Aryzta, the speciality bakery business best known for its Cuisine de France brand, saw pre-tax profits almost halve (-43%) to €208m for its 2017 financial year.

In results released on Monday morning, Aryzta reported a 31% decline in earnings (EBITDA) to €420.3m as margins narrowed sharply by 460 basis points to 11.1%. Group revenue for the year was back 2% to €3.8bn.

The sharp reduction in earnings for 2017 has seen Aryzta’s net debt to EBITDA multiple shoot up to a very high 4.15 times.

However, the Swiss-headquartered group has also announced a five year €1.8bn refinancing agreement that will see the ceiling for the company’s net debt:EBITDA ratio under a new covenant with key banking partners extended to 4.75 times.

This gives Aryzta some flexibility in managing its long-term debt as it begins to rebuild underlying earnings in the business again.

By geography

Aryzta Europe

Aryzta’s European business reported a slight decline (-0.5%) in sales for the 2017 financial year to €1.74bn.

However, with the impact of currency excluded, Aryzta’s European business recorded underlying growth of 1.4% as increased prices of 2% more than offset a 0.6% decline in sales volumes.

Earnings in the European business declined almost a quarter (-23%) to €211m as margins weakened to 12.1%.

Aryzta said margins were negatively impacted by cost inflation related to a weaker sterling as well as the soaring price of butter in Europe right now, which is a key ingredient and significant cost for bakeries.

Aryzta North America

In its North America business, Aryzta saw further sharp declines in sales as the impact of contract losses continues to be felt.

Underlying sales in the group’s North America business declined 6.3% to €1.8bn as sales volumes fell 8.5%.

Earnings for the year plunged 43% to €170m as margins contracted by 620 basis points to 9.5%. Aryzta said the decline in profitability was a result of negative operating leverage following contract losses during the year and increasing labour and input costs.

Sales from Aryzta’s rest of world division grew 16% last year to €259m.

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