Wednesday 23 January 2019

Aryzta set to take a €500m hit on French and US assets sale

Market disappointed with expected price for sale of 49pc stake in Picard

Kevin Toland took over as chief executive of Aryzta last September
Kevin Toland took over as chief executive of Aryzta last September
Samantha McCaughren

Samantha McCaughren

Troubled food group Aryzta will realise losses of around €500m on the sale of assets in the coming months.

In a profit warning last week, flagging a 20pc fall in its earnings expectations, the company said the sale of non-core assets was advanced and would generate more than €450m by July.

The assets had been acquired for around €1bn.

In a conference call, Aryzta confirmed that the disposal figure related to La Rousse (which has already been sold for around €30m), a 49pc holding in French company Picard and its US plant Cloverhill, which has been beset with problems, including an immigration crackdown in which a third of its workforce left the business.

In 2015, it bought the stake in frozen-food business Picard for almost €450m.

In 2014, it bought Cloverhill in the US for $660m (€530m) and subsequently invested in the business. The value of the loss-making business was written down significantly last September.

There was optimism among investors that the company would begin a long turnaround process following the appointment of chairman Gary McGann, a highly respected businessman who also chairs Paddy Power Betfair, to the role in January 2017. His appointment of Kevin Toland to the CEO role was also welcomed after the exit of Owen Killian.

However, in the call after last week's profit warning, analysts expressed unhappiness with the latest bad news.

Analysis of the announcement by brokers Berenberg said that the €450m target included the already announced sale of La Rousse and a €55m special dividend following a refinancing by its Picard in December. "This implies circa €370m proceeds for Cloverhill and Picard," it noted.

Jon Cox of Kepler Cheuvreux said of the number: "That seems somewhat low.

"I know Cloverhill... you've written that down to a fair amount and it is struggling, but it would seem to indicate you're not expecting too much from Picard also."

Warren Ackerman of Societe Generale said the latest update looked like a "complete shambles and it's going to be very painful for your beleaguered shareholders yet again. I'm just really struggling to see how things have moved so badly, so quickly."

Toland responded by saying he took 'slight exception' to the words complete shambles.

Another analyst asked if the company could ensure there would not be future profit warnings. "Every two quarters, you come with a profit warning," he said.

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