Aryzta underlying profit crashes more than 70%

Aryzta has reported steep declines in profit and earnings – but insists the business is well placed for future growth.

Announcing its results for the year to 31 July 2018, the international baked goods giant reported a 9.5% fall in revenue to €3,435m (£3,057m), down 1.2% on an organic basis. European revenue fell 1.6% to €1,710.6m (£1,522m), but grew 0.9% on an organic basis.

Earnings were hit by factors including the butter price hike and Brexit concerns in Europe, and by labour and distribution cost increases in the US.

Underlying net profit fell 72.3% to €49.6m (£44.6m), while underlying EBITDA declined by 28.2% to €301.8m (£268.7m). The firm’s EBITDA margin declined 230 points to 8.8%.

The results come in the year Aryzta has made a string of senior appointments, including a new CEO, CFO, chief strategy officer, chief people officer, general counsel and new CEOs of both the North American and European businesses.

Following a review, it has developed a business plan focused on the frozen bakery market. Activity has included a cost reduction programme designed to drive €200m (£178m) in savings over a three-year period with annual targeted run-rate savings.

The business has also sold the Cloverhill and La Rousse business, and sold its stake in Signature Flatbreads back to its founders.

“During the 2018 financial year, the board has worked to refocus the strategy, rebuild the management team and put the business back on the path to stability, performance and growth,” stated Aryzta.

The company is raising up to €800m (£712m) of equity capital to reduce debt and give the business the finances to fund the turnaround programme.

Aryzta said the benefits of the funding would include: improved liquidity and financial flexibility; enabling the business to maximise the value of disposals; providing greater certainty for its customers and suppliers; and providing funding for other investment projects.

“After completion of the capital increase, Aryzta believes it will be well positioned to deliver on its key objectives of stabilising its business and driving performance and growth by exploiting the potential of the steadily growing frozen bakery market through strengthening customer relationships and improving operational efficiency,” stated the company.

For the coming financial year, Aryzta expects underlying performance to be stable, with mid-to-high single-digit organic EBITDA growth.

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