Urs Jordi, the horse-loving chairman of Cuisine de France owner Aryzta, has seized the executive reins again.
Investor advisory firms held their noses as the Swiss man, installed as chairman in a late-2020 boardroom coup, clung to a dual chairman-chief executive role for over four years as he searched for the right CEO to continue a turnaround he’d started. It was a situation that defied governance norms.
Defending the drawn-out process in an interview with The Irish Times in 2023, Jordi said the board had a “clear idea” of the type of boss needed, stressing: “There is no room for experiments.”
The wait seemed worth it when he finally landed on Michael Schai, who previously worked under Jordi at the group and, before that, Hiestand, the Swiss bakery business that merged in 2008 with Dublin-based IAWS to form Aryzta.
It would turn out to be a failed trial bake.
Shares in Aryzta – which supplies everyone from the likes of McDonald’s and Subway to Lidl, Aldi and Dunnes Stores – slumped as much as 17 per cent this week. It followed the group’s announcement of Schai’s sudden departure, after a little over nine months, as it issued a profit warning that stirred memories of its troubled past.
Jordi, who has taken up the interim CEO role again, told analysts on a hastily arranged call on Wednesday that Aryzta has gone from being “a cruise ship to a warship”.
Although several analysts in Zurich – where Aryzta is based and its shares are traded – have welcomed Jordi sliding back into the saddle, the whole episode raises questions about his ability to find the right leader.
It also complicates the search for a new CEO. Anyone looking at the job will have to ask whether this is a skittish board, led by a high-handed chairman.
But could Jordi have sat back and allowed a hard-won recovery in market trust in recent years to evaporate?
Since rejoining Aryzta in late 2020, seven years after walking away from what had become a large debt-fuelled mergers and acquisitions (M&A) vehicle, Jordi has rebooted the business. He has done this by selling off unwanted assets (including its problem North American business and Brazilian unit) to cut debt and injecting innovation back into its baked products. Furthermore, he has redeemed most of the expensive hybrid debt-equity instruments weighing down its balance sheet.
Two-and-a-half years into the turnaround, Aryzta’s shares were double the price at which the previous board – led by Irish corporate grandee Gary McGann – was entertaining flogging the entire business. The would-be buyer in that possible sale was a unit of Elliott Management, the New York hedge fund founded by billionaire Paul Singer.
Schai was to continue the journey. In early May, he lifted the cloth on a series of new medium-term targets. They including growing sales at a faster rate than the wider baked-goods market, increasing earnings margins, retiring the remainder of its hybrid instruments and returning Aryzta to being a dividend payer. Its last shareholder distribution was way back in 2017.
Sources said it had become increasingly clear in recent months that Schai was not making much headway on his €60 million cost-cutting plan. That plan had become more important amid ongoing cost inflation and cautious consumer spending.
“We are in a challenging environment and the pace of implementation of the necessary cost implementation measures was slower than expected,” Martin Huber, Aryzta’s chief financial officer, told analysts during a conference call on Wednesday, without pointing fingers.
Schai’s immediate departure had been “unanimously decided” by the board and the former CEO, Aryzta said in a stock exchange statement earlier that morning.
The profit warning downgraded full-year market expectations for earnings before interest, tax depreciation and amortisation (Ebitda) by 10 per cent to “at least €300 million”. The timing of this warning was unfortunate.
“We believe the CEO dismissal and, more importantly, the warning after reiterating full-year guidance [in] mid-August, significantly deteriorates the company’s reputation, which was in the process of being restored,” said Juan Ros Padilla, an analyst with Oddo BHF.
While a dropping of Aryzta’s Irish stock market quotation in 2021 capped a shift in its centre of gravity from Ireland to Switzerland, it retains an office in Grange Castle in southwest Dublin, attached to its Irish baking hub, which produces up to 80,000 tonnes of bread and pastries a year for customers.
Jon Cox, analyst with Kepler Cheuvreux, downgraded his rating on the stock to reduce, saying in a note to clients: “Aryzta has won back investor confidence in recent years amid an operational and balance-sheet recovery.”
The market value of Aryzta staged a mini-rally on Friday, rising as much as 6.6 per cent to 1.36 billion Swiss francs (€1.46 billion).
While the shares remain down 28 per cent over the past six months, they are still trading almost 75 per cent above Elliott’s 2020 offer – adjusted for a consolidation of shares in a 40-for-one reverse share split earlier this year.
Vontobel’s Arben Hasanaj said while the CEO exit “stirs up uncertainty at a time when Aryzta had finally regained a reputation for reliable execution”, he remains “confident” Jordi can deliver on the medium-term targets.
But there is a growing view that the earnings targets – spanning out to 2028 – will now be backend-loaded.
It is also expected that a return to dividends – with some analysts anticipating a few crumbs for shareholders as early as next year – will likely drift too.
