Aryzta shares slide on poor update

Shares in Cuisine de France owner Aryzta slid nearly 7% yesterday after the company reneged on assurances it wouldn’t incur any restructuring costs this year and said around 2% of its global workforce may be cut as part of ongoing cost-cutting initiatives.

In its third quarter trading update – covering the three months to the end of April - the Zurich-headquartered group yesterday said its current year’s performance will be hit by one-off restructuring costs relating to cost reduction moves.

One Zurich-based analyst noted that as the company hadn’t expected any restructuring costs at the time of its interim March results, the latest statement shows “Aryzta continues to operate with very low visibility.”

Aryzta’s “continued progress in underlying revenue recovery” of 0.9% annualised growth for the third quarter (total revenue was down 2.4%) also failed to impress analysts.

Aryzta reiterated its full-year guidance – earnings per share in line with consensus and free cash generation of over €200m -and said its latest efficiences will “enhance our future competitiveness”.

It added that it is in discussions with relevant works councils about operational changes, which it added “may impact approximately 2% of the group’s total employees.”

While the quarter showed “an improving trend in all regions” Europe was the only area where revenues rose. That said, North America’s decline has continued to contract.

The group’s share price – down by over 24% since January and by nearly 39% in the past 12 months – was down by just under 5% in Zurich at CHF39.56 and fell by 6.61% to €35.30 in Dublin.

“The Aryzta story remains a work-in-progress and the third quarter interim management statement has pluses and minuses,” according to Davy Stockbrokers’ Cathal Kenny.

“The renewal of all outstanding contracts is a welcome development which removes a key unknown from the investment case and strengthens visibility.

"The underlying revenue performance in North America is a little disappointing, along with the re-occurance of a one-time cash charge,” he added.

“The company is guiding earnings per share ‘in line with consensus’ which it estimates at 355.5c.

"We will reduce our earnings per share forecasts to around 355c to reflect the difference in like-for-like growth and continued weakness in margins into the second half,” added Liam Igoe of Goodbody Stockbrokers.

Aryzta also said it can’t provide guidance on the potential costs that may arise from the outcome of the job discussions.


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