Thursday 19 September 2019

Aryzta shares jump on signs revenue is stabilising

Aryzta CEO Kevin Toland
Aryzta CEO Kevin Toland
John Mulligan

John Mulligan

Shares in Swiss-Irish baked goods group Aryzta jumped in Dublin yesterday after it reported a small rise in organic revenue during the first quarter of its financial year.

It's the first time in three years that the challenged Cuisine de France owner has posted a quarterly sales increase. Its total revenue fell 5.2pc to €862.3m in the quarter, which included a 5.3pc decline as a result of disposals, and a currency hit.

However, organic growth edged 0.3pc higher in the period, which the group said represented "ongoing stabilisation across the business, despite commercial challenges".

Aryzta said the overall revenue figure for the quarter is in line with expectations.

The 0.3pc organic rise included a volume decline of 0.6pc and a price/mix improvement that accounted for a 0.9pc improvement.

In Europe, the group's organic revenue was 2pc higher with broadly-flat volumes. Revenue declined in the quarter, by 1.1pc to €430.4m.

Aryzta said it continues to work to recover cost increases in Europe, particularly due to sustained high butter prices and recent flour price increases.

"Flat volumes in the period also reflect the year-on-year impact of insourcing in Switzerland and Germany and challenging trading conditions in the UK," it added.

In North America, organic revenue fell 2.8pc. Disposals accounted for an 8.7pc decline in revenue, while foreign exchange movements resulted in a 1.1pc boost. Volumes in North America declined 2.1pc. Total revenue for the period in the region was down 10.4pc at €366.9m.

Aryzta CEO Kevin Toland said that the company remains "resolutely focused" on its core frozen business-to-business bakery market. He added that the group has "the management team and resolve to implement what is a multi-year turnaround strategy".

Earlier this month, Aryzta shareholders narrowly approved an €800m capital raising plan, with 53pc of votes cast in favour. Aryzta's biggest shareholder, Cobas, had opposed the move.

Aryzta is using €500m of the €740m net proceeds to cut its debt pile, while €150m has been earmarked to help fund a turnaround plan called Project Renew. That aims to deliver €90m in savings a year at the group by 2021.

Aryzta, which manufactures burger buns for McDonald's, had net debt of €1.62bn at the end of January.

The group said that for its 2019 financial year, it expects its underlying performance to be stable and for the "early benefits" of its Project Renew plan to positively impact the business.

It expects to generate mid to single-digit organic growth in earnings before interest, tax, depreciation and amortisation for the year.

Aryzta's shares jumped almost 7pc in Dublin yesterday.

Irish Independent

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