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Wednesday 23 May 2018

Shares fall as Aryzta issues new profit alert

Minister for Finance Paschal Donohue with Aryzta CEO Kevin Toland
Minister for Finance Paschal Donohue with Aryzta CEO Kevin Toland
John Mulligan

John Mulligan

Shares in troubled Swiss-Irish food group Aryzta slumped as much as 22pc yesterday as it issued a fresh profit warning - the first under new chief executive Kevin Toland - and told investors that its US business is underperforming.

The Cuisine de France owner - beset by strategic missteps, higher costs and Brexit woes - has been trying to navigate its way out of trouble for the past year. Mr Toland, the former chief executive of Dublin Airport operator DAA, took up the CEO mantle at Aryzta last September, and is charged with spearheading a multi-year turnaround programme.

Aryzta said that its earnings before interest, tax, depreciation and amortisation (EBITDA) in the 12 months to the end of July, excluding currency movements and disposals, are now likely to be 15pc below the €420m reported in the previous financial year. The figure will be 20pc lower on a reported basis.

It had expected the current year's number to be broadly in line with that of 2017.

It noted that EBITDA weakened in the three months to the end of December in both Europe and the United States "with this trend not expected to reverse for the remainder of full-year 2018".

The group also said yesterday that it remains compliant with its banking covenants following a €1.8bn refinancing last September. Mr Toland said that Aryzta's revamped senior executive team is "fully focused" on meeting the challenges facing the business.

"We are progressing the disposal of non-core assets and deleveraging programme which is a key component of our multi-year turnaround programme and delivery of the €1bn cash generation target," he said.

Aryzta, which has been eyeing the sale of assets including its 49pc stake in French frozen food firm Picard, said yesterday that it expects to complete the sale of €450m of assets by the end of its current financial year, which finishes in July. It previously unveiled a four-year, €1bn deleveraging target.

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The non-core asset disposals planned by Aryzta also include a sale of its US-based Cloverhill bakery operation.

Illinois-based Cloverhill, which Aryzta acquired as part of €730m deal in 2014, has proved debilitating for Aryzta.

It said that while revenue in the US has continued to stabilise, the EBITDA performance there, excluding the Cloverhill arm, is underperforming expectations.

It said that factors hitting the US arm - double-digit inflation in distribution costs, higher than expected labour costs, and a tightening US labour market - are "more significant than expected".

It added that performance improvement actions in the US are "behind delivery plan".


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