Q3 revenues at bakery group grow by almost 15%

Third-quarter revenues at Irish-Swiss bakery group Aryzta grew by almost 15% boosted largely by its better-performing north American operations.

Group revenue — covering the three months to the end of April — amounted to just under €1.2 billion; a 14.9% year-on-year increase. This growth comprised a 10.8% revenue increase for its total food business and a 6.7% rise in revenue in its Food Europe division. However, on an underlying basis, revenues in that arm fell by 2.6% on a like-for-like basis.

In its summation of its latest quarterly performance, Aryzta said that the Food Europe segment continues to be “one of the most challenging trading environments within the group, with both political and economic uncertainty continuing to dampen consumer confidence”.

“Price increases over the past year, to cope with the significant raw material inflation, have presented an additional challenge; given the weak consumer sentiment in the region,” the Zurich and Dublin-based company added.

Outside of Europe, performance was better. In north America, total revenue was up by 12.4%, to €349.3m; with underlying revenue growth of 6% measured. Growth there was aided by recent acquisitions and the group’s increased growth in the coffee shop/fast food outlet “limited serve restaurant” (LSR) channel.

Rest of the World food revenue grew by 27.1% in the quarter to €57.3m; new acquisitions contributing over 9% of sales. “Continued investment in expansion opportunities” was given as one of the reasons for that division’s growth.

Group chief executive Owen Killian commented that the overall results reflect the dual benefits of acquisition contributions and “improvement in channel mix”.

“Weak consumer demand in Europe depressed underlying revenue in the period. Progress on our Aryzta Transformation Initiative [ATI] continues to support performance, and this remains an essential focus,” he added.

Revenue contribution from Origin Enterprises — the Dublin-based agri-services business in which Aryzta owns nearly 69% — fell by 2.2% year-on-year in the third quarter.

In terms of overall group outlook, Aryzta said that despite difficult trading conditions in Europe, it still expects to generate underlying earnings per share of 338c for the current financial year.

Analyst reaction to yesterday’s update from one of the best performing Irish-quoted stocks was generally upbeat.

While John O’Reilly, of Davy Stockbrokers, said that nothing in recent data concerning the north American food sector — particularly the LSR channel — suggests any imminent slowdown. NCB Stockbrokers was more concerned, although has kept its “hold” recommendation, with a €35 price target for the stock.

“We remain cautious given the implied volume trend in Europe, but reiteration of guidance is encouraging when many peers in the sector are announcing profit warnings,” NCB said.