With Owen Killian at the helm, ARYZTA AG reported total revenue for Q3 up 13.2% with sales rising to nearly €1bn despite weak markets.
ARYZTA AG, one of the largest frozen bakery companies in the world, reported total revenue grew by 13.2% in Q3 to €973.2m. While underlying revenue growth declined by 2.3%, acquisitions provided 3.1% growth and currency movements provided growth in the quarter of 12.4%.
Europe revenue grew by 4.7% in the third quarter to €405.9m. Underlying revenue growth was 1.8% and revenues declined by 0.6% from the impact of acquisitions and net disposals, while currency added 3.5%.
European revenue remained, largely driven by growth in In-Store-Bakery in the large retail channel led by discounters. However, ARYZTA AG reporeted European margin performance has softened and has yet to recover. Switzerland was impacted negatively from the decoupling of the Swiss Franc and the euro, while France suffered from negative consumer sentiment due to security concerns.
North America revenue grew by 21.5% in the quarter to €509.4m. Underlying revenue growth declined 6.7%, but acquisitions provided 6.9% growth.
Commenting on the Q3 trading update, ARYZTA AG chief executive officer, Owen Killian said: “As anticipated, underlying revenue declined in North America by 6.7% in the quarter, and this trend is expected to continue through Q4. Food Europe has yet to recover in Switzerland, where the consumer economy has suffered since the removal of the currency peg in January, and in France due to security concerns in the quarter.”
Killian added: “Based on an expected flat trading performance within the food Group, combined with a reduced 29% contribution from Origin, underlying fully diluted EPS is expected to be circa 400c in the financial year of 2015.”
The trading update stated that the decline in underlying revenue in North America reflects the impact of the SKU rationalisation strategy to improve capacity utilisation and reduce investment CapEx allocation. This trend is expected to continue through Q4 with the consequential impact for margins from negative operating leverage.
Rest of world revenues increased by 9.0% in the quarter to €57.9m, with an underlying growth contribution of 3.4%, and a favourable currency impact of 5.6%. Accoridng to the report, the underlying revenue growth remains consistent with historical quarterly revenue development trends, which is a combination of capacity commissioning and market growth.
According to Killian, notwithstanding the short-term weakness in performance, ARYZTA is confident the business model is well positioned. “There is increasing evidence of cross-selling through the existing customer centric strategy and this will deliver future earnings growth,” he said.