Aryzta Revenues Hit by Weak US Market and Swiss Franc Decoupling

02 Jun 2015 --- Swiss food group Aryzta, which specialises in bakery, has released third quarter 2014 results, reporting a 13.2% rise in revenues to €973.3m, but a fall in underlying revenues, largely as a result of a stagnant US market.

Europe revenue grew by 4.7% in the third quarter to €405.9m. Underlying revenue growth was 1.8%. Revenues declined by (0.6)% from the impact of acquisitions and net disposals, while currency added 3.5%.

CEO Owen Killian said: “As anticipated, underlying revenue declined in North America by (6.7)% in the quarter and this trend is expected to continue through Q4. Food Europe has yet to recover in Switzerland, where the consumer economy has suffered since the removal of the currency peg in January and in France due to security concerns in the quarter. Based on an expected flat trading performance within the Food Group, combined with a reduced 29% contribution from Origin, underlying fully diluted EPS is expected to be circa 400c in FY 2015. Notwithstanding the short-term weakness in performance, Aryzta is confident the business model is intact. There is increasing evidence of cross-selling through the existing Customer Centric Strategy and this will deliver future earnings growth.”

European revenue remained largely driven by growth in In-Store-Bakery in the large retail channel led by discounters. However, European margin performance has softened and has yet to recover. Switzerland was impacted negatively from the decoupling of Swiss Franc and the Euro, while France suffered from negative consumer sentiment due to security concerns. North America revenue grew by 21.5% in the quarter to €509.4m. Underlying revenue growth declined (6.7)%, a 170 bps improvement over the Q2 (8.4)%.

Acquisitions provided 6.9% growth, while currency movements positively impacted by 21.3% in the quarter. The decline in underlying revenue in North America reflects the impact of the SKU rationalisation strategy to improve capacity utilisation and reduce investment CapEx allocation. This trend is expected to continue through Q4 with the consequential impact for margins from negative operating leverage.

Rest of World revenues increased by 9.0% in the quarter to €57.9m, with an underlying growth contribution of 3.4% and a favourable currency impact of 5.6%. The underlying revenue growth remains consistent with historical quarterly revenue development trends, which is a combination of capacity commissioning and market growth.