Zurich / CH. (aag) Swiss Aryzta AG announced its third quarter trading update for the period ended 30 April 2017. Overview:
- Q3 Aryzta Group underlying revenue was flat compared to Q3 2016. On a quarterly sequential basis underlying revenue growth increased by 2.0 percent.
- Aryzta Europe Q3 underlying revenue increased by 4.3 percent. On a quarterly sequential basis underlying revenue growth increased by 3.7 percent.
- Aryzta North American Q3 underlying revenue declined by (4.3) percent, which reflects a 1.5 percent quarterly sequential improvement from the (5.8) percent decline in Q2.
- Aryzta Rest of World Q3 underlying revenue increased by 3.7 percent. On a quarterly sequential basis underlying revenue growth declined by (5.6) percent.
- Ongoing margin pressure
- Increased headwinds relating to labour issues and negative operating leverage from weaker revenue in North America.
- Optimisation of European capacity remains challenging and will take significantly more time to address than anticipated.
- Cash generation remains key financial and operational focus.
- As previously advised, given the pace of management transition and the extent of operational reviews underway, the Board is not in a position to provide guidance. Accordingly, prior guidance should not be relied upon.
Aryzta Group
Total Group revenue increased 2.7 percent in Q3 to 975.2 million EUR. Underlying revenue was flat, while currency added 2.7 percent growth. Group underlying revenue comprised a negative volume impact of (2.7) percent and a positive price/mix impact of 2.7 percent. On a sequential quarterly basis, Group underlying revenue growth improved by 2.0 percent, reflecting a strong performance in Europe, a modest improvement in North America and some weakness in Rest of World. The Group is experiencing ongoing margin pressure from increased headwinds relating to labour issues and negative operating leverage from weaker revenue in North America and from optimising European capacity, which will take significantly more time to address than expected.
Aryzta Europe
Aryzta Europe revenue increased by 3.9 percent in Q3 to 436.9 million EUR. Underlying growth of 4.3 percent was offset by a negative currency movement of (0.4) percent. Underlying revenue comprised a volume impact of 1.3 percent and a price/mix impact of 3.0 percent (primarily mix). The improvement also reflects the temporary benefit of delays in the scheduled transfer of volume in Switzerland, however, this will impact negatively in Q4 and FY18. Demand remains strong in the region, with some progress achieved in commissioning of new capacity. However, considerable challenges remain in optimising this capacity, which will take significantly more time to address than expected. Pricing lags relating to Brexit and some raw material inflation continue to impact.
Aryzta North America
Aryzta North America revenue increased by 0.1 percent in Q3 to 473.7 million EUR. An underlying revenue decline of (4.3) percent was offset by a positive currency impact of 4.4 percent. The underlying revenue decline of (4.3) percent comprised of a negative volume impact of (6.7) percent offset by a price/mix impact of 2.4 percent. The North American performance reflects a quarterly sequential improvement of 1.5 percent from the (5.8) percent underlying revenue decline in Q2. North America continued to experience declining revenue from a small number of already disclosed customer contract volume losses. However, the North American business faces headwinds from increasing labour supply issues and negative operating leverage from weaker revenue.
Aryzta Rest of World
Aryzta Rest of World revenue increased by 15.3 percent in Q3 to 64.6 million EUR. This growth consists of underlying revenue growth of 3.7 percent and a currency movement of 11.6 percent. Underlying revenue growth comprised volume growth of 0.7 percent and a price/mix impact of 3.0 percent. The volume decline in Rest of World reflects phasing of planned promotional rollouts with major customers.
CEO Appointment
On 18 May, Aryzta announced the appointment of Kevin Toland as CEO. Toland will join Aryzta following a customary six month notice period, or earlier, if mutually agreed by both parties.
Board Renewal
On 26 May, as part of ongoing Board refreshment and renewal, focusing on North American and Continental European experience, Aryzta announced James B. (Jim) Leighton as the first of two planned additions to its Board as an Independent Non- Executive Director. The appointment is subject to approval by Aryzta shareholders at its AGM.
Picard
The Board has appointed HSBC as its advisers in relation to an evaluation of alternatives for its 49 percent investment in Picard. Work continues on this brief and the Board will communicate any substantial change to the market as early as is practicably possible.
