Cantillon: Aryzta shares fall as firm keeps its head down over US business

Food group Aryzta broke with tradition yesterday by failing to provide an earnings guidance with its latest set of half-year numbers. "We are focused on establishing a sequential growth pattern and view short-term earnings guidance as less relevant," the company said.

However, later in the same statement, it said underlying earnings should be in line with previous guidance, once adjusted for disposals. Not for the first time, investors were left scratching their heads.

Aryzta recently shed two of its food and dressings businesses, netting the group about €100 million, a move likely to reduce earnings by 3-5 per cent, but nowhere in the company’s statement is this acknowledged.

The Swiss-Irish enterprise, best known in Ireland for its Cuisine de France label, does not have a reputation for divulging too much. It has been struggling to stem a collapse in investor confidence linked to problems in its US business and the acquisition of a 49 per cent stake in French frozen food group Picard, viewed as expensive by analysts.

A series of opaque company statements hasn't helped. As one broker politely put it, "visibility across the business remains low". It appears a transfer of business from the US to Europe has left the company with spare capacity in North America, which has eroded margins .

The company has tried to fill the hole by relaunching retail offerings from its La Brea Bakery and Otis Spunkmeyer brands. but it's too early to judge the success of this strategy, which involves a hefty marketing cost.

The company's problems in the US have been compounded by the loss of some valuable contracts, equivalent to about 13.6 per cent of its US business, which boasts McDonald's and Subway among its clients. The upshot has been a near 50 per cent collapse in the company's share price. Following yesterday's numbers, the shares were down 10 per cent.

On the upside, the company’s European arm appears to be performing well with food-related revenue up 9.5 per cent to €881.7 million for the six months to the end of January.