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May 13, 2020

Aryzta pressed again by investors to improve performance

Swiss-Irish bakery business Aryzta has come under pressure again from investors to improve its performance.

By Dean Best

Swiss-Irish bakery business Aryzta has come under pressure again from investors to improve its performance and reduce complexity in the group.

Investors Cobas Asset Management in Spain and Switzerland-based Veraison said they have “formed a shareholder group holding over 17.3% of the shares” of Aryzta, adding in a statement that the two “have joined forces to actively contribute to improvements in the company”. 

Aryzta has struggled financially for a number of years, particularly in North America, and embarked on a capital-raising exercise in 2018 to bolster its capital structure and cut billions of euros of debt. Despite objections from some investors, including the largest at the time, Cobas, the company raised EUR800m (US$870m today).

Both Cobas and Veraison are concerned about a drop in the share price, which “has once again slumped significantly more than the market”, despite the extra cash raised, they said.

Aryzta’s shares were down around 6.7% at 0.36 Swiss francs as of mid-afternoon today (13 May) and have fallen 1.1% since the start of January. That means the business “trades at a significant discount to the company value”, the two investors said.

The bakery firm, which supplies buns to fast-food chain McDonald’s, has also sold off a host of what it deems non-core assets, including most recently the disposal of its UK-based foodservice business Delice de France and most of its stake in French frozen food manufacturer Picard.

But North America still remains an issue, and has been a market that investors have previously pushed Aryzta, led by chief executive Kevin Toland, to exit and focus on its core European operations.

Cobas and Veraison continued in the statement: “Trust in Aryzta must be rebuilt. Only in this way can Aryzta create value for all stakeholders again. However, the shareholder group believes that Aryzta should focus more strongly and that the complexity of the group must be significantly reduced. 

“The shareholder group is convinced that the food industry offers sustainable value creation potential even in the environment currently shaped by Covid-19.”

Aryzta declined to comment when contacted by just-food.

Back in March, Zurich-based Aryzta had already warned about the implications of Covid-19, and said it was expecting a “material impact” this year as market conditions and “prospects” have worsened over the past week or more.

That same month, as it reported results for the six months through January, the company said its North America division was “significantly behind” in terms of EBITDA, while organic revenues and volumes fell in that market and Europe too.  

And in an update last week, Aryzta said it had taken “immediate and decisive action to maximise cash and reduce costs”, and had accrued “savings versus plan” of EUR50m. It said the company currently holds liquidity of more than EUR385m, up from EUR360m on 24 March.  

But it has also been forced to suspend new projects under its Project Renew turnaround programme because of the Covid-19 outbreak, while three of its facilities in Europe and five in North America had paused production. 

Cobas and Veraison added: “The shareholder group hopes to be able to bring about the necessary changes in a constructive dialogue with the company and thus put Aryzta back on a solid foundation.”

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