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Edited Transcript of ARYN.VX earnings conference call or presentation 8-Oct-19 6:30am GMT

Full Year 2019 Aryzta AG Earnings Call

Zurich Oct 15, 2019 (Thomson StreetEvents) -- Edited Transcript of Aryzta AG earnings conference call or presentation Tuesday, October 8, 2019 at 6:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Frédéric Pflanz

ARYZTA AG - CFO

* Gerard Van Buttingha Wichers

ARYZTA AG - Head of IR

* Kevin E. Toland

ARYZTA AG - CEO & Executive Director

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Conference Call Participants

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* Cathal Kenny

Davy, Research Division - Senior Analyst of Food and Beverage

* Jason Molins

Goodbody Stockbrokers, Research Division - Analyst

* Jean-Philippe Bertschy

Bank Vontobel AG, Research Division - Head of Consumers Team

* John Mark Ennis

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Jörn Iffert

UBS Investment Bank, Research Division - Director and Analyst

* Mirza Faham Ali Baig

Crédit Suisse AG, Research Division - Research Analyst

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Presentation

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Operator [1]

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Welcome to the ARYZTA AG 2019 Full Year Results Conference Call hosted by Kevin Toland, CEO; and Frédéric Pflanz, CFO.

(Operator Instructions) I will now hand you over to Gerard Wichers, Head of Investor Relations.

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Gerard Van Buttingha Wichers, ARYZTA AG - Head of IR [2]

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Good morning, ladies and gentlemen. Thank you for taking the time to join our call this morning.

I would just like to briefly draw your attention to the safe harbor statement which applies to today's announcement and discussion. You will find the safe harbor statement on Slide 2 of the presentation.

As said, present on the call are Kevin Toland and Frédéric Pflanz, CEO and CFO of ARYZTA, respectively. Before taking your questions, they would like to provide a summary overview of our fiscal '19 performance, and I'd like to hand over to Kevin.

Kevin?

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Kevin E. Toland, ARYZTA AG - CEO & Executive Director [3]

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Thank you, Gerard, and good morning, ladies and gentlemen. Thank you for joining us this morning.

The purpose of 2019 was improving the underlying position of the company through the capital raise and executing our plan. We've made good progress on execution and delivery of our stability on the basis of improved performance in the future. One, EBITDA has been stabilized and slightly improved at EUR 307.5 million, plus 1.9%. Two, we have good progress on renew, with EUR 26 million savings delivered in the year and our EUR 40 million exit run rate achieved. Three, North American EBITDA has been stabilized and in fact improved by 9% even though we still have revenue stabilization issues to address. Four, we've substantial progress on our disposal program, which will be 85% complete when Picard disposals would close. And five, we've strong improvements in all our balance sheet ratios. For example, our net debt-to-EBITDA at the year-end is 2.43x.

Turning to Slide 3 and the key financial highlights for our 2019 financial year.

We're pleased to report that despite challenges faced, key measures of group profitability have improved. The focus for FY '19 was delivering on year 1 of our turnaround program. Project Renew yielded EUR 26 million of savings in fiscal year '19, which have been independently verified. We also generated annualized run rate savings of EUR 40 million. We grew underlying EBITDA by plus 1.9% to EUR 308 million and improved underlying EBITDA margin by plus 30 basis points to 9.1%. While this is some way off from our medium-term target, we have a very clear focus and are going in the right direction. We're making the changes necessary to rightsize the business and drive profitability and in time growth.

Group organic revenue was flat, while total revenue declined minus 1.5% to EUR 3.383 billion. In North America, we achieved underlying EBITDA stabilization, but revenue challenges remain, which I'll discuss in detail in this presentation. We delivered operating free cash generation of EUR 144 million and cash flow generated from activities of EUR 53 million. We have a much improved balance sheet with significant covenant headroom and net debt-to-EBITDA ratio of 2.43x. Group debt is at its lowest level since 2013.

Finally, as you will have seen on Friday, we received a binding offer to sell the majority of ARYZTA's Picard stake. When complete and combined with our other noncore disposals, we would have realized 85% of our asset disposal target.

Moving to Slide 4. ARYZTA delivered group-level EBITDA stability and a slight improvement sequentially H2 versus H1.

Turning now to our revenue performance for the period on Slide 5 at a group level. Total revenue declined by 1.5% to EUR 3.383 billion, reflecting the impact of disposals of minus 2.9% and a favorable currency movement of plus 1.4%. Group organic revenue is flat, as a 2% price/mix improvement was offset by a 2% volume decline.

Now turning to Slide 6, on our North America business, which as you can see from our release today remains challenging on a top line revenue basis. North America accounts for just over 40% of ARYZTA's group revenue and 30% -- 32% of group EBITDA. It's a very important element of ARYZTA's business and turnaround and growth strategy. And while fiscal year '19 was difficult, we're very focused on the issues, and we're making progress.

In FY '19, organic revenue declined by minus 3.8%, with volumes declining minus 5.1%, offset by a price/mix increase of plus 1.3%. Underlying EBITDA there was stabilized and in fact improved by 9% to EUR 98 million as the first Project Renew benefits and bakery initiatives savings impacted. And the underlying EBITDA margin was improved by 90 basis points to 7%. We have seen significant SG&A savings driven by headcount reductions, and we've implemented a sustained cost control focus throughout the business.

On Slide 7, we want to deal with the issues that impacted our North American business for the year and the steps we've taken to address these issues, in particular a deep dive into the revenue. The overall revenue decline was minus $66 million. Firstly, in QSR, whilst our overall performance was satisfactory and we maintained our position with key customers, there was a $14 million loss in the channel, with revenue reduction with one customer accounting for $15 million. It's important to remember that in B2B within QSR our performance is also tied to the underlying sales as from the customer. In this case, our business position with this customer has been fully stabilized, and we are driving new business for and with them through a number of new product innovations which are rolling through into fiscal '20. In large, the -- in retail, the majority of the revenue loss was associated with one large retail customer. As I indicated during our Q3 revenue call, we lost 2 lines. That situation has been addressed through new products that are in the process of being progressively rolled out with that customer through fiscal '20. In foodservice, we had some losses in the earlier part of the year, but that position has been improved in H2 with a combination of steps already activated. Net-net, organic revenue will remain challenging through the first half of fiscal '20 as the events of fiscal '19 continue to have some impact, with a positive evolution expected in H2.

Moving to Slide 8 to take a similar deep dive into our North American Q4 revenue performance and the issues. Total revenue loss in the quarter was $32 million or 8%. The revenue loss was largely attributable to the QSR and large retail sectors. In the QSR channel, organic revenue declined by $21 million. Some of that relates to volume loss due to the exit of a customer from a noncore category. However, within the period, we also signed a new and a multiyear contract with that same customer. A change in our bakery footprint made to better support future increased volumes with another key customer caused temporary lost volumes. This has been resolved, and the benefits should flow through from Q2 fiscal year '20. And lastly, discontinued customer promotional activity also impacted within QSR in Q4. The retail channel in North America remains challenging due to a competitive retail environment generally, and private label penetration increases. We experienced significant volume declines driven largely by artisan breads with one key customer in the period. The issue has been reversed and we're back to a full portfolio, securing category management with the customer driven by an extensive marketing program including new product innovation, packaging and in-store marketing solutions. We also saw pizza volume loss due to capacity constraints and our decision to improve overall profitability within this category. We had a small volume decrease in independent and convenience retail, while we saw gains in other foodservice.

Turning to Slide 9 just to summarize the actions we've taken to stabilize North American revenue and improve performance. As we've said before, the revenue stabilization is challenging and the recovery will take time and will be bumpy. We reiterate that, despite the revenue decline reported today, we've not lost any major customers. And just to highlight some of the actions that we put in place to turn around the region: Firstly, the new management team is now well embedded; and has recently appointed a new head of marketing for the retail channel, which accounts for 30% of revenue in the region. Customer relationships have been repaired and strengthened across all channels. Our supply chain and procurement processes have been improved across the organization, benefiting customers and margins, including realignment and expansion of capacity to better support service levels. We have a strategy in place to optimize margin opportunity across all channels. We've refocused our innovation around core, higher-margin categories and away from noncore, lower-margin categories. And over the period, we've been awarded new business wins that will start to impact through fiscal '20 but primarily in the second half.

North America continues to not only be a very important region for the group but also for the overall global bakery market, and we're absolutely committed to delivering continued EBITDA growth and stabilized revenue. We've taken the initial steps, which have delivered the EBITDA improvement in fiscal '20. In terms of revenue, we continue to expect negative comps in Q1 and Q2, as we see the impact of volume changes from last year flowing through into this year. However, positive organic revenue evolution is expected through H2 as the new contract wins and volumes are realized.

Turning to Slide 10. ARYZTA Europe delivered revenue up 0.2% to EUR 1.71 billion despite the impact of insourcing within the year. Organic revenue increased plus 1.9%, helped by a price/mix improvement of plus 2.2%. Whilst full year EBITDA and EBITDA margin declined, we saw sequential improvement H2 over H1. And overall, FY '19 was a good year of progression in our European business.

Moving to Slide 11 with a good start to Project Renew, with savings of EUR 11 million achieved in FY '19 primarily through headcount reductions and manufacturing efficiency. The optimization of the bakery footprint progressed well in the year, with 2 loss-making bakeries sold in Europe. And we advanced with the steps to transfer production from older plants and slower lines to quicker, more automated facilities, with full completion in the second half of FY '20. These steps will be margin accretive in FY '20 and provide a path towards our improved utilization rate.

Our renewed customer focus is starting to help us win. In Switzerland, we were able to achieve a multiyear contract extension with our 2 largest customers. The strategic cooperation for both customers covers our retail as well as our petrol and convenience businesses.

Moving to Slide 12, Brexit. We are as prepared as we can be for Brexit given the ongoing high level of uncertainty. We've been fully engaged with our customers around Brexit plans and have taken steps to derisk short-term operational planning. Long-term risks remain given the current lack of clarity. However, the FY '20 impact is not expected to be material, and the total revenue exposed to U.K. is less than 5% of group revenue.

Slide 13, ARYZTA Rest of World. Rest of World had continued organic growth at plus 8.9%. While EBITDA growth is in line, it is offset somewhat by currency impact to a net growth of plus 4.7%. Revenue growth in the region continues to be capacity constrained in some countries and we plan a new bakery in Brazil.

I'll now hand you over to Frédéric, our CFO, for a financial review and a Project Renew update.

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Frédéric Pflanz, ARYZTA AG - CFO [4]

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Thank you very much, Kevin, and good morning, everybody.

I will now talk you through the next stages of the presentations, and we'll be starting with the underlying income statement on Page 15.

Our EBITDA in the year progresses by EUR 5.7 million, of which EUR 2 million are related with organic EBITDA growth, another EUR 2 million with foreign exchange variations and the rest is related to disposals. Thus, we're almost up 2% in published figures and circa 1% organically rounding up slightly.

Depreciation stays about the same year-on-year, while our joint venture Picard was again participating positively with the underlying net profits to the tune of about EUR 5 million behind lower financing costs they have and lower taxes. Our net financing cost is strongly down versus prior year, as the total debt level of the company decreased following the capital raise mid-November onwards and we paid lower interest rate as well. Consequentially, we see an increase of our underlying pretax profits of 31%.

Income taxes stayed relatively stable in absolute terms, varying only by EUR 1 million at EUR 33.5 million, but they had a reduced effective tax rate versus prior year.

Our underlying net profit reaches EUR 74.3 million and progresses circa EUR 25 million versus prior year.

Moving now to Page 16, we see the very important reconciliation from the underlying EBITDA to the IFRS income statement.

We start with the same EUR 307.5 million EBITDA number as on the previous page. We deduct the depreciation of EUR 120 million, the ERP SAP amortization at EUR 17 million, so which is slightly improved EBITDA, just slightly up EUR 5 million. Intangible amortization of EUR 136 million is lower by EUR 20 million versus prior year. The disposal of businesses, which was a EUR 183 million loss in 2018 behind the Cloverhill disposal, is now reduced to just EUR 7 million. And goodwill impairments, which reached EUR 175 million, mostly in Europe, last year, stay at 0 in FY '19, but let's note that in the middle of our reorganizational program we have cash-generating units with limited goodwill headroom at the closing.

Restructuring-related charges of EUR 17 million were reached just behind Project Renew in 2019. These compared to the EUR 70 million in 2018, which were essentially linked to the labor-related business interruption at Cloverhill. More detail on restructuring charges, we will see while reviewing Page 22.

Let's move on now. Let's drive another point, that the number is the lowest number in restructuring charges for quite a number of years in our accounts and is coherent with our initial budget at renew which was EUR 20 million. In the end, we show a very small IFRS operating profit of EUR 5 million versus a loss of EUR 423 million behind the exceptional effects we've had in the years before. After taking to account the JV profits, the financing costs and the IFRS income taxes, we arrive still at a loss for 2019, minus EUR 29 million, but we were at minus EUR 470 million the year before. The hybrid dividend increased to EUR 39 million versus EUR 32 million in the year before, as the EUR 250 million hybrid went through the step-up rate when it was not called in March 2019.

After reviewing the income statement, let's now have a look at our quarterly revenue numbers and how these split into mix and volume effects. For that, we go to Page 17. On Page 17, you see 5 columns to the left and a -- which are the quarterly results since quarter 4 2018; and the column to the right, which gives the annual figure. We have added the Q4 of prior year to the chart this year to facilitate your reading.

Kevin Toland has already gone into detail about how the annual organic revenue number in Europe and North America came out and how they were split, and he gave quite some detail concerning North America. Let me just now point some key points here. On an annual basis, our revenue was stable, with price/mix up 2% and volumes down by 2%. After 4 good quarters, quarter 4 lagged behind in volume terms, driven mostly by North America, which Kevin explained in detail; and through a slight delever by Europe, where the volatility that was pointed out in Q3, in the revenue call, came to play again this time.

In Europe, the year finishes still at plus 1.9% in revenue terms. Prices are up 2.2%. And volumes are down by minus 3 -- 0.3%, especially after the lower quarter 4. I would not read that much into Q4 volumes. In any case, the minus 0.3% annual evolution comes in a time where we have multiple times flagged the insourcing in Germany with one major customer; and in Switzerland, another customer we've lapped in Q1 2019. This insourcing cost us on an annual basis 1.7% of volume growth in Europe. It will lap in Germany only in Q1 or even in Q2 if the customer continues to take longer to ramp up its production. In summary, I think Europe shows a rather good year at an annual plus 1.9%, whereas in prior year we were only at plus 0.9%.

In North America, price/mix effects are up 1.3% after several years of decline. The major issue here is to reestablish volumes. Price/mix in Q4 looks very strong at plus 4.5%. Let's not read anything into that because it comes after a Q4 of last year where the mix effect, because of new volumes behind our lower-priced pizza business, gave the number down. So on an annualized basis, the number of pricing is around again 1% mark, so basically we would be increasing our prices on an annual basis for the last quarter for about 1.3%. The work that needs to be done, and I think Kevin has flagged it already, is the stabilization of the volumes and there will not be positive volumes in North America in Q1 and Q2 of next year.

Finally, in the rest of the world, there is an acceleration in Q4. Price/mix and volumes are almost equal on an annual basis at plus 4.5%, to get to the 9% growth. This is an improvement of 1% versus prior year.

So globally we see on the organic revenue side an improvement for ARYZTA in Europe from minus 1.6% to minus 0.3% in volume and continued strong price effect; in North America, pricing moving from minus 0.5% to plus 1.3%, with volumes still the challenge; and an acceleration in rest of the world with 1% with better pricing.

Let's move to Page 18, where we see the cash generation.

Cash before interest payments, JV dividends and income taxes but after restructuring cash outflows comes in at EUR 144 million, up 33%. Where does this positive evolution come from? Working capital evolution in 2019 was negative by EUR 27 million, but still we've got better than in H1 2019 where the number was strongly negative by almost EUR 80 million. Still there was an outflow year-on-year, and it's similar to the volume -- to the value that we've got in 2018. We can say that the strain on our working capital is lessening, but we still feel the pressure. Among others, as an example, supply credit has not fully come back yet, and we are still in that situation where pressure is on our working capital. Debtor securitization is also slightly down to EUR 13 million in FY '19. Last year, it was EUR 19 million. The program now uses EUR 190 million of the EUR 210 million possible. And last year, we used EUR 200 million. This number varies with the "end of the year" phasing in the major countries that use debtor securitization.

CapEx was stable versus prior year at EUR 86 million. And the renew CapEx cash outflow was only EUR 20 million, but in fact, we engaged and installed in our factories a much higher number. We estimate that to be EUR 35 million to EUR 40 million. We just did not pay yet the suppliers on that. We're almost in-line here with the renew program estimation of EUR 45 million. You will remember that we said last year EUR 45 million of CapEx and EUR 20 million of restructuring spend would come into play in renew, but we only could start the program after the capital raise in November, when the program renew was fully funded, and this is the reason why we are slightly late here in terms of CapEx spending.

Restructuring-related cash flows were 25 -- EUR 24 million versus the EUR 70 million in the prior year.

Total cash flow from all of our activities reaches EUR 53 million versus last year at EUR 110 million, but that included the equity dividend from Picard, EUR 91 million. And apples to apples, we compare EUR 53 million to EUR 20 million, a slight improvement again.

So let's move to Page 19, where we see the consequent deleveraging of the balance sheet over 2 years. From a senior net debt level of EUR 1.73 billion, we're now down to EUR 733 million. This is naturally thanks to the EUR 740 million equity raise but also thanks to about EUR 300 million of cash generation, equity dividends from Picard and disposal proceeds in 2018, [end of 2019]. This number does not yet include the potential proceeds to come from the binding offer received from Picard last week. We expect that transaction to close at the calendar end.

Let's move to Page 20, where we just see in a graph the gross debt evolution over 2 years. And you can see that this graph has moved from [strongly down] through the beneficial effect of the capital raise. Cash at year-end stands at similar levels as in prior years at EUR 378 million, which we will see again on Page 21, but more importantly, our net debt over EBITDA ratio is an improvement versus prior year going down from 3.83 to 2.43, 1.4 turns better; and also a slight improvement versus H1, which also included the capital raise at 2.5. For the future, the covenant test level here will remain at 3.5, so we do have good headroom here. For the record, let's also note that we have another covenant which is the interest cover ratio, where our headroom again is good, 3.45x versus 2x. And for the future, the ratio to meet will go back to 3x at H1 2020, but again there is headroom. Let's also note on the right-hand side on the bottom that the Schuldschein note repayment of EUR 206 million coming up in December 2019 can and will be paid out of existing facilities; and that, already in September, we paid down another EUR 40 million of our term loan as the usual amortization goes.

Moving to Page 21, we see the current total capital stack including gross debt, cash and the hybrids and the deferred hybrid dividends of EUR 82 million. From a total of almost EUR 2.7 billion gross, net EUR 2.3 billion, we go down to EUR 1.6 billion net. We did not count the EUR 250 million hybrid last year. And we announced this morning that we also deferred the hybrid dividend payment for the Swiss francs hybrid at the end of the month. And we have no hybrid coupons payment plans at the moment.

Moving to Page 22 that shows you the detail of the restructuring costs that I already mentioned. Just to confirm: We announced restructuring charges of renew at the beginning of the year of circa EUR 20 million; and we finished at EUR 17 million, again partially late due to the late start of renew.

Page 23 shows the joint venture situation, with Picard as the only joint venture remaining as we sold our Signature joint venture already in H2 2018. Picard is the leading frozen fresh food retailer in France with a strong market share and an almost 14% EBITDA profitability. We received last week a binding offer from IGZ group in France to sell the majority of our interest in Picard for a total compensation of EUR 156 million. This offer is naturally subject to customary regulatory approval and a works council process in France. We expect the transaction, as said before quite a few times, before the calendar year-end.

Let's move to Page 24, where we can see the progress that ARYZTA has made over the last 24 months since the new CEO and the management arrival. All disposals that I mentioned here are coherent with ARYZTA's strategy to exit noncore business. Upon completion of the Picard transaction, we would have realized circa 85% of the net proceeds of our noncore asset divestment target.

Now I want to concentrate a little bit more on Project Renew, as it's a really important piece of our reorganizational program, and for that we move to Page 26. In summary, it says we were on track in 2019, realized EUR 26 million of savings with a good acceleration and more than doubling the savings between H1 and H2. It also says that we are on track for FY '20 to reach our target annualized run rate savings of EUR 70 million, as we already reached the annualized targeted savings in 2019 of EUR 40 million. And we continue and we will maintain our run rate savings target at the end of 2021 of EUR 90 million.

Turning to Page 27 to wrap up the detail per region for renew and give a short look out to what's going to be happening in the ramp-up in 2020.

In ARYZTA North America, the EUR 15 million of savings that were achieved in FY '19 were achieved primarily behind the operating model savings. Our total SG&A in North America is down by 17%. We also had strong procurement and value engineering projects, and the manufacturing efficiency gains in bakeries were achieved but more in the second half of the year. We will see more savings from the manufacturing stream. Europe saw EUR 11 million of savings to flow to the P&L. They were starting later initially, but they were catching up in the second half, again operating model, manufacturing efficiency, with a little bit less procurement and supply chain optimization.

We will see more savings from the manufacturing work stream in 2020 as the automation project line-by-line ramp up and the bakery optimizations come fully into play in their role in generating savings. We have sold 2 loss-making facilities in Europe in 2019. We closed 1 bakery in North America just before the year-end. We wanted to move the weight of the savings in manufacturing from about 20%, which they were at the end of 2019, to 1/3 where they were already in the run rate, up to the 40% that we plan at the end of the plan. In the appendix on Page 43, you can see the detail of this, and you can see also how the 2019 actuals per work stream work separately.

By the way, before I hand over to Kevin: From Page 36 onwards, you will see in the appendix financial details on the financial statement, including the balance sheet, the -- our financial maturities and details on the hybrid funding.

Now for the review and the outlook into 2020, I hand back to our CEO, Kevin Toland. Kevin?

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Kevin E. Toland, ARYZTA AG - CEO & Executive Director [5]

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Thank you, Frédéric.

Turning to Slide 29, I'd like to review the progress made in our 3-year turnaround plan.

As already said, group underlying EBITDA increased by 1.9% and margin increased by 30 basis points on a group level, while North American underlying margins increased by 90 basis points. We achieved positive pricing across all regions and a price/mix of plus 2% at the group level. Project Renew delivered independently verified savings of EUR 26 million in FY '19 and an annualized run rate saving of EUR 40 million. We sold 2 loss-making bakeries in Europe during the year, and we've disposed off our UK Food Solutions business since the year-end. We closed our first bakery in North America. And as you will have seen last Friday, we announced a binding offer to sell the majority of the Picard stake. And on completion of the transaction, we will have realized 85% of our asset disposal target. We've delivered segmental operating free cash generation of EUR 144 million and achieved cash flow generation from activities of EUR 53 million in the period. And we have the lowest net debt level since 2013, with significant covenant headroom.

Turning to Slide 30. In summary, fiscal '19 was a year where we improved the underlying position of the company and achieved stabilization, and you can see that on the left-hand side of the graph. Looking ahead, we expect, on the right-hand side, to see group underlying EBITDA to continue to improve further in fiscal year '20 with a continued increase in the underlying EBITDA margin, net debt to decline further and further benefits from renew as the savings see a step-up in fiscal '20.

Ladies and gentlemen, thank you for your attention. We're now happy to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question, sir, comes from the line of Jason Molins from Goodbody.

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Jason Molins, Goodbody Stockbrokers, Research Division - Analyst [2]

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Kevin, Frédéric, a few questions from me, if you don't mind. I guess, just starting off on the overall market and the present bakery compared to your performance. Maybe you can just give a bit of color and clarity on how you're seeing that progressing, and it would be useful. And then on -- in terms of Europe, on the insourcing, how much is left to do in Germany? I think you outlined some of this in terms of Q1 and Q2 next year, but maybe just some clarity on that. And also, in terms of the 1.7% that you called out, how much of that was Switzerland versus Germany? If you can put some color around that, that would be useful. And then just a final question really back on North America and just some color on the cost front, maybe just around input costs and freight costs. And I guess, Frédéric, you were flagging we shouldn't read too much into the Q4 price/mix component but more focusing on the 1.3% and so maybe just a bit more guidance around the [costs for diesel].

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Kevin E. Toland, ARYZTA AG - CEO & Executive Director [3]

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Thank you, Jason. Firstly, on the overall market versus our performance, the overall bakery market is pretty flat to slightly up. Frozen bakery is up a little bit more than that. Clearly, we're not operating at that level because our focus has been on stabilization and profit improvement. And I think we've achieved the stabilization and the first steps of improvement but also very, very heavy focus on not just having revenue for the sake of revenue but having profitable revenue and doing a good job for our customers. So I think we'll see our catch-up with the overall market as we go forward. Secondly, in terms of the European insourcing, a fair degree of it went through in the course of last year but, as we called out through the year, was running late for a variety of reasons, which we are happy to have late insourcing. It's better than early insourcing. And the last piece that will tail on through quarter 1 and quarter 2 in Germany. The Swiss piece was finished through in the first quarter of the year we've just gone out of. I think it'll also be fair to say that the customer relationships in both instances are strong, growing and very, very close. So I think we've gone through the insourcing from the past and come out of it with a good position with both of those customers.

I think, lastly, just moving to the North American cost side. Input costs are -- there's nothing to particularly call out year-on-year. I think what we have seen is we're now actually broadly similar on freight and distribution costs, if you take full year '18 versus full year '19; if you take a combination of the cost increases that played their way through the year and the efficiencies we managed to gain from reorganizing our supply chain, how we buy freight lanes, et cetera. So pretty neutral year-on-year if you take all those things in the round, Jason. And sorry. I just didn't answer: We don't particularly parse out Switzerland versus Germany.

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Operator [4]

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And your next question comes from the line of Jörn Iffert from UBS.

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Jörn Iffert, UBS Investment Bank, Research Division - Director and Analyst [5]

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The first one is, please, on the EBITDA bridge. And if I see on group-level making this simplistic, organic sources flattish, but you said you had a EUR 26 million benefit from cost savings, so I'm wondering if these are really net cost savings? Or are you investing this again? Otherwise, EBITDA growth should be a little bit higher. Or what I'm missing here? And second question is, please, on the activities cash flow outlook for fiscal year '20. What is roughly the guidance you can give us also looking on the past, like, CapEx and net working capital? And then the last question on North America and I'm aware you said you're not losing any customer, so you're losing on contracts. When you see the customers replacing these contracts, do you see it is coming from competitors which are larger players or the smaller local players? Just to give us an update here, please.

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Kevin E. Toland, ARYZTA AG - CEO & Executive Director [6]

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Okay. Thank you, Jörn. Let me take the first question. I'll get Frédéric to comment on the second one, and I will take the third one. In terms of the EBITDA bridge, I think it's important to come back to Project Renew. Well, Project Renew is a program designed to improve our efficiency, structurally take out costs and improve the business through rightsizing, efficiency, our operating model. And we're very, very clear on that and calling out what it is and tracking, as you will have seen. I think it's also important to remember it's going against a business background that isn't savvy. I think, for example, you will have seen the effect of insourcing working through in Europe, which had been anticipated, anyway, and the impact there. And I think, if you take that piece into account, plus the North America piece, I think we're very comfortable with Project Renew. And if you think of -- if you, for example, went to Page 4 and you look at H2 2018 and you said EUR 140 million by 2 is EUR 280 million, plus EUR 26 million, it gives you a sense. Frédéric, I might just finish out and then get you to come back on the last piece, on the cash.

In North America, whilst we clearly have lost volumes in the course of the year, I think the actions -- if you take what actually happened case by case, I think, in the QSR side, except for the piece where one category was exited by the customer and we've actually extended our position with multiyear contracts with that same customer in North America and elsewhere, I think that was lost to a competitor. But by and large, the other QSR factors relate more to the performance of the channel itself in the round. And I think what you can see is, on the other one that we called out on Page 7, Jörn, the -- that was new innovation coming, the revenue loss $15 million. You can see we've got new products and new innovations that's already in place and starting to flow through into the market. In retail, the retail channel has been pretty competitive. You've had a lot of competition between the retailers brand and label and with online, and I think 2 key things there: one, and it calls out in Q3, that with one retailer we lost 2 lines. 1 just came to the end of its natural life cycle. And we lost out to another competitor, where we both tested different products. And the consumer -- we were giving 2 different tests. The consumer preferred the other one. And the second item, we did lose to a medium-size competitor who chose to compete pretty heavily on price for that contract. The other key issue in retail, as we called out, is in artisan bread; and I think what we have done is we've reversed that situation. We've again got full category leadership and a full program. So that was a loss in the quarter but one we see now reverse and in fact actually going to go the other way as those programs kick in, in the course of next year. But nothing to particularly call out in North America on the competitive environment. It's a competitive market. And I think the big thing I would call out is we have been progressively and continue to improve our own ability to compete, and that's what's going to let us win in the medium term.

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Frédéric Pflanz, ARYZTA AG - CFO [7]

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Maybe 3 comments on the working capital and on the cash flow. First of all, you're perfectly right that our working capital, and I said that just before, is still under pressure. I'm not saying that the pressure is increasing, but it's still under pressure. Probably the market is also a little bit more risk averse. And I -- we have flagged to the market that we needed liquidity during the capital raise. We used about EUR 40 million liquidity in 2018, another EUR 40 million in 2019. And I don't want to paint things flat, but it could well be that this comes again into 2020, in which case it would basically reach the liquidity level of which we needed of the capital increase when we said EUR 120 million to EUR 130 million. That's point one.

Point two, let's go back to CapEx. In fact, in 2019, our CapEx was lower than expected. The first one is because we just did not start renew as early as we would have wanted. We have engaged the spendings, but we only spent EUR 20 million during the year. And when you only spend EUR 20 million but you want to spend EUR 45 million, there is another EUR 25 million that's going to be a overhang into next year. And we expect the CapEx behind renew, let's say, to be EUR 50 million, EUR 55 million in 2020. The normal capital expenditure is perfectly in our guidelines. We said somewhere in the long term between 3.5% and 4.5%; and in the short term, as we're watching out exactly what we do and how we spend, more a little bit like 3%. And you would have known that one of the reasons why we are slightly behind our CapEx spending in 2019 was linked to the fact that the bakery in Brazil that we've announced is still in the planning phase. Things always take longer than what's planned. So I would expect renew capital expenditure to be between EUR 50 million and EUR 55 million. I would expect normal capital expenditure to be, let's say, around a 3.0, 3.5 percentage point. And then we will see how the bakery in Brazil gets underway. And you're right: On net working capital, we are still under pressure. And I expect a slight outflow similar to this year.

And maybe one last point on renew. We have also restructuring costs in 2020 planned, and they have not changed. When you look on Page 26, the planned investments of EUR 7 million is the mixture between the renew capital expenditure and that I just mentioned and the restructuring costs.

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Jörn Iffert, UBS Investment Bank, Research Division - Director and Analyst [8]

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Okay. Does that mean that the cash flow or the equity for cash flow in fiscal year '20 is slightly negative in-between EUR 25 million to EUR 50 million or so? Is this fair to assume?

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Frédéric Pflanz, ARYZTA AG - CFO [9]

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I -- no. I think you -- if you think it -- I think it will not be very positive, but it will be positive.

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Operator [10]

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And your next question comes from the line of Jean-Philippe Bertschy.

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Jean-Philippe Bertschy, Bank Vontobel AG, Research Division - Head of Consumers Team [11]

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I have a couple of questions as well. The first one is in North America. I'm a bit surprised that you were not flagging out a bit better, the sales decrease in the fourth quarter, as we had a call beginning of June. So the last quarter was already through or mostly through. And then do you have an impact? I saw that you were reducing the marketing expenses by 15%. It was maybe too less to impact the sales or your salespeople. And you were like mentioning as well some streamlining. If you can quantify that and especially when -- if you can quantify the streamlining in the current fiscal year, as you're mentioning some further streamlining. And you are talking as well about some new business wins. If you can quantify those, if each will be enough to offset the losses in the current year. And the second question is on Picard, if you can quantify the net book loss for the current year and why you're keeping a 4% or 5% stake in the company? And the last one, I think, to Frédéric. You were talking about some goodwill impairments risks. Is -- I didn't understand that correctly.

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Kevin E. Toland, ARYZTA AG - CEO & Executive Director [12]

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Thank you, JP. I think, on the first question which is sales in Q4, we don't normally give any disclosure of how trading is going within the quarter. It was early in the quarter when we had the call, but I think it's a fair-enough comment. And I think what we have done, you'll see here, is giving an indication that we expect to add the flow-on from the issues in North America to flow into Q1 and Q2. And we're planning, forecasting and anticipating that; and it's built into our view of the outlook for this year. So I think it's we're giving more color than we have, as hopefully you will see, in North America with a deep dive into the revenue both in the quarter and in the full year and an illustration. So that's, hopefully, covers that. In terms of the impact on sales and marketing, I think what we've called out is we had a 17% saving in the ex sales general overhead and administration category, not in marketing or sales directly. And that really came out of the Project Renew but also as we have streamlined the North American organization; reduced the head count in central function; and very much made sure that we're set to focus on the strategy, which is about the customer, operations, bakery, bakery performance and where we have started a number of other activities. That's all taken place already. In fact, we did the reorganization in the beginning of last fiscal. And you'll have seen in Project Renew, as Frédéric calls out, benefits of that coming through in the year we're in. So that really -- the streamlining has been done in North America in terms of the management and the organization structure. Clearly, we'd indicated we're also making some changes through Project Renew to rightsize the bakery network. That's a longer process because what you have to do is make sure you're able to transfer the production, transfer the lines, plan it out very carefully to make sure it doesn't have an impact on customers. We announced the first bakery closure at the end of last year. And there'll be more to come, but we don't call them out specifically in advance because, as you'll appreciate, there's a long process to work through to be able to do it successfully, which we've been able to do so far.

In terms of new business. I've given a little bit of flavor in terms of on the different channels in Q4 and for the full year. I think what I'd probably take out of it is that in QSR we have stable positions with our customers. We've improved it. We have dealt with issues that we've had, and we have new products going into the market with key customers in the course of next year. If you move through to the retail channel, we have 2 particular issues, both of which have been dealt with and successfully, one where we had lost some business and we have new business coming through, but that takes a period of time to progressively ramp up; the other where we had lost business in the quarter with one particular retailer in artisan bread, which has been reversed and turned around the other way, with a full program now in place and starting to roll out with them through fiscal '20. So it's taking a negative to, hopefully, a positive when we get through towards the end of the year. And in foodservice, we had some supply chain challenges as we went through the year which have now been addressed. And you can see in the second half performance, and I comment on it, that we got through those. We fundamentally improved our ability to forecast. We've realigned our capacity in a number of key categories. And whilst it's a competitive market, I think we faced into and addressed the issues and improved our position. And whilst we will have headwinds flowing through from the lapping of some of the issues from last year in the first 2 quarters, we're confident that we'll be back into positive evolution in North America in the second half. And we've considered, planned all of that and taken into account in setting our guidance and planning for this year.

I think, in terms of the goodwill impairment in Picard, I'll take the Picard remaining stake. I think you'll all appreciate it's been a long process for a number of years to get to the position of last Friday where we announced a binding offer for the majority of our stake in Picard. I think we -- suffice to say that it's the best and the right deal for the company, including maintaining that remaining stake. And I'll hand over to Frédéric to comment on the goodwill impairment question.

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Frédéric Pflanz, ARYZTA AG - CFO [13]

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Yes. Maybe, before I go into that, let me just say something about marketing expense cutting. I said clearly SG&A savings, Jean-Philippe. And then let's go back to our H1 declaration on Page 19, where we gave an update on Project Renew. We were talking about a reduction of 76 general head count, including 4 management, in the North American team; changing the operating model; annual projected savings EUR 7.4 million. This is what we're talking about, administration cost reduction, taking out layers of administration people that we have built in the past for the bigger business. This was communicated in H1, so I don't -- the marketing expenses taken out, I don't think that this is the reality here. I...

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Jean-Philippe Bertschy, Bank Vontobel AG, Research Division - Head of Consumers Team [14]

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I was just referring, Frédéric, to advertising and marketing expenses in your annual report.

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Frédéric Pflanz, ARYZTA AG - CFO [15]

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Yes. And then on Page 159, you see the post-balance sheet events relating to Picard. And we have written the following text: Our holding for Picard for gross consideration would be sold if we were to receive a binding offer from Invest Group Zouari of EUR 156 million. And then later, the transaction is subject to a works council consultation in France and to customary regulatory approvals. Subject to ARYZTA's acceptance of the offer following completion of the works council consultation process, the transaction is expected to close in the last quarter of 2019. And the -- upon completion, as we flagged in the press release, the proposed transaction is expected to generate a material one-off noncash accounting loss currently estimated to be circa EUR 280 million based on year-end 2019 carrying value, but actually this could change depending on exactly the date of closing and could change depending on the timing when the proposed transaction closes, as the results for Picard would continue to be consolidated under the equity method of accounting until then. This is what we have disclosed on Page 159 in the annual report. So there will be naturally a noncash accounting loss that we would register at the moment upon completion of the transaction.

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Jean-Philippe Bertschy, Bank Vontobel AG, Research Division - Head of Consumers Team [16]

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Very helpful. And Frédéric, have I understood you right that you are saying it as well that you have some little headroom for goodwill impairments in some of the business units in Europe in your...

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Frédéric Pflanz, ARYZTA AG - CFO [17]

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You will -- yes. We have -- I said that because, when you're in the middle of a restructuring and you always -- and you -- we had goodwill impairment in 2018, as you may recall, of EUR 175 million, of which the biggest part was in Europe. And when you're in the middle of a restructuring process and you have written-down your goodwill just the year before, the headroom is not very strong. And then naturally your headroom will progress the further you advance for your restructuring program. I just wanted to flag that because we're very transparent, very clear. And we've disclosed that in our annual accounts, under note 15, in the goodwill section.

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Jean-Philippe Bertschy, Bank Vontobel AG, Research Division - Head of Consumers Team [18]

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And you can quantify the risk?

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Frédéric Pflanz, ARYZTA AG - CFO [19]

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No, because there is no risk because -- that, that's -- please listen to what I say. Thank you. We have little headroom. I have not talked about a risk.

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Operator [20]

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And your next question comes from the line of Cathal Kenny from Davy.

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Cathal Kenny, Davy, Research Division - Senior Analyst of Food and Beverage [21]

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Two questions from my side. Firstly, on just brand performance in North America and just to hear an update on Otis and La Brea. My second question then is just looking back. I mean we've had persistent negative volumes in North America now for quite a number of years, obviously more acute in Q4 '19. And just to Kevin, on that, how do you think of the bakery footprint in that -- against that backdrop?

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Kevin E. Toland, ARYZTA AG - CEO & Executive Director [22]

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Thanks, Cathal. So maybe just taking your first question. We have 2 very strong B2B brands in North America, which are Otis, which goes across all channels but is very strong in particular in foodservice; and also La Brea, which again goes across all the channels but is stronger in retail. So maybe taking Otis first: I called out that we've had some challenges during the year in terms of our own supply chain performance. We've dealt with those challenges. We've also gone through within the -- if you like, the channel a rebuild of our capability, our programs, our route to market, our relationships. So I think we're coming out of the end of next (sic) [last] year and into this year in a much better place. And I think we've good, strong position that we'll build of for the future, but it's taking periods of time. Moving to La Brea: I think we clearly called out in -- you can see a substantial volume loss in artisan bread, which is La Brea is our B2B brand in artisan breads in North America, you'll have seen in the quarter. The retail pressures had led to a position where we were losing volume. I think what we've done on the positive side is we've entirely turned that around. And we've got now back to a position with that particular customer of category management and leadership, a full rebound program bringing through new products, bringing through innovation, bringing through activation programs, new packaging, et cetera, to build on that as we go forward. So La Brea operates in a good underlying category in artisan bread with good opportunities. And we've now put in place the steps to actually do a better job and have some confidence with that as we go forward.

In terms of the second question, in terms of the negative volumes. I think clearly the volumes last year were worse than we'd anticipated, Cathal, which means that our utilization was lower than we planned as well. It doesn't particularly change our plans for the actual network rightsizing because we're advancing on those. And we're putting in place capacity where we need it and we'll adjust as we go forward, but I don't think there's any -- last year has no particular impact on that because, I think -- as we come out through the end of this year, as renew is further implemented and has full traction, particularly as the automation ramps up, and our efficiency, with the right network in place, I think we'll be okay. And we'll start heading to the capacity utilization levels we need. And of course, if that doesn't prove to be the case, we'll continue to look at is it the right footprint. These things are dynamic, but as of now, no change.

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Cathal Kenny, Davy, Research Division - Senior Analyst of Food and Beverage [23]

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Okay. And just one quick follow-up, Kevin, just in terms of the end markets, are you seeing kind of higher churn rates? I mean, is it in general more volatility at a shelf level? And like I'm thinking of limited-time offers in QSR, things like that.

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Kevin E. Toland, ARYZTA AG - CEO & Executive Director [24]

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Yes, I think that continues. What you've seen even in areas like QSR, Cathal, is people are continually bringing in limited-time offers to win share, to rejuvenate their own offering, et cetera. And you'll have seen we called out in Q4 that one particular customer, their promotional activity was down year-on-year, impacting our volumes. So that's very much at the call of the customer and it is a trend and an increasing trend. It's one of the reasons we need Project Renew to be both efficient and also very flexible in being able to respond to that. So we're -- I think we're getting better at that, I will say, Cathal, but we are seeing it continuing. And we see this operating and giving us good opportunities. We see opportunities through next year to taking advantage of LTOs. I think the key thing to remember is the word "limited" in an LTO in that it'll come and it'll go, so not to confuse with the underlying business growth or decline.

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Operator [25]

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And your next question comes from the line of John Ennis, Goldman Sachs.

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John Mark Ennis, Goldman Sachs Group Inc., Research Division - Equity Analyst [26]

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A couple from me. Coming back to Project Renew quickly. It looks like around 20% of the EUR 26 million of savings were retained in the end, when you look at the EBITDA expansion of EUR 5 million. So given that a number of the offsets you cited, including issues in North America and insourcing in Europe, are going to continue at least in the first half, is that level of retention sensible going into 2020, i.e., 20% of the savings can drop through again? That will be my first question. And then my second is on North America again. You mentioned contract wins. And I just wanted to check how much visibility you have on those wins at this stage? And whether you've factored in any kind of potential delay on those contracts given that sometimes the visibility on insourcing and some of these other contract movements have been, I guess, delayed relative to previous expectations. I just wanted to make sure I fully understood what you're factoring in and what market level of growth you're anticipating here as well. And then on my third question, it's just really around the EBITDA guidance. You've talked about 2020 growth. I just wondered how you felt about the consensus expectation for 9% EBITDA growth this year.

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Kevin E. Toland, ARYZTA AG - CEO & Executive Director [27]

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Okay. Maybe starting with the first one. I think we've been very clear that renew is a program to take out costs, improve efficiency and rightsize our business. I think you have to think, John, if we weren't doing renew, the insourcing at the North America factories would be happening, anyway. So I think it's -- I wouldn't confuse or conflate the two of them in terms of retention, as we're very clear renew is going to be delivered. It's been independently verified. And it's a number of programs which are very, very well advanced. And at the same time, we've got to deal with the dynamics within the business and through the business separately from renew, which we're doing. The first point. Secondly, in terms of North America, I think we've continued to improve our level of visibility in the North American market. We've done a fairly fundamental overhaul of our forecasting systems, processes, tools. We've introduced integrated business planning over the period of the last 2 years sort of quarter by quarter. We have got better. I believe we've got a good level of visibility. We have a good level of consideration going into what we've factored in. And I think you'll have seen us calling out that Q1 and Q2 will continue to be a negative trend line rolling out from last year, albeit that some of the new wins are starting up or due to start up. So we've called those as fairly and clearly and prudently as we can.

I think -- on insourcing, I think it was very clear the insourcing in Europe had been decided a number of years ago. And always with these things, when they start happening, they take longer, sometimes for a variety of reasons. And I think we were happy last year to be able to accommodate those delays in Europe. I think -- lastly, in terms of the EBITDA growth, I think it's very early in the year. We've been very clear on what's happening, and we've been very clear on what we see is driving our improvement going forward. We're not actually calling out a number. And I think, as the year evolves, we'll be providing more granularity, as is the norm.

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Frédéric Pflanz, ARYZTA AG - CFO [28]

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Maybe I want to add one thing Kevin said before, and maybe it was not that listened to. In H2 of 2018, our underlying EBITDA run rate was EUR 140 million. The EUR 140 million improved to EUR 151.6 million in H1 2019 and EUR 156 million. If you take EUR 140 million times 2, you come to EUR 280 million. If you add Project Renew, you're basically to our EBITDA number of 2019, and that has been sequential improvement. So I think what we said is that the benefits of Project Renew would flow into the P&L. Yes, they did. We have a enormous drop between H1 2018 and H2 2018, you'll remember that well, from EUR 161 million and -- to about EUR 140 million. You can see that on Page 4. And I think one should keep in mind that we are in a restructuring program; that we have sequential benefits; and that the stability that we're showing now going up by 1.9% year-on-year comes through sequential improvement over a 6 months period, after 6 months, EUR 140.5 million, EUR 161.6 million and EUR 155.9 million. And that, I think, is a good news.

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Operator [29]

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And your last question comes from the line of Faham Baig from Crédit Suisse.

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Mirza Faham Ali Baig, Crédit Suisse AG, Research Division - Research Analyst [30]

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A couple from me as well. Can I begin with a question on leverage? I recall you guided the market to a EUR 1 billion deleveraging target by FY '21. On my estimates, so far, you've delivered just under EUR 500 million, including Picard. And with FY '20 free cash flow, to Frédéric's point, slightly positive, how do you bridge that gap to EUR 1 billion? Should we be expecting more asset disposals? Please, could you comment on that? Because I think it's an important point because, if you -- your net debt-to-EBITDA might be 2.4, excluding the hybrids, but if you were to include the hybrids, it's at 5.2x, which is still very high. So any further commentary on that would be helpful. And then just a couple of housekeeping questions. Could you just help us with interest costs, tax costs for FY '20? And also I think you mentioned that there was a disposal of a U.K. noncore business. What was the amount received for that? And how should we think about the impact on the P&L in FY '20?

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Frédéric Pflanz, ARYZTA AG - CFO [31]

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So you are perfectly right. If we include in the totality of the capital stack the hybrids and the net debt, and you can see that, and I think we always declare that and we're starting to do that on Page 21, you can see clearly that our 1.6 million total -- EUR 1.6 billion total capital stack gets, versus the EUR 307 million, still to a highly -- a high number above 5. I think the first thing one should note is we went down from 3.83 to 2.43. And if we were to close the Picard, we would -- transaction, we would then just -- pro forma would be another 0.5 down. So that would get us to the under -- again on that pro forma basis, under 2x multiple. And it would get us for the first time in a long, long period of time back to a 4x if we include the totality of Picard, right. And let's not forget that the hybrid funding is like equity funding. We can choose when the hybrid dividends are paid. And as you have seen, we have no hybrid dividends payments planned. So yes, the situation is taking longer to improve, but the situation is really improving. And I think you can see it very clearly on Page 19 of the presentation. Opening debt as of the first of August FY '18 was EUR 1.73 billion. We're down to EUR 733 million now.

And you are perfectly right on the question of the deleveraging target. I think the number is slightly above, but this is probably rounding. We have -- we will have achieved -- if we were to close the Picard transactions and that happens in Q1 -- sorry, in Q2 of this year, before the end of the calendar year, we would be at 85% of our net noncore asset disposal target. Some smaller disposals are still ongoing, and we believe that we can achieve that. On the other hand, Project Renew is a major capital investment that we're doing with the help of our shareholders. And you are perfectly right, we're slightly behind but we still believe that we need to deleverage our balance sheet by about EUR 1 billion, and we're going to get there maybe slightly later than initially expected.

The last point, on the disposal of the food solutions business. You will find again on Page 159, where we talk about -- of our annual account, where we talk about post-balance sheet event, it was small disposals, the benefits that we took out of the business for a gross consideration of EUR 8 million of a transaction that will result in a loss compared to the initial investment. This is not surprising. The U.K. market in the foodservice business, as you know, is extremely complicated. Brexit is definitely not helping. And we have closed that transaction just very recently. It was basically last week.

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Mirza Faham Ali Baig, Crédit Suisse AG, Research Division - Research Analyst [32]

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And just on interest and tax guidance, sorry, for FY '20...

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Frédéric Pflanz, ARYZTA AG - CFO [33]

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Oh, yes. Sorry. Yes, you are perfectly right -- sorry. I have that on the list, and I hadn't picked it on. You're perfectly right. We expect the interest to come down strongly compared to what we have in prior years. And this is linked to the fact that our average indebtedness has come down strongly, and we continue to work on reducing that. And you can count on a number that is, in my opinion, strongly down by more than 40%. And on the tax, we have said at the beginning of last year, and we, I repeat that now, that the tax rates that we have as an -- effective tax rates at the moment are very much linked to the fact that we still have very low profits in the subsidiaries and that we are improving that. But in other subsidiaries, we have a little bit [of work]. So I would expect on the midterm our tax rates to normalize around numbers in the mid- to high 20s. Whether that happens as quickly in next year as not, but you should expect the cash outflow of a number which is above what we had in prior year and expect that to be EUR 6 million or EUR 7 million above.

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Operator [34]

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Thank you. I will hand back over to you, sir.

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Kevin E. Toland, ARYZTA AG - CEO & Executive Director [35]

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Okay. So thank you very much for all your questions and your time early this morning. We look forward to meeting with many of you over the coming days and staying in touch.

So thanks very much. Goodbye.

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Operator [36]

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Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.