Aryzta AG: Announces First Quarter 2017 Results

Zurich / CH. (aag) Swiss Aryzta AG announces results for the first quarter 2017 (01 August to 31 October 2016). Commenting on the results, Aryzta AG Chief Executive Officer Owen Killian said: «The revenue development in Q1 FY-2017 is in line with our expectations. The weaker underlying revenue development reflects the impact of expected contract renewal volume declines in North America, timing of new business listings, as well as a subdued European performance disrupted by consolidation of manufacturing activities in Germany. Aryzta remains focused on unlocking the underlying revenue development of its well invested assets and demonstrating its strong cash generating capacity. The material reduction in total group debt funding costs will provide EPS support for FY-2017. Our outlook for both free cash generation and for underlying fully diluted EPS remains unchanged».

Key Performance Summary

  • Total revenue declined by (3.3) percent in the first quarter to 962.3 million EUR.
  • Underlying revenue declined by (1.2) percent in the period.
  • Excluding customers impacted by contract renewals, underlying revenue growth was 0.4 percent.
  • Europe had a solid volume performance of +1.8 percent, offset by a negative price/mix impact of (0.4) percent, largely related to transactional currency volatility.
  • North America reported a volume decline of (5.7) percent, driven by long-term contract renewal losses. This was mitigated by a positive price/mix performance of +1.0 percent.
  • Excluding contract renewals, North America underlying revenue declined (1.9) percent, due to timing of new business listings.
  • Rest of World underlying revenue growth was strong at 9.7 percent due to continued success with key customers and channel expansion.
  • Group refinancing plans are on track to obtain attractively priced long-term funding from public and bank sources.

Business in Europe

Europe revenue declined (1.4) percent in the first quarter to 436.3 million EUR. This decline consisted of underlying growth of 1.4 percent and a net acquisition/(disposals) impact of (1.1) percent, with a negative currency movement of (1.7) percent. European volume growth was 1.8 percent, despite the temporary disruption due to consolidation of manufacturing activities in Germany. This solid volume performance was partially offset by the negative (0.4) percent price/mix result, due to the impact of significant transactional currency volatility in the region during Q1.

Business in North America

North America revenue declined (7.5) percent in the first quarter to 462.5 million EUR. This decline consisted of an underlying revenue decline of (4.7) percent and disposals of (3.3) percent, with a positive currency impact of 0.5 percent. The volume decline of (5.7) percent in North America largely reflects the impact of volume losses arising from the renewal of long-term contracts completed during FY16. This was mitigated by a positive price/mix performance of 1.0 percent, primarily as a result of changes in customer product portfolios. North America underlying revenue growth, excluding contract renewals, declined (1.9) percent in Q1, due to timing of new business listings. These volumes are expected to be replaced by the solid pipeline of new food items. Aryzta’s brand rollout continues to gain listings, in line with the phased development programme.

Rest of World

Rest of World revenue increased 21.1 percent in the first quarter to 63.5 million EUR. This growth consisted of strong underlying growth of 9.7 percent and a positive currency impact of 11.4 percent. The strong underlying revenue performance in Rest of World reflects continued volume and price/mix growth with key customers, as well as channel expansion in Rest of World geographies.

Group Debt Refinancing

On 23 September 2016, Aryzta redeemed all Private Placements for a total consideration of 1.396 billion EUR (1.563 billion USD). This redemption was funded via a new 18-month term loan and existing financing resources. Aryzta also announced plans to access debt capital markets over this 18 month window to extend the debt maturity profile and to optimise the resulting funding costs and net present value of the early redemption. This process is progressing satisfactorily and Aryzta will update the markets when complete. In September 2016, Aryzta provided guidance for FY 2017 finance costs, including hybrid financing, in the range of 80 to 105 million EUR. Aryzta now expects FY 2017 finance costs, including hybrid financing, to be in the range of 80 to 95 million EUR.

Outlook

As advised in September, our focus is primarily on free cash generation. The material reduction in total group debt funding costs will provide EPS support for FY17. Our outlook for both free cash generation and for underlying fully diluted EPS remains unchanged.