Aryzta AG: First Quarter 2018 Revenue Update

Zurich / CH. (aag) Swiss Aryzta AG is pleased to announce its revenue update for the period ended 31 October 2017.

Key Developments

  • Total revenue declined by (5.5) percent in the first quarter to 909.7 million EUR. Group organic revenue declined by (2.6) percent in the period. Currency had a (2.9) percent negative impact on revenue.
  • Aryzta Europe, despite the expected reduction from Swiss in-sourcing, had organic growth of 0.6 percent, offset by negative currency headwinds of (0.9 percent).
  • Aryzta North America organic revenue declined by (7.0) percent in the period, driven entirely by Cloverhill. Currency had a further (4.5) percent negative impact on revenues.
  • Aryzta Rest of World had strong organic growth of 7.8 percent, offset by a negative currency impact of (5.3 percent).
  • Excluding the impact of the Cloverhill business in North America, Group organic revenue increased by 1.3 percent.

Commenting on the Q1 2018 revenue update, Aryzta AG Chief Executive Officer Kevin Toland said: «The business challenges are unchanged from those outlined in September. Europe continues to perform to expectation, including Germany, with broadly based growth across the region offsetting planned Swiss in-sourcing. Progress at Cloverhill in North America is proving difficult. Management’s priority is to continue to identify issues and opportunities to address operating performance and to maximise available free cash flow».

Aryzta Europe

Organic revenue growth of 0.6 percent was driven by a 1.3 percent increase from improved price/mix and a decline of (0.7) percent in volumes. The performance reflects the continuing impact of planned volume in-sourcing in Switzerland offset by solid performance across the rest of the region, including improving KPI’s at Eisleben in Germany. Customer repricing negotiations due to higher butter prices and Brexit continue.

Aryzta North America

After a number of quarters of declining growth, organic revenue, excluding the Cloverhill business, increased by 1.0 percent. In terms of the overall performance of the North American business, challenges continue in the ambient manufacturing and co-packing facilities at Cloverhill. These are site specific issues relating to volume losses arising from the strategic misstep into the B2C centre aisle, high labour turnover, recruitment costs and continuing labour inflation. Labour inflation continues to be a key challenge in the US. Canada is performing well with solid volume growth driven by both retail and QSR innovation-led product customisation.

Aryzta Rest of World

Aryzta Rest of World revenues increased by 2.5 percent to 65.0 million EUR during the period, led by strong organic revenue growth across the region of 7.8 percent. Organic revenue growth was driven by a 2.7 percent improvement in volumes and a 5.1 percent positive impact from improved price/mix.

Outlook

The business issues remain unchanged from those outlined in September. Given the range of the internal and external challenges, management’s best current estimate is that FY18 Ebitda is expected to be broadly in line with FY17 Ebitda.