Aryzta to refocus on European arm

Cuisine de France owner Aryzta is to refocus its attention on its business-to-business frozen bakery and European food solutions divisions as challenges at its North American arm continue to eat into group earnings.

Aryzta to refocus on European arm

The Irish-Swiss baked goods group — formed through the 2008 merger of IAWS and Swiss group Hiestand — yesterday reported revenues of €3.8bn for the 12 months to the end of July, representing a 2.1% decline on the previous year.

Earnings — on an EBITDA basis — fell by over 31% to €420.3m and underlying net profit fell by 42.5% to €179m. A non-cash impairment charge of €860m — relating to goodwill, intangibles and fixed assets — was incurred in the period.

Rising costs and declines in contract renewal customers dragged Aryzta’s North American revenues down nearly 6% last year, to just under €1.8bn.

The American business also incurred impairment charges of nearly €757m.

It also incurred €37.6m in restructuring costs relating to “business interruption challenges” at its Cloverhill Bakery business in Chicago, due to wholesale changes in staff.

Despite European earnings falling by over 23% and revenue down by 0.5%, Aryzta said most of its European geographies performed well — although there were capacity issues in Germany and UK margins were affected by Brexit uncertainty and the weakening of sterling.

Aryzta’s board yesterday said its “best current estimate” for EBITDA for the 12 months to next July is to be “broadly in line” with the 2017 outcome.

On the positive side, the group said a new five-year €1.8bn refinancing has been completed, as has a new banking covenant ceiling for net debt of 4.75 times earnings.

It added that the last year saw continued strong cash generation of €196m and that its strategic direction is now defined.

Management has assembled a new leadership team after a year of “significant change” and the group’s shares — down 33% since January — jumped nearly 9% yesterday.

The guts of Aryzta’s former management, including CEO Owen Killian, departed earlier this year in light of investor unrest over falling earnings and unpopular investment decisions.

The sale of Aryzta’s 49% share in highly-indebted French food retailer Picard remains unresolved, but the group remains intent on achieving “a fair market return” once agreement is reached on a sale by all shareholders.

Joint ventures, including Picard, performed well in the last year, contributing over €21m to group profits and €1.5bn to revenues.

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