Financial earnings

Aryzta posts fallen revenues amid asset disposal drive to tackle debt

By Gill Hyslop contact

- Last updated on GMT

Aryzta reported a decrease in revenues amid an agressive turnaround program to deleverage its balance sheet that could see "other disposals". Pic: ©GettyImages/mizar
Aryzta reported a decrease in revenues amid an agressive turnaround program to deleverage its balance sheet that could see "other disposals". Pic: ©GettyImages/mizar
Swiss-Irish food group Aryzta reported a 6.3% dip in revenues for the first half of the year, but said it expects to raise more than €450m ($555m) from full-year asset sales to deleverage its balance sheet.

The maker of frozen baked goods saw sales fall 6.3% to €1.76bn ($2.17bn) and a pre-tax loss of €231m ($284.97,) for six months ended January 31, 2018, versus a loss of €139.7m ($172.32m) the same time the previous year.

The company noted the drop was primarily due to butter pricing and insourcing in Europe, as well as labour and distribution inflation in the US.

It said volume declines at its Cloverhill Chicago and Cicero bakeries – both of which were sold subsequent to the end of the period – had pushed revenue down by 14.1% in its North America division to €786.4m ($970m).

Excluding the impact of Cloverhill, Aryzta’s sales would have been up 1.3% on an organic basis.

Revenues at Aryzta’s European division rose by 0.7% to €868.3m ($1.07bn) – mostly driven by increases in price/mix – as well as in the rest of the world by 2.2% to €131.9m ($162.7m)

Earnings before interest, taxes, depreciation and amortization (EBITDA) declined by 29.6% to €161.3m ($198.97m), while underlying net profit decreased 53.5% to €50.9m ($62.78m).

Turnaround program

Artyza’s CEO Kevin Toland said the group is “actively implementing a range of measures”​ to improve EBITDA.

“We are in a multi-year turnaround program,”​ he said.

“Under our new leadership team, we are reshaping the group’s focus on our core B2B frozen bakery customers, improving operational efficiencies and deleveraging the balance sheet."

Under the leadership of Toland – who took over the helm in September last year following the resignation of long-standing chief executive Owen Killian​– the beleaguered bakery group has focused on drumming down its €1.7bn debt by offloading assets.

The group said its disposals so far have generated proceeds of around €140m ($172.7m), with the company “on track”​ to see receipts “exceed”​ €450m in its current financial year.

Last month, Aryzta sold its Cloverhill bakery business in the US to Twinkies maker Hostess Brands.

In January, the company unloaded its Dublin-based La Rousse Foods unit to Irish retailer Musgrave.

On Monday, the company revealed it is selling its 50% stake in Signature Flatbreads – which makes tortilla wraps, pita and naan breads for the UK market – to its joint venture partner for an undisclosed amount.

It also announced it has committed to disposing its 49% interest in French frozen foods company Picard, which it acquired in 2015 for €447m ($551.3m).

London-based private equity firm Lion Capital owns 51% of Picard, and Aryzta needs its approval for a sale.

Further disposals

“We’re not only looking to sell our JV but we’re looking at other disposal processes,”

Highlights for six months ended January 31, 2018

  • Revenue fell 6.5% to €1.76bn ($2.17bn)
  • EBITA dropped 29.6% to €161.3m ($198.97m)
  • Net profit decreased 53.3% to €50.9m (62.78m)

Aryzta CFO Frederic Pflanz told analysts during the earnings call, emphasizing the company cannot talk about other disposals on the way.

“We can assure you that each time one will happen, we will inform the market,” ​added Pflanz.

“As you can see, we have been in a good process; January one sale realized, February, another sale realized, March another sale agreed.”

Meanwhile, Aryzta announced general counsel and company secretary Pat Morrissey will be resigning from the board, promoting a search for his replacement. 

Related topics: Bread, News, Markets

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