Kerry Regulatory News (KYGA)

News release

Thursday, 9 August 2018

Kerry Group - Interim Management Report

for the half year ended 30 June 2018

Kerry Group, the global taste & nutrition and consumer foods group reports a solid underlying business performance for the half year ended 30 June 2018.

Edmond Scanlon - Chief Executive Officer

"Evolving consumer trends and the changing marketplace have provided increased opportunities and demand for Kerry's industry leading RD&A and broad technology portfolio. This, along with the Group's enhanced end use market focus, drove healthy volume growth and underlying margin expansion in the first half of 2018. We also continued to make progress with and invest in business development initiatives aligned to our strategic growth priorities.

In light of the above, we update our guidance and now expect to achieve growth in adjusted earnings per share of 7% to 10% in constant currency."

INTERIM MANAGEMENT REPORT

For the half year ended 30 June 2018

The breadth and pace of changing consumer demands continued to drive major fragmentation and change along the supply chain and within the industry. Major global consumer trends such as authenticity, healthfulness, sustainability, premiumisation, clean label and convenience aligned with local consumer preferences continue to drive increased innovation opportunities. The agility of Kerry's business model and integrated solution capability is more relevant than ever in supporting customers to optimise speed to market, in order to meet consumer preferences.

The Group again delivered volume growth ahead of its markets. Taste & Nutrition achieved sustained volume growth in North America, solid growth in Latin America, a good performance in Europe and continued strong growth in APMEA.

UK and Irish consumer foods markets encountered challenges in the period, however Kerry's Consumer Foods division delivered a solid underlying performance.

Business Performance

Group revenue on a reported basis increased by 1.4% to €3.2 billion reflecting strong volume growth and contribution from acquisitions, offset by adverse currency movements. Business volumes grew by 3.6% and pricing increased by 0.6% in the period. The reported revenue increase reflects the aforementioned business volume growth and positive pricing, contribution from acquisitions of 3.9%, an adverse translation currency impact of 6.6% and an adverse transaction currency impact of 0.1%.

Taste & Nutrition delivered 4.1% volume growth and pricing increased by 0.6%. Consumer Foods' business volumes increased by 1.3% and pricing increased by 0.9%.

Group trading margin reduced by 10 basis points to 10.5%, reflecting a 10 basis points improvement in Taste & Nutrition, positive underlying margin improvement in Consumer Foods offset by adverse sterling exchange rates resulting in a 60 basis points margin reduction.

Constant currency adjusted earnings per share increased by 9.0% to 144.2 cent (H1 2017 currency adjusted: 132.3 cent). Basic earnings per share increased by 0.5% to 128.3 cent (H1 2017: 127.6 cent).

The interim dividend of 21.0 cent per share represents an increase of 11.7% over the 2017 interim dividend. The Group achieved free cash flow of €201m in the period (H1 2017: €357m).

Business Reviews

¹volume growth

· Volume growth driven by Meat, Beverage & Snacks End Use Markets (EUMs)

· Pricing +0.6% - easing raw material inflation managed through customer pass-through pricing model

· Trading margin +10bps - good underlying growth driven by operating leverage, portfolio enhancement and efficiencies, offset by currency headwinds and growth investments

The division achieved good growth across an increasingly diverse customer base. Developing markets delivered strong growth of 9.6%, with APMEA being the main driver. Foodservice delivered a good performance across all regions, growing at 6.2% overall in the period. Reported revenue increased by 1.4% to €2,579m, as volume growth and the contribution from business acquisitions were offset by significant translation currency headwinds.

Kerry's taste technologies recorded a strong performance across all regions, with TasteSense™ sugar-reduction technology and natural extracts being key drivers of growth. Kerry's broad clean label technology portfolio performed well, with fermented ingredients, proteins, nutritional bioactives and enzyme technologies all delivering good growth in the period. The Group maintained a strong innovation pipeline, anchored by the ability to create new nutritional product solutions that meet local consumer taste preferences across the globe.

Americas Region

· 2.8% volume growth

· Good performance in North America, driven by Meat, Snacks & Beverage EUMs

· LATAM delivering solid growth

High levels of product churn continued right across the marketplace, with clean label being a major driver of product innovation across retail categories and foodservice channels. Centre of store categories continued to weigh on industry growth levels. Kerry delivered volume growth ahead of the market by winning market share through speedy innovation across broader customer alliances and partnerships. Reported revenue in the region decreased by 2.4% to €1,307m, with significant translation currency headwinds more than offsetting volume growth and the contribution from business acquisitions.

In North America, Kerry's Meat EUM continued to deliver strong growth, meeting consumer demands for authentic taste, natural shelf life preservation and a broader range of alternative protein based products. Kerry's natural extract capabilities were a key driver of growth in the Beverage EUM, where strong progress was continued through new launches with Kerry's 'Cold Brew' technology.

The Snacks EUM delivered strong growth through new innovative healthier snacks and indulgent world taste experiences. Kerry's dairy taste and clean label technologies benefitted from enhanced wellness and premiumisation trends within the Meals EUM.

The acquisitions of the Kettle business from Tyson Foods and Dottley Spice in late 2017 strengthened Kerry's positioning and contributed to a strong performance in the foodservice channel in the period. Good progress was also made in the expansion of fermented ingredient manufacturing capacity at the Group's Rochester, Minnesota facility.

In LATAM, Mexico and Central America delivered good growth, while Brazil performed well, but was impacted by the truck drivers industrial action in Q2. The Snacks and Bakery & Confectionery EUMs delivered good growth, along with foodservice chains across the region. The implementation of Kerryconnect progressed successfully in line with expectations.

The global Pharma EUM continued to grow well, with excipients in North America delivering strong growth. The Group acquired the pharmaceutical lactose manufacturing facility of Rothschild, Wisconsin based Foremost Farms in the period, further strengthening Kerry's pharmaceutical lactose supply base. Kerry's Ganeden® probiotics & Wellmune® branded immunity enhancing ingredients delivered excellent performance, as they continued to broaden market reach with a number of new launches into wider applications.

Europe Region

· 2.7% volume growth

· Good performance in Beverage, Meat & Dairy EUMs

· Foodservice delivered strong growth through both chains & independent operators

Good growth was achieved, as Kerry continued to develop its in-market customer engagement to meet evolving local consumer preferences across the region. Reported revenue increased by 2.9% to €700m, with volume growth and the contribution from business acquisitions partially offset by translation currency headwinds.

The Beverage EUM delivered a strong performance in both the retail and foodservice channels, with a number of innovations deploying Kerry's TasteSense™ sugar-reduction technology and natural extracts portfolio. New beverage menu ranges were developed with key foodservice partners.

The Meat EUM continued to provide good growth opportunities, as Kerry's clean label and innovative texture technologies performed well. Kerry's Smoke & Grill and Meat-Free technologies were successfully deployed in a number of new launches in the UK and Northern Europe. A majority shareholding was acquired in Netherlands based Ojah - a market leading plant-based protein manufacturer in Europe producing textured meat alternatives, enhancing the Group's meat-free technology portfolio. The Meals EUM was challenged in the period, as retailers in some geographies reduced promotional activity. The Bakery & Confectionery EUM delivered a solid performance, while the Snacks EUM performed well with better-for-you offerings and indulgent taste products. Russia delivered good growth, particularly into the Meat and Snacks EUMs, while production commenced in Kerry's first manufacturing facility in the country, providing a key platform for future business development and growth.

The Dairy EUM had good growth in the ice cream category, with a number of new launches in both premium and dairy-free ranges using Kerry's taste technologies. International dairy markets remained challenging during the half year. Demand from major dairy importing countries for primary dairy products continued to benefit from the nutritional values of dairy. While demand for butterfat in particular remained relatively strong, market stability was impacted by continued shifts in supply / demand balances.

APMEA Region

· 10.1% volume growth

· Good performance across all EUMs - in particular Snacks, Meals & Bakery

· Progressing strategic expansion - both organic and acquisitive

The APMEA region continues to evolve as a highly fragmented marketplace with broad-based market dynamics and consumer trends including convenience, healthfulness, snacking, e-commerce and increased regulation. Such trends, together with local consumer taste preferences, are driving major consumption change and underlying market growth in both retail and foodservice channels. Excellent growth was achieved in the period, as Kerry's business model continued to be successfully deployed. Kerry continued to invest in capabilities to capitalise on these ongoing local market opportunities. The recent acquisitions of Tianning Flavours, Taste Master and Hangman have all further strengthened Kerry's authentic local taste capabilities.

Reported revenue in the region increased by 9.7% to €537m, with volume growth and the contribution from business acquisitions partially offset by translation currency headwinds.

The Snacks EUM delivered strong growth due to the continued development of new snacking occasions across the region. Local category leaders continued to innovate through the introduction of new authentic world flavours, with Kerry's Smoke & Grill, Barbecue, and Dairy technologies being deployed across a range of products.

The Meals EUM performed strongly, through increased consumer demand across the region for new fusion flavours, using both sweet and savoury technologies, combined with better-for-you offerings in both the retail and foodservice channels, most notably in China.

The Bakery EUM continued to deliver strong growth in both sweet and savoury applications, through integrated solutions that supported customers in broadening their ranges.

Sub-Saharan Africa and MENAT achieved strong growth, through better-for-you applications into the Snacks & Beverage EUMs. The Group continued to invest in its strategic growth priorities in the region. Good progress was made through investments in ongoing footprint expansion in Malaysia, Indonesia and China. Two further acquisitions were made in the period; SIAS Food Co. - a leading China-based supplier of culinary and fruit ingredients and systems to the foodservice and food manufacturing industries, and Season to Season - a leading South African supplier of taste ingredients and systems to the African snack and food sectors.

¹volume growth

· Volume growth led by good performance across the Food to Go range

· Pricing +0.9% - easing raw material inflation across the period

· Trading margin - growth more than offset by the negative impact of transaction currency

Changing consumer behaviours in the UK and Ireland and the evolving market landscape continue to drive heightened competition. Discounter chains continue to gain market share, with retailers in general focusing more on range simplification, customer brands and EDLP strategies. Within this rapidly changing environment, retailers are seeking to capitalise on higher growth areas of snacking and 'on the go' consumption, while consumers' multi-shopping behaviours continue to evolve, and online shopping maintains strong growth.

Reported revenue increased by 1.2% to €685m, as volume growth and the contribution from business acquisitions were offset by translation currency headwinds. 'Everyday Fresh' enjoyed solid growth, as the Richmond range delivered good growth across the period, with Richmond chicken sausages also being successfully launched in the second quarter. Denny benefitted from increased marketing support in Ireland. The traditional spreads category continues to be challenged, however the division's softer butter technology delivered good growth with private label brands within the UK, as did the Dairygold brand in Ireland.

'Convenience Meal Solutions' were impacted by reduced promotional activity as well as the extended warm weather spell towards the end of the period. While there was good business development in 'better-for-you' ranges, the frozen meals category continued to be challenged.

'Food to Go' performed well with strong growth in Cheestrings. The relaunch of Fridge Raiders commenced towards the end of the period, and the Fridge Raiders brand will now embrace a broader range of snacking products across a wider consumer demographic. Good progress was achieved in the development of the out of home segments with good growth into pub and restaurant chains. Rollover delivered strong growth with a number of new listings into retailers, as they developed broader food to go platforms in their stores.

The Brexit mitigation programme made further progress in the period and is on track to deliver on its objectives.

Financial Review

* Before brand related intangible asset amortisation and non-trading items (net of related tax)

Revenue 

On a reported basis Group revenue increased by 1.4% to €3.23 billion (H1 2017: €3.18 billion) and 8.0% in constant currency. Volumes grew by 3.6%, pricing increased by 0.6%, adverse transaction currency of 0.1%, contribution from business acquisitions of 3.9% and adverse translation currency of 6.6%.

H1 2017: Group reported revenue +4.8%, volumes +3.8%, pricing +1.8%, transaction currency (0.4%), acquisitions +0.6%, translation currency (1.0%).

In Taste & Nutrition, reported revenue increased by 1.4% to €2.58 billion (H1 2017: €2.54 billion). Volumes grew by 4.1%, pricing increased by 0.6%, contribution from business acquisitions of 4.6% and adverse translation currency of 7.9%.

H1 2017: Taste & Nutrition reported revenue +6.9%, volumes +4.2%, pricing +1.7%, transaction currency (0.1%), acquisitions +0.7%, translation currency +0.4%.

In Consumer Foods, reported revenue increased by 1.2% to €685m (H1 2017: €677m). Volumes increased by 1.3%, pricing increased by 0.9%, adverse transaction currency of 0.4%, contribution from business acquisitions of 1.0% and adverse translation currency of 1.6%.

H1 2017: Consumer Foods reported revenue (2.8%), volumes +2.3%, pricing +1.9%, transaction currency (1.4%), translation currency (5.6%).

Trading Profit & Margin

Group trading profit increased by 0.5% to €340.0m (H1 2017: €338.4m) reflecting 8.7% growth, after taking account of an adverse translation currency impact of 8.2% in the period.

Group trading profit margin reduced by 10 basis points to 10.5%, as underlying margin expansion attributable to improved product mix, operating leverage and efficiencies was offset by currency headwinds and growth investments.

Trading profit margin in Taste & Nutrition increased by 10 basis points to 13.1%, due to the benefits of improved product mix, operating leverage and efficiencies, offset by currency headwinds and growth investments.

Trading profit margin in Consumer Foods decreased by 60 basis points to 7.0%, due to significant transaction currency headwinds partly offset by underlying margin expansion.

Finance Costs (net)

Finance costs (net) for the period decreased by €0.6m to €33.8m (H1 2017: €34.4m) due to cash generation and a reduction in pension interest, offset by acquisition activity.

Taxation

The tax charge for the period, before non-trading items was €36.5m (H1 2017: €38.5m) which represents a reduction of 30bps since year end to an effective tax rate of 13.1% (H1 2017: 13.7%). The reduction in the tax rate was due to changes in tax rates in a number of jurisdictions.

Acquisitions

During the period, the Group completed a total of four acquisitions and entered into a joint venture at a total cost of €120.3m.

Non-Trading Items

The Group recorded €15.4m of costs net of tax (H1 2017: €17.8m) due to costs associated with acquisition integration and the Brexit mitigation programme.

The Group achieved free cash flow of €200.6m (H1 2017: €357.2m). This decrease is due to increased investments in working capital and capital expenditure.

A summary balance sheet as at 30 June 2018 is provided below:

Property, plant & equipment increased by €78.3m to €1,607.9m (Dec 2017: €1,529.6m, H1 2017: €1,430.1) due to additions made in the period and foreign exchange translation movements, offset by the depreciation charge.

Intangible assets increased by €81.9m to €3,728.6m (Dec 2017: €3,646.7m, H1 2017: €3,414.2m) due to additions made in the period and foreign exchange translation movements, offset by the amortisation charge.

Current assets increased by €109.6m to €2,141.3m (Dec 2017: €2,031.7m, H1 2017: €2,159.8m), as increased trade and other receivables and inventories were offset by a reduced level of cash in hand at 30 June 2018.

At the balance sheet date, the net deficit for all defined benefit schemes (after deferred tax) was €35.4m (Dec 2017: €102.0m, H1 2017: €186.4m). The decrease in the net deficit from year end relates to a favourable movement in discount rates and inflation rates.

At 30 June 2018, net debt stood at €1,403.3m, an increase of €61.6m relative to the December 2017 debt of €1,341.7m.

At 30 June the key financial ratios were as follows:

 *Calculated in accordance with lenders' facility agreements which take account of adjustments as outlined in the financial definitions accompanying the Interim Financial Statements.

The average maturity profile of net debt was 5.5 years at the end of the period (Dec 2017: 6.0 years). At the period end 72% of net debt was carried at fixed rates. The Group's balance sheet is in a healthy position. With a net debt to EBITDA* ratio of 1.5 times, the organisation has sufficient headroom to support its future growth plans.

There were no changes in related party transactions from the 2017 Annual Report that could have a material effect on the financial position or performance of the Group in the first half of the year.

Group results are impacted by fluctuations in exchange rates year on year versus the euro. The chart below outlines the difference in average exchange rates from H1 2018 compared with H1 2017.

http://www.rns-pdf.londonstockexchange.com/rns/2671X_1-2018-8-8.pdf

Details of the principal risks and uncertainties facing the Group can be found in the 2017 Annual Report on pages 62 to 68. These risks include but are not limited to; the identification and integration of acquisition targets, failure to adapt the portfolio to respond to unprecedented marketplace dynamics, quality & food safety risks, inability to secure, build, and engage a robust talent pipeline, systems implementation risks, unauthorised use of Group intellectual property, geopolitical risks, Brexit, and ongoing operational and compliance risks. However, risks with increased potential impact in the second half of the year include fluctuating currencies and ongoing geopolitical volatility including Brexit. The Group actively manages these and all other risks through its control and risk management process.

The Group Condensed Consolidated Interim Financial Statements have been prepared on the going concern basis of accounting. 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 budget for a period not less than 12 months, the medium term plans as set out in the rolling five year 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.

The Board has declared an interim dividend of 21.0 cent per share (an increase of 11.7% on the 2017 interim dividend of 18.8 cent) payable on 16 November 2018 to shareholders registered on the record date 19 October 2018.

Future Prospects

Kerry has embraced the changing marketplace and is well placed to respond to localised consumer trends and customer requirements through industry leading innovation. Kerry's Taste & Nutrition model is uniquely positioned to deliver for customers in this environment. Growth prospects for the full year remain strong due to a good innovation pipeline, while bearing in mind the strong comparatives from the second half of 2017. While remaining cautious on the consumer landscape within the UK, Consumer Foods is well placed to continue to outperform its markets.

The Group will continue to invest in business development aligned to strategic growth priorities and lead the continued consolidation of the industry benefiting from the Groups strong balance sheet and scalable business model.

In February 2018, we guided growth in adjusted earnings per share of 6% to 10% on a constant currency basis. Given the momentum of the business, we now expect to achieve growth in adjusted earnings per share of 7% to 10% in constant currency.

Responsibility Statement

The Directors are responsible for preparing the Half Yearly Financial Report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 of Ireland (S.I. No. 277 of 2007) ("the Regulations"), the Transparency Rules of the Central Bank of Ireland and with IAS 34 "Interim Financial Reporting" as adopted by the European Union.

The Directors confirm that to the best of their knowledge:

· the Group Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2018 have been prepared in accordance with the international accounting standard applicable to interim financial reporting adopted pursuant to the procedure provided for under Article 6 of the Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002;

· the Interim Management Report includes a fair review of the important events that have occurred during the first six months of the financial year, and their impact on the Group Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2018, and a description of the principal risks and uncertainties for the remaining six months;

· the Interim Management Report includes a fair review of the related party transactions that have occurred during the first six months of the current financial year and that have materially affected the financial position or the performance of the Group during that period, and any changes in the related parties' transactions described in the last Annual Report that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.

On behalf of the board

8 August 2018

Disclaimer Forward Looking Statements

This Announcement contains forward looking statements which reflect management expectations based on currently available data. However actual results may differ materially from those expressed or implied by these forward looking statements. These forward looking statements speak only as of the date they were made and the Company undertakes no obligation to publicly update any forward looking statement, whether as a result of new information, future events or otherwise.

RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2018

Kerry Group plc

Notes to the Condensed Consolidated Interim Financial Statements

for the half year ended 30 June 2018

1. Accounting policies

These Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2018 have been prepared in accordance with the requirements of IAS 34 'Interim Financial Reporting' and using accounting policies consistent with International Financial Reporting Standards as adopted by the European Union. The accounting policies applied by the Group in these Condensed Consolidated Interim Financial Statements are the same as those detailed in the 2017 Annual Report except for changes in accounting policies in respect of IFRS 9 'Financial Instruments' and IFRS 15 'Revenue from Contracts with Customers' outlined below. Some comparative information has been re-presented to align with the current half year presentation. In the 2018 Condensed Consolidated Interim Financial Statements, the Group has re-presented corresponding balances of 'Revenue by location of external customers' in note 2 for 2017 comparatives to align with the current year presentation. In addition the Group has included an accounting policy in relation to joint ventures as follows:

Basis of Consolidation - 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 associate and joint ventures' loss/(profit) after tax' within Trading Profit in the Consolidated Income Statement, and its share of post-acquisition movements in reserves is recognised in reserves until the date on which joint control ceases. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment, less any impairment in value. Where indicators of impairment arise, the carrying amount of the joint venture is tested for impairment by comparing its recoverable amount with its carrying amount.

Unrealised gains arising from transactions with joint ventures are eliminated to the extent of the Group's interest in the entity. Unrealised losses are eliminated to the extent that they do not provide evidence of impairment. The accounting policies of joint ventures are amended where necessary to ensure consistency of accounting treatment at Group level.

The following Standards and Interpretations are effective for the Group from 1 January 2018 but do not have a material effect on the results or financial position of the Group:

2. Analysis by business segment

The Group has determined it has two reportable segments: Taste & Nutrition and Consumer Foods. The Taste & Nutrition segment manufactures and distributes an innovative portfolio of taste & nutrition solutions and functional ingredients & actives for the global food, beverage and pharmaceutical industries. The Consumer Foods segment manufactures and supplies added value branded and consumer branded chilled food products to the Irish, UK and selected international markets. Corporate activities, such as the cost of corporate stewardship and the cost of the kerryconnect programme, are reported along with the elimination of inter-group activities under the heading 'Group Eliminations and Unallocated'.

Information about geographical areas

\* The 2017 segmental analysis has been re-presented to reflect the change in management responsibility whereby the revenues of external customers located in the Middle East & Africa are now reported as part of APMEA (formerly APAC) instead of Europe (formerly EMEA).

**Asia Pacific, Middle East & Africa

The accounting policies of the reportable segments are the same as those detailed in the Statement of Accounting Policies in the 2017 Annual Report. Under IFRS 15 'Revenue from Contracts with Customers' revenue is recognised at a point in time.

3. Non-trading items

*including impairment of assets held for sale

(i) Acquisition integration and restructuring costs

During the period, acquisition integration and restructuring costs of €13.7m (30 June 2017: €19.9m; 31 December 2017: €36.0m) primarily related to costs of integrating acquisitions into the Group's operations and transaction expenses incurred in completing current year acquisitions. These costs reflect the closure of factories, relocation of resources and the restructuring of operations in order to integrate the businesses into the existing Kerry operating model. In the period ended 30 June 2018, a tax credit of €3.4m (30 June 2017: a tax credit of €6.8m; 31 December 2017: a tax credit of €10.8m) arose due to tax deductions available on acquisition integration and restructuring costs.

(ii) Consumer Foods Brexit mitigation programme

Kerry continues to implement the Brexit mitigation programme which was initiated in 2017. As part of this programme, certain sourcing and production activity has been relocated and other activities restructured as a result of the impending changes due to Brexit. The charge relating to this in 2018 is €5.1m (30 June 2017: €nil; 31 December 2017: a charge of €11.7m) and the associated tax credit is €0.9m (30 June 2017: €nil; 31 December 2017: a credit of €1.0m).

(iii) Loss on disposal of businesses and assets (including impairment of assets held for sale)

During the period the Group disposed of property, plant and equipment primarily in Ireland, Malaysia and the US for a consideration of €8.3m. In 2017, the Group disposed of unused property, plant and equipment and in the period to 30 June 2017 disposed of its 22.5% shareholding in Addo Food Group Limited for a combined consideration of €33.3m (30 June 2017: €31.0m). The investment in Addo Food Group Limited was disposed from the investment in associate line on the Condensed Consolidated Balance Sheet. A net tax credit of €0.2m (30 June 2017: a net tax credit of €0.2m; 31 December 2017: a tax credit of €0.1m) arose on the disposal of businesses and assets. There were no impairments of assets held for sale recorded in the period. In 2017, assets classified as held for sale were impaired to their fair value less costs to sell by €1.0m.

(iv) Tax credit due to change in tax rates

On 22 December 2017, the US Tax Cuts and Jobs Act ("the Act") was enacted into law. This Act brings about fundamental changes to the US tax system, both from an individual and corporate tax perspective. As a result of the Act, the statutory rate of US federal corporate income tax has been reduced from 35% to 21% with effect from 1 January 2018. The reduction in the US corporate income tax rate to 21% required revaluation of Kerry's US deferred tax liabilities. This resulted in a one-off deferred tax credit in 2017, which is reported in the Income Statement as a non-trading item of €52.8m.

4. Finance income and costs

5. Earnings per A ordinary share

In addition to the basic and diluted earnings per share, an adjusted earnings per share is also provided as it is considered more reflective of the Group's underlying trading performance. Adjusted earnings is profit after taxation attributable to owners of the parent before brand related intangible asset amortisation and non-trading items (net of related tax). These items are excluded in order to assist in the understanding of underlying earnings.

6. Dividends

Since the end of the period, the Board has proposed an interim dividend of 21.00 cent per A ordinary share. The payment date for the interim dividend will be 16 November 2018 to shareholders registered on the record date as at 19 October 2018. These Condensed Consolidated Interim Financial Statements do not reflect this dividend.

7. Retirement benefits obligation

The net deficit recognised in the Condensed Consolidated Balance Sheet for the Group's defined benefit post-retirement schemes was as follows:

At 30 June 2018, the net deficit before deferred tax for defined benefit post-retirement schemes was €44.6m (30 June 2017: €233.8m; 31 December 2017: €124.3m). This was calculated by rolling forward the defined benefit post-retirement schemes' liabilities at 31 December 2017 to reflect material movements in underlying assumptions over the period while the defined benefit post-retirement schemes' assets at 30 June 2018 are measured at market value. The decrease in the net deficit before deferred tax of €189.2m was driven primarily by favourable movements in discount and inflation rates.

8. Financial instruments

i) The following table outlines the components of net debt by category at the balance sheet date: