Business Irish

Sunday 25 February 2018

Aryzta ceo Owen Killian to step down

• Aryzta shares soar up to 21pc
• Finance boss also goes
• Picard stake under review

Former Aryzta boss Owen Killian
Former Aryzta boss Owen Killian
John Mulligan

John Mulligan

Aryzta chairman Gary McGann started the long journey of restoring investor confidence in the troubled Swiss-Irish food group yesterday, announcing the departure of long-serving, embattled ceo Owen Killian.

Chief financial officer Patrick McEniff and the boss of Aryzta's business in the Americas, John Yamin, will also be leaving the company at the end of its financial year in July.

Shares in the company rocketed more than 21pc at one stage yesterday - a reflection of how eager investors were for change at Aryzta, whose shares plummeted by a third last month after it issued a profit warning. That slump knocked about €1.4bn off its market capitalisation.

At its peak, yesterday's surge added as much as 577m Swiss francs (€542m) to the Cuisine de France owner's market cap.

Aryzta's primary listing is in Zurich, with a secondary listing in Dublin.

But, with the search for new top brass set to begin, Aryzta is now effectively operating within a power vacuum. Mr McGann - the former ceo of Smurfit Kappa - is not taking on any interim executive responsibilities.

Investec analyst Ian Hunter said that such a move would have provided some comfort to investors.

Aryzta announced three new insider executive management appointments yesterday: Dermot Murphy as chief operating officer, Europe; Ronan Minahan as coo Americas; and Robert O'Boyle as coo Asia-Pacific, Middle East and Africa.

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Mr Hunter said he remains optimistic about Aryzta's long-term future but warned that it faces big challenges.

"This is proactive, the board has taken control and we can expect things to move on from there," he said, adding the changes should have been made earlier.

Mr Hunter said that Aryzta's €1.7bn net debt pile remains a concern when the company is languishing. Aryzta said yesterday that it has increased the covenant headroom under its senior revolving credit facility, enabling its debt to EBITDA (earnings before interest, tax, depreciation and amortisation) covenant to rise to four times from 3.5 times.

Aryzta has additional, so-called hybrid debt of €800m that doesn't sit on the balance sheet and which isn't included in the net debt to EBITDA calculations. Included, and prior to the new covenant ceiling, it would bring Aryzta's net debt to EBITDA ratio from 3.4 times to 4.8 times.

For more than two years, Aryzta - whose customers include McDonald's and Subway - has been struggling to maintain margins, retain customers and fix a model that up until 2014 had delivered for shareholders.

In 2015, Aryzta paid €446m for a 49pc stake in French frozen food firm Picard - a move widely regarded by investors as a misstep for the company.

It bought the stake from private equity group Lion Capital, with an option to buy the remainder.

Aryzta yesterday all but signalled its intention to ditch its stake in Picard, announcing a review of its investment strategy in joint ventures.

"As part of that review, Aryzta has commenced a process with Lion Capital to evaluate investment alternatives for the Picard business," it said. It added that, if it sells its Picard stake, proceeds will be used to strengthen its balance sheet.

Irish Independent

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