Aryzta AG

Investor Presentation • Oct 7, 2019

ARYZTA AG H1 Results, FY 2017

13 March 2017

This document contains forward looking statements which reflect the Board of Directors' 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.

Key Developments

• Continued strong cash generation of €99m
• Financing costs reduced by €26m
• Weighted average interest cost reduced to 1.62%
• Increased Syndicated Bank RCF covenant to 4.0x Net Debt: EBITDA
• Extended €614m term loan maturity to February 2019
• Strategic review of Joint Ventures investment strategy underway
• Interim CFO appointed
• Management transition accelerated
• In these circumstances, the Board is not in a position to provide guidance
• Free cash flow is key near-term performance measure

ARYZTA Group – Underlying Income Statement

Six month period ended 31 January 2017

in EUR '000	January 2017	January 2016	%
Group revenue	1,906,036	1,960,014	(2.8)%
EBITA1	158,533	230,832	(31.3)%
EBITA margin	8.3%	11.8%	(350) bps
Joint ventures, net of interest and tax	16,710	13,699	22.0%
EBITA including joint ventures	175,243	244,531	(28.3%)
Finance cost, net	(29,622)	(55,940)	47.0%
Hybrid instrument accrued dividend	(16,022)	(15,876)	(0.9%)
Pre-tax profits	129,599	172,715	(25.0%)
Income tax	(18,534)	(29,348)	36.8%
Non-controlling interests	(1,635)	(2,293)	28.7%
Underlying net profit2	109,430	141,074	(22.4)%
Underlying fully diluted EPS (cent)3	123.2	158.4	(22.2)%

1 See glossary on slide 36 for definitions of financial terms and references used in the presentation.

2 See bridge from underlying net profit to reported net profit, as included on slide 11.

3 The 31 January 2017 weighted average number of ordinary shares used to calculate underlying fully diluted earnings per share is 88,846,838 (H1 2016: 89,039,290).

H1 2017 Underlying EPS Bridge

ARYZTA Group Underlying Revenue Six month period ended 31 January 2017

in EUR million	Europe	North America	Rest of World	Total Group
Group revenue	861.8	915.2	129.0	1,906.0
Underlying growth	1.0%	(5.2)%	9.5%	(1.6)%
Acquisitions/(disposals), net	(1.8)%	(1.7)%	–	(1.6)%
Currency	(1.5)%	1.1%	10.8%	0.4%
Revenue growth	(2.3)%	(5.8)%	20.3%	(2.8)%

ARYZTA Group – Quarterly Underlying Revenue

	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017	Q2 2017	H1 2017
ARYZTA Europe
Volume %	2.1%	2.7%	3.3%	3.1%	1.8%	(0.1)%	0.8%
Price/Mix %	3.4%	1.1%	0.6%	(0.1)%	(0.4)%	0.7%	0.2%
Underlying growth %	5.5%	3.8%	3.9%	3.0%	1.4%	0.6%	1.0%
ARYZTA North America
Volume %	(9.4)%	(6.5)%	(4.2)%	(1.2)%	(5.7)%	(5.5)%	(5.6)%
Price/Mix %	3.8%	4.1%	1.9%	(0.9)%	1.0%	(0.3)%	0.4%
Underlying growth %	(5.6)%	(2.4)%	(2.3)%	(2.1)%	(4.7)%	(5.8)%	(5.2)%
ARYZTA Rest of World
Volume %	(3.7)%	(0.8)%	3.7%	0.1%	4.9%	7.6%	6.4%
Price/Mix %	5.9%	6.5%	3.8%	9.3%	4.8%	1.7%	3.1%
Underlying growth %	2.2%	5.7%	7.5%	9.4%	9.7%	9.3%	9.5%
ARYZTA Group
Volume %	(4.0)%	(2.1)%	(0.3)%	0.8%	(1.7)%	(2.3)%	(2.0)%
Price/Mix %	3.6%	2.9%	1.2%	0.0%	0.5%	0.3%	0.4%
Underlying growth %	(0.4)%	0.8%	0.9%	0.8%	(1.2)%	(2.0)%	(1.6)%

ARYZTA Group – Segmental EBITA Six month period ended 31 January 2017

in EUR '000	January 2017	January 2016	%
ARYZTA Europe	78,085	105,370	(25.9)%
ARYZTA North America	65,471	113,129	(42.1)%
ARYZTA Rest of World	14,977	12,333	21.4%
ARYZTA Group EBITA	158,533	230,832	(31.3)%

EBITA Margin	January 2017	January 2016	bps
ARYZTA Europe	9.1%	12.0%	(290) bps
ARYZTA North America	7.2%	11.7%	(450) bps
ARYZTA Rest of World	11.6%	11.5%	10 bps
ARYZTA Group EBITA Margin	8.3%	11.8%	(350) bps

• ARYZTA Europe margin decline primarily due to:
  • » Ongoing commissioning of new bakery capacity in Germany at initial lower margins
  • » Brexit impacting cross-border revenues and input costs
• ARYZTA North America margin decline primarily due to:
  • » Increased labour rates and employee costs across North America
  • » Negative operating leverage from underlying volume declines
  • » Continuing investment in brand strategy

Joint Venture Underlying Income Statement

Six month period ended 31 January 2017

in EUR '000	Picard January 2017	Signature January 2017	Total January 2017	Total January 2016
Revenue	787,738	55,614	843,352	734,984
EBITDA	126,967	6,475	133,442	118,008
Depreciation	(14,792)	(2,667)	(17,459)	(16,231)
EBITA	112,175	3,808	115,983	101,777
EBITA margin	14.2%	6.8%	13.8%	13.8%
Finance cost, net	(47,584)	(630)	(48,214)	(40,193)
Pre-tax profit	64,591	3,178	67,769	61,584
Income tax	(33,092)	(420)	(33,512)	(33,925)
Joint venture underlying net profit	31,499	2,758	34,257	27,659
ARYZTA's share of JV underlying net profit	15,331	1,379	16,710	13,699

– ARYZTA's share of JV underlying net profit increased by 22% to €17m

• Picard (49% interest)
  • » H1 2017 EBITDA of €127m
  • » H1 2016 figures reflect only five months of results, following investment in August 2015
  • » TTM EBITDA of €204m
• Signature Flatbreads (50% interest)
  • » H1 2017 EBITDA of €6m
  • » TTM EBITDA of €13m
• Strategic review of Joint Ventures investment strategy underway
• The carrying value of joint ventures and related receivables as of 31 January 2017 is €509m

Integration and Rationalisation Activities Six month period ended 31 January 2017

in EUR '000	Non-cash January 2017	Cash January 2017	Total January 2017	Total January 2016
Net gain/(loss) on disposal of businesses	–	–	–	2,395
Asset write-downs	(2,347)	–	(2,347)	(7,379)
Acquisition-related costs	–	–	–	(965)
Severance and other staff-related costs	–	(4,190)	(4,190)	(7,714)
Contractual obligations	–	(4,126)	(4,126)	(5,774)
Advisory and other costs	–	(2,496)	(2,496)	(320)
Net acquisition, disposal and restructuring-related costs	(2,347)	(10,812)	(13,159)	(19,757)

• Integration and rationalisation-related costs continued to decline during H1 2017
• €2m non-cash costs
  • » Largely related to finalisation of Germany bakery transition and site closure
• €11m cash costs
  • » Severance and other staff-related costs relate to various rationalisation decisions across the Group
  • » Contractual obligations primarily relate to idle facilities closed in prior years

Underlying Net Profit Reconciliation

Six month period ended 31 January 2017

January 2017	January 2016
109,430	141,074
(87,460)	(86,370)
16,072	17,817
(2,229)	(1,873)
16,022	15,876
(182,513)	–
(13,159)	(19,757)
2,804	3,512
(141,033)	70,279
–	–
–	48
–	48
–	(45,769)
–	(45,721)
(141,033)	24,558

Cash Generation Six month period ended 31 January 2017

in EUR '000	January 2017	January 2016
EBIT	71,073	144,462
Amortisation	87,460	86,370
EBITA	158,533	230,832
Depreciation	70,484	69,025
EBITDA	229,017	299,857
Working capital movement	(17,551)	26,707
Working capital movement from debtor securitisation1	25,252	39,984
Capital expenditure, net	(47,003)	(108,392)
Acquisition and restructuring-related cash flows	(28,323)	(26,971)
Segmental operating free cash generation	161,392	231,185
Interest and income tax	(55,675)	(53,456)
Other2	(6,305)	(4,688)
Cash flow generated from activities	99,412	173,041

1 Total debtor balances securitised as of 31 January 2017 is €239m.

2 Other is comprised primarily of non-cash amortisation of deferred income from government grants.

Net Debt and Investment Activity

Six month period ended 31 January 2017

in EUR '000	January 2017	January 2016
Opening net debt as at 1 August	(1,719,617)	(1,725,103)
Cash flow generated from activities	99,412	173,041
Disposal of businesses, net of cash and finance leases	–	35,992
Proceeds from disposal of Origin, net of cash disposed	–	225,101
Investment in joint venture	–	(450,732)
Net debt cost of acquisitions	–	(26,917)
Contingent consideration paid	(896)	(42,118)
Dividends paid	(3,350)	(4,603)
Private Placement early redemption and related costs	(182,513)	–
Foreign exchange movement1	(42,856)	(5,566)
Other2	(1,677)	(2,641)
Closing net debt as at 31 January	(1,851,497)	(1,823,546)

1 Foreign exchange movement for the period ended 31 January 2017 is primarily attributable to the fluctuation in the US Dollar to euro rate from July 2016 (1.1162) to January 2017 (1.0674). Foreign exchange movement for the period ended 31 January 2016 was primarily attributable to the fluctuation in the US Dollar to euro rate from July 2015 (1.1109) to January 2016 (1.0915).

2 Other is comprised primarily of non-cash amortisation of upfront borrowing costs.

ARYZTA Group Financing

– Debt Financing

• » Net debt of €1,851m
• » Weighted average interest cost of 1.62%
• » Interest cover of 4.95x (hybrid as debt)
• » Syndicated Bank RCF covenant increased to 4.0x Net Debt: EBITDA for the three tests at 31 July 2017, 31 January 2018 and 31 July 2018
• » Extended €614m term loan maturity to February 2019
• » Weighted average maturity extended to 3.17 years
• Hybrid Financing
  • » Total hybrid outstanding of €802m

	January 2017	July 2016
Net Debt: EBITDA1 (Syndicated Bank RCF)	3.41x	2.90x

1 Calculated based on the terms of the Syndicated Bank RCF.

• 1 The term debt maturity profile is set out as at 31 January 2017, adjusted for the term loan maturity extension. Gross term debt at 31 January 2017 is €2,076.7m. Net debt at 31 January 2017 is €1,851.5m, which also includes overdrafts and finance leases, and is net of cash and related capitalised upfront borrowing costs.
• 2 Incorporating the drawn amount on the Syndicated Bank RCF of €1,076.5m as at 31 January 2017, which represents 52% of the gross term debt.

ARYZTA Europe Six month period ended 31 January 2017

ARYZTA Europe H1 2017 Financial Metrics

Revenue		(2.3)%
Underlying revenue		1.0%
Acquisitions/(disposals), net		(1.8)%
Currency		(1.5)%
EBITA		(25.9)%
EBITA margin		(290) bps

1 Allocations based on revenue for the year ended July 2016.

• Slower than expected ramp-up of new bakery capacity in Germany
• Brexit impacting H1 2017 margins; however, pricing recovery expected in H2 2017
• Swiss customer insourcing of c.€80m of revenue has started, but at a lower than expected pace
• Robust revenue performance across European bakeries including CEE and the Netherlands
• Discounter channel continues to take share, disrupting both large and small retail
• Continuing to grow and develop exports out of Europe
• Innovation-driven Food Solutions proposition continues to align with market trends
  • » Health & Wellness
  • » Indulgence
  • » Portability & Convenience
  • » Value

ARYZTA North America Six month period ended 31 January 2017

ARYZTA North America H1 2017 Financial Metrics

Revenue		(5.8)%
Underlying revenue		(5.2)%
Acquisitions/(disposals), net		(1.7)%
Currency		1.1%
EBITA		(42.1)%
EBITA margin		(450) bps

1 Allocations based on revenue for the year ended July 2016.

ARYZTA North America Revenue Analysis

ARYZTA North America

• Labour cost increases impacting performance
• Previously announced contract renewals resulting in volume reductions and negative operating leverage
• Co-pack revenue losses impacting earlier than anticipated
• Enacting efficiency improvement programmes and price increases
• Continued investment in North America branded strategy Otis Spunkmeyer snack cake range

ARYZTA Rest of World Six month period ended 31 January 2017

1 Allocations based on revenue for the year ended July 2016.

ARYZTA Rest of World Revenue Analysis

ARYZTA Rest of World

• Underlying growth momentum from:
  • » Increasing global approach and support of international customer partnerships
  • » Expansion of offer to convenience and retail channels
  • » Organic growth in foodservice through innovative premium food exports from Europe
  • » Changing dietary patterns and rising medium income levels continue to sustain growth
  • » Increased penetration into emerging markets

• Continuing to focus on customer service, support and food safety
• Increased focus on cost alignment and efficiency initiatives
• Improving revenue growth and operating leverage of well-invested asset base
• Peak capital expenditure cycle completed
• Increased focus on cash generation
• Strengthening the balance sheet
  • » Amended and extended financing agreements provides headroom
  • » Strategic review of Joint Ventures investment strategy underway
• Potential to reduce leverage by more than €1 billion within four years

Thank you

Appendix

ARYZTA Group Balance Sheet as at 31 January 2017

in EUR '000	As at January 2017	As at July 2016
Property, plant and equipment	1,610,739	1,594,885
Investment properties	20,771	24,787
Goodwill and intangible assets	3,624,696	3,617,194
Deferred tax on acquired intangibles	(201,166)	(210,635)
Working capital	(408,348)	(361,307)
Other segmental liabilities	(67,833)	(76,109)
Segmental net assets	4,578,859	4,588,815
Joint ventures and related receivables	509,159	495,402
Net debt	(1,851,497)	(1,719,617)
Deferred tax, net	(119,160)	(113,823)
Income tax	(57,280)	(49,118)
Derivative financial instruments	(2,494)	(13,888)
Net assets	3,057,587	3,187,771

Net Debt as at 31 January 2017

		Outstanding
Debt Funding as at 31 January 2017	Principal	in EUR `000
Syndicated Bank RCF	USD 870m	(815,065)
Syndicated Bank RCF	CAD 45m	(32,155)
Syndicated Bank RCF	CHF 245m	(229,300)
Term loan facility	EUR 614m	(614,000)
Schuldschein	EUR 366m	(366,000)
Schuldschein	USD 22m	(20,142)
Gross term debt		(2,076,662)
Upfront borrowing costs		14,250
Term debt, net of upfront borrowing costs		(2,062,412)
Finance leases		(1,918)
Cash and cash equivalents, net of overdrafts		212,833
Net debt		(1,851,497)

Hybrid Funding as at 31 January 2017

		Outstanding
Hybrid Funding as at 31 January 2017	Principal	in EUR `000
Hybrid funding – first call date April 2018	CHF 400m	(374,367)
Hybrid funding – first call date March 2019	EUR 250m	(250,000)
Hybrid funding – first call date April 2020	CHF 190m	(177,824)
Hybrid funding at 31 January 2017 exchange rates		(802,191)

ARYZTA Group – Return on Invested Capital

		North	Rest	Total
in EUR million	Europe	America	of World	Group
31 January 2017
Group share net assets	1,837	2,524	218	4,579
TTM EBITA	189	196	28	413
ROIC1	10.3%	7.8%	13.1%	9.0%
31 July 2016
Group share net assets	1,903	2,488	198	4,589
TTM EBITA	215	243	26	484
ROIC1	11.3%	9.8%	13.0%	10.5%

1 See glossary on slide 36 for definitions of financial terms and references used.

2 Group WACC on a pre-tax basis is currently 7.5% (2016: 8.0%).

Continuing Operations – Five Year KPIs

In EUR million	July 2012	July 2013	July 2014	July 2015	July 2016	Total/CAGR1
Revenue	2,867.6	3,085.5	3,393.8	3,820.2	3,878.9	8.5%
EBITDA	465.2	500.4	589.2	638.3	609.6	8.3%
Underlying net profit – continuing operations	246.6	268.4	324.6	330.0	311.5	7.4%
ARYZTA AG underlying fully diluted EPS (cent)1	337.5	360.3	422.2	402.2	350.3	2.5%
ARYZTA AG underlying fully diluted EPS (cent)1 – continuing operations	286.0	303.0	363.0	368.9	350.3	6.1%
Net debt as at 31 July	(976.3)	(849.2)	(1,642.1)	(1,725.1)	(1,719.6)
Hybrid funding as at 31 July2	(333.0)	(648.4)	(657.4)	(804.8)	(793.5)
Total Net Debt and Hybrid as at 31 July	(1,309.3)	(1,497.6)	(2,299.5)	(2,529.9)	(2,513.1)

1 CAGR is calculated for the five-year period from FY 2011.

2 Hybrid funding is shown based on 31 July spot rates and before associated issuance costs.

Continuing Operations – Five Year Cash Generation

In EUR million	July 2012	July 2013	July 2014	July 2015	July 2016	Five Year Total
EBIT	275.0	300.1	362.5	346.0	308.6	1,592.2
Amortisation	99.8	106.6	123.8	168.0	176.2	674.4
EBITA	374.8	406.7	486.3	514.0	484.8	2,266.6
Depreciation	90.4	93.7	102.9	124.3	124.8	536.1
EBITDA	465.2	500.4	589.2	638.3	609.6	2,802.7
Working capital movement, including securitisation	(19.3)	(11.2)	46.6	40.7	94.9	151.7
Capital expenditure	(135.6)	(216.2)	(336.8)	(410.1)	(212.9)	(1,311.6)
Acquisition and restructuring-related cash flows	(88.6)	(86.5)	(105.6)	(101.3)	(81.7)	(463.7)
Segmental operating free cash generation	221.7	186.5	193.4	167.6	409.9	1,179.1
Dividends received from Origin	11.2	14.3	16.4	17.1	–	59.0
Hybrid dividend	(16.3)	(16.6)	(29.4)	(39.1)	(31.8)	(133.2)
Interest and income tax	(97.7)	(91.0)	(103.4)	(118.0)	(114.0)	(524.1)
Other	1.7	0.6	(2.9)	(6.2)	2.6	(4.2)
Cash flow generated from activities	120.6	93.8	74.1	21.4	266.7	576.6

Continuing Operations – Five Year Net Debt

In EUR million	July 2012	July 2013	July 2014	July 2015	July 2016
Opening net debt as at 1 August	(955.5)	(976.3)	(849.2)	(1,642.1)	(1,725.1)
Cash flow generated from activities	120.6	93.8	74.1	21.4	266.7
Disposal of businesses, net of cash and finance leases	–	–	–	22.7	42.1
Proceeds from disposal of Origin, net of cash disposed	–	–	71.8	398.1	225.1
Investment in joint venture	–	–	–	–	(450.7)
Cost of acquisitions	(101.0)	(311.6)	(862.8)	(149.8)	(26.9)
Collection of receivables from joint ventures	–	–	–	–	21.5
Contingent consideration paid	(7.2)	(0.2)	(4.2)	(9.2)	(46.9)
Hybrid instrument proceeds	–	319.4	–	69.3	–
Share placement	140.9	–	–	–	–
Dividends paid	(43.7)	(46.0)	(51.2)	(69.4)	(57.3)
Foreign exchange movement	(139.2)	62.0	(22.7)	(363.8)	36.0
Other	8.8	9.7	2.1	(2.3)	(4.1)
Closing net debt as at 31 July	(976.3)	(849.2)	(1,642.1)	(1,725.1)	(1,719.6)
Net Debt: EBITDA1 calculations as at 31 July
TTM EBITDA	465.2	527.0	654.9	640.4	608.2
Dividends from Origin – discontinued operations	10.4	14.3	16.4	17.1	–
EBITDA for covenant purposes	475.6	541.3	671.3	657.5	608.2

1 Calculated based on EBITDA, including dividends received, adjusted for the pro forma full twelve month contribution from acquisitions and full twelve month deductions from disposals.

Closing Rates	January 2017	July 2016	% Change
Swiss Franc	1.0685	1.0855	1.6%
US Dollar	1.0674	1.1162	4.4%
Canadian Dollar	1.3995	1.4562	3.9%
Sterling	0.8489	0.8399	(1.1)%
Average Rates	January 2017	January 2016	% Change
Swiss Franc	1.0820	1.0862	0.4%
US Dollar	1.0910	1.1020	1.0%
Canadian Dollar	1.4422	1.4806	2.6%
Sterling	0.8625	0.7276	(18.5)%

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 intangible amortisation; before net acquisition, disposal and restructuring-related costs and related tax credits.
• 'EBITDA' presented as earnings before interest, taxation, depreciation and amortisation; before net acquisitions, disposal and restructuring-related costs and related tax credits.
• 'ERP' Enterprise Resource Planning intangible assets include the Group SAP system.
• 'Hybrid instrument' presented as Perpetual Callable Subordinated Instrument in the Financial Statements.
• 'Segmental Net Assets' Based on segmental net assets, which excludes joint ventures, all bank debt, cash and cash equivalents and tax balances, with the exception of deferred tax liabilities associated with non-ERP intangible assets, as those deferred tax liabilities represent a notional non-cash tax impact directly linked to segmental intangible assets recorded as part of a business combination, rather than an actual cash tax obligation.
• 'ROIC' Return On Invested Capital is calculated on a consistent basis year over year using a pro-forma trailing twelve months segmental EBITA ('TTM EBITA') reflecting the full twelve month contribution from acquisitions and full twelve months deductions from disposals, divided by the respective Segmental Net Assets, as of the end of each respective period.
• 'Underlying net profit' presented as reported net profit, adjusted to include the Hybrid instrument accrued dividend as finance cost; before non-ERP related intangible amortisation; before Private Placement early redemption related costs and before net acquisition, disposal and restructuring-related costs, net of related income tax impacts.
• The Group utilises the underlying net profit measure to enable comparability of the results from period to period, without the impact of transactions that do not relate to the underlying business. It is also the Group's policy to declare dividends based on underlying fully diluted earnings per share, as this provides a more consistent basis for returning dividends to shareholders.