European bakery giant ARYZTA has cuts its earnings outlook as the business continues to face “challenges” in North America, although the company says it is making progress in its turnaround strategy.

Aryzta, which supplies buns to fast-food giant McDonald’s and is listed in both Switzerland and Ireland, now expects full-year organic EBITDA growth of low-single digits, compared to the mid- to high-single-digit range announced last October, according to its latest earnings release.

Zurich-based Aryzta is in the middle of a three-year transformation plan dubbed Project Renew, which aims to realise cost savings of EUR200m (US$225m), pay down debt and dispose of non-core assets. Last year, the company successfully raised EUR800m from shareholders to support the plan after overcoming opposition from its largest investor Cobas Asset Management.

Chief executive Kevin Toland said in his accompanying earnings commentary Aryzta is on course to realise the EUR40m portion of the cost savings targeted for this year, which will benefit its underlying EBITDA result in the next financial year.

Aryzta delivered third-quarter revenues of EUR848m, representing top-line growth of 4.5% and organic growth of 1.3%. 

Over the nine months to the end of April, revenues climbed 0.8% on an organic basis but were down 1.5% overall amid what the company listed as a “disposal movement” of minus 3.6%. Azyzta has already let go of a batch of non-core assets, having sold the Cloverhill bakery business in the US, Signature Flatbreads in the UK and foodservice business Rousse Foods in Ireland.

Aryzta said other “key achievements” so far this year include a “major downsizing of the North America management organisation” and a restructuring of its German sales and marketing operations.

CEO Toland said: “Our Q3 performance, which follows a consistent period of improving revenue performance, shows sequential improvement in terms of group organic revenue. We are addressing the challenges presented to our business, particularly in the North American market where sales stabilisation continues to be challenging whilst profitability has been stabilised. Continued stabilisation of the business, delivering for our customer base and realising the expected benefits from Project Renew remains our absolute focus within the current financial year.” 

The company did not provide profit numbers, but Alain Oberhuber, the CEO and consumer goods analyst at MainFirst Schweiz, said the new guidance translates to an EBITDA range of EUR307-324m, which fits with its own estimate of EUR313m.

See just-food’s analysis: Has Aryzta found right mix to grease recovery wheels?