Aryzta to go ahead with French sale

By Geoff Percival

Troubled Cuisine de France owner Aryzta is still expected to sell its 49% stake in French food retailer Picard in order to pay down debt before its financial year closes at the end of July.

An earlier-than-expected trading statement, bereft of a sale update, partly fuelled another huge sell-off of the group’s stock.

Shares in the Irish-Swiss baked goods group tumbled by more than 27% — having plummeted by over 30% at one stage — after a second profit warning in five months forecast full-year earnings to be 9%-12% lower than previously thought. Aryzta originally shaved 15% off its annual earnings estimates in January.

The latest update showed Aryzta’s third quarter revenue to be down by nearly 17% at €811.4m, mainly due to the impact of disposals and currency fluctuations.

Its European operations weakened more than expected with revenue down 6.4%, driven by insourcing problems in Germany and Switzerland and weak consumer spending in the UK — putting them on a par with its troubled North American business.

“We are particularly disappointed by the current warning in that the main driver would appear to be renewed weakness in Europe, where we had thought that there were signs of recovery,” said Ian Hunter at Investec.

A new three-year restructuring plan aims to deliver €200m in cost savings.

Aryzta also said its disposal programme remains “on track”, but gave no update on plans to monetise its Picard stake; something which investors have urged for some time.

It did say, however, that the dividends from Picard are strengthening the balance sheet. Analysts still expect a sale of the French asset in the next two months — although not all are in favour — as Aryzta’s new earnings guidance suggests it is at risk of breaching its lending covenants.

“Net debt needs to fall toward €1.2bn by July 2018 which would suggest that they maybe €150m light at present,” said Darren McKinley at Merrion.

“While a Picard sale may offer some relief, an equity issue may be better than selling off Picard at a bad price for an asset that has been performing better than the rest of the group.

“We would be concerned that restructuring may result in asset impairments which could weigh on book value,” he said.

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