Revenues fall by 22.4% at Aryzta in first half of year

Swiss-Irish food group Aryzta said on Monday that its revenues slid by 22.4 per cent in the six months to January 2021, as the group was hit by Covid-19 lockdowns in Europe. Aryzta said it would not provide forward guidance, "given ongoing challenges and uncertainty surrounding Covid-19".

Revenues fell to €1.3 billion in the six months to January 2021 when compared with the same period in 2020, with earnings (EBITDA) down by 26.5 per cent to €124.8 million. Aryzta said it was on track to deliver a 25 per cent annualised reduction in group overheads in the full year.

The group generated a positive cash flow from activities of €33.8 million and said it now has certainty around “debt reduction, strengthening its balance sheet and de-risking its financial position into the future”.

Aryzta chairman and interim chief executive Urs Jordi said the results highlight the group's "significant progress" in its strategy of simplifying the business and de-risking the balance sheet .

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“The progress to date validates the overwhelming shareholder vote for change in September and December 2020 and the renewed board’s decision to reject the proposal to sell the entire business. We can now focus on delivering the necessary operational improvements and returning to organic growth as we leverage the significant broad bakery experience to improve shareholder returns. Delivery of our targets will ensure we rebuild trust and credibility with investors, lenders, customers, suppliers and employees as both are in need of repair after years of disregard.”

Cost reductions

Aryzta said its improved first-half performance reflects the benefit of cost reductions through simplification of the business model and reporting structure and a strong recovery in its North American operation. These improvements however, were offset by Covid-19-related disruptions in Europe especially in the second quarter, due to the impact of lockdowns and restrictions across the region and the resultant negative impact on the food service channel.

The group reported net restructuring, impairment and disposal related costs totalling € 35 million, which were mainly due to severance costs and excessive advisory fee commitments as well as Covid-19-related costs.

On Friday, the group said it had sold its North American business for $850 million (€711 million) to US private equity firm Lindsay Goldberg. The group said the deal validated “the board’s strategy to remain independent”. Last year it resisted an attempted takeover by US hedge fund Elliott, which had valued the group at € 734 million.

Given Covid-19 restrictions, ongoing disposal process and change across the organisation, Aryzta said it would not be “prudent” to provide forward guidance for the remainder of the current financial year. However, it said that by end 2022, it is targeting an earnings margin run rate of 12.5 per cent, based on the implementation of its multilocal business model, additional costs savings and improved performance.

“This is an intermediate target and will need to improve further over time,” the company said.