Aryzta Food North America profit climbs in first half

by Eric Schroeder
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La Brea Bakery bread, Aryzta
Aryzta said the market response to the relaunch of La Brea Bakery was encouraging during the period.

ZURICH, SWITZERLAND — Operating profit in the six months ended Jan. 31 totaled €61,972,000 ($68,857,000) in the Food North America unit of Aryzta AG, up 3.5% from €59,869,000 in the same period a year ago. Revenue increased nearly 4% to €971,016,000 ($1,078,905,000), up from €937,171,000. Underlying revenue growth, though, fell 4% during the first half.

“Underlying revenue growth, although still behind expectations, continued to improve during the period, and is expected to continue to develop through H2,” Aryzta said. “Revenue developed positively in the retail and food service channels. The Q.S.R. market is proving highly competitive. As the consumer’s perception of value is increasingly based on multiple variables, of which price is only one consideration, some customers are gaining share, while others are losing out. Underperformance in the Q.S.R. segment, supply chain optimization and supply chain contract renewals were the key drivers of the volume decline in North America.”

Otis Spunkemeyer cookies, Aryzta
The relaunch of Aryzta's Otis Spunkmeyer branded portfolio experienced success.

Aryzta said the market response to the relaunch of La Brea Bakery and Otis Spunkmeyer branded portfolio was encouraging during the period.

Owen Killian, Aryzta
Owen Killian, c.e.o. of Aryzta AG

“Over time, we should see more wins coming from branded Otis Spunkmeyer and La Brea Bakery, as those relaunches roll into the system, likely through 2017 and 2018,” Owen Killian, chief executive officer, said during a March 14 conference call with analysts. “We’re investing in those currently; you don’t see much wins from those at the moment, but you’re going to see that stabilizing going forward.

“So where we see our revenue growth coming from in North America is stabilizing the supply chain contracts so that we don’t see that big bar of losses going forward. And then focusing on the quality of the wins, which is a combination of cross-selling for private label, cross-selling for even the supply chain customers for periodic items that we can have on their menu boards and, in particular, trying to drive our brands into the marketplace.”

Aryzta noted there was some price inflation during the period due to higher ingredient costs. Labor and freight costs also increased, the company said.

Total group revenue at Aryzta increased 5.5% during the six months to €1,960,014,000, with currency movements of 5 percentage points, acquisition growth of 0.3 points and underlying revenue growth of 0.2 points.

“Underlying revenue growth momentum continued to improve, although still 18 to 24 months behind prior expectations,” Mr. Killian said. “Free cash flow was strong during the period, as anticipated, and remains the key business focus. Underlying net profit from continuing operations remains flat.”
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