Earnings Release • Jun 7, 2010
Earnings Release
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8 June 2010
This presentation 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 statements. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments.
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Outlook
Zurich based Swiss AG
Operations in Europe, North America, South East Asia and Australia – pre-acquisitions
Origin listed on the AIM in London (AIM; OGN) and ESM in Dublin (ESM; OIZ)
Food Europe has leading market positions in the speciality bakery market in Switzerland, Germany, Poland, the UK, Ireland and France. In Europe, ARYZTA has a mixture of business to business and consumer brands, including Hiestand, Cuisine de France, Delice de France and Coup de Pates.
*pre-aquisitions
Food North America has leading market positions in freshly baked cookies and freshly baked artisan bread. The business has two iconic brands which evoke emotional appeal with the US consumer, namely Otis Spunkmeyer and La Brea Bakery.
*pre-aquisitions
ARYZTA has embryonic businesses in Japan, Malaysia and Australia. This gives ARYZTA an excellent opportunity to understand the customer diversity and opportunity in this vast market.
ARYZTA AG is the majority shareholder (71.4%) in Origin Enterprises plc, which has a listing on the AIM in London and the ESM in Dublin (AIM:OGN,ESM:OIZ). Origin is a leading player in the agri-nutrition sector in Ireland, the UK, Poland and Norway and has a leading ambient food and cereal milling business in Ireland.
Announcing two strategic acquisitions of the following bakery businesses:
Fresh Start Bakeries was signed yesterday evening 7 June, to close within 30 days (subject only to anti-trust clearance)
Great Kitchens signed and closed yesterday evening 7 June
| in Euro `000 | January 2010 | January 2009 | % |
|---|---|---|---|
| Group revenue | 1,394,053 | 1,571,169 | (11.3)% |
| Group operating profit1 | 114,013 | 126,450 | (9.8)% |
| Share of associates and JVs2 | 13,635 | 7,837 | |
| Operating profit incl. associates and JVs1 | 127,648 | 134,287 | (4.9)% |
| Finance cost, net | (23,723) | (24,405) | |
| Pre-tax profits1 | 103,925 | 109,882 | |
| Income tax1 | (16,965) | (19,675) | |
| Minority interest3 | (4,430) | (6,233) | |
| Underlying fully diluted net profit | 82,530 | 83,974 | (1.7)% |
| Underlying fully diluted EPS (cent) | 104.5c4 | 107.7c4 | (3.0)% |
1 Before impact of intangible amortisation, non-recurring items and related tax credits.
2 Associates & JVs profit net of tax and interest.
3 Presented after dilutive impact of Origin management incentives.
4 January 2010 underlying fully diluted EPS calculated using weighted average number of shares in issue of 78,946,101 (January 2009: 77,999,274).
| Revenue Growth | (7.7)% | (7.9)% | 26.3% | (7.4)% | (16.0)% | (11.3)% |
|---|---|---|---|---|---|---|
| Currency | (0.8)% | (5.2)% | 4.7% | (2.1)% | (3.3)% | (2.7)% |
| Transfers within segments |
(0.2)%2 | – | 18.2%2 | – | – | – |
| Acquisitions and disposals |
3.4%1 | – | – | 2.3% | (0.8)%4 | 0.9% |
| Underlying growth | (10.1)% | (2.7)% | 3.4% | (7.6)% | (11.9)% | (9.5)% |
| Group revenue | 533.6 | 254.7 | 12.6 | 800.9 | 593.1 | 1,394.0 |
| in Euro million | Food Europe | Food N. America |
Food Developing Markets |
Total Food Group |
Origin3 | Total |
1 Reflects the contribution of French bolt on acquisition in February 2009 not included in the prior year comparative.
2 Reflects the transfer of business activity from Food Europe to Food Developing Markets due to operational change.
3 Origin revenue is presented after deducting intra group sales between Origin and Food Group.
4 In the case of Origin this reflects the impact of the disposal of its marine protein and oils business in February 2009 which is now included in the share of profit from associates & JV line. It also reflects the contribution from the acquisitions of CSC Crop Protection Ltd. and GB Seeds Ltd. which are not included in the prior year comparative.
| Food | ||||||
|---|---|---|---|---|---|---|
| Food N. | Developing | Total | ||||
| in Euro million | Food Europe | America | Markets | Food Group | Origin3 | Total |
| Group revenue | 794.4 | 390.3 | 20.4 | 1,205.1 | 1,011.8 | 2,216.9 |
| Underlying growth | (8.6)% | (3.7)% | 10.7% | (6.7)% | (10.2)% | (8.4)% |
| Acquisitions and disposals |
2.5%1 | – | – | 1.7% | 0.2%4 | 1.0% |
| Transfers within segments |
(0.2)%2 | – | 17.8%2 | – | – | – |
| Currency | (0.1)% | (4.7)% | 6.1% | (1.6)% | (1.5)% | (1.5)% |
| Revenue Growth | (6.4)% | (8.4)% | 34.6% | (6.6)% | (11.5)% | (8.9)% |
1 Reflects the contribution of French bolt on acquisition in February 2009 not included in the prior year comparative.
2 Reflects the transfer of business activity from Food Europe to Food Developing Markets due to operational change.
3 Origin revenue is presented after deducting intra group sales between Origin and Food Group.
4 In the case of Origin this reflects the impact of the disposal of its marine protein and oils business in February 2009 which is now included in the share of profit from associates & JV line. It also reflects the contribution from the acquisitions of CSC Crop Protection Ltd. and GB Seeds Ltd. which are not included in the prior year comparative.
| Food | ||||||
|---|---|---|---|---|---|---|
| Food N. | Developing | Total | ||||
| in Euro million | Food Europe | America | Markets | Food Group | Origin2 | Total |
| Group revenue | 260.8 | 135.6 | 7.8 | 404.2 | 418.7 | 822.9 |
| Underlying Growth | (4.6)% | (5.4)% | 24.8% | (4.6)% | (7.6)% | (6.1)% |
| Acquisitions and disposals |
– | – | – | – | 1.8%3 | 1.0% |
| Transfers within segments |
(0.3)%1 | – | 17.2%1 | – | – | – |
| Currency | 1.3% | (3.9)% | 8.7% | (0.4)% | 1.5% | 0.5% |
| Revenue Growth | (3.6)% | (9.3)% | 50.7% | (5.0)% | (4.3)% | (4.6)% |
1 Reflects the transfer of business activity from Food Europe to Food Developing Markets due to operational change.
2 Origin revenue is presented after deducting intra group sales between Origin and Food Group.
3 In the case of Origin this reflects the impact of the disposal of its marine protein and oils business in February 2009 which is now included in the share of profit from associates & JV line. It also reflects the contribution from the acquisitions of CSC Crop Protection Ltd. and GB Seeds Ltd. which are not included in the prior year comparative.
Economic conditions remain challenging
Supporting customers to reposition food service within c-stores
Value proposition with freshly prepared convenience offerings drives footfall
Continued investment in new field sales staff
Growth in new customers offsetting declines in existing customers
Underlying business
Transaction impacts
Foreign exchange
Credit Suisse and Zürcher Kantonalbank (ZKB) acted together with Bank of America, BNP Paribas, Rabobank and UBS as mandated lead arrangers
Ten Swiss Cantonal banks also participated in the syndicated bank facility*
* Canton banks – Aargauische Kantonalbank, Banque Cantonale Vaudoise, Bank Coop AG, Basler Kantonalbank, Basellandschaftliche Kantonalbank, Schaffhauser Kantonalbank, Luzerner Kantonalbank AG, Raiffeisen Schweiz Genossenschaft, Banca dello Stato del Cantone Ticino,Thurgauer Kantonalbank
| Description | Principal1 | Maturity2 |
|---|---|---|
| May 2010 – Syndicated Bank Loan | CHF 600m | Dec 2014 |
| May 2010 – US Private Placement | USD 420m/EUR 25m | May 2013–May 2022 |
| Dec 2009 – US Private Placement | USD 200m | Dec 2021–Dec 2029 |
| Nov 2009 – Swiss Bond | CHF 200m | March 2015 |
| Jun 2007 – US Private Placement | USD 450m | June 2014–June 2019 |
| 1 Average Interest cost c. 4.6% |
2 Current weighted average maturity c. 8 years
Net debt: EBITDA (not greater than) 3.5 times
| in Euro `000 | Food Group |
|---|---|
| Food Group opening net debt as at 31 July 2009 | (505,504) |
| Cash flow generated from activities | 91,375 |
| Investment capital expenditure | (22,591) |
| Dividends paid | (30,603) |
| Deferred consideration and acquisition costs | (2,128) |
| Foreign exchange movement¹ | (16,727) |
| Other | (1,679) |
| Food Group closing net debt 31 January 2010 | (487,857) |
| Net debt to EBITDA² | 1.69x |
1 Foreign exchange movement is primarily attributable to the fluctuation in the US Dollar to Euro rate between July 2009 (1.4252) and January 2010 (1.3985) on the US\$ 650m private placement.
2 Food Group net debt to EBITDA ratio based on bank covenant definition. EBITDA includes contribution from the Canadian JV. It also is adjusted for the non-cash share based payments charge.
Consideration of USD 1.08bn
USD 760m debt financed
USD 140m equity financed
USD 180m debt financed
* Based on proforma TTM to May 2010
Once-off expense to the Income Statement in July 2010 under new accounting rules (IFRS 3 Revised)
* ROI calculation based on EBITA before the impact of non-recurring items and including contribution from associates and JVs (after interest and tax), as a percentage of net assets (excluding all bank debt, cash, cash equivalents and tax related balances).
"Great Strategic Fit"
Fresh Start Bakeries (incorporating Pennant Foods and Sweet Life) is a global supplier of speciality bakery products with a leading position in the Quick Service Restaurant (QSR) segment.
Pennant Foods is a leading provider of speciality bakery products and solutions to the North American QSR, foodservice and retail in-store-bakery channels.
Sweet Life is a leading innovator and manufacturer of sweet baked goods servicing the North American and Asian QSR channel.
Great Kitchens is a leading supplier of pizza and appetisers with a focus on the deli segment of the North American retail grocery channel.
* wholly owned manufacturing locations excluding JV locations
Expanded global reach in speciality bakery
* Acquisition pro forma TTM revenue excluding JVs to May 2010 (translated at USD-EUR rate of 1.41, based on average TTM to April 2010, as Food Group revenue is included above for TTM April 2010).
Increasingly diversified customer mix in speciality bakery
* Acquisition pro forma TTM revenue excluding JVs to May 2010 (translated at USD-EUR rate of 1.41, based on average TTM to April 2010, as Food Group revenue is included above for TTM April 2010).
Continued focus on speciality bakery
* Acquisition pro forma TTM revenue excluding JVs to May 2010 (translated at USD-EUR rate of 1.41, based on average TTM to April 2010, as Food Group revenue is included above for TTM April 2010).
ARYZTA benefiting from long-term food industry trends
As markets evolve, consumers spend more at foodservice establishments and increase consumption of frozen products
* Excluding spend on ice cream products Source: EuroMonitor, World Bank, L.E.K. Consulting analysis
Spending on food away from home has consistently grown 1–2% faster than spending on food at home
Source: Bureau of Economic Analysis, L.E.K. Consulting analysis
39 © ARYZTA, June 2010
Source: Global Industry Analysts, Inc (GIA), L.E.K. Consulting analysis
40 © ARYZTA, June 2010
U.S. Baked Goods Growth
Frozen and bake-off bakery products are growing 1–2% faster than the rest of the baked goods market
| 2006 | 50% | 50% |
|---|---|---|
| 2014F | 55% | 45% |
Source: Food For Thought, Technomic, Nielsen, L.E.K. Consulting analysis
41 © ARYZTA, June 2010
"Management targets to double the earnings base within 5 years"
* Improvements: Underlying business, transaction related and foreign exchange
"Developing customer partnership model with leading operators in every channel to consumers"
*All enquiries regarding investor meeting requests should be sent by email.
Talacker 41 8001 Zurich Switzerland Tel: +41 (0) 44 583 42 00 Fax: +41 (0) 44 583 42 49 [email protected] www.aryzta.com
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