Bakery group Aryzta downgrades full-year guidance

25-Jan-2018 - Last updated on 25-Jan-2018 at 14:16 GMT

Swiss-Irish baked goods company Aryzta has decreased its full-year guidance by 15%. Pic: ©iStock/Vicheslav

Swiss bakery business Aryzta has downgraded its full-year 2018 EBITDA, previously projected to be ‘broadly in line’ with last year, but now expected to be around 15% lower.

The Group reported that, while revenue was still stable, EBIDTA weakened during the second quarter in both the US and Europe, a trend it anticipates will not reverse for the remainder of the year.

In September, Aryzta reported a 2.1% revenue decrease of €908m ($1.07bn) in the last financial year, with profits on both sides of the Atlantic (North America and Europe) taking a nosedive by 5.7% each.

Notwithstanding recovering butter price

Aryzta said European performance is estimated to account for around 20% of the anticipated fall against expectations.

While there is progress on the recovery of the butter price and improvements in capacity utilisation in Germany are on track, the company does not expect these to offset the volume and associated margin lost to timing of insourcing sufficiently.

It also noted Brexit-related pressures will continue to affect Aryzta’s UK business.

Double-digit inflation

It reported US revenue - excluding Cloverhill - continues to stabilize and Canada is performing well.

However, EBITDA performance of Aryzta’s US business - again excluding Cloverhill - is underperforming.

Aryzta blamed this on double-digit inflation in distribution costs, higher-than-expected labour costs and a continuing tightening of the US labour market.

Additionally, the company said the recovery strategies it adopted - like price increases, reductions in selling, general and administration costs, and brand investments - are beginning to generate savings but again are behind plan.

Earlier this month, BakeryandSnacks reported Arytza had appointed Dave Johnson as CEO of North America in a bid to reverse declining margins.

“The newly strengthened management team is now in place and fully focused on addressing those challenges,” said Kevin Toland, Aryzta’s CEO.

“While acknowledging the major challenges, revenue remains resilient,” he added.

Aryzta reported its Rest of World business is progressing as planned.

Disposal plan

The Swiss-Irish baked goods maker also announced it is beginning to dispose of some of its assets as part of its four-year disinvestment program.

“We are progressing the disposal of non-core assets and deleveraging program, which is a key component of our multi-year turnaround program and delivery of the €1 billion ($1.24bn) cash generation target,” added Toland.

The disposal processes of La Rousse Foods, Cloverhill and JV investments are at different stages, but the company expects to generate more than €450m ($563m) by year-end FY18.

Aryzta noted it will update the market as appropriate.

It will announce its second quarter results on March 12.