Aryzta, the speciality bakery group best known for its Cuisine de France brand, has reduced its forecast earnings (EBITDA) for its 2018 financial year by 20% on a reported basis.

This would imply earnings of circa €335m for 2018. Underlying earnings excluding currency translations are forecast lower by around 15%.

In a statement released to stock markets on Thursday morning, Aryzta said revenues were fairly stable across the business, excluding its Cloverhil Bakery subsidiary.

However, the Swiss-headquartered group said profit margins have weakened in the business over the last trading quarter in both Europe and North America and this trend is expected to continue for the rest of the year.

Europe

Aryzta said its European business will account for about 20% of the expected shortfall in earnings.

The company said it has made progress on capacity utilisation in its German business and achieved good price recovery after butter prices spiked in the last year.

However, Aryzta said these improvements were not enough to outweigh the lower sales volumes and Brexit-related pressures facing its UK business.

North America

North America continues to be problematic for the group. Excluding the Cloverhill bakery business which is in the process of being sold, Aryzta’s business in North America is plagued by rising costs and tightening profit margins.

The company said distribution costs in the US are rising in double-digit figures, while labour costs are also rising in a tightening US labour market.

On top of this, Aryzta said plans to increase prices and reduce spending on brands was behind schedule.

Divestment programme

Aryzta plans to offload a number of non-core assets, including LaRousse Foods, Cloverhill Bakery and JV Investments, over the coming four years in a bid to generate €1bn in cash.

Kevin Toland, chief executive with Aryzta, acknowledged the major challenges facing the company but highlighted that revenues remain resilient.

“We are progressing the disposal of non-core assets and deleveraging programme which is a key component of our multi-year turnaround programme and delivery of the €1bn cash generation target,” he said.

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