Aryzta European business continues to outpace US

Group revenue at global baking business Aryzta has slumped 5.5% in the first quarter to €909.7m (£812m).

Aryzta’s European division, which includes the UK, performed ahead of the overall business, with organic revenue growth of 0.6%. This was driven by a 1.3% increase from improved price/mix, as volumes fell 0.7%.

The company said it was continuing price negotiations with European customers due to higher butter prices and Brexit. Aryzta reported in its full-year results in September that commodity price inflation – particularly soaring butter prices – had not been fully mitigated.

“Europe continues to perform to expectation, with broadly based growth across the region,” said Aryzta chief executive officer Kevin Toland, who joined the business in September following the departure of Owen Killian.

Revenue from the Aryzta North America division fell 7.0% in the quarter, which the company said was entirely due to its troubled Cloverhill operation, with revenue excluding Cloverhill up 1%.

Production at the company’s Cloverhill plant has fallen 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 – a third of the workforce - leaving the business and having to be replaced with new hires. This has brought a “significant decrease in the labour efficiency and production volumes” as well as increased waste levels.

“Progress at Cloverhill in North America is proving difficult,” said Toland. “Management’s priority is to continue to identify issues and opportunities to address operating performance and to maximise available free cash flow.”

Aryzta’s Rest of World division increased revenues by 2.5% to €65m during the period, led by 7.8% organic revenue growth across the region.

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