Aryzta looks to ‘flat’ trading performance

Swiss based food group Aryzta reported a 13.2 per cent growth in revenues for its third quarter, but underlying revenues fell by 2.3 per cent as it was hit by falling revenues in the US.

Revenues grew by 13.2 per cent to €973.2m in the 13 weeks to end April 30th, as currency movements provided growth in the quarter of 12.4 per cent.

In Europe, revenue grew by 4.7 per cent in the third quarter to € 405.9m, largely driven by growth in in-store-bakery in the large retail channel led by discounters.

“However, European margin performance has softened and has yet to recover,” Aryzta said.

North America revenue grew by 21.5 per cent to € 509.4m, but underlying revenue growth declinedby 6.7 per cent.

“The decline in underlying revenue in North America reflects the impact of the SKU rationalisation strategy to improve capacity utilisation and reduce investment CapEx allocation. This trend is expected to continue through Q4 with the consequential impact for margins from negative operating leverage,” Aryzta said.

Following Aryzta's placing of 29m shares in Origin Enterprises in March 2015, the group's remaining 29 per cent interest in the Irish agri group will be presented as discontinued operations within the group's results.

Chief executive Owen Killian said the decline in the group's North America business is expected to continue through Q4, adding, "Food Europe has yet to recover in Switzerland, where the consumer economy has suffered since the removal of the currency peg in January and in France due to security concerns in the quarter".

As such, the group is forecasting a “flat trading performance” within the food group, combined with a reduced 29 per cent contribution from Origin, underlying fully diluted EPS is expected to be circa 400c in FY 2015.

“Notwithstanding the short-term weakness in performance, Aryzta is confident the business model is intact. There is increasing evidence of cross-selling through the existing customer centric strategy and this will deliver future earnings growth.”