Aryzta shares hit record low as Swiss brokers highlight risks

Shares in Aryzta slumped to an all-time low on Thursday as two heavyweight brokerages highlighted risks to the Swiss-Irish baked goods company's turnaround and how much it can make to lower its €1.53 billion debt burden from the sale of a stake in a French frozen foods business.

Aryzta shares have plummeted by as much as 13 per cent so far this week to a record low of 0.695 Swiss francs in Zurich, leaving it with a market value of 696 million francs (€645 million).

UBS analyst Joern Iffert slashed his share price target for Aryzta by 41 per cent to 0.80 Swiss francs (73.6c) as well as his earnings forecasts, saying the weakening consumer confidence could hit its sales, while the timing of savings from a cost-cutting programme is uncertain.

Shares in the maker of prebaked bread, croissants, cookies and pastries – best known in Ireland for its Cuisine de France brand – lost 96 per cent of their value over the past five years amid a series of profit warnings, disappointing results, management changes and, late last year, a deeply discounted rescue share sale, which raised €790 million.

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Cost cutting

While the UBS analyst sees the group, led for almost two years by chief executive Kevin Toland, meeting its target of cutting €90 million of costs in the three years to July 2021, he said Aryzta is not a sales growth story.

“We see organic growth prospects of circa 1 per cent year on year in the medium term, below the food sector at 2-3 per cent,” Mr Iffert said. “The key reason for our below-sector expectation is the accelerating consumer trend towards healthy snacking, with its negative impact on demand for Aryzta’s sweet baked goods offering, which accounts for 40-45 per cent of group sales.”

Earlier this week Credit Suisse analyst Faham Baig cut his value estimate for Aryzta's 49 per cent stake in French frozen foods company Picard to €140 million from €200 million. Aryzta has been seeking to sell this interest, which was acquired in early 2015 for €447 million, for more than two years.

Aryzta extracted €90 million from Picard last year through special dividends as the French company refinanced itself. UBS’s €1.53 billion debt figure for Aryzta includes subordinated – or hybrid – financial instruments that the company records as an equity instrument under accounting rules.

Mr Baig said the recent European economic slowdown was “concerning” and the North American market remained a challenge.