Aryzta shares fall as food group's profits, margin decline
Published 27/09/2016 | 02:30
Shares in Irish-Swiss food group Aryzta dipped yesterday as its pre-tax profits fell over 8pc to €365.5m and a full percentage point was sliced from its margin.
The Zurich-headquartered company, which has its roots former Irish agri group IAWS, saw its full-year revenue climb 1.5pc to €3.87bn.
The company, headed by chief executive Owen Killian, has spent the past year trying to shore up investor confidence tied to concerns over sales growth, its acquisition strategy, and a tougher North American market.
Confidence in the company was also dented in the spring when Mr Killian sold €16m worth of shares in the group.
He said he regretted the move, but that it was triggered by the weakness in the share price impacting the collateral value of the share.
Releasing its full-year results yesterday, Aryzta said that its earnings before interest, tax, and amortisation (EBITA) declined 5.7pc to €484.8m.
In the 12 months to the end of July, its EBITA margin was 12.5pc, which was lower than the 13.5pc it recorded in the previous financial year.
Aryzta was created in 2008 by the merger of IAWS and Hiestand. The group's operating units and brands include Cuisine de France, Otis Spunkmeyer, and La Brea bakery.
Mr Killian said that underlying revenue growth had been subdued by the impact of contract renewals of North America during the year.
"The cumulative effect of these contract renewals, combined with the long anticipated volume loss in Switzerland, will also negatively impact full-year 2017," he said.
Revenues at its Food Europe division rose 1.8pc to €1,74bn. Revenues at its North America unit declined 1.8pc to €1.9bn.
One bright spot for investors was the improvement in free cash flow, which the group said was ahead of target, at €267m. For 2017, it's predicting cash generation of between €225m and €275m.
The company said that post the balance sheet date, it completed the early redemption of €1.2bn in long-term, private placement debt at a cost of €1.41bn, cutting its borrowing costs.
Davy Stockbrokers analyst Cathal Kenny said that while Aryzta's adjusted earnings per share was in line with the forecast, and free cash flow was also solid, the group's operating model "has yet to reach a point of stability, primarily led by margin development".