Shares in bakery giant Aryzta rallied by as much as 12% in trade on Tuesday after the company reported half-year results which show the first signs of a turnaround.

Aryzta achieved organic sales growth of 0.7% in the six-month period to the end of January 2019 as half-year sales hit €1.7bn.

Aryzta said it achieved higher sales prices of 0.9%, which was only partially offset by a 0.2% decline in volumes.

Underlying earnings (EBITDA) in the business declined by 6% to €151.6m, as margins tightened from 9% last year to 8.9% for the first half of the company’s 2019 financial year.

Aryzta achieved organic sales growth of 0.7% in the six-month period to the end of January 2019 as half-year sales hit €1.7bn

The decline in earnings was a result of falling profits in Aryzta’s European division.

Aryzta’s European business saw earnings fall 9.4% in the period to €82.2m, which the company attributed to higher logistics and raw material costs such as butter.

Positive

However, the major positive for Aryzta will be the emerging signs of a turnaround in its beleaguered North America division.

For the first time in five years, Aryzta’s North America division reported margin growth, indicating the business has begun to turn around.

Earnings margins in Aryzta’s North America division widened from 6.4% last year to 6.8% for the first half of the 2019 financial year, which Aryzta management attributed to the early benefits of Project Renew, the group’s multi-year cost-cutting plan.

Sales in North America posted an organic decline (excluding disposals) of 1.8% to €718m, mainly as a result of a 2% drop in sales volumes.

Sales prices rose by 0.1% in the period.

While it is still early days, Aryzta management will be encouraged to see the first signs of a recovery, particularly in the company’s North America business.

Aryzta chief executive Kevin Toland said the half-year results represented the first step for the company to deliver on its multi-year turnaround plan.