By Federica Mileo
(Reuters) -French catering group Elior beat annual core profit forecasts on Wednesday and said the difficult talks to improve contracts in its home market were nearly finished, sending its shares up more than 7%.
Europe's third biggest contract caterer, which cut its margin target twice this year as the negotiations dragged on amid high costs of food and labour, said it had worked to eliminate sources of loss in certain strategic contracts.
"Difficulties are now almost completely resolved, except for one contract still under renegotiation," CEO Daniel Derichebourg said in a statement.
However, Elior lowered its organic sales growth target for 2024, saying volumes were normalising after a boost from an Omicron catch-up effect earlier this year.
It reported adjusted earnings before interest, taxes and amortisation (EBITA) of 59 million euros ($64.35 million) in the year through September, its first annual core profit since the COVID pandemic started. This beat analysts' forecast of 50 million euros.
"The combined balance of the volume effect and price increases almost offsets the impact of inflation," Derichebourg said.
Elior, which competes with Sodexo (EPA:EXHO) and Compass Group (LON:CPG), said it would keep hiking prices to offset costs in the coming year, while food price inflation in Europe should decelerate.
The group sees organic revenue growth of 4% to 5% and an EBITA margin of around 2.5% in fiscal 2024. It had previously forecast average growth of at least 7% over 2023 and 2024.
The outlook cut was expected by the market, Alphavalue analyst Yi Zhong said, adding the positive share reaction was driven by the core profit beat and fewer worries around net debt and forecasts.
Analysts' consensus expected organic growth of 5.9% for 2024.
Elior, which is in the process of integrating recently acquired Derichebourg Multiservices (DMS), now expects to reach 56 million euros in annual synergies from the deal by 2026, up from its initial 30 million euro target.
($1 = 0.9168 euros)