Aryzta AG: announced financial results for H2/2012

Zurich / CH. (aag) Swiss Aryzta AG announced its financial results for the six month period ended 31 January 2013. Commenting on the results, Chief Executive Officer Owen Killian said: «Aryzta´s underlying net profit performance was robust despite challenging trading conditions. Good progress on net debt reduction was also achieved despite significant ATI related investments. Aryzta expects to complete its ATI programme as planned in FY-2014 to enhance its customer centric strategy. Current consensus FY-2013 underlying fully diluted EPS, including accretion from the recently announced strategic acquisition, looks reasonable at this stage. Aryzta expects to return to double-digit underlying fully diluted EPS growth in FY-2014». Key Performance Highlights:

Food Group

  • Revenue increase of 6,9 percent to 1,50 billion EUR.
    • Food Europe increased by 2,0 percent.
    • Food North America increased by 10,6 percent.
    • Food Rest of World increased by 11,8 percent.
  • Ebitda increase of 6,3 percent to 183,9 million EUR.
    • Food Europe increased by 4,6 percent.
    • Food North America increased by 6,8 percent.
    • Food Rest of World increased by 12,5 percent.
    • Food Group Ebitda margin remained consistent at 12,3 percent.
  • Underlying fully diluted net profit increased by 5,1 percent to 121,5 million EUR.
  • Conversion of Ebitda to Operating Free Cash of 84,8 percent (H1/2012: 75,3 percent).
  • Net debt: Ebitda ratio of 1,79x (H1/2012: 2,13x).
  • Food Group gross term debt weighted average maturity of circa 5,38 years.
  • Weighted average interest cost of Food Group debt financing facilities of circa 4,59 percent.


  • Revenue increased in the period by 11,9 percent to 567,7 million EUR.
  • Ebitda declined by 59,3 percent to 2,4 million EUR.
  • Ebitda margin decreased by 80bps to 0,4 percent.
  • Contribution from associates and joint ventures increased by 53,8 percent to 10,9 million EUR.
  • Underlying fully diluted EPS increased by 16,2 percent to 7,59 cent.


  • Group revenue increased by 8,2 percent to 2,07 billion EUR.
  • Group Ebitda increased by 4,2 percent to 186,3 million EUR.
  • Underlying fully diluted net profit increased by 5,6 percent to 129,4 million EUR.
  • Underlying fully diluted EPS increased by 0,5 percent to 146,4 cent.

Food Group business

Aryzta´s Food Group business is primarily focused on speciality baking, a niche segment of the overall bakery market. Speciality bakery consists of freshly prepared offerings giving the best value, variety, taste and convenience to consumers at the point of sale. Aryzta´s customer channels consist of a mix of convenience and independent retail, large retail, quick serve restaurants (QSR) and other foodservice categories.

Total Food Group revenue grew by 6,9 percent to 1,50 billion EUR. Aryzta´s underlying Food business performed well, posting underlying revenue growth of 1,7 percent in what continues to be a very challenging trading environment.

Food Ebitda increased by 6,3 percent, while Ebitda margins were maintained at 12,3 percent, reflecting the impact of the fragile consumer spending environment and the absence of any notable price increases in the period.

Food Europe

Food Europe has leading market positions in the European speciality bakery market. It has a diversified customer base including convenience retail, gas stations, multiple retail, restaurants, catering and hotels, leisure and QSR.

Food Europe revenue grew by 2,0 percent to 641,6 million EUR, of which 0,5 percent was underlying growth, with favourable currency movements accounting for the balance. The improvement in underlying growth compared to the decline of 1,0 percent reported for the year ended 31 July 2012 represents a very strong performance by Food Europe, given the absence of any visible signs of significant economic improvement in the region. Selling prices remained unchanged in the period despite raw material volatility, especially in wheat, which is expected to trigger price increases during the second half of the year.

Ebitda increased by 4,6 percent to 77,6 million EUR, with margins expanding by 30bps to 12,1 percent, due to the benefits of ongoing ATI measures and changes in the food offering.

Macro-economic conditions remained challenging across the region throughout the period, with continued fragile consumer spending, due to increased government taxation and employment concerns.

Investment in upgrading facilities continued throughout the period, and the new bakery in Poland is expected to begin production during the second half of the current financial year. This will help satisfy increased demand from QSR customers in the region. Additional capital investment in the roll-out of the Food Group single-instance ERP platform also continued to progress to plan during the period.

Food North America

Food North America is a leading player in the US speciality bakery market. It has a diversified customer base, including multiple retail, restaurants, catering and hotels, leisure, hospitals, military, fundraising and QSR. Aryzta is the leader in high-value artisan bakery through La Brea Bakery, which focuses on the premium bakery segment. Aryzta´s well-established partnerships with key global QSR customers, which dominate the North American convenience food landscape, position the Group to grow market share in tandem with these customers.

Food North America revenue grew by 10,6 percent to 740,5 million EUR, with underlying revenue growth of 2,2 percent and additional contributions from acquisitions of 2,7 percent. Favourable currency movements supported the reported performance in the period by 5,7 percent. The underlying revenue growth in North America was almost entirely due to changes in product mix and increased volumes. This reflects the continued progress on deepening customer relationships and leveraging the broader range of Aryzta food offerings within the region. The performance also benefited from somewhat stronger consumer spending trends in North America compared to Europe.

Ebitda grew by 6,8 percent to 90,7 million EUR during the period, representing a margin of 12,3 percent. This margin contraction of 40bps is due to the impact of discontinued businesses and new business development and is expected to be temporary.

Food North America also completed two small acquisitions during the period, which will support the continued optimisation of the North American manufacturing network. During the period Food North America also discontinued its Direct Store Delivery business, resulting in the closure of 50 distribution centres and 224 truck routes. Additionally, the Group disposed of its 50 percent interest in a joint venture, previously held as part of the Food North America segment.

Food Rest of World

Food Rest of World revenues grew by 11,8 percent to 118,2 million EUR, with acquisition contribution of 4,8 percent and underlying revenue growth of 5,6 percent. Favourable currency benefited reported growth by 1,4 percent.

Ebitda grew by 12,5 percent to 15,6 million EUR, while Ebitda margins improved by 10bps to 13,2 percent. This was largely due to improved capacity utilisation from recently completed capacity in Brazil and the non-recurrence of costs incurred during the building and commissioning of this new bakery. The new capacity expansion underway in Malaysia remains on track and new sales offices were established in Jakarta and Singapore during the period. The key driver of revenue growth and capacity expansion in this region remains Aryzta´s partnerships with global QSR groups, which should underpin the Group´s future growth prospects.

Aryzta Transformation Initiative

In September 2011, Aryzta announced a three year plan to invest 400 million EUR in the Aryzta Transformation Initiative (ATI), through supply chain optimisation, ERP implementation and upgrading the Food Group´s manufacturing footprint to fewer, larger, more efficient multi-product bakeries. ATI was launched with the goal of becoming the leading global bakery company, by leveraging Aryzta´s people, capabilities, partnerships and brands. Critical to this initiative is the development of a customer-centric strategy, with highly effective cross-functional teams, to replace the previous business model of autonomous business units. The financial goal of these investments is to improve the Aryzta Food Group ROIC from FY-2011 underlying food assets to 15 percent by 2015.

Since the launch of ATI, the Food Group has expanded by over 15 percent through acquisitions. Furthermore, additional opportunities to improve the Food Group´s competitiveness have been identified, including the cessation of Direct Store Distribution in the USA and the further centralisation of certain administrative tasks. Accordingly, the original 400 million EUR estimate is expected to increase by up to 15 percent and non-recurring cash costs could be up to 40 percent of the overall ATI investment.

Management remains confident that continuing this transformation effort will further align our organisational structure internally and will also better support our overall customercentric strategy. The successful efforts to date have positioned the group well for continued growth and margin expansion as we enter the second half of the ATI program.