Baked goods manufacturer in a quandary

Aryzta, a group focused on baked goods, has just achieved a ‘black zero’  in profits. But the challenges remain enormous.

Crisis-hit ready-to-bake bakery products maker Aryzta presented its annual financial statements which closed at the end of July, on Monday. Sales increased markedly. Revenue increased by 15 percent to around 1.8 billion euros. Organically, sales were even up by around 18 percent.

But around 60 percent of the business had already exceeded pre-Covid levels at constant exchange rates, the company also highlighted in a media release.

Leaving the loss zone

Despite the sales boost the bottom line was only a mini-profit of 0.9 million euros. However, things did look much worse in the previous financial year, when a loss of 236 million euros was incurred.

Chairman of the Board of Directors and interim Group CEO, Urs Jordi, also highlighted the progress made in underlying profitability and the improved level of the Group’s overall debt.

Explosion of costs?

Certainly, the situation has improved. However, the challenges facing the baked goods group should not be underestimated. But Jordi’s management sees the group as well positioned, especially concerning inflation in costs, and therefore they did not adjust their forecasts.

With regard to the gas crisis in Europe, the company explained in a conference call that numerous production capacities, for example in Germany or Spain, had already been switched from gas to oil.

Furthermore, the Group’s management does not anticipate a complete power shutdown, which would be a major problem for the Group’s frozen products in particular.

Secured demand

The management’s comments on customer behavior were interesting. If an economic downturn were to cause consumers to save, they would simply cut back on their luxuries, they said. However, only very few people would actually do without fresh bakery products every day.

In other words, there would be less demand for premium products and more demand for inexpensive baked goods on a daily basis. A complete loss of demand is therefore unlikely.

muula.ch has it on good authority that in some regions of the world Aryzta also supplies the typical burger buns for the McDonald’s fast food chain. And millions of these are consumed every day.

Investors skeptical

And when an economic slump does manifest itself, unsurprisingly, consumers increasingly go to such fast-food restaurants instead of frequenting gourmet restaurants. So this is more likely to point to a rising demand for Aryzta products either way.

Notwithstanding, uncertainties about the future are great. This is also reflected in the assessments of investors. Aryzta shares lost around ten percent at times in a slightly declining overall market.

Chairman of the Board of Directors and Group CEO ad interim, Urs Jordi, also highlighted the progress made in underlying profitability and the improved level of the Group’s overall debt.

03.10.2022/kut./ena.