Food group Aryzta’s full-year profit falls more than 8%

Pretax profit at Swiss-Irish food group Aryzta fell 8.3 per cent in the 12 months ending July, while revenue climbed 1.3 per cent.

The frozen baked goods supplier said profit for the full year totalled €365 million compared with €398 million a year earlier on turnover that was up marginally to €3.87 billion from €3.82 billion.

Aryzta said the rise in revenue was largely attributable to a favourable currency impact of 1.4 per cent, related to the strengthening of the dollar.

Last week, Aryzta named Gary McGann, former chief executive of Smurfit Kappa, as its next chairman as the Swiss-based company grapples with a 51 per cent slump in its market value over the past two years.

Aryzta announced the successor to current chairman Denis Lucey, subject to shareholder approval in December, after European markets closed on Thursday.

Strong European growth

Underlying revenue rose 0.5 per cent, reflecting strong growth in Europe but also a decline in turnover in North America due to the impact of long-term contract renewals.

The company, which is best known here for its Cuisine de France brand, said earnings before interest, taxes and amortisation (ebita) declined 5.7 per cent to €484.8 million, as against €513.9 million a year earlier.

Aryzta’s European operations reported revenue of €1.74 billion, up 6.1 per cent compared with the prior year, while turnover at the company’s US business was down 1.8 per cent to €1.9 billion.

The group’s operations in the rest of the world, which primarily includes businesses in Brazil, Australia, New Zealand, Japan, Malaysia and Singapore, saw revenue fall 3.3 per cent to €227 million, due to currency fluctuations.

Group ebita margins declined to 12.5 per cent with about half of the fall related to increased investment in brand marketing.

Cash generation

Aryzta said it generated cash ahead of target of €267 million and projected cash generation for full-year 2017 to be in the range of €225 million to €267 million.

“The strategy to invert capital allocation and focus on free cash generation has been successful, with €267million generated in the year, demonstrating the highly cash-generative potential of speciality food. Underlying revenue growth has been subdued by the impact of contract renewals in North America during full-year 2016,” said chief executive Owen Killian.

“The cumulative effect of these contract renewals, combined with the long-anticipated volume loss in Switzerland, will also negatively impact full-year 2017. This is being mitigated by strong underlying growth in all regions, driven by investment in brands and food innovation,” he added.

Formed under the 2007 merger of the Irish Agricultural Wholesale Society (IAWS) and Swiss group Hiestand, has seen its share price slide in the past two years amid flagging investor confidence in the performance of its US arm, amid big contract losses.

Shares slumped almost 10 per cent in one day in March after Aryzta missed its revenue targets and Mr Killian announced he had sold €16 million of shares in the business, equivalent to two-thirds of his total stake. He said at the time that the move was “not indicative” of his confidence in or commitment to Aryzta.