Speciality baker Aryzta today reduced its profit outlook after the recovery plans of its new-look management team were dented by renewed weakness in Europe, its biggest market.
Shares in Aryzta, whose brands include Cuisine de France and Otis Spunkmeyer, closed over 27% lower in Dublin trade today, and are down around 60% this year.
"While we have made a solid progress in what is a multi-year turnaround programme, we have clearly underestimated the extent of the challenges and the time required to address those challenges," chief executive Kevin Toland, who started last September, said in conference call with analysts.
The Swiss-Irish company said today that it expects full-year earnings before interest, tax, depreciation and amortisation (EBITDA) to be 9-12% lower than the reduced guidance it issued in January.
"Yet again, Aryzta has failed to deliver on ever-lower targets," Investec analyst Ian Hunter said.
He added that the main reason for the outlook cut appears to be renewed weakness in Europe, where he thought there had been signs of recovery.
The company cited rising distribution and labour costs in North America, high butter prices and weak consumer spending in some European markets, particularly the UK.
Aryzta said its EBITDA margin in the third quarter came in below management expectations.
The company reported a 16.8% drop in third-quarter revenue to €811.4m, mainly because of disposals and currency effects.
Aryzta also announced a three-year restructuring plan, to be implemented immediately, which it expects to deliver a cumulative €200m in cost savings over three years.
The company said the plan is aimed at restoring the company's "financial flexibility".
It said that industry operating conditions - including higher input, distribution and labour costs - continued to impact its performance in the three month period.
Revenues in its European division fell by 6.4% to €409m as volumes declined by 5%.
Its North American division saw revenues slump by 28.2% to €340.4m as volumes declined by 1.9% despite the company's strong consumer base.
Meanwhile, revenues in the Rest of the World division eased by 4% to €62m with volumes growing strongly - up 7.5%. It said this reflected the continued strong growth dynamics in its frozen bakery business in Brazil and Asia Pacific, Middle East and Africa (APMEA).
"Challenges include labour and distribution inflation in North America, sustained high butter prices, insourcing in Switzerland and Germany and weak consumer spending in some European markets, particularly the UK," the company said.
"Aryzta has identified and is addressing the challenges facing the historical business model and the industry generally and will stay focused on its core, the frozen B2B bakery market," the company's chief executive Kevin Toland said.
As part of the ongoing process, he said the group has "sold selected loss-making assets, rationalised headcount, and under the new management put in place a series of efficiency and cost reduction activities to accelerate performance improvement.
"As part of this process, we are also today announcing a three year €200m restructuring and cost reduction plan aimed at restoring financial flexibility and aligning our asset and cost base with current and expected business conditions," he added.
Shares in the company were sharply lower in Dublin trade today.
