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March 24, 2020

Coronavirus – Aryzta envisages “material impact” as conditions deteriorate

Aryzta said it now expects a "material impact" on its business this year from coronavirus as market conditions deteriorate.

By Dean Best

Aryzta said it now expects a “material impact” on its business this year from coronavirus as market conditions and “prospects” have worsened over the past week or more.

While the Swiss-Irish bakery firm said trading patterns in the third quarter of its fiscal year were in line with guidance up to 15 March, business conditions have since deteriorated. As a consequence, the company is reducing capital expenditure, with all future capex projects suspended. Aryzta said “two smaller plants have closed in Europe and ongoing evaluation of further shuttering of plants and lines” is taking place.

“It is now clear that Covid-19 will have a material impact on group performance in FY-20,” the company said in a statement today (24 March). “We cannot reasonably gauge what consequences will result from the situation as neither the duration nor the depth of this issue can be fully assessed at this point in time.”

Two weeks ago, Aryzta chief executive Kevin Toland had said the impact of Covid-19 on its business was so far concentrated in the out-of-home segment in Asia, particularly in China, where the virus first erupted in late December. The company is “monitoring a rapidly evolving situation, actively assessing its consequences”, it said at the time.

Today, Aryzta provided an update across its geographical regions. “In the Rest of World, the foodservice channel, particularly in Southeast Asia, is being strongly impacted, while the QSR segment in Brazil and the Pacific region is challenging due to the reduced footfall resulting from government-related restrictions,” it said.

In terms of the overall business conditions, it added: “We are continuously monitoring the situation with our key stakeholders and are actively assessing the consequences of recent government responses to Covid-19 within the different channels. The company said it is “actively reducing” staff hours and the workforce in the “most-impacted countries”. 

“Aryzta has full business continuity plans in place and active where necessary to maintain service levels and to meet our customers’ expectations. Actions are progressing to implement flexible working policies and, where necessary, to adjust available capacity to the rapidly changing demand of the different channels.” 

The initial impact on Aryzta from the foodservice channel in Asia is now being felt on the rest of the group’s operations in Europe and North America.

The company added: “In Europe, QSR (10% of European revenue) and foodservice have been strongly impacted by the significantly reduced footfall following government related-restrictions. Retail is performing well with a small uplift coming from this channel. 

“In North America, a similar pattern is now visible in the major states; with QSR and foodservice affected by Covid-19- related restrictions, partially offset by drive-through service offerings or home delivery, which many restaurants and QSRs provide. Retail sales are still robust and reorders are coming through the supply chain.” 

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