Aryzta’s UK business hit by weak pound and soaring butter costs

Rising butter costs and the impact of weakened sterling have taken their toll on Aryzta Food Solutions’ UK business in the past year.

Revenue from the bakery giant’s Europe division fell 0.5% in the year ended 31 July 2017, to €1,738.6m.

While the business had a strong performance in most European countries, Aryzta reported that commodity price inflation - particularly soaring butter prices - had not been fully mitigated.

In the UK, the business has been hit by the weakness of sterling following the Brexit vote, which increased the cost of ingredients supplied from the Eurozone.

Aryzta said it had also experienced “considerable challenges” in transferring 225 SKUs in Germany from the Fricopan facility to Eisleben and in optimising the operations around additional bakery capacity.

The company’s total group revenue fell 2.1% to €3.8bn during the year ended 31 July 2017, primarily due to a decline in Aryzta’s North America business. Group EBITDA fell by almost a third to €420.3m.

Aryzta North America revenues dropped 5.7% to €1,799.1m as a result of contract losses and co-pack customers switching to in-sourcing volumes earlier than anticipated.

The division also suffered a drop in production at its Cloverhill plant after a federal audit of a third-party agency that supplied staff for the site revealed inadequate documentation. This resulted in about 800 experienced workers leaving the business and having to be replaced with new hires.

“As these individuals had significant knowledge and experience of the baking process and represented over one-third of the workforce at these facilities, there has been a significant decrease in the labour efficiency and production volumes, as well as an impact on increased waste levels at these facilities, as a result of this disruption,” stated the business.

Revenues at the company’s operations in the Rest of World – which represents 7% of total revenue and includes businesses in Brazil, Australia, New Zealand, Japan, Malaysia, Singapore and Taiwan –increased by 15.8% to €259.1m.

Former Glanbia USA & Global Nutritionals chief executive and president Kevin Toland joined the business as CEO this month following the departure of Owen Killian.

Killian, chief financial officer Patrick McEniff, and Americas CEO John Yamin all resigned in February following a period of trading described as “unexpected and extremely disappointing” by Killian.

Subscribers to British Baker can download our report on butter and fats here.

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