Cloverhill Bakery products, Aryzta
Difficulties with Aryzta's Cloverhill Bakery continued in the first quarter.

ZURICH, SWITZERLAND — Difficulties with its Cloverhill Bakery continued, as did disappointing sales in North America, for Aryzta AG in the first quarter ended Oct. 31.

Aryzta North America reported revenue of €409.5 million ($484.8 million), which was down 11.5% from the previous year’s first quarter. Organic revenue, which was down 7%, and currency, which had a negative effect of 4.5%, contributed to the decrease. Volume was down 7.1% in Aryzta North America while price/mix was up 0.1%. Organic revenue in Aryzta North America has dropped in five straight quarters: 4.7%, 5.8%, 4.3% and 10.6% in the four quarters of fiscal 2017 and now 7% in the first quarter of fiscal 2018.

Excluding Cloverhill, which Aryzta acquired in 2014, organic growth was 1% in Aryzta North America in the first quarter of fiscal 2018.

Challenges continue in the ambient manufacturing and co-packing facilities at Cloverhill, Aryzta said.

“These are site-specific issues relating to volume losses arising from the strategic misstep into the B-to-C center aisle, high labor turnover, recruitment costs and continuing labor inflation,” the company said. “Labor inflation continues to be a challenge in the U.S. Canada is performing well with solid volume growth driven by both retail and Q.S.R. innovation-led product customization.”

Zurich-based Aryzta Group companywide had first-quarter revenue of €909.7 million ($1,076.9 million), which was down 5.5% from the previous year’s first quarter. Aryzta Europe had revenue of €435.2 million, down 0.3%, and Aryzta Rest of the World had revenue of €65 million, up 2.5%.

Kevin Toland, Aryzta
Kevin Toland, c.e.o. of Aryzta AG

“The business challenges are unchanged from those outlined in September,” said Kevin Toland, chief executive officer of Aryzta AG. “Europe continues to perform to expectation, including Germany, with broadly based growth across the region offsetting planned Swiss in-sourcing.

“Progress at Cloverhill in North America is proving difficult. Management’s priority is to continue to identify issues and opportunities to address operating performance and to maximize available free cash flow.”