Aryzta Ag · SIX:ARYN
Aryzta — H1 2018 Earnings Presentation
38 slides from Aryzta's earnings presentation, Mar 12, 2018
Slide 1: H1 2018 Results
H1 2018 Results 12 March 2018
Slide 2: Forward Looking Statement
Forward Looking Statement This document contains forward looking statements, which reflect management’s current views and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking
Slide 3: H1 2018 – Financial Overview
H1 2018 – Financial Overview • H1 EBITDA of €161 million • EBITDA margin decline of 200bps excl. Cloverhill (300bps incl. Cloverhill) > Decline due to previously disclosed issues > Butter pricing and insourcing in Europe > Labour and distribution inflation in US • Disposals on track to exceed €450 m
Slide 4: Key Developments
Key Developments • Committed to deliver four-year deleveraging target of c. €1 billion > Asset disposal programme on track > Reduced capex in FY 2018 > Scrip dividend alternative chosen for FY 2017 > Generating operating cash flow • Identified strategic, financial and operating issues and actions •
Slide 5: Disposals on Track to exceed €450m
Disposals on Track to exceed €450m > Circa €140m realised to date, proceeds to be applied to debt reduction > La Rousse Foods completed in January 2018 > Cloverhill completed in February 2018 > Signature Foods Joint Venture sale agreed in March 2018 > Further disposals underway 5 March 2018
Slide 6: Business Refocus Underway
Business Refocus Underway • Focus on core B2B, customer service and innovation > Exited loss making businesses (Cloverhill, LA DSD) > Focus on B2B frozen bakery > Focus on utilization including line optimisation and manufacturing footprint > Asset disposal programme • Strengthening the team and evol
Slide 7: Addressing the Operational Issues
Addressing the Operational Issues Operating Issue Action Underway Input Costs Pricing & re-formulation Capacity reduction in Switzerland/Market Insourcing in Europe diversification in Germany German Capacity Ramp up Volume/Quality/ Service Headcount reduction/Possible automation/ Pricing SG&A/Labour
Slide 8: Maximise Cash Generation
Maximise Cash Generation • Disposals target to exceed €450m by end of FY 2018 • Target of €1 billion deleveraging over four years • Combination of operating cash flow and disposals • Strong capital discipline including capex optimisation • Scrip dividend in FY 2017 • FY 2018 hybrid bond will not be
Slide 9: Financial Review
Financial Review 9 March 2018
Slide 10: ARYZTA Group – Underlying Income Statement
ARYZTA Group – Underlying Income Statement in EUR ’000 January 2018 January 2017 % Group revenue 1,786,549 1,906,036 (6.3)% REVENUE H1 2018 EBITDA1 161,284 229,017 (29.6)% EBITDA margin 9.0% (67,977) 12.0% (70,484) (300)bps 3.6% 1,787 Depreciation Joint ventures, net of interest and tax 15,928 16,71
Slide 11: ARYZTA Group: Revenue Evolution
ARYZTA Group: Revenue Evolution ARYZTA ARYZTA ARYZTA ARYZTA in EURm Europe North America Rest of World Group Group Revenue 868.3 786.4 131.9 1,786.6 Organic growth 1.7% (7.5)% 9.1% (2.2)% Acquisitions/(disposals), net – – – – Currency (1.0)% (6.6)% (6.9)% (4.1)% Revenue Growth 0.7% (14.1)% 2.2% (6.3
Slide 12: Volume & Price / Mix Trend
Volume & Price / Mix Trend Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 H1 2018 ARYZTA Europe Volume % 1.8% (0.1)% 1.3% (4.7)% (0.7)% (1.3)% (1.0)% Price/Mix % (0.4)% 0.7% 3.0% 4.0% 1.3% 4.2% 2.7% Organic growth % 1.4% 0.6% 4.3% (0.7)% 0.6% 2.9% 1.7% ARYZTA North America Volume % (5.7)% (5.5)% (6
Slide 13: Segmental EBITDA
Segmental EBITDA EBITDA EBITDA % in EUR `000 January 2018 January 2017 % Change Margin 2018 Margin 2017 Change ARYZTA Europe 90,740 110,283 (17.7)% 10.5% 12.8% (230) bps ARYZTA North America 49,962 99,119 (49.6)% 6.4% 10.8% (440) bps ARYZTA Rest of World 20,582 19,615 4.9% 15.6% 15.2% 40 bps ARYZTA
Slide 14: ARYZTA Europe
ARYZTA Europe H1 2018 H1 2017 Revenue € 868.3 m € 861.8 m Revenue 0.7% Organic revenue 1.7% EBITDA € 90.7 m € 110.3 m EBITDA (17.7)% EBITDA Margin 10.5 % 12.8 % EBITDA margin (230) bps • Volume decline of (1.0)% • Positive Price/Mix impact of +2.7% • Negative currency impact of (1.0)% 14 Mar
Slide 15: ARYZTA Europe
ARYZTA Europe • Switzerland impacted by insourcing • UK impacted by Brexit related pricing challenges • Germany: good progress on volumes but cost inflation not yet fully recovered > Improved volumes, improved quality and improved efficiencies in-line with planned expectations > Insourcing an issue
Slide 16: ARYZTA North America - (excluding Cloverhill)
ARYZTA North America - (excluding Cloverhill) H1 2018 H1 2017 Revenue € 724.2 m € 782.1 m Revenue (7.4)% Organic revenue (0.4)% EBITDA € 50.0 m € 72.0 m EBITDA (30.6)% EBITDA Margin 6.9 % 9.2 % EBITDA margin (230) bps • Volume decline of (0.8)% • Positive Price/Mix impact of +0.4% • Negative
Slide 17: ARYZTA North America
ARYZTA North America • Increased labour costs • Industry wide increased transport and distribution costs • Negative operating leverage from cumulative volume losses and insufficient cost realignment • Actions to address these issues > New North America CEO in place with reinforced management team >
Slide 18: ARYZTA Rest of World
ARYZTA Rest of World H1 2018 H1 2017 Revenue € 131.9 m € 129.1 m Revenue 2.2% Organic revenue 9.1% EBITDA € 20.6 m € 19.6 m EBITDA 4.9% EBITDA Margin 15.6 % 15.2 % EBITDA margin 40 bps • Volume growth of +5.9% • Positive Price/Mix impact of +3.2% • Negative currency impact of (6.9)% • Strong
Slide 19: Cash generation
Cash generation in EUR `000 January 2018 January 2017 EBITDA 161,284 229,017 Working capital movement (32,594) (17,551) Working capital movement from debtor 10,315 25,252 securitisation1 Capital expenditure (41,959) (62,751) Proceeds from sale of fixed assets 772 15,748 and investment property Restr
Slide 20: Impairment, disposal and restructuring
Impairment, disposal and restructuring Non-cash Cash Total Total in EUR `000 2018 2018 2018 2017 Net loss on disposal of business/ group held- for-sale (149,336) – (149,336) – Impairment and disposal of fixed assets – – – (2,347) Labour-related business interruption – (38,730) (38,730) – Severance a
Slide 21: Group Financing
Group Financing Six month period ending 31 January 2018 Syndicated Bank RCF & Term Loan January 2018 July 2017 Net Debt: EBITDA 4.21x 4.15x Interest Cover (including Hybrid interest) 4.16x 4.64x • Debt Financing > Net Debt of €1,623m > Weighted average maturity of 3.65 years > Weighted average inter
Slide 22: Joint Ventures
Joint Ventures Picard Signature Total Total January January January January in EUR `000 2018 2018 2018 2017 Revenue 810,337 60,402 870,739 843,352 EBITDA 130,766 8,343 139,109 133,442 EBITDA margin 16.1% 13.8% 16.0% 15.8% Depreciation (14,980) (2,401) (17,381) (17,459) Finance cost, net (42,186) (20
Slide 23: Summary
Summary 23 March 2018
Slide 24: ARYZTA - Roadmap
ARYZTA - Roadmap STABILITY PERFORMANCE GROWTH 1 Build new management 1 Turnaround culture & execute on 1 Winning team to lead growth team and increased focus on ‘people plan’ strategy and improvement operational efficiencies Focus on operational excellence and global coordination 2 Re-build baking p
Slide 25: Summary
Summary • Addressing fundamental trading and operational challenges in the US • Good progress but a long way to go in optimising German plant • Core leadership team rebuilt and in place • Refocusing on customer service, innovation and efficiency in core B2B frozen bakery • Good progress to date on s
Slide 26: Thank You
Thank You 26 March 2018
Slide 27: Appendix
Appendix 27 March 2018
Slide 28: Group Underlying Net Profit Reconciliation
Group Underlying Net Profit Reconciliation January January in EUR `000 2018 2017 Underlying net profit 50,933 109,430 Amortisation of non-ERP intangible assets (86,186) (87,460) Tax on amortisation of non-ERP 41,548 16,072 intangible assets Share of JV intangible amortisation and (5,058) (2,229) res
Slide 29: Return on Invested Capital
Return on Invested Capital ARYZTA ARYZTA ARYZTA North Rest of ARYZTA in EUR million Europe America World Group 31 January 2018 Segmental net assets1 1,618 1,377 190 3,185 TTM EBITA1 122 50 30 202 ROIC 1 7.5% 3.6% 15.8% 6.3% 31 July 2017 Segmental net assets1 1,676 1,710 194 3,580 TTM EBITA1 147 100
Slide 30: Balance Sheet
Balance Sheet in EUR `000 January 2018 July 2017 Property, plant and equipment 1,287,091 1,386,294 Investment properties 20,249 19,952 Goodwill and intangible assets 2,301,445 2,651,937 Deferred tax on goodwill and intangibles (40,778) (82,534) Working capital (327,199) (334,078) Other segmental lia
Slide 31: Net Debt & Investment Activity
Net Debt & Investment Activity January January in EUR `000 2018 2017 Opening net debt as at 1 August (1,733,870) (1,719,617) Cash flow generated from activities 39,755 99,412 Disposal of businesses, net 46,781 – Contingent consideration paid – (896) Private Placement and RCF early redemption costs (
Slide 32: Debt Financing
Debt Financing 31 January in EUR `000 2018 Syndicated Bank RCF (686,951) Syndicated Bank Term loan (983,662) Schuldschein (383,304) Gross term debt (2,053,917) Upfront borrowing costs 26,394 Term debt, net of upfront borrowing costs (2,027,523) Finance leases (977) Cash and cash equivalents, net of
Slide 33: Hybrid Funding
Hybrid Funding First call date Coupon Step-up if not called Principal in EUR `000 April 2018 4.0% 6.045% +3 Month Swiss Libor CHF 400m (342,654) March 2019 4.5% 6.77% +5 Year Euro Swap Rate EUR 250m (250,000) April 2020 3.5% 4.213% +3 Month Swiss Libor CHF 190m (162,760) Hybrid funding at 31 January
Slide 34: EUR Closing and Average Rates
EUR Closing and Average Rates Average Average Closing Closing Currency H1 2018 H1 2017 % Change H1 2018 FY 2017 % Change CHF 1.1573 1.0820 (7.0)% 1.1674 1.1340 (2.9)% USD 1.1862 1.0910 (8.7)% 1.2425 1.1756 (5.7)% CAD 1.4923 1.4422 (3.5)% 1.5350 1.4674 (4.6)% GBP 0.8923 0.8625 (3.5)% 0.8760 0.8933 1.
Slide 35: Major F&B trends in 2017
Major F&B trends in 2017 The major F&B trends in 2017 are expected to provide a mix of headwinds and tailwinds for the baked goods industry F&B Mega Trends Consumer and market impact Shifting consumer package 1 • Consumers are increasingly seeking smaller portion sizes, particularly single-serve ite
Slide 36: ARYZTA’s key channels
ARYZTA’s key channels Channel Retail ISB QSR Foodservice Retail Center Aisle ARYZTA capability fit High High High Low Key trends 1 Shifting consumer ì 3 Snacking & food on- ì 3 Snacking & food on- ì 1 Shifting consumer package impacting package size preferences the-go the-go size preferences channel
Slide 37: ARYZTA’s unique selling proposition
ARYZTA’s unique selling proposition ARYZTA’s unique selling proposition is as the world’s leading global, frozen, B2B bakery solutions provider Extensive product range Large-scale capabilities Leading B2B Scale to serve big customers in product offerings Large Retail, QSR, Convenience & Independent
Slide 38: Presentation Glossary
Presentation Glossary –– ‘Joint ventures, net of interest and tax’ – presented as profit from joint ventures, net of interest and tax, before non-ERP amortisation and the impact of associated non-recurring items. –– ‘EBITA’ – presented as earnings before interest, taxation, non-ERP related intangibl