YESTERDAY MORNING ONE of Ireland’s best-known chief executives, Owen Killian, announced his resignation from one of the country’s largest public companies.
The Roscommon native is stepping down from the helm of Aryzta – pronounced ’Arista’ for those unfamiliar with the name - a Swiss-Irish frozen bakery firm probably best known here as the company behind the Cuisine de France brand.
Killian has led the company, a member of the Irish stock exchange’s ISEQ 20 index, for well over a decade and was widely credited as building into one of the biggest success stories to come out of Ireland.
However, the company has been struggling for the past two years and investor patience had been wearing thin with the CEO.
This is what has been happening inside the multinational food firm – and the reasons why pressure has been slowly mounting on Killian to step down.
Humble origins
Aryzta began its life as the Irish Agricultural Wholesale Society (IAWS), founded in 1897 as a wholesale trading company for various farming co-operatives.
It went on a buying spree shortly after listing on the Irish Stock Exchange in 1988, taking over several food businesses in the 90s and early 2000s. Perhaps the most crucial of these deals was the acquisition of Cuisine de France, for which it shelled out an eye-watering IR£50 million in 1997.
It was seen as a massive over-investment with several other companies backing away from the purchase due to the price. Killian, who was number two to IAWS boss Philip Lynch at the time, was said to be instrumental in driving the deal through.
The Roscommon man had held several positions at IAWS since its flotation and was the company’s chief operations officer at the time. The decision would prove to be the correct one as it helped IAWS transform from a struggling fertiliser and feed co-op into a large food business.
Killian finally got the top job at IAWS in 2003 and four years later spun out the company’s agricultural business into a separate firm, with the money from the deal to be used to fund more acquisitions.
IAWS took a big stake in Swiss food group Hiestand in 2003 and Killian eventually spearheaded a merger between the two. The company was renamed Aryzta and became a global food behemoth, with a turnover of almost €5 billion by 2014.
Despite his efforts to keep a low profile, Killian became one of Ireland’s best-known chief executives as he entered the ranks of the high-earners – taking in close to €6 million in 2014.
Trouble
The company’s shares hit €73 in March 2015, but they have since more than halved in value after a string of profit warnings.
In 2015 Aryzta announced that it was going to pay almost €450 million for a 49% stake of Picard, a French chain of frozen food supermarkets. It was seen as a high price to pay for a non-controlling stake in a company that was not a straight fit into Aryzta’s business.
Weak demand in Switzerland and France led to a big drop in the earnings forecast for 2016, and the firm began to struggle in the US.
Last March, Killian sold €16 million worth of his shares in the company, equivalent to two-thirds of his total stake. Investors took a dim view of the decision, and Aryzta’s share price slid further as it revealed that it had failed to hit its earnings targets.
Pressure began to build on Killian, and Gary McGann, the long-time CEO of successful paper and packaging business Smurfit Kappa, was brought in as chairman in a move that was widely viewed as an attempt to steady the ship.
The company’s debt also began to mount, it lost several important customer contracts and suffered in the face of intense competition, such as from a revamped Twinkie brand eating into Aryzta’s Otis Spunkmeyer cookie product’s sales in the US.
Revenues at the firm dropped in the most recent quarter, hurt by a particularly weak performance in its largest market, North America, where sales were down 7.5%.
In January 2017 Aryzta warned that its earnings could drop by as much as 20%. On a conference call with analysts Killian said: “I’m both embarrassed and angry that we’re in this position”.
Resignation
The pressure finally came to bear on Killian, who announced his resignation this morning.
The company’s chief financial officer, Patrick McEniff, and John Yamin, the head of the the firm’s US division, will also stand down. The resignations will be effective at the end of Aryzta’s current financial year in July.
Aryzta announced the appointment of a new executive team and also said that it plans to review its Picard stake.
In a statement, McGann said that the new management team “provides stability with an objective to deliver, in time, both performance and growth”. Investors will be hoping that things can be turned around quickly.
Written by Paul O’Donoghue and posted on Fora.ie
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