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Aryzta not through selling non-core businesses

March 16, 2018
Food & Drink

Aryzta AG will focus on pricing changes and its core B2B frozen foods business as it continues to dispose of non-core businesses, company executives said in a March 12 earnings call.

Problems with the Cloverhill Bakery business played a role as Zurich-based Aryzta reported decreases of 30% in EBITDA and 6% in revenue for the six-month period ended Dec. 31. Excluding the Cloverhill Bakery business, EBITDA decreased by 20%.

Aryzta addressed the Cloverhill problems earlier this year. Hostess Brands, L.L.C. agreed to buy a Cloverhill facility in Chicago, and Bimbo Bakeries USA agreed to buy a Cloverhill facility in Cicero, Ill.

“I’m glad to say that business is now sold and behind us,” said Kevin E. Toland, Aryzta’s chief executive officer, in the March 12 call.

Signature Flatbreads, AryztaThis month, Aryzta agreed to sell its 50% interest in Signature Flatbreads to its joint venture partners for about €34 million ($42.4 million). Signature Flatbreads produces Indian breads, flatbreads, tortillas, pizza bases and pitas in India and the United Kingdom. The transaction, which is expected to be completed in the third quarter of the fiscal year, is consistent with Aryzta’s strategy to focus on its frozen B2B bakery operations and exit non-core businesses, the company said.

Disposals are on track to exceed €450 million ($557.9 million), Aryzta said.

“And you must understand why we cannot talk about other disposals on the way, but we can assure you that each time one will happen, we will inform the market, and we will do it timely,” said Frédéric Pflanz, chief financial officer for Aryzta.

Aryzta reported EBITDA of €161.3 million ($200 million) for the six months ended Dec. 31, which compared to €229 million during the same time in 2016. Group revenue of €1,786.5 ($2,215 million) compared to €1,906 million. The Cloverhill Bakery business largely was responsible for a €201 million impairment and restructuring charge in the first half, Mr. Toland said.

The percentage declines were greater for Aryzta North America, where EBITDA fell nearly 50% to €50 million ($62 million) from €99.1 million, and revenue was down 14% to €786.4 million ($975.1million) from €915.2 million.

Organic revenue was down 7.5% in North America. Excluding the Cloverhill Bakery business, organic revenue for Aryzta North America was down 0.4%. Besides Cloverhill, impacts on Aryzta North America EBITDA primarily related to negative operating leverage from cumulative volume losses and insufficient cost realignment, combined with a continued increase in labor costs and industrywide increases in transportation and distribution costs.

“We’re at the moment doing strong price discussions and have increases underway with customers in relation to our transport and distribution increase,” Mr. Pflanz said.

Aryzta truckAryzta is negotiating freight surcharges and price increases linked to freight, he said. While the new Electronic Logging Device mandate has led to increased truck freight costs, a U.S. unemployment rate just above 4% also is a factor.

“That means that many of the people today have a choice, and it’s harder to find truck drivers at the moment,” Mr. Pflanz said. “So that will not change.”

Dave Johnson became c.e.o. of Aryzta North America on Jan. 23. He most recently was president and c.e.o. of North America for Barry Callebaut.

“He’s already reshaped our structure and focus, placing greater emphasis on both customers and operations,” Mr. Toland said.

By Jeff Gelski

Source: Food Business News

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