More than 27pc was wiped off the value of Aryzta yesterday after the troubled Swiss-Irish group issued a fresh profit warning.
The shock news rattled investors and will increase the pressure on CEO Kevin Toland to deliver a turnaround plan. Around €450m in shareholder value was vaporised in trading on the Irish Stock Exchange.
Mr Toland, who took up his role at Aryzta in September, faced criticism in a call with analysts yesterday.
The company said full-year ebitda (earnings before interest, taxation, depreciation and amortisation) would be 9pc-12pc lower than previous expectations.
Societe Generale analyst Warren Ackerman told Mr Toland that he was “struggling a little bit to see another reason for the double-digit downgrade”.
“I’m still a bit surprised that you’re still saying that you’re underestimating the challenges in the group … all the factors that you’re flagging today are the same factors as we’ve heard before.”
In response Mr Toland said that a number of issues were taking longer to resolve than the company had hoped.
“We clearly have some very, very strong headwinds facing us in terms of cost inflation, particularly around labour and distribution. And we have been seeking to contain that and offset it by further cost efficiencies across the network,” he said, adding that some of the cost reduction measures were going to plan and others weren’t.”
Mr Toland said market conditions are “very challenging” across the industry.
The bakery group yesterday announced plans to cut costs by €200m over three years. That comes on top of an asset disposal programme as the group seeks to get its debt down.
Mr Toland sought to reassure analysts about the company’s compliance with its bank covenants.
He said that Aryzta would not need to make further disposals to remain within the terms of its debt facilities.
The company told the market yesterday that group revenue was more than 16pc lower in the third quarter year-on-year, saying this was mainly due to currency headwinds and asset disposals. One of the businesses Aryzta has recently sold off is fine foods company La Rousse, bought by retail group Musgrave. It is also plotting the sale of a 49pc stake in French frozen food retailer Picard. Mr Toland said this was “in process” and would not comment further.
The company’s acquisition of that stake in 2015 was met with a negative reaction, with the deal one of the catalysts for a reversal in market sentiment. A recent refinancing of Picard has resulted in Aryzta starting to receive dividend payments.
The Picard deal was pursued by Owen Killian, the long-time Aryzta boss who was replaced by Mr Toland.
Other problems that the company has faced include a loss of business after Aryzta decided to compete with customers for whom it produced goods on a white label basis.
It has also faced labour difficulties, in particular a raid on a premises in Chicago by US immigration authorities which cost it 800 staff.
The staff had been supplied to Aryzta by a third-party agency. “The clear understanding with the agency was that employees were legitimate and were capable of being employed,” Aryzta chairman Gary McGann said in December.
“Unfortunately, that didn’t turn out to be the case.”