Bakery business Aryzta has cuts its forecast earnings and announced plans to slash costs by £175m over the next three years.

The business reported that organic revenue had fallen 1.2% in the 13 weeks ended 30 April, which it described as a “stable” performance in the face of weaker market conditions and difficulties recovering rising costs. Revenue was down 16.8% when disposals and currency impact were taken into account.

The business warned that earning margins were below management expectations over the period, and that it estimated full-year earnings would now be between 9% and 12% lower than earlier guidance.

It said previously outlined issues – including increased labour distribution and butter costs – had impacted performance.

And it highlighted the UK as a market that had been hit particularly hard by weakened consumer spending.

The Aryzta board said it had approved a three-year restructuring plan that would be implemented immediately and would aim to deliver a total of €200m (£175m) in cost savings over three years.

“Aryzta has identified and is addressing the challenges facing the historical business model and the industry generally and will stay focused on its core, the frozen B2B bakery market,” said the company’s chief executive Kevin Toland.

“As part of the ongoing process, the group has sold selected loss-making assets, rationalised headcount and, under the new management, put in place a series of efficiency and cost reduction activities to accelerate performance improvement.

He added that the €200 million restructuring and cost reduction plan was designed to “restore financial flexibility and align our asset and cost base with current and expected business conditions”.

In Aryzta’s European division, organic revenue declined 2.6% in the period, with volumes down 5%. US organic revenue fell 1.3% on volumes down 1.9%.

Former Friesland Campina chief operating officer Gregory Sklikas last month joined Aryzta as CEO of its European business.