ARYZTA AG

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00:42 Thank you. Good morning, everybody, and thank you for taking the time to join us today for our FY twenty twenty one results conference.

And today, we have our Chairman and CEO, Urs Jordi; and Martin Huber, our CFO, joining us to present. Just to let you know that all the documents, our Annual Report, Presentation and Ad-Hoc are available on our website, aryzta.com.

1:13 Just before we begin, I would just like to draw your attention to the forward-looking statement on page two of the presentation. This applies to all the discussions today.

1:27 And I would now like to hand over to our Chairman, Urs Jordi.

01:40 Hello, and good morning, ladies and gentlemen at this first autumn day, rainy day for the presentation of our annual results talk today about the past year, last twelve month, and amongst others about pricing. This is the price of product, it’s share of variable costs.

On this variable cost today, labor is having a heavy impact, raw material, packaging material, energy, all these price raises, you know. It's an important component for our actual year now twenty two.

And we will talk about this price increase and how it works in a moment. 02:41 Fiscal year twenty one, full year revenue you know from the release today morning.

And underlying EBITDA outperformance is ahead of our expectations slightly. We had especially a good Q4.

So a good momentum is coming back. We returned back to organic growth.

This is what we told at the beginning. This is key.

A company without organic growth is sooner or later finding itself in difficulties. 3:18 Disposal of North American business of our ANA business is done closed.

There is carve-out work in progress, but on a good track. And this business ended for the moment in good hands with Lindsay Goldberg.

3:35 Disposal of our Brazilian business is signed closing will follow soon. We have the CADE approval which is the antitrust authority in Brazil.

That was the important step to take. And that worked a good week ago, so we are confident that the closing will be managed fast and smooth.

04:04 The new five year refinancing is agreed. There is still work to be done, but this as well is done.

Liquidity improved, obviously, as you can see, and net debt are reduced due to the disposals and due to the improving operational business we have. 04:27 Simplification of the business, the place and the local businesses are more empowered.

You know that we are going for this multi local business. There is not one ARYZTA.

There are many ARYZTA’s in the world, food and especially bakery business is very local. The same people has a different taste in Asia or in the Nordics or here.

The customers we have, they have different needs, and this is the way then we approach this. 05:02 Reduction of the group overhead cost is well on track.

It's even slightly higher. You remember, we had before this Asian management levels, the European management levels, U.S.

management levels. That's all gone.

All the remaining operations are in direct report now into the Group CEO. That works quite well.

And obviously, we have a new CFO appointed Martin Huber. Welcome.

Good start ahead. And let me use the opportunity to give a warm thank you to Jonathan Solesbury as well.

He on boarded in a difficult moment, in difficult times, and he did very well. And he is now in his retirement life phase and we well respect this.

05:56 Q4 trends are very supportive to the outlook. There was a strong organic growth that bounce back in Q4, especially in foodservice.

Retail appears resilient. That's coming back.

There's a bit of difference in shopping behavior and pattern, but we are confident that we get there our targets. The QSR outperforms.

QSR seems to pick up all the lost volumes in restaurant, in snacking, in out-of-home consumption. This is a clearly outperforming channel.

And foodservice shows a strong rebound, especially now with holiday seasons we had over summer and now in autumn. 06:52 Simplification of structure and business continues.

We are basically today a one point six, one point seven billion businesses. So this is our needs to be managed with lean, fast and agile structures.

Multi local, focus on the approach of this, I just explained, so we have a Danish operation, a Dutch operation, Irish operation, Swiss operation, the German operation, Eastern Europe, Hungary, France, not to forget, our Asian colleagues. They are very well settled and close to their local business.

They are able to take decisions fast. We are able to take decisions much faster than in the past, which is a good thing to have, especially in times when price negotiations are actual.

7:54 In QSR, there is a pass-through model based on pricing protocols. You know how this works.

So this is somehow a process, which is settled and works in QSR. This is a catalog business and negotiation business with bigger customers.

Retail now is -- as far as pricing is concerned, now in negotiating phase. Most of the retail contracts are calendar year contract.

So now we are heading there towards a good start into the calendar year twenty two. 8:33 There is a financial progress we achieved.

This is by far not yet the end, where we should be. There is a healthier balance sheet now appearing than a year ago.

Let me be understood right. This is maybe step two or step three out of ten steps, which need to be done.

ARYZTA still today is a leverage company. But I think in the last twelve months, we did the important activities and the right steps in the right direction, more need to follow, but there is still room for improvement.

That’s clear. Disposal program delivered U.S.

and the Brazilian sales. We gave the guidance range of six hundred billion to eight hundred million of euro disposal total, we would like to achieve.

We are well ahead of this, so this worked. 9:31 We maintained a solid liquidity position.

We have reduced our bank debts and the refinancing. Board did a lot of work around the hybrids, the hybrid instruments, the interests, the deferred and the actual ones and formed the view on the future capital structure for ARYZTA.

Disposals and higher business performance led to an improved financial outlook. So we have confidence that the solid way that is continuing.

We will pay all accumulated deferred and current interest of the Swiss hybrid instruments. There are two.

And we will pay all accumulated deferred interest and compound interest on the [Technical Difficulty]. 10:36 The option to consider, reduction of the outstanding hybrid principal according our financial capacity is an ongoing phase.

So at the moment, we pay the deferred interest, the actual interest and we will address these three principles, hybrid principles according our capacity and our operational development. Nevertheless, hybrid financing may still be part of our future financial structure.

11:11 As it took ten years to build it up. We invested now a year to pay the roof way the more or less two hundred twenty million Martin, that's correct, the accumulated and deferred interest, the actual interest.

And the principals, we will address again according to our capacity. There is a big elephant in the room, which is the inflation.

You hear it. You see it.

You pay bills in your flats and homes, for gas, for fuel, for heating. Flour is much more expensive than it was some months ago.

In Germany, we had day -- one day last week with almost a ten percent cost increase on butter. 12:09 Labor is a big issue in our biggest market in Germany as well.

There is a new government waiting to take the power. And the twelve euro minimum salary discussion is very prominent there.

So we will absorb the majority through price increases. This is an increase we need of plus/minus ten percent.

It depends on channel, on customer and product of constellation we have, but it goes somewhere towards the ten percent. There is an ongoing efficiency increased program in many aspects all over the organization.

So this will absorb a part, but the majority will have to be absorbed via pricing. 12:55 Substantial to get this not only for us, for everybody in the market.

This is a clear picture for me. Let me [Technical Difficulty] an inflation of [Technical Difficulty] five percent overall, much easier to manage than an inflation of one percent.

Because the one percent inflation is raising the expectation that suppliers are absorbing this. An increase we have now, I've never seen in my time in the business, so it's so massive.

Therefore, the answer is not yes or no, price increase or not. Question is only how much.

13:37 There is a mix of pass-through and tender pricing, as I told just before. There is a Quick Serve Restaurant model, which is basically based on pricing the protocols, the mechanism we follow.

There is a foodservice business, which is basically a couple of business with new catalogs with year-end. New prices are in there.

And there's a tender business in retail. We are actually now working on the tenders with the big customers to have then a new pricing level beginning of next year.

14:13 Higher cost, higher input costs are making the calculations around investments, efficiency investments much more easier. So the threshold comes down.

We continue to invest in optimization and in more efficient processes and better and smarter ways to cooperate in the supply chain world. 14:45 Fiscal year twenty two outlook.

We are now finishing P2, period two and entering into period three. So, we target the mid-single digit positive organic growth, which is a plus/minus five percent.

We had already discussions today morning about this. ARYZTA didn't have organic growth over the last seven, eight years.

So we are back there now first time, which is a good thing to have. And we will invest all our efforts to remain on the track in the commercial part of the business.

15:26 We target a twelve point five percent run rate of EBITDA pre-IFRS for the actual year, which is an intermediate step. You know the mathematics in the business.

This is a very investment-intensive business. It’s a heavy business.

This is an intermediate target. The end of this way we will see.

But if we do the mathematics right, it needs to end somewhere on a fifteen percent EBITDA level. Otherwise the entire constellation doesn't make sense with D.

[Technical Difficulty]. 16:03 And last but not least to achieve a sustainable net profit, which is then the bottom line target in the constellation to be able to support gain our balance sheet and then hopefully, at the end of the day for first time for many years to our shareholders.

16:30 I would then hand over to Martin for more details and the numbers.

16:42 Turning to slide ten. Our turnaround strategy is working and ARYZTA has delivered a good set of figures ahead of expectation, both on top and bottom line in twenty twenty one.

The four key highlights of our twenty twenty one results are: first, the return to positive organic revenue growth in the second part of the year; a resilient performance on the profit despite lower revenues; return to positive -- third, return to positive operating cash flow; and fourth, we have done an important step towards a more sustainable capital structure. 17:24 Turning to slide eleven.

ARYZTA has delivered improved organic revenue performance in twenty twenty one, although, we still suffered effects from COVID. In twenty twenty, the business has suffered two severe COVID quarters, while in twenty twenty one, the COVID continue to impact throughout the full year and only improved towards the last quarter of the year.

Although organic growth is still negative, growth performance has significantly reduced. And this is thanks to two things: the improved management focus due to the multi local business approach; and second, an improved consumer sentiment amid lower COVID infection cases.

18:09 At group level, revenues decreased from two point nine billion to two point three billion in twenty twenty one. While, for the continuing operations, we decreased revenues from one point seven billion to one point five billion.

This resulted in an organic growth for the group at minus six point one percent and for the continuing operation at minus six point four percent 18:32 Turning to slide twelve. Despite the notable decrease in our revenues, we have improved our underlying EBITDA margin by one hundred ninety basis points to ten point eight percent for the group.

This contribution was possible due to three things, price and mix improvements, operational efficiencies, and very strong action to right-size our structural cost. Continuing operations contributed to ten basis points improvement to eleven point four percent.

This more than compensated the negative volume impact on our revenues of minus seven percent. 19:11 North America improved its profitability by three hundred and ninety basis points to nine point six percent due to a revenue recovery in foodservice and Quick Serve Restaurants, strict cost management and contribution from restructuring.

19:25 Turning to slide thirteen. Operating free cash flow improved significantly in twenty twenty one.

The group delivered a positive operating cash flow of ten point four million, after a negative result of eighty four point five million in the previous year. Two contributors of this result were disciplined working capital management, particularly with strong contribution from our European businesses and a very strict management of the CapEx approval process.

This was achieved in fact, by the way, despite a reduction of circa forty four million of our securitization program due to disposal of our North American business. 20:10 Continuing operation contributed fifty point two million euro to the positive cash flow.

And our divested North American discontinued operations delivered a negative operating cash flow, which was entirely driven by the repayment of the securitization due to the disposal of the business. 20:29 Turning to slide fourteen.

Successful disposal of our North American business for eight hundred and fifty million euro, which was achieved ahead of schedule and at the higher end of our expectation, supported the reduction of our net debt from one billion, eleven million euro to two hundred and twenty million euro, together with improved business performance as well as cash management. As a result of this, our net debt to EBITDA ratio reduced significantly to zero point six times in twenty twenty one.

20:58 Overall, interest cost decreased from forty two point seven to thirty five point eight percent. The three main factors supporting this was a lower drawing on the RCF and the term loan.

The effect of the repayment of two hundred five point five million Schuldschein notes in December twenty nineteen and lower lease interest expenses. For twenty twenty two, our estimates for the interest costs range between fifteen million euro to nineteen million euro, including the lease interest expenses.

As you can see as well, interest coverage ratio was at one point nine times, which was well above the minimum of one time. 21:40 Over the next couple of slides, I will now focus on the performance of our continuing operations in Europe and rest of the world, consisting of Asia and Brazil.

Thank you. So overall revenues for continuing operation decreased by eight point six percent versus previous year.

The [subdued] (ph) trading environment, particularly in the first half of the financial year was a key contributor to this. Therefore, our -- we suffered a volume decrease of seven percent, which was partially compensated by a positive contribution of four point six percent from pricing and mix.

This resulted in an organic growth of minus six point four percent. 22:19 Disposals reduced revenues by zero point nine percent.

This was due to the divestment of our UK business in the first quarter of twenty twenty. And the weakening of the Brazilian real, the Polish zloty and Hungarian forint impacted sales or revenue by one point three percent for the year.

22:41 Turning to slide sixteen. Both regions improved their performance versus previous year.

Europe with a channel structure that is exposed to slower COVID recovery, delivered an organic growth of minus seven point nine percent. Rest of the world with a strong QSR channel rates generated an organic growth of two point three percent.

In Europe, the strong COVID restrictions and the long lockdowns impacted revenues significantly, especially our Foodservice channel suffered with an important margin. As a result of this, the Foodservice revenue share decreased from thirty one percent to twenty seven percent in the region.

23:25 Retail and QSR performance was more resilient, particularly our QSR business in Europe delivered almost the same level of revenues in twenty twenty one versus twenty twenty. In rest of the world, we returned to a positive organic growth of two point three percent compared to a negative performance in previous year.

The strong exposure to the QSR channel in this geography supported this performance. In fact, in APAC, we had the most successful year in terms of revenue in QSR.

This was partially muted by the strongly affected Foodservice channel in this region. 24:04 Turning to slide seventeen.

Quarterly sales evolution is clearly linked to management -- to improved management focus from the multi local approach and the improving trend of the pandemic, while the first two quarters ARYZTA suffered in all three channels from significant negative volume impact. This turned positive in the second half of the year.

In Q3, retail and QSR channel delivered a positive organic growth and compensated the negative performance of our Foodservice channel. 24:39 In Q4, all three channels delivered positive organic growth.

Worth mentioning, that the Foodservice channel delivered or contributed about fifty percent of the quarterly revenue performance in Q4. In Q4, the revenue performance was supported by a baseline effect, particularly in the Foodservice channel.

For twenty twenty two, we have all plans aligned to consolidate our return to positive organic growth and expect to deliver a mid-single digit revenue growth in twenty twenty. 25:15 Turning to slide eighteen.

Price/mix contribution for the year as mentioned before was positive at zero point six percent and strengthened quarter-by-quarter. Second part of the year showed a clear acceleration, thanks to the good contribution of -- in terms of product mix from the Foodservice channel, improved portfolio management and the first positive contribution from pricing.

Urs has highlighted the inflationary pressure and the need for pricing. Our input costs have suffered double-digit increases, for example, butter and flour have increased by more than twenty percent since the beginning of twenty twenty one.

So therefore, we plan for our price increase at seven percent plus. 26:02 We will not only rely on price increases.

We certainly will continue working on operational efficiencies and expect an equal contribution both from pricing and operational efficiency to make front to the headwinds of our input costs. 26:19 Turning to slide nineteen.

The QSR business, which is twenty percent of our business, has showed the fastest recovery from the COVID impacts. We have seen particularly in those outlets that have drive-through the fastest contribution to the sales growth.

This has helped us to achieve in this channel an organic growth of two point three percent. The retail channel which represents about fifty percent of our revenues has proven to be resilient.

Nevertheless, this channel has also suffered some change in purchasing behavior. The strong preference for package bread offering due to hygiene concerns, especially in the first part of year have impacted the bake-off performance in retail.

This resulted in a negative organic growth of minus three percent. 27:09 The negative impact from out-of-home consumption as well as impulse snacking has hit our Foodservice channel strongest and drove the organic growth down to minus seventeen point seven percent.

This channel returned as I mentioned before to positive organic growth in Q4. And when we look at particularly in France, our biggest foodservice business, the pace of recovery will largely depend on the reopening of the restaurant, tourists and hospitality sector.

27:39 Turning to slide twenty. Underlying EBITDA margin of continuing operation improved ten basis points to eleven point four percent, supported by three main drivers: disciplined cost management, the contribution from price and mix; and the strong actions on our structural costs, including the targeted twenty five percent reduction of our group overhead.

These three drivers more than compensated the negative impacts of the volume impact. 28:11 The improvement of ten basis points in Europe to ten point nine percent was the key driver of the profit increase in continuing operations.

Majority of our European businesses improved their EBITDA margin, including Germany, our biggest market. Contribution for price/mix, efficiencies resulting from increased capacity utilization and the reduction in conversion costs supported as well as restructuring-related savings.

28:41 Rest of the world on the other side decreased the margin slightly to thirteen point six percent. This reduction was driven by Brazil, which suffered significant negative currency impact, inflationary pressures, input cost headwinds, which they were only able to partially offset through strict cost management and restructuring.

29:01 Turning to slide twenty one. Let me look at the non-recurring costs for the continuing operation.

This amounted in twenty twenty one to forty nine point eight million. The three main components of these costs are severance and staff-related costs of twenty four point eight million.

These costs are related to the reduction of our regional and global head office as well as executive teams, together with many restructurings that we have performed in the different businesses across the group. 29:35 Legal and financial obligation totaling sixteen point one million where the second most important component and they relate to advisory and [indiscernible] banks costs related to the Elliot bit, which was projected by the board in December twenty twenty.

These costs are to a large extent legacy commitment. 29:54 Then profit on disposal reduced our non-recurring costs by eight point six million.

This relates to a disposal of the remaining four points six percent shareholding in Picard, which included the gain on disposal and the dividend of one point one million which we received during the period. 30:11 Turning to slide twenty two.

On this slide, negative figures are a deterioration of working capital positive figures are an improvement. For the group, working capital performance significantly improved versus previous year.

At group level, working capital has increased by one hundred and seventy five point four million in twenty twenty. While in twenty twenty one, it still increased, but at a much lower pace at fifty nine point nine million euro.

And this was associated to the reduction of our securitization program that we had to reduce given disposal of the North America business. 30:52 Now on continuing operation, working capital actually improved by twelve point three million after a significant increase in the previous year.

And this was -- this performance was mainly driven by the European business, which accelerated the cash conversion cycle by ten days. All three levers of working capital contributed, strongest contribution came from inventory management as well as accelerated cash collection.

31:21 Turning to slide twenty three. In summary, we can say that the turnaround plan of ARYZTA is on track.

With a much improved management focus, we are well prepared to consolidate our return to positive organic growth. The results from our strong structure cost actions, the acceleration of operational efficiencies and pricing will support margin progression in twenty twenty towards our run rate of around fourteen percent underlying EBITDA that is equivalent to the twelve point five percent that we have mentioned before pre-IFRS.

31:58 The strengthened discipline and working capital, the repayment of the deferred and current hybrid interest, proceeds that we will from Brazil, plus the new RCF, set us up to further progress towards a more sustainable capital structure in the next year. 32:17 With this, I conclude the financial review of twenty twenty one and hand back to Urs.

32:25 Thanks, Martin for details. This picture, you know, quite well, all about operational improvement at the moment.

So we had a clear focus in the last year, fiscal year twenty one on the balance sheet. We are focusing this year on the P&L, as I mentioned top line growth, a good quality top line growth with improved pricing, and then through a reasonable cost structure, going down on reasonable net profit.

This is to be gained, having then the future value of ARYZTA, which is representing the true value of our business. 33:21 North American business, just to remember again, disposed for eight hundred fifty millions of U.S.

dollars in cash to Lindsay Goldberg, a wonderful partner and a good new home, a good new owner for our North American business. There is a Brazilian business, which is signed and soon closed with the CADE approval, which again is the – probably the most important step in this administrative process to the sale of the business.

33:58 We did good progress in simplifying the business in supporting the business in fast and more efficient structures, in removing costs. The businesses were cost overloaded, not only in the group, the businesses as well.

There is a new refinancing agreed, as I mentioned the five hundred million of euro with our lenders – with new lenders. 34:24 On the hybrids, again paying back the accumulated, deferred and actual interest on all three hybrid principals.

Nevertheless, hybrids for the time being will remain part of our capital structure. And we will work -- continue to work towards a lean and agile business structure.

Basically, we are a much smaller organization now one point six five billion of sales. In European countries and Asian countries, we are an industrial bakery and we do our utmost to the correct structure and correct processes in place to support our business model.

35:19 The outlook again for fiscal year twenty two, mid-single digit organic, positive organic growth is the target. The Q4 is a bit misleading.

There is a base effect in -- and this is a -- I think a good and solid view and prognosis and target for the actual year, to have a plus/minus five percent organic revenue growth. The two point five percent EBTIDA, I already mentioned before, it's an intermediate target.

This is a run rate we will achieve in the actual fiscal year. And then in a consequence, having a sustainable net profit.

36:11 This was the prepared presentation and we would now go to the Q&A question, first to the questions in the room and then to the questions from the listeners.

36:43 First question, you were mentioning an organic sales growth target of roughly five percent for the current year. At the same time, you're aiming for price increases of roughly ten percent.

So this means at the end of day, you are expecting a volume decrease of five percent. That's my first question.

37:02 Second question, what was the recent sales trend you have seen so far in the first two months of the new financial year? And how far are with these new price negotiations in terms -- let's say, or you're already ten percent through or fifty percent through, whatever indication you can give here?

37:18 And my last question is regarding the EBITDA margin before IFRS-16. You're aiming for an exit rate of twelve point five percent.

Could give us any flavor here, what’s your best guess in terms of H1 and full year? Thank you.

37:38 Thank you, Patrik. I’ll start with maybe the last one and would then hand over to Martin for the price and volume mix in pricing.

At the end of the day, it's always a mix and Martin will go back to this. Basically a five percent volume growth target, so pricing is then to a certain extent coming on top.

Pricing has a phase in effect, so we are already now in the fiscal year twenty two. And maybe now coming to the question of how this works, it’s the QSR part of our business.

It's roughly one fifth of our business. There is a pricing mechanism in place, which basically is based on two different systems.

It’s an Asian system and the European system. 38:28 The European system has always a bit a slight delay.

The Asian business is faster, but don’t forget we are covered. So this is then a balancing effect.

So the QSR pricing is on a good track. There is again a pricing mechanism based on pricing protocols, which will lead with -- in the worst case of slight delay to a correct pricing.

38:56 Retail now is in negotiation time, most of the retail contracts are annualized contracts January till December. So we are now in negotiation with all our biggest customers around this.

There is a good progress so far done. Usually, these contracts are then being closed towards year end, end of November, beginning of December, but we are confident to get the pricing they are looking for.

Again, the cost in -- or increases is that significant and nobody is able to ignore this in service. This is a catalog business basically.

39:39 There is as well a pricing mechanism targeting a year end change then, starting with first of January. Remember vision as well that there is a coverage we have in place, so we will able to face it [Technical Difficulty] time wise in a good moment.

I'm not able to tell you to what extent we are there in retail or in foodservice pricing. This is a thing we are managing with our customers so I can’t give you more details for this.

40:19 You are asking about sales trends. One or the most obvious one, we can see is the Quick Serve Restaurant trends, the system providers they pick up the volume which is not or – which was lost or is lost by the smaller protagonist in the market around the world.

The organized customer, and the better they’re organized, the more they pick up are growing clearly outgrowing the market faster. As well as Martin mentioned, there is a trend towards packed products.

41:02 There's is a bit less impulse sales and more packed product sales, but the normal pattern is slowly coming back, but still a bit depressed on the simple sales. Foodservice had a strong rebound in the summer holiday seasons, especially in France, in Switzerland as well.

And Asian companies a bit less due to the ongoing pandemic situation there. But as soon as the lockdowns and the restrictions becoming less foodservice is coming back with the products we know and we have.

[Technical Difficulty] And Martin, price volume mix in growth?

42:01 Well, we say -- we guided for an overall mid-single digit growth so that can have a lower end and the high-end of mid-single digit, let's put it five percent to eight percent. Pricing will certainly come in, and I would expect a lower mid-single digit volume performance.

The long term improvement, Urs has mentioned is five for the twenty twenty two results, a lower mid-single digit volume evolution. On top of the pricing, we go to the mid-single digit.

42:45 But then all in all, this would still mean than double-digit, right? I mean, if you are aiming for low-single digit volume growth…

42:49 No. We say our overall organic growth as I said is mid-single digit that has a lower and the high end of five percent to eight percent.

Then we are at the high end of mid-single -- then we are at mid-single digit, and it will have a volume component and the price component.

43:09 Carbohydrates are growing with the population. Population is growing by one percent.

We are in a convenience part of the carbohydrate market and this market is growing between three percent, four percent, five percent volume. And this is the place we are aiming to.

Martin, EBITDA margin?

43:37 As I mentioned before, our strict cost management that we have taken during the previous year will gradually help us to improve profit margin together with the additional operational efficiencies and the pricing that should start coming through. And therefore, as we mentioned, we will aim at the run rate of fourteen -- around fourteen percent towards the end of the fiscal year twenty twenty.

43:06 Gradual improvement means also H1 should be better than H2 last year. Despite headwinds from -- despites seasonality or special effects, yes.

44:18 Thanks a lot.

44:28 Patrik Schwendimann again Zurcher Kantonalbank, concerning for planned repayment of the hybrid bond interest, when exactly is this likely to happen? And can you give us some more details about the terms concerning they agreed five years euro five hundred million refinancing in [indiscernible].

And last question, could you give us an insight into latest product innovations and what we can expect in the near future?

45:07 The hybrid interest details, Martin can show you later. But basically, there are two payments windows, one will in October for the two Swiss hybrids, and there is Euro hybrid due in March.

45:33 [Technical Difficulty] slide in the back up, where you can consult the timing on the payment of the cumulative and compounded interest of one hundred seventy five. And then there are the due dates of the different hybrids where we paid the current interests.

45:53 Maybe for the refinancing details?

45:55 Yes. So the refinancing to continue is -- at very similar rates as the current one that we just retired at the end of September.

Our RCF interest weighted average interest rate for the concluded period was one point four percent. So the structure is very similar.

You can expect similar rate for our new RCF.

46:28 As far as innovations are concerned, there is an overall trend towards artisan and artisanal products towards starter products, so not really the white roll or the white baguette. It's rather a handmade appearing product.

We start the flour with sour dough in with plant based ingredients business. This is a big trend.

Co2 footprint is a big question now coming up. There is a lot of -- there are a lot of efforts going into this customized products on the different regions.

There are in QSR initiatives towards more exclusive products. So having then a lower end of the pricing scale and the higher end of the pricing scale.

And it's different from country to country, customer to customer, but these are basically the trends.

47:39 But were you so far happy with your product quality or do you see there is some room for improvements?

47:46 There is always a room for improvement. And ARYZTA suffered on the quality side and on the innovation side over the last years.

Innovation by the way is not only product. Product is one part.

There is the entire value chain we should take into consideration. But there is always a room for improvement.

We need to improve this innovation process and the quality level overall, but this is an endless and evergreen topic we’re addressing. 48:24 Basically, innovation is almost not the most efficient way, let me say like this to defend the company from becoming not relevant anymore and protecting the company from pricing erosion.

So innovation is key for all businesses we are doing in foodservice, in Quick Serve Restaurant and in retail, towards the trend, I told there are innovations in the logistic part of the business, even in the packaging part of the business that's a big issue as well driven by shortages in the market, foil, cardboard box, carton boxes were not always available so then organization, our organizations are becoming very innovative around topics like this. So it’s a very levy environment.

We woke up in ARYZTA since we are in power.

49:30 Thank you. It's Jorn Iffert from UBS.

Three questions, please. The first one is on your current utilization in Q4.

Can you tell us whether it's roughly standing? And also if you see your cost base on the ground and the production side as more or less efficient right now that you only would need to do some fine tuning.

49:51 The second question, if I make a quick back of the envelope and cash flow calculation. On the equity free cash including the hybrid dividends and the interest costs, it should be around sixty million maybe CapEx, slightly below one hundred million.

Is it fair to assume that the equity free cash flow this year is already reaching fifty million plus? 50:12 And the third question, please on your balance sheet.

I mean, you have your hybrids outstanding with an, in brackets interest costs, six percent plus. You're paying on the credit facility, one point five percent.

Isn't there the option to, for example, refinancing the euro hybrid already with that or to evaluating also a convert or capital increase in the future? Just some more color would be appreciated.

50:40 I will hand over then to Martin. Let me go firstly maybe to the hybrids.

We did a lot of homework and analysis around the hybrid. And the way they are in the balance sheet now are not that bad.

They are expensive. But at the end of the day, a refinancing of the hybrid wouldn't lead us at the moment to an arbitrage to a lower interest.

We have always to take in consideration that hybrids are part of our equity structure. So we need to take care that this remains like this.

51:19 The company did the capital raise in twenty thousand and eighteen Jorn. And the process from twenty thousand and eighteen until twenty twenty ended in the name of the board to sell the company.

So the money is gone. So we understand and you will understand that there is very limited humor and enthusiasm for a capital raise, whether it's direct one or an indirect one via that equity swap.

So this is not a topic at the moment. We clearly go after the two hundred and twenty million and we will eat the elephant, the three hybrids in bits and pieces.

For the time being, this is the plan. So for more details, Martin.

52:10 I think the first question was on capacity utilization, the factories if I got that right. And if we are already happy with the efficiencies that we have achieved, I think we made good progress in twenty twenty one.

But as Urs said, it was an important step of many. It's a good set of figures.

But there is still -- there is still work to be done in terms of improving the capacity utilization, which is below seventy percent overall at group level and continue working on efficiencies. As I mentioned before, this will be an important part, together with pricing to offset the headwinds.

So we have established a good base to continue working from, but we’re not yet satisfied where we are. So we see opportunities still to come in terms of efficiencies and certain capacity utilization.

And I guess the strong drive in innovation will also help us to support that volume growth. 53:17 In terms of cash flow, continuing operation as I showed you before, delivered around fifty million euro this year.

And we expect to continue increasing that in the full year twenty two, it will sizably increase. And certainly, overall cash flow will be negative because we paid the deferred and the cumulative to interest.

53:45 Maybe just one quick follow-up. I mean, total interest cost with the hybrid together sixty million and according to your, I think interest guidance and then the CapEx, is it fair to assume between eighty million to one hundred million this year?

53:56 Lower, I think you have to -- you have to be a bit, it can be a bit less aggressive in terms of CapEx.

54:03 Thanks a lot.

54:05 But yes, the hybrid interest about forty five million, the current ones, and then you had the other interest, plus the leases that I mentioned you before.

54:15 Thank you.

54:51 Yeah. Good morning.

Thank you for taking my questions. First one, I'll start with the easy ones, slide thirty five on your presentation, cash generation of the continued operations.

So if we would add now a year -- financial year twenty twenty two, I mean, could we go here through the most important numbers? I mean, to my understanding, EBITDA of the continued business will be, let's say, two hundred million?

And then I think you indicated that the CapEx should be below one hundred. I mean given an input cost of increase of more than ten percent shouldn't there be a significant adverse negative effect on the working capital movement on that slide, page thirty five?

55:38 Could you quickly comment on the lease contracts, is that still on the same forty five million level? And could you please comment on the restructuring related cash flows, which has been around fifty million last year.

Can that expected to be close to zero? And just to have clarity, could you give me a best guess on the interest and income tax, which has been minus forty two million for the last year?

That will be my first question. 56:05 Then the second question is on the capital structure that you mentioned that you have given a lot of thought.

Just to be clear, there is no negotiations at the moment with hybrid holders on potentially transforming their hybrid into equity capital and there's also no plan to do so in the future? That's the second question 56:25.

And then the third question on the capacity utilization again. So if I understand you correctly, you're guiding for mid-single digit organic growth, which means minus five percent volume growth as you have indicated.

And I assume, this will basically all come from the Retail segment and not from QSR and probably not from the catalog business. So given this is a bit more, let's say, fifty percent of your business, the Retail business could be down in volumes by ten percent next year.

I mean, shouldn't that then give you a significant negative hit on the capacity utilization in financial year twenty twenty two? That will be my questions.

Thank you very much.

57:20 Thank you, Andreas. I'm not sure whether we managed to write down everything you asked.

Maybe I’d take the easy one to give Martin a moment time to be prepared for question one, which is -- the question two about the finance structure and the hybrids. No.

There is at the moment, no discussion with the hybrid holders about that equity swap. And no, there are no plans at the moment to go there.

Martin, question one?

57:59 And the question one, if I was right was on working capital and significantly…

58:04 So, I mean, if I may, I mean probably, it’s easiest, if you just look on slide thirty five. In the appendix of few slides, where you have the cash generation and when you can -- just could comment on most of the lines.

I said, I mean, EBITDA should I guess be around two hundred million and then for twenty twenty two, I mean how much negative working capital would you expect, would you expect the same level of lease contracts? Would the restructuring be close to zero?

And what would be best case for the interest and income tax? Thank you.

58:38 No. Let's start with the -- with more straightforward one.

I think Urs also mentioned it on the slide and we will target or expect nonrecurring cost to be minimal in twenty twenty two, certainly, not at the levels that we have had in this year. And when it comes to the lease, you can expect similar levels as we have in twenty twenty one.

When it comes to working capital, yes, it's certainly true that we will have an input cost decrease which will impact to some extent the inventories, but there is also efficiencies that we will still foresee in terms of management of payables as well as cash collection. So we will see continuous improvements in our working capital management.

59:44 And the interest on income tax?

59:47 The interest rates I've given you a range of fifteen million to nineteen million. And then we'll have -- the payment of the deferred and accumulated hybrid interest, which you can see also in the deck, it's one hundred and seventy five million plus the current hybrid interest, which are around forty five million, that gives you that two hundred twenty that Urs mentioned before.

60:25 If I may put in an add-on, I mean, the cash generation might be negative this year. And in the following years, it will be, let's say, somewhere between zero to hundred million.

I mean, will that then not take quite long pay down the eight hundred million hybrids to a reasonable net debt to EBITDA level including the hybrids. Thank you.

60:55 So as I just reinforced, operating free cash flow next year will be certainly positive and will be more positive than it was this year, number one. Number two, the overall cash flow from the activities will be negative as I mentioned before given the repayment of the -- mainly the repayment of the hybrid interest.

So we expect our performance to continue to improve. And therefore, over the next periods, we can review as Urs mentioned, depending on the performance how we will address the hybrid principle.

61:36 Andreas, we discussed this several times that hybrid mountain was built up over the last ten years. It will take a moment to digest this, that's not possible in a moment.

There is no plan and no room at the moment for a capital raise. So, having now the view on the hybrid principles there are three basically.

There is a euro hybrid, which is the expensive one, north of six percent and there are two Swiss hybrids of about four percent plus/minus both. So the two Swiss hybrids are moderate.

The euro hybrid is expensive and the most probably the first one, we will address. But at the end of the day, the cost of capital, if you take share capital, owners’ capital is much higher than the six percent or the four percent.

So it's still an efficient solution. It's an expensive solution.

It's a historic solution. We will address this and as I told, there are more and less expensive one, but doing this with this process is from a cost of capital point of view, a more efficient way than the capital raise.

63:02 That's clear. Thank you very much.

63:12 Hi, guys. Can you hear me, okay?

63:17 Yeah.

63:19 Brilliant. Sorry, can I just come back to the guidance and primarily the EBITDA margin guidance, because, yeah, I'm just trying to get my head around this.

So, I guess the first question is, what was the EBITDA margin pre-IFRS-16 in twenty twenty one because I don't think you've disclosed the least depreciation unless I've missed it? Well, I've to go at it anyway, and I get to around eight point five percent for FY twenty one, which means that by the end of I guess FY twenty two you're expecting a four hundred basis points increase in your EBITDA margin on a pre-IFRS-16 basis that accounts to around sixty million euros, given that your volume forecast for FY twenty two is at the lower end of mid-single digit, and that you're saying that you're going to absorb half of the double-digit twenty percent plus input cost appreciation.

64:47 How do you get the fall-through of such a large operating margin expansion? Because it seems to me that you're going to be seeing a marginal leverage on the volumes of well in excess of one hundred percent?

65:14 Fiscal year twenty one is a condensed view on twelve months, so the P&L and the performance of the company improved towards the year end. The same we will see in fiscal year twenty two.

There is a pricing, a phasing in and there is a costing phasing in. As I mentioned, we have there some coverage positions.

So the four hundred basis points you need always to see on the timeline, it’s based on our budgets and plans and programs doable there is a lot of operational improvement. 66:01 Let remind you that there was a cost removal of twenty five percent plus/minus on the group overhead cost, which didn't fully appear in the P&L twenty one.

There is an – a ramp up in the total saving as well coming in the fiscal year twenty two. So for us the twelve point five percent is a doable and reasonable target.

Martin?

66:29 Listen, just to be – just to reinforce what I mentioned before, the twelve point five percent pre-IFRS EBITDA margin corresponds to around fourteen percent post-IFRS-16. So the fourteen percent -- around fourteen percent run rate, which we expect to achieve towards the end of the financial year twenty two corresponds to the eleven point four percent that we have reported for continuing operation.

67:08 Okay. That's helpful.

And I guess a question on sort of strategy. I think as you mentioned, you want to step up your playing field within QSR in Europe.

How is that developing any early wins that you can call out? When do you think your exposure will be more aligned to the market in Europe?

67:38 This is -- we are in actual projects now to align with this in the existing production capacities. We are building now at this very moment additional one in Poland.

We are in discussion with our customers about next steps. So this is an ongoing process.

We shipped today products and volume almost through Europe to support markets which are fast growing. There are projects most probably we will address in Asia.

So this is an ongoing process. 68:22 The next bigger capacity, which is coming to the market is then already somehow in a good year from now from Poland.

Poland will support Poland, Czech, part of Hungary, Germany, yes and Germany. So this is the journey we go.

There is a lot of innovation in this QSR channel, which is a widening the offer from a positioning point of view and from a new product category point of view. This is the way, we will pick up this trend, by the way, the same way in retail and in foodservice, the world became different.

69:11 There are more and more house -- single person households. There are more and more people taking care for their lifestyle.

There are studies saying that as more expensive basic food products are, the higher volume has been sold via bread because bread is the cheapest component in the basic food. It’s cheaper and more efficient than fruits, than meat, than dairy, than fish, for example.

We are addressing all these trends, so QSR is a strong trend, but not the only one. 69:51 Did I answer the question with this?

69:53 Yeah. That's helpful.

Thank you.

70:08 Hi. Good morning, everybody and thanks for taking my questions.

I just have one and it's more so a clarification question around the inflation cost pools. So if you take it in turn, you've called out for raw material, labor and distribution cost inflation.

Can you maybe just guide us to your overall expectation for inflation across those cost pools and then break it down by A, what you're getting via pricing and B, what you might recover in terms of thus internal efficiencies? Thank you.

70:42 The absorption is in majority through pricing, it's two-third or even more of the costs. We will have to get via pricing, the rest via efficiency increase and better and smarter processes.

The breakdown in the cost components, if I understood the question, well, you mentioned flour, Martin told this, that there is a flour price increase over the last twelve months of twenty percent plus. Butter I mentioned last week, actually last week within two and five, three trading days, almost ten percent.

There is a labor cost increase. In our biggest market, it's not only there, but mainly there.

The hourly rates was around eleven euro an hour, minimum salary. So we are now on almost thirteen.

71:45 There is an energy price explosion, let me say like this over the last two months you read it in the newspaper. There is a construction material increase so we had projects with budgeted rate of one hundred -- budgeted investment of one hundred and we ended then, after a review of the project on one hundred fifty percent cost base now managed down and slimmed some, but there is still a significant inflation.

72:24 Now it's important that again, we understand that this is a timing game as well. It's the question from when on we get the new prices and we will get the new prices we will make sure with all our efforts.

And what the current coverage position is we have in the market. We cover flour, we cover butter, we cover energy, we cover other raw material.

So it is somehow a mix fiscal year twenty two is a mix of pricing. Pricing going then into growth.

And costing, costing going then into the cost part. 73:07 Price increase or the cost increase, the cost inflation, we believe is driven by two factors that is we should understand well, which is a release of the COVID pushback.

Everywhere, if somebody tries to buy a new car now, you will see this. There are some parts not available so would easily end up in the situation getting a car with all – without all the components.

But this pushback will go away. And there will be a left over -- the leftover is a significant cost increase on the basics into our industry.

Let me give you an example. The transportation cost of a container from Denmark or Rostock or Hamburg or Rotterdam, wherever it is to an Asian port into Shanghai or into Tokyo or wherever it is, was in the past below two thousand dollars a container.

Now, it's above four maybe above five, so a fact of two and half. This is significant.

We will remain there. And it's our big project for this year to A, absorb this to one third.

So could this will be possible and to hand over then the rest to the customers, there is no really alternative to this. 74:42 Did I answer with this your question?

74:46 You did. Thanks for the color.

I appreciate it.

74:50 Ladies and gentlemen, we have received a number of questions online. So I have the summary of some of them that have not already been answered.

So I just call them out for the transcript. So that everyone is aware of them.

So the first question was that, can you comment further on the expected proceeds of Brazilian business?

75:13 We agreed with the partner with Grupo Bimbo, a wonderful company, a good competitor. This is important to understand good competitors are good challengers, acting on a reasonable price level.

We agreed with Grupo Bimbo to keep silent on this. But as I mentioned at the beginning, the range of six hundred million to eight hundred million is well exceeded together with North American business.

This is the answer for this question.

75:50 The next one is that, with the payment of the deferred hybrid interest. Does this mean that going forward hybrid interest will be paid as normal?

76:02 In the future? Yes.

76:05 Would you care to comment further on the level of the securitization program that operates within the company?

76:13 Martin?

76:15 This is part of our way we manage working capital and our financing. Brazil has not been part of it.

So there is no effect of the divesture of the Brazilian business to be considering that. And we consider this to continue supporting our working capital performance and financing.

It's relatively efficient way of financing at the relatively low cost.

76:47 And the final one, that's hasn't been answered really is, could you comment on the targeted the leverage that you would expect for the OpCo, excluding hybrid?

77:02 We don't publish targeted leverage ratios. What we have said, we will continue working on strengthening the balance sheet through operation, above all, through operational performance or improved operational performance.

And subsequently, as the company finance health allows, we will start turning towards the hybrid as we mentioned in the presentation.

77:30 That concludes a summary of the questions that we received. And I now hand back to Urs for some closing remarks.

Thank you.

77:42 Thank you for the questions. And I hope we were precise enough with the answer -- or the answers.

It's the journey now for a bit more than twelve months, we undertook. So I think we did some first good steps in the right direction over the last twelve months, many more need to follow.

This year is all about qualitative revenue growth, pricing absorption. And there is a lot about cost, cost efficiency, process efficiency.

There is a lot about delivering what we plan. 78:36 We see and we realize and Jorn figured figure this out as well somehow in a research, there is an increasing morale in the company, which is important.

The company is nothing else than the sum of its people working for. Some of its customers buying from us, partners financing us, supporting us all over the place, I remember times when ARYZTA had to pay flour packaging and transport before any truck was delivered.

These times are gone. So slowly, we go back or we are coming back into a normalized world, it will take time.

79:20 You shouldn't expect new big announcements in that written as we had it this year. We did now the first big steps more will follow, but it will take time.

For me, the important view is that the plane called the plane, the ARYZTA plane is gaining flight altitude and not losing anymore. In the past, the plane lost flight altitude.

Then it's a question of time until the first month nor the Irish Seas loop. So, we turned the flight path up to higher levels.

It will take time. It's work.

It's not just happening from one day to another. And we know that you understand this very well, not only on the hybrid part of the business.

80:25 Good to see you here in Zurich, many of you, we saw each other since many, many years, that's good to see you back in an old cooperation targeting towards hopefully better world. So let us invite you for something to it as it should be for a food company.

It’s a shame -- would be a shame to let people go home without a good -- something good to eat and present. And if you hand over this bag you are carrying home to your wife and to your kids, give them more regards from us.

From Hiestand in Switzerland or from ARYZTA, they know where they can buy it tomorrow, because tomorrow it's going to be eaten or over. 81:23 Thank you.

Have a good day, and let me invite you as I told for the short bite. Thank you.