Business Irish

Monday 27 March 2017

Aryzta warns consumers of double-digit price inflation

Peter Flanagan

Peter Flanagan

IRISH-led food conglomerate Aryzta has warned that "double- digit" price inflation may hit consumers after it reported half-year results yesterday.

For the six months to the end of December, the bakery giant -- which counts Cuisine de France among its brands -- reported earnings before interest, tax, depreciation and amortisation that increased by 52pc to €173.1m on the back of revenue rising by 36pc to €1.89bn. Those numbers translated to diluted earnings per share which rose by more than a third to 140.3c.

Despite those results, which were in line with market expectations, the company warned the higher cost of commodities could lead to higher prices.

"The overall operating environment remains challenging with primary food inflation accelerating during the period.

"Dynamic pricing is being implemented to recover the cost from rising input prices," it added. "The period has seen a return of food raw material inflation and a consequent return to dynamic pricing, last seen in 2008.

"Current trends suggest double-digit price inflation may be necessary to recover costs.

"Volatility in these input costs is likely to become an ongoing feature of the industry, emphasising the importance of maintaining secure reliable material sourcing, it added.

Food companies have been under severe pricing pressure in recent months with cereals and other commodity prices hitting record highs almost every week.

Revenue continued to decline in Ireland and UK but the company said there "is evidence of market stabilisation".

"Challenges still remain in these markets with ongoing support to customers in repositioning their value proposition."

Continental Europe has returned to growth, but North America has now overtaken Europe as the biggest revenue generator after the takeover of Maidstone Bakeries in Canada. The region provided €610.5m of revenue and EBITDA of nearly €77m.

NCB Stockbrokers' Conor Hartnett welcomed the results but warned the higher costs could impact the bottom line.

"We are encouraged by the underlying sales performance in Europe and North America; however, immediate attention now focuses on recovery of raw material input price inflation.

"Double-digit price inflation will likely impact volume growth as the operating environment remains challenging. "We do not expect any significant change [in our buy rating]," he said.

Aryzta closed down 0.94pc at €33.60.

Irish Independent

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