Improved efficiencies drive strong Aryzta results

by Eric Schroeder
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ZURICH, SWITZERLAND — Improved efficiencies keyed by the Aryzta Transformation Initiative (A.T.I.) helped drive an increase in EBITA within the Food Group at Aryzta A.G. in fiscal 2014. EBITA in the fiscal year ended July 31 was €486,294,000 ($612,365,000), up 20% from €406,695,000 in fiscal 2013.

Total Food Group revenues were €3,393,783,000 ($4,275,034,000), up 10% from fiscal 2013.

Within the company’s Food North America business, EBITA increased 21% during fiscal 2014 to €230,313,000, while revenues rose nearly 9% to €1,586,560,000.

“Underlying revenues grew 1.3% during the year, with improved momentum reflecting increased customer volumes during the second half of the year, following particularly challenging trading conditions during the first half of the financial year,” Aryzta said. “The 13% acquisition-related revenue contribution is primarily related to the acquisition of both Pineridge Bakery and Cloverhill Bakery during the second half of the year. Pineridge is a top-tier specialty bakery in Canada, while Cloverhill Bakery is a leading manufacturer of individually wrapped ready-to-eat snacks in the United States.

“These acquisitions significantly enlarged Aryzta’s manufacturing footprint in North America, extended its customer access in Canada and its product portfolio in the United States while providing an attractive entry point into the high growth North American snacking market.”

Aryzta said it has “substantially completed” its A.T.I. program, which was launched in September 2011. The three-year program was focused on supply chain optimization and ERP implementation with the goal of making Aryzta a leading international bakery company. Prior to embarking on the program, the Aryzta Food Group functioned as more than 30 independent bakeries and kitchens, serving specific markets or customer segments, with individual marketing approaches, pricing policies and product portfolios. As of July 31, there is now a single go-to-market sales strategy with an aligned product listing and full visibility of bakery production capacities and customer delivery channels, the company said.

“These changes have been enabled through dedicated management teams and leveraging the capabilities of the single instance ERP platform,” Aryzta said.

In a Sept. 29 conference call to discuss financial results, an analyst pointed out that Aryzta still has almost 50% more bakeries in North America than in Europe, despite broadly similar revenues between the two regions. He asked Owen Killian, chief executive officer, whether there is still room for further bakery footprint optimization in the United States, even though A.T.I. is largely completed.

“I don’t think we should get too hung up on numbers or just on numbers of bakeries, because there are no two bakeries alike, in our experience, in terms of what they’re producing, the dough types, the number of production lines, the intensity of capital,” Mr. Killian said. “In North America, almost all of our customers are of a substantial scale, and we’re not outsourcing a substantial amount of our production. We’re producing most of it. Whereas in Europe, you have this food solutions business constituting 43% of our revenues, and we’ve called out 350 supplier partners coming into that business.

“So Europe is not as intensive vis-à-vis production and bakery as is North America, but you could have the same volumes coming off smaller numbers of better invested bakeries. It’s not an exact science. You can’t just divide it into the number of bakeries and take any guidance from that.”
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