Farming & Food

No news almost good news for Aryzta

Cantillon: Shares in Swiss-Irish food group rise as results broadly meet low expectations

Aryzta chief executive Kevin Toland and non-executive director Dan Flinter: must get the €800 million capital raise across the line. Photograph: Alan Betson

Tue Oct 2 2018 - 05:40

In the context of a near-three-year-long plunge in the share price, a sequence of profit warnings and missed earnings targets, and the ousting of the company’s entire management team, you might well ask, what constitutes good news for the average Aryzta investor? The answer, it seems, is no news.

For the first time in a long while, the Swiss-Irish food group produced a set of numbers that were broadly in line with market expectations and avoided having to deliver another nasty shock to investors.

The company also confirmed that its plan to raise €800 million in new capital, seen as vital to shoring up the business, had been underwritten, in price terms, by the investment banks handling the transaction.

The result was an initial 33 per cent spike in the shares, sending the stock over €11 for the first time in several months. It gave up some of those gains but still closed up by 15 per cent.

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Picard negativity

Does this mark a turnaround in the company’s fortunes? It’s far too early to say. There are a number of circles to be squared, not least the turnaround of its ailing US division, which posted another precipitous decline in revenue, and the sale of its stake in French frozen food group Picard, key drivers of the recent collapse in investor confidence.

The latest figures would have sent a chill down the spine of most investors if the bar hadn’t been set so low. They show underlying profit at the company fell 72 per cent to just under €50 million in the 12 months to the end of July while earnings decreased by 28 per cent to €302 million.

These metrics had been flagged and digested in advance, and the company could boast a better-than-expected outlook for the coming year.

The first hurdle ahead of chief executive Kevin Toland and his team will be to get the €800 million capital raise, which still needs shareholder approval, across the line amid reports of opposition from the company's biggest shareholder, Cobas Asset Management. The move is seen as vital to stabilising the group and avoiding a fire sale of its Picard stake.

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