Aryzta earnings surge 58% to top market expectations

Aryzta, the Swiss-Irish baked goods group, said on Monday its earnings surged 58 per cent in the year to the end of July to top market expectations as it accelerated its turnaround following a tumultuous period.

The company behind Cuisine de France in the Republic saw its earnings before interest, tax, depreciation and amortisation (ebitda) jump to €271.3 million from €171.9 million for the previous 12 months, as its sales grew by 20.9 per cent to €2.12 billion and its earnings margin widened by 3 percentage points to 12.8 per cent.

The consensus call among analysts was for ebitda of €265.7 million, sales of €2.11 billion and a margin of 12.6 per cent. Aryzta’s customers range from McDonald’s and Subway to Lidl, Aldi and Dunnes Stores.

Organic sales growth amounted to 21.6 per cent, while profit for the period jumped to €112 million from €900,000 for the previous year – which was its first positive result in six years.

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“Our strong organic growth performance of 21.6 per cent underpinned the delivery of a much improved profit of €112 million. This was achieved in a period of challenging trading, with persistent inflation, cost of living increases, supply chain and energy costs concerns,” said chairman and interim chief executive Urs Jordi, who rejoined the group in late 2020 as part of boardroom coup after years of profit warnings at Aryzta.

“We remain on track to deliver further improvements across all key metrics in line with our guidance for the remainder of 2023 and reiterate our midterm 2025 targets.”

Mr Jordi, a baker by training who walked away from Aryzta in 2013 after the company had become a large debt-fuelled mergers and acquisitions (M&A) vehicle, has focused ever since rejoining the business on cutting back its asset base, unsustainably high borrowings and repositioning its baked goods to cater for evolving tastes.

The company has lowered its focus on commodities breads and moved more towards speciality offerings, such as sourdough, high protein and clean-label products.

Aryzta struck a deal to sell its troubled North American business to US private equity firm Lindsay Goldberg in March 2021 for $850 million (€807.2 million). It disposed of its Brazilian business months later.

Mr Jordi has also overseen a sharp reduction in Aryzta’s net debt to €1.02 billion from €1.89 billion in mid-2020, just before he took over the then-troubled company.

The group’s net debt has fallen from 7.3 times earnings to an estimated 3.7 times over the same period. Aryzta has a key target of cutting the ratio further to three times earnings in 2025, which Mr Jordi said on Monday “will open up attractive refinancing options”.

About 53 per cent of the group’s sales last year came from the retail channel, with 28 per cent from food service and 19 per cent from quick-services restaurants (QSR). Europe accounted for 88 per cent of total revenues.

“Aryzta’s retail business continued to increase its market share, QSR growth benefited from restaurant growth and innovation,” it said. “In food service, growth was supported by continued strong out of home consumption.”