Aryzta shares advance 33% despite €470m loss

Despite reporting a full-year loss of €470 million baked goods giant Aryzta’s share price jumped more than 30 per cent in trading on Monday.

The baked goods giant has been fire fighting a collapse in investor confidence linked to its ailing US business and several questionable acquisitions.

However, for the first time in nearly three years, the companyproduced a set of annual results that were broadly in line with market expectations. Aryzta makes burger buns for McDonald's in north America and owns the Cuisine de France brand here.

The figures showed underlying earnings for the 12 months to the end of July slumped 28 per cent to €302 million, while revenue fell by 10 per cent to €3.4 billion. In Europe, revenues fell by 1.6 per cent to €1.7 billion, while in north America they were down 18.4 per cent to €1.5 billion.

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Market sentiment was, however, buoyed by stronger-than-expected earnings forecasts for 2019, with the company expecting “mid to high single-digit” growth.

The results initially triggered a 33 per cent jump in the value of Aryzta shares but this was later pared, with the stock closing 15 per cent up at €9.48.

The company also said it was pushing ahead with its plan to raise €800 million in equity capital. And investors were encouraged by the news that the deal, which still requires shareholder approval, has now been fully underwritten in price terms by the banks handling the transaction.

What about the firm’s debt burden?

Part of the proceeds will be used to reduce debt, which stood at €1.5 billion at the end of July, down 13 per cent.

However, the sale is being opposed by Aryzta’s largest shareholder Cobas Asset Management, which holds a 15 per cent stake in the Swiss-Irish food group. Cobas plans to present an alternative fund-raising plan to management in the coming weeks.

Aryzta’s debt ballooned under former chief executive Owen Killian, who led a series of more than 10 acquisitions.

The capital raised will make it easier for the company to shed its 49 per cent stake in French frozen-foods retailer Picard, according to chief executive Kevin Toland, who took over the reins last year.

“Such disposals will be pursued under normal business conditions, rather than being perceived as distressed sales,” he said. But he denied the Picard sale would be a fire sale without the capital generation.

“Clearly we’re not a stronger seller if you look at our business challenges over the last year,” he said. “It’s a fine business, we’re just not a fine owner for it. To the point about fire sale, we overpaid at the beginning when we bought into this business . . . but I’m determined we’re not going to undersell on the way out, we’re going to look for fair value, for a very good stake in a very good business.”