Aryzta shares tumble as half-year revenues rise 5.5%

Shares in Swiss-Irish food group Aryzta fell by just over 10 per cent on Monday after the company admitted growth would be erratic over the next 18 months.

Aryzta said revenues rose 5.5 per cent to €1.96 billion during the six months to the end of January, on the back of increased sales of speciality foods. Earnings before interest, taxes, and amortisation (ebita) increased 2.7 per cent to €230 million, the company said.

However chief executive Owen Killian said that "revenue development has been erratic for the past 12 months and will be for a further18 months as we commission and optimise our capacity."

Mr Killian said shifting consumer trends and contract renewal in North America would negatively impact by around 3 per cent, claiming the best investor barometers would be free cash flow and underlying revenue growth.

Aryzta has been struggling to halt a collapse in investor confidence linked to problems in its US business, where it is said to have lost some big contracts, and the acquisition of a 49 per cent stake in French frozen food group Picard, viewed as expensive by analysts.

The company’s shares have dropped in value by nearly 50 per cent since the beginning of last year. On foot of yesterday’s numbers they closed 10 per cent down at €39.56.

Compared to the same period a year ago, the group reported a 13.6 per ent rise in overall revenues to €2.39 billion, as group earnings increased by 15.5 per cent to €229 million.

It said food-related revenue from its European arm rose 9.5 per cent to €881.7 million for the six months to the end of January, while its north American division saw revenues rise 3.6 per cent to €971 million. Rest of the world food-related revenues were down 7.2 per cent to €107.3 million.

Underlying net profit from continuing operations increased 2 per cent to €141.1million, Aryzta said with underlying fully diluted earnigns per share down 1.9 per cent due to the group’s disposal of Orgin discounted operations, which contributed €6.2 per cent during the prior period.

“Speciality food is a growth segment of the overall food market in Europe and North America where consumer demand was positive in the period. Aryzta is well-invested and well-positioned to grow, because its recently invested infrastructure is the most relevant and most competitive for this market,” Mr Killian said.

The company is in a “fragile recovery mode, still facing a bumpy road ahead,” Jean-Philippe Bertschy, an analyst at Bank Vontobel in Zurich, wrote in a note

Davy analyst Cathal Kenny said underlying revenue momentum is set to continue although operating margins will remain under pressure due to supply chain contract renewals, bakery commissioning and increased brand support investment.

”Visibility, particularly for margins, across the business remains low,” he noted.