Aryzta AG: June 2020 revenue and liquidity update

Zurich / CH. (aag) Financial position of Swiss-Irish Aryzta AG is stable – health and wellbeing of colleagues, customers and suppliers okay on a scala from obviously to hopefully. That is the essence of the company’s latest «revenue and liquidity update», reported this week as follows.

• Aryzta has seen steady improvement in the revenue trend of the business, currently tracking to a negative organic revenue evolution of about (23) percent for month to date in June, versus (36) percent in May and (49) percent in April.
• From mid-March onwards, Aryzta took decisive and rapid action to protect and maximise liquidity in the business. This included pausing production in bakeries to reduce capacity in line with demand, furloughing headcount, availing of government relief initiatives, suspending capital expenditure and eliminating discretionary cost to the maximum extent possible.
• These actions are being kept under constant review as the Group expects a bumpy recovery over the coming months. The Group continues to be vigilant with the impact and developments of Covid-19. Keeping all costs under control to the maximum extent possible remains a key priority, while we will continue to adjust our business to reflect changes in the economic environment.
• In Europe most economies are beginning to re-emerge from lockdown at varying speeds driving an improving weekly revenue trend which is now tracking at about (27) percent. QSR and In-Store-Bakery are gradually improving whilst Foodservice and convenience retail channels continue to be negatively impacted due to work at home and lower tourism across the region.
• In North America revenue evolution is tracking at about (18) percent. The signs of recovery are concentrated in the QSR and retail channels in the region, while Foodservice remains negatively impacted by Covid-19 related restrictions.
• In Rest of World revenue evolution is tracking at about (20) percent. Similar to all other regions, Foodservice remains negatively impacted. QSR has rebounded in the Asia Pacific region, while the performance in Brazil is improving but remains more challenging.
• In line with the loosening of restrictions in a number of markets, we have quickly adapted to the evolution in the market and Aryzta has begun to adjust production upward using adapted shift patterns:
  • In Europe only one bakery is still fully paused compared to three as of 30 April and about 80 percent of the lines are currently operational.
  • In North America only one bakery is still fully paused compared to five as of 30 April with about 90 percent of the lines are currently operational.
  • Overall Aryzta has about 22 percent of staff furloughed versus about 30 percent as of 30 April.

Liquidity

Reflecting the Group’s decisive and effective focus on cash conservation, Aryzta maintains liquidity of about EUR 370 million on 25 June compared to EUR 385 million at the end of Q3 and stable versus three months ago. This is consistent with our estimate of a net cash outflow in Q4 as announced on 26 May. The Group continues to expect to finish the year with a good overall liquidity position. Aryzta has no material debt maturities over the coming 14 month period (EUR 17 million due March 2021).

Balance Sheet

In May, the Group executed an amendment to its financial covenants, effective for the next two covenant tests relating to the annual Financial Statements as of the end of July 2020 and the interim Financial Statements as of the end of January 2021. The Net Debt: Ebitda Ratio shall be lower or equal to 6.0x and the Net Interest Coverage Ratio shall be greater than 1.5x, each of which provides Aryzta with increased covenant headroom. Aryzta has announced it will defer hybrid interest due July 2020.

Health + Safety

A key priority of the Aryzta Board and the Executive Management Committee continues to be the health and wellbeing of our colleagues, customers and suppliers during this challenging period. We are continuously monitoring the situation with our key stakeholders and are actively assessing the consequences of government responses to Covid-19 within the different channels and thus effectively managing our supply chain. We will concentrate specifically on the safety of our employees, particularly where and when we transition employees back into the business. Our focus remains on having the highest quality and product safety standards across all bakeries in full compliance with reinforced Covid-19 protocols.