Aryzta warns of margin pressure as North American business struggles

Speciality bakery company Aryzta has reported on Tuesday morning a near 3% growth in revenues to €975m for its third quarter to the end of April.

However, underlying growth in the business was flat over the last three months as the company’s business in North America continues to drag performance.

Underlying revenues in Aryzta North American division declined 4.3% in this latest quarter to €474m, primarily due to a 6.7% decline in sales volumes. This is the largest decline in sales volumes for the North American business in 18 months and was only partially offset by a 2.4% increase in pricing.

In a note to shareholders, Aryzta said its North American business faces “headwinds from increasing labour supply issues and negative operating leverage from weaker revenue.”

Europe

In its European division, Aryzta reported underlying growth of 4.3% in third quarter sales to €437m. This was driven by a 1.3% growth in sales volumes and a 3% increase in pricing.

The company said demand in Europe “remains strong” and that some progress had been made in commissioning new capacity.

However, Aryzta warned that “considerable challenges” remain to fully optimise this new capacity, which management say will take more time to address than expected.

The group added that pricing lags from Brexit and some raw material inflation were continuing to work their way through. Underlying third quarter sales at Aryzta’s rest of world division increased 7.5% to €194m.

Outlook

Once again, Aryzta announced it was not in a position to provide earnings guidance for the full financial year due to the “pace of management transition” continuing within the business.

While Aryzta recently announced Kevin Toland as the company’s new chief executive, the search for a new chief operating officer is continuing.

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