S.a.r.l. Services 22 Zenbury International Limited S.a.r.l. Services 22 Romania Kerry Romania S.R.L. Taste & Nutrition 23 Spain Kerry Iberia Taste & Nutrition, S.L.U. Taste & Nutrition 24 Harinas y Semolas del Noroeste, S.A.U. Taste & Nutrition 25 Pevesa Biotech, S.A.U. Taste & Nutrition 26 Biosearch, S.A.U. Taste & Nutrition 27 Malta Kerry Malta Limited Services 28 Slovakia Dera SK, S.R.O. Taste & Nutrition 29 Sweden Tarber AB Taste & Nutrition 30 Ukraine Kerry Ukraine LLC Taste & Nutrition 31 USA Kerry Holding Co. Investment 32 Kerry, Inc. Taste & Nutrition 32 Ganeden Biotech, Inc. Taste & Nutrition 32 Insight Beverages, Inc. Taste & Nutrition 33 Fleischmann’s Vinegar Company, Inc. Taste & Nutrition 34 Kerry Stock & Broth Company Inc. Taste & Nutrition 35 Niacet Corporation Taste & Nutrition 36 Natreon, Inc. Taste & Nutrition 37 Canada Kerry (Canada) Inc. Taste & Nutrition 38 Mexico Kerry Ingredients (de Mexico), S.A. de C.V. Taste & Nutrition 39 Enmex, S.A. de C.V. Taste & Nutrition 40 Brazil Kerry do Brasil Ltda Taste & Nutrition 41 Kerry da Amazonia Ingredientes e Aromas Ltda Taste & Nutrition 42 Costa Rica Baltimore Spice Central America, S.A. Taste & Nutrition 43 Global Spice, S.A. Taste & Nutrition 44 Chile Kerry Chile Ingredientes, Sabores Y Aromas Ltda Taste & Nutrition 45 Colombia Kerry Ingredients & Flavours Colombia S.A.S. Taste & Nutrition 46 Real S.A.S. Taste & Nutrition 47 Panama Kerry Panama, S.A. Taste & Nutrition 48 Kerry Holdings Panama, S.A. Taste & Nutrition 49 Guatemala Baltimore Spice Guatemala, S.A. Taste & Nutrition 50 Aromaticos de Centroamerica, S.A. Taste & Nutrition 51 Kerry Guatemala, S.A. Taste & Nutrition 52 El Salvador Baltimore Spice de El Salvador, S.A. de C.V. Taste & Nutrition 53 Aromaticos de Centro America, S.A. de C.V. Taste & Nutrition 53 Thailand Kerry Ingredients (Thailand) Limited Taste & Nutrition 54 Philippines Kerry Food Ingredients (Philippines), Inc. Taste & Nutrition 55 Kerry Manufacturing (Philippines), Inc. Taste & Nutrition 56 Kerry Group Annual Report 2022 Financial Statements Notes to the Financial Statements 252 36. Group entities (continued) Principal subsidiaries and joint venture undertakings (continued) Country Company Name Nature of Business Registered Office Singapore Kerry Ingredients (S) PTE Ltd Taste & Nutrition 57 Malaysia Kerry Ingredients (M) Sdn. Bhd. Taste & Nutrition 58 Kerry Group Business Services (ASPAC) Sdn. Bhd. Taste & Nutrition 58 Almer Malaysia Sdn. Bhd. Taste & Nutrition 58 Japan Kerry Japan Kabushiki Kaisha Taste & Nutrition 59 China Kerry Food Ingredients (Hangzhou) Co., Ltd Taste & Nutrition 60 Kerry Ingredients Trading (Shanghai) Co., Ltd Taste & Nutrition 61 Kerry Foods (Nantong) Co., Ltd Taste & Nutrition 62 TianNing Flavor & Fragrance (JiangSu) Co., Ltd Taste & Nutrition 63 Zhejiang Hangmai Food Technologies Co., Ltd Taste & Nutrition 64 Sias Food Co., Ltd Taste & Nutrition 65 Shandong Tianbo Food Ingredients Co., Ltd Taste & Nutrition 66 Egypt Kerry Egypt LLC Taste & Nutrition 67 Indonesia PT Kerry Ingredients Indonesia Taste & Nutrition 68 PT Kerry Trading Indonesia Taste & Nutrition 69 India Kerry Ingredients India Private Limited Taste & Nutrition 70 Australia Kerry Ingredients Australia Pty. Ltd Taste & Nutrition 71 New Zealand Kerry Ingredients (NZ) Limited Taste & Nutrition 72 Kenya Kerry Kenya Limited Taste & Nutrition 73 Afribon (K) Limited Taste & Nutrition 74 South Africa Kerry Ingredients South Africa (Proprietary) Limited Taste & Nutrition 75 South Korea Kerry Ingredients Korea LLC Taste & Nutrition 76 Jungjin Food Co., Ltd Taste & Nutrition 77 Saudi Arabia AATCO Food Industries LLC Taste & Nutrition 78 Oman AATCO Food Industries SPC Taste & Nutrition 79 Vietnam Kerry Taste & Nutrition (Vietnam) Company Limited Taste & Nutrition 80 UAE Kerry MENAT DMCC Taste & Nutrition 81 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 2022 253 36. Group entities (continued) Registered Office 1 Prince’s Street, Tralee, Co Kerry, V92 EH11, Ireland. 2 Newmarket, Co. Cork, Ireland. 3 Millburn Road, Coleraine, Londonderry, BT52 1QZ, United Kingdom. 4 Thorpe Lea Manor, Thorpe Lea Road, Egham, Surrey TW20 8HY, United Kingdom. 5 Kerry, Bradley Road, Royal Portbury Dock, Bristol BS20 7NZ, United Kingdom. 6 Havenlaan 86C, Bus 204, 1000 Brussel, Belgium. 7 Maarssenbroeksedijk 2a, 3542 DN, Utrecht, Netherlands. 8 Cuneraweg 9c, 4051 CE, Ochten, Netherlands. 9 Papesteeg 91, 4006 WC Tiel, Netherlands. 10 Pujmanové 1753/10a, Nusle, 140 00, Praha 4, Czech Republic. 11 43 Rue Louis Pasteur, 62575 Blendecques, France. 12 Zone Industrielle du Plan, BP 82067, 06131 Grasse, CEDEX, France. 13 Hauptstrasse 22, 63924, Kleinheubach, Germany. 14 Neckarstrasse 9, 65239, Hochheim, Germany. 15 Hanna-Kunath-Strasse 25, 28199, Bremen, Germany. 16 c/o Kerry Food GmbH , Hauptstrasse 22, 63924, Kleinheubach, Germany. 17 Perlickstrabe 5, 04103, Leipzig, Germany. 18 Toftegårdsvej 3, DK-5620, Glamsbjerg, Denmark. 19 Via Capitani di Mozzo 12/16, 24030 Mozzo Bergamo, Italy. 20 Ul. Energetyczna 13, 56-400, Olesnica, Poland. 21 Dévai utca 26-28, Budapest, H-1134, Hungary. 22 17 Rue Antoine Jans, Luxembourg L-1820, Luxembourg. 23 313 - 315, Barbu Vacarescu str, 5th floor Bucureşti Sectorul 2, Romania. 24 Calle Coto de Doñana, 15, 28320 Pinto, Madrid, Spain. 25 Polígono Industrial de las Gándaras de Budiño, O Porriño, Pontevedra, Spain. 26 Avda de la Industria s/n, Visos del Alcor, Seville, Spain. 27 Camino del Purchill, 66, 18004, Granada, Spain. 28 4, V. Dimech Street, Floriana, FRN 1504, Malta. 29 Hodžovo námestie 1A, Bratislava, 811 06, Slovakia. 30 Box 1420 - Frejgatan 13, 114 79 Stockholm, Sweden. 31 Avenue Peremoghy, 53, Kiev, 03067, Ukraine. 32 3400 Millington Road, Beloit WI 53511, United States. 33 635 Oakwood Drive, Lake Zurich IL 60047, United States. 34 12604 Hiddencreek Way, Suite A, Cerritos CA 90703, United States. 35 1711 North Liberty Street, Harrisonburg VA 22802, United States. 36 275 Northpointe Parkway, Suite 105, Amherst NY 14228, United States. 37 C T Corporation Systems, 820 Bear Tavern Road, West Trenton NJ 08628, United States. 38 Osler, Hoskin & Harcourt, LLP, 100 King Street West, 1 First Canadian Place, Suite 6200, Toronto ON M5X 1B8, Canada. 39 Carretera Panamericana Irapuato-Salamanca, Km 11.2, Apartado Postal 789, Irapuato, Guanajuato, 36660, Mexico. 40 Rio Lerma 228, Fraccionamiento Industrial San Nicolas, Tlalnepantla de Baz, Estado de Mexico, CP 54030, Mexico. 41 Avenida Mercedes Benz 460, Distrito Industrial, Campinas, Sao Paolo, 13054-750, Brazil. 254 Financial Statements Notes to the Financial Statements Kerry Group Annual Report 2022 36. Group entities (continued) Registered Office (continued) 42 Rua Hidra 188, Santo Agostinho, Manaus, 69036-520, Brazil. 43 Liceo de Pavas 200m West, 100 mts North, PO Box 1035 - 1200, San Jose, 10109, Costa Rica. 44 De la esquina noreste fabrica BTICINO, 50 mts al este, edificio a mano izquierda , San José, Costa Rica. 45 C.M. El Trovador No. 4280, Of 1205, Las Condes, Suc. Cerro Portezuelo 9901, Quilicura, Santiago, Chile. 46 Carrera 7 No 71-52, Torre A Piso 5, Bogota, Colombia. 47 Carrera 3 # 6a – 100 oficina 703., Ed. Torre Protección, Cartagena, Bolivar, Colombia. 48 Parque Industrial Costa del Este, Calle 3ra Lote 88. Corregimiento Parque Lefevre, 0819-01869, Panama. 49 Distrito Panama, Provincia Panama, Panama. 50 Avenida Petapa 52-20, Zona 12, Guatemala, Guatemala. 51 23 Avenida 34-61, Zona 12, Colonia Santa Elisa, Guatemala, Guatemala. 52 Kilómetro 26.5 Carretera al Pacifico, Paso a Desnivel, Entrada a Amatitlán, Amatitlán, Guatemala. 53 2 Calle Oriente Avenida Melvin Jones, Local 14, Centro Comercial Argoz, Santa Tecla, La Libertad, El Salvador. 54 No. 618, Moo 4, Bangpoo Industrial Estate, Tambol Prakesa, Amphur Muang Samutprakarn, Samutprakarn Province, Thailand. 55 Room 406, Cebu Business & Investments Consultants, 4/F Tulips Centre, AS Fortuna Street, Mandaue City, Cebu, 6014, Philippines. 56 8/F The W Fifth Avenue Building, 5th Avenue, Bonifacio Global City, Fort Bonifacio, Taguig City, 1634, Philippines. 57 8A Biomedical Grove, #02-05/12, Immunos, 138648, Singapore. 58 Tricor Corporate Services Sdn Bhd (779773-H), Suite 1301, 13th Floor, City Plaza, Jalan Tebrau, 80300 Johor Bahru, Johor, Malaysia. 59 Kamiyacho Sankei Building. 2F, 1-7-2, Azabudai 1-chome, Minato-ku, Tokyo 106-0041, Japan. 60 Renhe Industry Zone, Jiulong Village, Hangzhou, China. 61 Room 311, Floor 3, Building 1, No 239 Gang-Ao Road, Pilot Free Trade Zone, Shanghai, China. 62 North Side of Xiangjiang Road, Rudong County, Nantong City, China. 63 Dujiashan, Huayang County, Jurong, Jiangsu Province, 212425, China. 64 26 Tai Ping Qiao Industry Park, Xin’an, Deqing County, Zhejiang Province, China. 65 North side of XinYe Road, West side of LiDaXian, DaChang Industrial District, LangFang City, HeBei Province, China. 66 No.6 Haichuan Road, Jiezhuang Street, Hi-tech Zone, Jining, Shandong Province, China. 67 5th Floor, Namaa Bulding, Rameses Extension Street, 6th District, Nasr City, Cairo, Egypt. 68 JL Industri Utama Blok SS No. 6, Jababeka II Mekarmukti, Cikarang Utara, Bekasi 17520, Indonesia. 69 Jalan Industri Utama Blok SS-6 Kawasan Industri Jababeka 2, Kel. Mekarmukti, Kec. Cikarang Utara, Kab, Bekasi Prov. Jawa Barat, Indonesia. 70 8th Floor, Pritech Park Annex, Marathahalli-Sarjapur Outer Ring Road, Bellandur, Bangalore, Karnataka, 560103, India. 71 Suite 202, 7-9 Irvine Place Bella Vista NSW 2153, Australia. 72 11-13 Bell Avenue, Otahuhu, Auckland, New Zealand. 73 Avocado Towers, L.R. No 209/1907, Muthithi Road, Nairobi, 00100, Kenya. 74 Kalamu House, Grevillea Grove, Brookside Westlands, P.O. BOX 61120, 00200, Nairobi, Kenya. 75 Block 3 Nguni Park, 4-6 Lucas Drive, Hillcrest, Durban, KwaZulu Natal, 3610, South Africa. 76 9th Fl., Sheenbang Bldg, 1366-18, Seocho-dong, Seocho-Gu, Seoul, 137-863, Republic of Korea. 77 #82 Yuolgum-5gil, Sunghwan-eup, Cheonan-si, Choongchungnam-do, Republic of Korea. 78 PO Box Number 5802, PC 21432, 2nd Industrial City, Jeddah, Kingdom of Saudi Arabia. 79 P.O Box 729, P.C-112, Muscat, Sultanate of Oman, Oman. 80 Me Linh Point Tower, 2 Ngo Duc De Street, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam. 81 Unit No: AG-GF-01, AG Tower, Plot No: JLT-PH1-I1A, Jumeirah Lakes Towers, Dubai, United Arab Emirates. EXPANDING SERVICES Kerry Group Annual Report 2022 255 # SUPPLEMENTARY INFORMATION # Financial Definitions (NOT COVERED BY INDEPENDENT AUDITORS' REPORT) Kerry uses a number of financial and non-financial key performance indicators (KPIs) to measure performance across its business. These KPIs help inform decision making, assist effective goal setting and track progress in achieving the Group's strategic objectives. Kerry believes that long-term sustainable success will be achieved by generating value for all stakeholders, while developing and monitoring strategy, managing the risks that face the organisation and embedding the Group's purpose and values. Non-financial key performance indicators are outlined in pages 38-39, while the principal financial definitions used by the Group, together with reconciliations where the non-IFRS measures are not readily identifiable from the financial statements, are as follows: ## 1. Revenue ### Volume growth This represents the sales growth year-on-year, excluding pass-through pricing on input costs, currency impacts, acquisitions, disposals and rationalisation volumes. Volume growth is an important metric as it is seen as the key driver of organic top-line business improvement. Pricing impacts revenue growth positively or negatively depending on whether inputs move up or down. A full reconciliation to reported revenue growth is detailed in the revenue reconciliation below. ### Revenue Reconciliation | 2022 | Volume growth | Price | Transaction currency | Acquisitions | Disposals | Translation currency | Reported revenue growth | | --- | --- | --- | --- | --- | --- | --- | --- | | Taste & Nutrition | 7.8% | 8.7% | 0.2% | 5.6% | (1.1%) | 8.2% | 29.4% | | Dairy Ireland | 0.1% | 22.8% | 0.1% | - | (37.6%) | 1.2% | (13.4%) | | Group | 6.1% | 11.7% | 0.2% | 4.3% | (9.8%) | 6.8% | 19.3% | | 2021 | Volume growth | Price | Transaction currency | Acquisitions | Disposals | Translation currency | Reported revenue growth | | Taste & Nutrition | 8.7% | 0.9% | - | 2.4% | - | (2.8%) | 9.2% | | Dairy Ireland | 6.2% | 1.8% | - | - | (13.0%) | 1.1% | (3.9%) | | Group | 8.0% | 1.2% | - | 1.8% | (3.5%) | (1.8%) | 5.7% | Prior year 31 December 2021 has been re-presented to reflect the changes in our reporting segments in line with how the Chief Operating Decision Maker (the Executive Directors) assesses the Group's performance from 1 January 2022. The Irish dairy processing activities, previously reported in Taste & Nutrition, have been combined with the remaining dairy activities of the Consumer Foods business and this segment is named Dairy Ireland. Included within the Dairy Ireland 31 December 2021 comparatives are the results of the Consumer Foods Meats and Meals business which was disposed by the Group on 27 September 2021. ### Like-for-like$^{1}$ Revenue Reconciliation | 2022 | Volume growth | Price | Transaction currency | Acquisitions | Disposals | Translation currency | Like-for-like revenue growth | | --- | --- | --- | --- | --- | --- | --- | --- | | Taste & Nutrition | 7.8% | 8.7% | 0.2% | 5.6% | (1.1%) | 8.2% | 29.4% | | Dairy Ireland | 0.2% | 36.0% | 0.2% | - | - | 0.7% | 37.1% | | Group | 6.7% | 12.9% | 0.2% | 4.8% | (0.8%) | 7.2% | 31.0% | | 2021 | Volume growth | Price | Transaction currency | Acquisitions | Disposals | Translation currency | Like-for-like revenue growth | | Taste & Nutrition | 8.7% | 0.9% | - | 2.4% | - | (2.8%) | 9.2% | | Dairy Ireland | 5.5% | 3.2% | - | - | - | 0.6% | 9.3% | | Group | 8.2% | 1.3% | - | 2.1% | - | (2.4%) | 9.2% | 256**Supplementary Information**^{}[] Financial Definitions Kerry Group Annual Report 2022 ## 2. EBITDA EBITDA represents operating profit after taxation before finance income and costs, income taxes, depreciation (net of capital grant amortisation), intangible asset amortisation, non-trading items and share of joint ventures' results after taxation. EBITDA is reflective of underlying trading performance and allows comparison of the trading performance of the Group's businesses, either year-on-year or with other businesses. | | 2022 €'m | 2021 €'m | | --- | --- | --- | | Profit after taxation | 606.5 | 763.0 | | Share of joint ventures' results after taxation | 0.4 | - | | Finance income | (6.6) | (0.3) | | Finance costs | 72.8 | 70.2 | | Income taxes | 92.5 | 53.3 | | Non-trading items | 146.2 | (91.5) | | Intangible asset amortisation | 82.7 | 80.8 | | Depreciation (net) | 221.6 | 201.5 | | **EBITDA** | **1,216.1** | **1,077.0** | ## 3. EBITDA Margin EBITDA margin represents EBITDA expressed as a percentage of revenue. | | 2022 €'m | 2021 €'m | | --- | --- | --- | | EBITDA | 1,216.1 | 1,077.0 | | Revenue | 8,771.9 | 7,350.6 | | **EBITDA margin** | **13.9%** | **14.7%** | ## 4. Operating Profit Operating profit is profit before income taxes, finance income, finance costs and share of joint ventures' results after taxation. | | 2022 €'m | 2021 €'m | | --- | --- | --- | | Profit before taxation | 699.0 | 816.3 | | Finance income | (6.6) | (0.3) | | Finance costs | 72.8 | 70.2 | | Share of joint ventures' results after taxation | 0.4 | - | | **Operating profit** | **765.6** | **886.2** | Kerry Group Annual Report 2022 257 5. 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 equity holders 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. | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | | EPS | Performance | | EPS | Performance | | | cent | | % | cent | | % | Basic earnings per share 341.9 (20.6%) 430.6 37.6% Brand related intangible asset amortisation 28.7 - 26.0 - Non-trading items (net of related tax) 70.0 - (75.8) - Adjusted earnings per share 440.6 15.7% 380.8 10.2% Impact of retranslating prior year adjusted earnings per share at (8.4%) 1.9% current year average rates* Growth in adjusted earnings per share on a constant 7.3% 12.1% currency basis * Impact of 2022 translation was (31.9)/380.8 cent = (8.4%) (2021: 1.9%). 6. Free Cash Flow Free cash flow is EBITDA plus movement in average working capital, capital expenditure (net), payment of lease liabilities, pensions contributions paid 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’. 2022 2021 €’m €’m Net cash from operating activities 721.8 654.0 Difference between movement in monthly average working capital and movement in the 22.6 146.6 financial year end working capital Share of joint ventures’ results after taxation* - 3.9 Payments on non-trading items 85.4 76.1 Purchase of assets (net) (221.0) (300.4) Payment of lease liabilities (35.1) (34.9) Proceeds from the sale of property, plant and equipment 38.1 19.4 Capital grants received 1.4 0.7 Exchange translation adjustment 27.2 0.7 Free cash flow 640.4 566.1 * Share of joint ventures’ results after taxation was not included in the Group’s EBITDA, but as a separate line item on the face of the Consolidated Income Statement for the year end 31 December 2022, therefore appears as a reconciling item in the comparative reconciliation for free cash flow. 258**Supplementary Information**^{}[] Financial Definitions Kerry Group Annual Report 2022 ## 7. Cash Conversion Cash conversion is defined as free cash flow, expressed as a percentage of adjusted earnings after taxation. Cash conversion is an important metric as it measures how much of the Group's adjusted earnings is converted into cash. | | 2022 €'m | 2021 €'m | | --- | --- | --- | | Free cash flow | 640.4 | 566.1 | | Profit after taxation attributable to equity holders of the parent | 606.4 | 763.0 | | Brand related intangible asset amortisation | 50.9 | 46.2 | | Non-trading items (net of related tax) | 124.2 | (134.4) | | Adjusted earnings after taxation | 781.5 | 674.8 | | Cash Conversion | 82% | 84% | ## 8. Liquidity Analysis The Net debt: EBITDA and EBITDA: Net interest ratios disclosed are calculated 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. | | 2022 Times | 2021 Times | | --- | --- | --- | | Net debt: EBITDA | 1.8 | 2.0 | | EBITDA: Net interest | 18.1 | 14.9 | ## 9. Average Capital Employed Average capital employed is calculated by taking an average of the shareholders' equity and net debt over the last three reported balance sheets. | | 2022 €'m | H1 2022 €'m | 2021 €'m | H1 2021 €'m | 2020 €'m | | --- | --- | --- | --- | --- | --- | | Equity attributable to equity holders of the parent | 6,221.9 | 6,088.7 | 5,601.2 | 4,963.1 | 4,655.5 | | Net debt | 2,217.4 | 2,456.3 | 2,124.1 | 1,980.6 | 1,945.1 | | Total capital employed | 8,439.3 | 8,545.0 | 7,725.3 | 6,943.7 | 6,600.6 | | Average capital employed | 8,236.5 | | 7,089.9 | | | The definition for total capital employed has been updated to reflect lease liabilities in 'Net debt' and 'Equity attributable to equity holders of the parent' as reported on the Consolidated Balance Sheet. This calculation no longer adds back 'Goodwill amortised (pre conversion to IFRS)' to 'Equity attributable to equity holders of the parent', in line with current market practice. EXPANDING^{}[] ADVISORS Kerry Group Annual Report 2022 259 ## 10. Return on Average Capital Employed (ROACE) This measure is defined as profit after taxation attributable to equity holders 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. ROACE is a key measure of the return the Group achieves on its investment in capital expenditure projects, acquisitions and other strategic investments. | | 2022 €'m | 2021 €'m | | --- | --- | --- | | Profit after taxation attributable to equity holders of the parent | 606.4 | 763.0 | | Non-trading items (net of related tax) | 124.2 | (134.4) | | Brand related intangible asset amortisation | 50.9 | 46.2 | | Net finance costs | 66.2 | 69.9 | | Adjusted profit | 847.7 | 744.7 | | Average capital employed | 8,236.5 | 7,089.9 | | Return on average capital employed | 10.3% | 10.5% | Prior year has been re-presented to align with the updated definition of 'Total capital employed'. ## 11. Total Shareholder Return Total shareholder return represents the change in the capital value of Kerry Group plc shares plus dividends in the financial year. | | 2022 | 2021 | | --- | --- | --- | | Share price (1 January) | €113.25 | €118.50 | | Interim dividend (cent) | 31.4 | 28.5 | | Dividend paid (cent) | 66.7 | 60.6 | | Share price (31 December) | €84.24 | €113.25 | | Total shareholder return | (24.7%) | (3.7%) | ## 12. Market Capitalisation Market capitalisation is calculated as the share price times the number of shares issued. | | 2022 | 2021 | | --- | --- | --- | | Share price (31 December) | €84.24 | €113.25 | | Shares in issue ('000) | 176,986.5 | 176,848.5 | | Market capitalisation (€'m) | 14,909.3 | 20,028.1 | ## 13. Enterprise Value Enterprise value is calculated as per external market sources. It is market capitalisation plus reported borrowings less total cash and cash equivalents. ## 14. Net Debt Net debt comprises borrowings and overdrafts, interest rate derivative financial instruments, lease liabilities and cash at bank and in hand. See full reconciliation of net debt in note 23 to the financial statements on pages 218-220. 260 Kerry Group Annual Report 2022 NOTES ### Courage ### Enterprising Spirit Open-mindedness ### Ownership ### Inclusiveness Kerry Group Prince’s Street, Tralee, Co. Kerry, V92 EH11, Ireland. T: +353 66 718 2000 ## Expanding Horizons is the story of ## www.kerry.com ## Kerry’s remarkable journey, from ## our origins in the dairy pastures of ## Southwest Ireland, to the company ## we are today, a world leader in Kerry Group Annual Report 2022 ## taste and nutrition. th In 2022, as we celebrated our 50 anniversary, this theme enabled us to reflect on our heritage, on what we have achieved and to look to the future with determination and optimism. We celebrated the people who made Kerry what it is today and who continue to do so every day, delivering real impact for our customers, as we strive to create a world of sustainable nutrition. ### Kerry Group ### Annual Report 2022 CBP010293