Aryzta Food North America profit climbs 113%

by Eric Schroeder
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ZURICH, SWITZERLAND — Contributions from recent acquisitions helped drive a 113% increase in operating profit within the Food North America segment at Aryzta AG in fiscal 2011. Operating profit in the year ended July 31 was €148,673,000 ($200,440,000), up sharply from €69,911,000 in fiscal 2010. Sales also were higher, climbing 112% to €1,212,463,000 ($1,634,095,000) from €571,585,000.

“During fiscal year 2011, the integration of Otis and Pennant into a single sweet bakery operation was completed and by year end approximately 80% of Aryzta’s North American food business was operating live on Enterprise Resource Planning (ERP),” Aryzta said. “Aryzta’s Food North America operations enjoy very strong customer relationships across all channels such that the impact of channel switching by consumers is minimized. Food North America posted a very strong performance in the enlarged (limited serve restaurant) channel, which enjoyed stable consumption volumes of bakery goods during the period, while businesses serving channels in higher income regions also posted strong revenue growth.”

In its Food Europe unit, operating profit rose 14% to €149,038,000 ($200,800,000) from €131,245,000, while sales increased 10% to €1,184,928,000 ($1,593,726,000) from €1,072,000,000.

“Throughout the year, continental European markets were the key growth drivers,” Aryzta said. “Market conditions in the U.K. and Ireland remained challenging, with weak consumer demand still evident. However, substantial progress has been made through operating efficiencies and cost curtailment initiatives, thereby allowing operators to increase their value offerings.”

Operating profit within the Food Rest of World unit soared 313% to €24,601,000 ($33,108,000) from €5,963,000 on a sharp gain in sales to €180,029,000 ($242,400,000) from €35,822,000.

“While EBITA margin declined in the period to 13.7% from 16.6% in the prior year due to the impact of the Japanese natural disaster in Q3, Aryzta’s Japanese business recovered well in Q4,” Aryzta said. “The development of a new bakery in Brazil is on track to satisfy the continuing strong volume growth in this market.”
On a companywide basis, Aryzta operating profits including associates and joint ventures rose 36% to €412,805,000 ($555,418,000) from €304,586,000 in fiscal 2010. Sales were €3,876,923,000 ($5,214,538,000), up 29% from €3,009,726,000 in fiscal 2010.

“2011 was a year of substantial repositioning for Aryzta AG,” said Owen Killian, chief executive officer. “Bakery volumes doubled leading to a 53.5% increase in Food Group revenue as a result of acquisition activity one year previously. Aryzta is now much better positioned opposite consumers with greater global access to limited serve restaurants and retail, complementing our well established deeply distributed food service business.

“Consumer confidence improved during the year leading to underlying Food Group revenue growth of 2.7%. It remains a tough economic environment for consumers who now also are dealing with higher food costs with less disposable income. We remain focused on working with our customers to manage input price inflation in an effective manner to maintain affordability without compromising quality or service.”

Aryzta said it has committed €100 million ($134.5 million) to a number of bolt-on acquisitions in Asia and the United Kingdom. The company expects to close the acquisition of two bakeries in Taiwan and Singapore in the first quarter of fiscal 2012. Additionally, Aryzta has closed the acquisition of a U.K.-based flat bread manufacturer, which primarily serves the U.K. retail channel. The acquisitions are expected to add about €78 million ($104.8 million) in revenue during fiscal 2012 and to be modestly accretive to earnings.

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