Organic revenue at Aryzta down 2.5% in first quarter

Organic revenue at Swiss-Irish baker Aryzta declined by 2.5 per cent during the first quarter of its financial year.

The company, which makes burger buns for McDonald’s and owns the Cuisine de France brand here, published a revenue update for the period ended October 31st, 2019, on Friday.

The group reported revenue declined by 2.1 per cent to €843.9 million, reflecting the impact from disposals of 1.6 per cent and a positive currency impact of 2 per cent.

In Europe, its revenue declined by 3.9 per cent to €413.7 million. Organic revenue in the region was relatively stable, decreasing by 0.9 per cent in the period with France, Hungary and Switzerland delivering a solid performance.

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Disposals had a negative impact of 3.3 per cent, relating to the sale of two loss making businesses in the previous financial year.

Furthermore, as part of the on-going disposal programme, Aryzta’s non-core UK Food Solutions business was sold last month.

In North America, revenue declined by 2.1 per cent to €359.3 million during the period. Organic revenue decreased by 6.1 per cent, with negative price/mix of 0.1 per cent and volume decline of 6 per cent.

In the rest of the world, revenue increased by 9.1 per cent to €70.9 million during the quarter.

Organic revenue increased by 7.5 per cent, stemming from 2 per cent volume growth with global strategic customers, as well as others across the region, combined with strong price/ mix growth of 5.5 per cent.

Aryzta chief executive Kevin Toland said the previous financial year "established foundations on our path towards stability, performance and growth". The first quarter of this financial year was "in line with our expectations".

“The negative first quarter organic revenue performance in our North American business was indicated at the time of our full year 2019 results,” he said.

“Whilst we expect second quarter revenue in North America to remain negative, we expect to see positive evolution emerge in the second half of the year as new contract volumes are realised.

“We expect further underlying earnings before interest, taxes, depreciation, and amortisation growth at a group level for the full year as the benefits of the second year of Project Renew are being realised.”

Looking ahead, the company identified potential risks and uncertainties including general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments.

Nearly a fifth of Aryzta shareholders voted against the company’s remuneration report at its agm in Switzerland last month, citing a lack of transparency about why some executives received such a high payout.

The dissent centred on a short-term bonus plan for regional executives, which investor advisory group Glass Lewis said rewarded them for simply implementing the company's three-year cost-cutting scheme to save €200 million, entitled Project Renew.

Glass Lewis had also raised concern about the size of a short-term bonus of 941,000 Swiss francs (€855,000) paid last year to Mr Toland.

It has been struggling to restructure itself and return to its base business after a credit-fuelled expansion and a loss of valuable business contracts in the US saw it issue a sequence of profit warnings.