Zurich / CH. (aag) Irish-Swiss Aryzta AG reduces FY-2018 Ebitda guidance and updates on deleveraging progress Aryzta in its 27 November 2017 Q1 Revenue Update guided that, with Aryzta facing a range of internal and external challenges, management’s best current estimate was that FY-2018 Ebitda was expected to be broadly in line with FY-2017 Ebitda.
Aryzta now needs to update that guidance. Management’s current best estimate is that FY-2018 Ebitda, on a like for like basis excluding FX and disposals, is likely to be c. 15 percent below that of FY-2017 (20 percent on a reported basis). While revenue, excluding Cloverhill, is relatively stable, Ebitda weakened towards the end of Q2 in both Europe and US, with this trend not expected to reverse for the remainder of FY-2018.
- Europe: European underperformance is estimated to account for c. 20 percent of the anticipated shortfall relative to expectations. There has been good progress on butter price recovery and the improvements in capacity utilisation in Germany are on track. However, this progress is not expected to be sufficient to offset the volume and associated margin lost to timing of insourcing and the impact of Brexit-related pressures on our UK business remains.
- North America: US revenue, excluding Cloverhill, is continuing to stabilise as previously indicated and Canada continues to perform well. However, Ebitda performance of Aryzta’s US business excluding Cloverhill is underperfoming expectations. The factors contributing to the variance – double digit inflation in distribution costs, higher than expected labour costs in a continuing tightening US labour market – are more significant than expected. In addition, a range of performance improvement actions, including price increases, reductions in SG+A cost and brand investment, while beginning to generate savings are behind delivery plan. The recently appointed CEO of North America together with a newly constituted Group management team are fully focused on dealing with these challenges.
- Rest of World: Rest of World is progressing as planned.
Bank Refinancing
Aryzta’s successful refinancing ensures the Group continues to be covenant compliant.
Cash Generation + Deleveraging
Aryzta previously set a 4-year, EUR 1 billion deleveraging target and expects to generate more than EUR 450 million by year-end FY-2018 from non-core asset disposals. These disposal processes (including La Rousse Foods, Cloverhill and JV investments), while advanced, are at different stages and Aryzta will continue to update the market as appropriate.
Chief Executive’s Statement
Kevin Toland, Aryzta CEO, commented: «While acknowledging the major challenges, revenue remains resilient. The newly strengthened management team is now in place and fully focused on addressing those challenges. We are progressing the disposal of non-core assets and deleveraging programme which is a key component of our multi-year turnaround programme and delivery of the EUR 1 billion cash generation target». Aryzta will announce FY-2018 half-year results on 12 March, 2018.
