Aryzta AG: benefits from disciplined cost management in H1-2023

Zurich / CH. (aag) Swiss-based Aryzta AG has announced its financial results for its first half of 2023, the 26-week period that ended in Schlieren (CH) on 28 January (H1-2023). Key highlights:

  • Revenue increased 24.2 percent from EUR 835.3m to EUR 1,037.1m
  • Organic revenue growth 25.4 percent
  • Ebitda increased to EUR 129.1m
  • Ebitda margin at 12.5 percent
  • Operating free cash flow reached EUR 76.0m
  • IFRS profit for the period of EUR 51.7m
  • Expectation of further improvements in FY2023 in all metrics
  • Reiteration of mid-term targets 2025
  • Redeeming in full the outstanding EUR 200m of Euro Hybrid bond as announced

Chairman’s and interim CEO’s summary:

Urs Jordi, Chairman and interim CEO: «Aryzta’s business performance improved across all our key metrics as our strategic plan continues to deliver. Revenue and organic growth both improved despite unavoidable pricing to recover significant cost inflation. Margins were maintained through improved operational leverage and strong focus on fixed cost controls. This increased cash generation and net profits. It also facilitated the planned redemption in full of the EUR 200m Euro Hybrid bond which improves our capital structure and reduces interest costs. Our performance reflects the step by step implementation of our bakery strategy as we focus on operational performance improvements within the businesses. We continue to benefit from market share gains as the competitive advantages of bake off drive volume and value.»


Outlook FY-2023

Current trading and consumer trends remain unchanged. Inflationary trends continue across all inputs with significant price volatility at elevated levels. Despite this challenging trading environment, the expectation is to deliver further improvement in all key metrics for FY-2023. The company reiterates the mid-term targets for 2025.

Interim financial business review

Aryzta’s strong H1 performance reflects the step by step implementation of business improvement initiatives as well as disciplined cost control to capture the benefits of the improved operational leverage.

Total revenue increased by 24.2 percent to EUR 1,037.1m and organic revenue growth increased by 25.4 percent with Europe achieving an organic growth of 26.2 percent and Rest of World achieving 20.2 percent organic growth. The growth was broad based across the Group and across channels with outperformance in some markets such as France, Poland and Switzerland in Europe as well as APAC. Outperformance was evident in some channels such as QSR reflecting the positive impact of new product innovation. In European retail, Aryzta outperformed the market in terms of both volume and value. Foodservice performance was supported by portfolio expansion and growth in customer base.

This strong performance was achieved against a backdrop of higher cost inflation necessitating pricing of 19.3 percent. Pricing in Q2 increased to 20.5 percent up from 18.1 percent in Q1. Consumer trends remained unchanged despite the price increases as bake off remained attractively priced within the overall food basket costs, supported by its competitive advantages in terms of savings on labour, space and waste.

Volume growth remained healthy at 5.8 percent reflecting the focus of local businesses growing their customer volumes through product innovation and renovation.

Ebitda margins increased to 12.5 percent from 7.1 percent in the prior period, of which 5.4 percent is due to the absence of disposal and restructuring costs which impacted the prior period. Excluding these impacts from the prior year, Ebitda margin was flat period on period, reflecting disciplined cost management and the improved strong operational leverage benefits. This protected the group margin from the significant input cost inflation pressure affecting the gross margin as a percentage of revenue. Strategic initiatives around improving operational performance such as continuous manufacturing improvement, recipe standardization, procurement and end-to-end optimization all contributed to the margin achievement.

Europe Ebitda margin declined by 20bps to 11.1 percent. This is the net effect of a margin reduction of 70bps from operations, as pricing in some European businesses only recovered inflationary effects in absolute terms, offset by the absence of restructuring costs (which amounted to 50bps).

Aryzta Rest of World achieved an Ebitda margin of 22.3 percent (+4140bps versus prior period). This reflected a very strong operating increase of 590bps supported by our other foodservice channel with a recovery in key markets like Japan and Australia and the benefit of the new Malaysian facility. The remaining increase of 3550bps related to the absence of disposal costs (including loss on the sale of Brazil).

Strong Cash performance

Aryzta delivered EUR 76m free cash from operations, a EUR 65m improvement from the comparable period. This was driven by the improved Ebitda along with disciplined working capital management. This resulted in a cash flow from activities of c.EUR 45m. The improved business and cash generation performance also delivered a significant improvement in the Group’s financial metrices. ROIC increased to 9.1 percent which is above the Group’s 8.0 percent WACC.

Redemption of EUR 200m Euro Hybrid

In February 2023, Aryzta AG announced the irrevocable redemption in full of the outstanding EUR 200m of its Euro Hybrid Bond. This will be funded from cash from activities and other existing resources. This redemption significantly improves the Group’s capital structure and reduces interest costs.

Appointment of Chief Operations Officer

Aryzta announces the appointment of Sandip Gudka as Chief Operations Officer (COO) and a member of the Executive Committee (EXCO) commencing 1 April 2023. In addition to his current responsibilities (Global Bun Bakeries managing director), Sandip will also assume responsibility for the ESG roadmap of the Group and will report directly to the Interim CEO. Sandip joined Aryzta in 2015 and has held a number of key senior management roles since then. Sandip’s appointment further strengthens the senior executive management team and enhances its capabilities to deliver the ongoing continuous change process to improve and deliver business performance.

Aryzta announces new fiscal year end date

Aryzta AG also announces that it is changing its fiscal year from July year-end to December year-end to align with calendar year reporting. As part of this process the company will issue audited IFRS financial statements for the 12 month period 31 July 2022 to 29 July 2023 (non-statutory financial statements) and its 2023 annual report and accounts (including compensation report) for the 17 month period from 31 July 2022 to 31 December 2023. All Aryzta AG directors will remain in office until the next AGM.

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