Swiss-based bakery group Aryzta generated operating profits (EBITA) of €565.8m for the year ending 31 July 2014, up 19% on the previous year. Revenues climbed 6.8% to €4.809bn, while pre-tax profits rose by 16.4% to €481.5m.

The strong results were driven by the group’s global food business, which recorded revenues of €3.4bn, a 10% increase. Food operating profits increased 19.6% to €486.3m due to business consolidation and improved efficiencies. Margins increased 110 basis points (BPS) to 14.3%.

Aryzta CEO Owen Killian said the company “remains financially disciplined and very cash-generative, which will support continued investment and sector consolidation”. He added that its alignment with the requirements of food companies will facilitate long-term growth.

Sales in Europe increased 14% to €1.59bn, driven by the acquisition of German bakery company Klemme in April 2013. Underlying revenues grew by 2.1% and earnings were up almost 24% to €230m.

Sales in North America were up 8.7% to €1.59bn. Earnings (EBITA) increased 21% to €230m. Margins increased by 150bps to 14.5%. Even though underlying revenues grew by 1.3%, reflecting increased customer volumes, the acquisition of Pineridge and Cloverhill bakeries increased sales by 13%. Unfavourable currency movements affected performance by 5.6%. Currency movements also affected sales in the rest of the world, which fell 5.7% to €221m. This was in spite of solid underlying revenue growth of 7.9 %. Earnings (EBITA) declined 15.7% to €26m.

Aryzta is also the majority shareholder in Origin Enterprises, with a 68.1% holding. Last week, Origin reported a 2.4% increase in operating profits to €87.4m for the year, even though revenues were down slightly to €1.4bn, reflecting lower fertilizer and feed prices.

Net debt at year end increased to €1.65bn, mainly due to acquisitions throughout the year, leaving a net debt to EBITA ratio of 2.45:1. Underlying earnings per share increased 17.2% to 422.2c with a proposed dividend of 63.33c. Shares in Aryzta have risen 38% in the past year and closed at €68.42 on Tuesday. The market cap has increased by €4.1bn over the past five years.

COMMENT

Aryzta’s food division has provided the platform for growth since IAWS paid €65m for Cuisine de France in 1998. Against a backdrop of a global economic crisis and a challenging retail environment, the group’s strategy has evolved from one of cost curtailment and operational discipline to reposition itself.

The group has moved away from convenience and retail towards large retail and quick-service restaurants. The more recent acquisitions have enlarged the group’s manufacturing footprint and will provide an entry point into the high-growth US snack market. The increased manufacturing platform, from four in 2008 to 18 today also gives tighter control and closer alignment to customers.