ZURICH, SWITZERLAND — Aryzta on Jan. 25 lowered its EBITDA guidance for fiscal year 2018, saying it now is likely to be 15% below the EBITDA of fiscal 2017 (20% on a reported basis). Previously the Zurich-based company said it expected this year’s EBITDA to be in line with fiscal 2017 EBITDA. EBITDA weakened toward the end of the second quarter in both Europe and the United States, and Aryzta expects the trend will not reverse through the remainder of the fiscal year.
U.S. revenue, excluding Cloverhill Bakery, continues to stabilize, and Canada continues to perform well.
“However, EBITDA performance of Aryzta’s U.S. business, excluding Cloverhill, is underperforming expectations,” the company said. “The factors contributing to the variance — double-digit inflation in distribution costs, higher-than-expected labor costs in a continuing tightening U.S. labor market — are more significant than expected.”
Also in North America, performance improvement actions are beginning to generate savings but are behind delivery plan. The actions include price increases; reductions in selling, general and administrative expenses cost; and brand investment.
Aryzta estimates underperformance in Europe will account for 20% of the anticipated shortfall relative to expectations.
“There has been good progress on butter price recovery, and the improvements in capacity utilization in Germany are on track,” Aryzta said of Europe. “However, this progress is not expected to be sufficient to offset the volume and associated margin lost to timing of insourcing, and the impact of Brexit-related pressures on our U.K. business remains.”
Aryzta will give half-year results on March 12.“While acknowledging the major challenges, revenue remains resilient,” said Kevin Toland, chief executive officer of Aryzta. “The newly strengthened management team is now in place and fully focused on addressing those challenges.”