Weston Foods income rises 43% in '07

by Eric Schroeder
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TORONTO — Operating income of Weston Foods rose 43% to C$366 million ($366.4 million) in the fiscal year ended Dec. 31. Adjusting for non-cash income, operating income in the most recent year was up 18% from fiscal 2006.

Weston Foods sales were C$4.3 billion ($4.3 billion), down 1.2% from fiscal 2006. Weston said foreign currency translation negatively impacted sales growth by approximately 3.4%. The company said price increases across key product categories combined with changes in sales mix contributed positively to sales growth by 3.5% for 2007.

Overall volume at Weston Foods decreased by approximately 1.3% for fiscal 2007 with approximately 0.7% of the volume decline attributable to the combined effect of the exit from the U.S. frozen food service bagel business early in the third quarter of 2006 and the discontinuance of contract manufacturing of biscuits for certain customers during 2006.

Restructuring and other charges during the year were C$5 million, which compared with charges of C$46 million in fiscal 2006.

For the fourth quarter ended Dec. 31, operating income at Weston Foods totaled C$49 million, down 27% from C$67 million in the fourth quarter of fiscal 2006. Net sales were C$932 million, down 5.5% compared with 2006.

The company said fresh bakery sales rose approximately 5.9%% in the fourth quarter and 4.5% for the full year, driven by price increases in key product categories combined with changes in sales mix.

"For the fourth quarter and for 2007, branded volume increases in the Arnold and Thomas’ brands in the United States and D’Italiano brand in Canada were more than offset by volume declines in other categories, particularly in food service and in private label products," Weston said. "Continued growth in whole grain products and the introduction of new and expanded products, such as Thomas’ 100 Calorie English Muffins, Thomas’ mini square bagels and product innovation in the Wonder+ line, contributed positively to branded sales growth in 2007."

Weston said fresh-baked sweet goods sales, primarily sold under the Entenmann’s brand, were flat in the quarter but down 0.8% for the full year. The volume decline was attributed to softness in full size categories that were partially offset by the introduction of new and expanded products, such as the Entenmann’s 100 Calorie Little Bites.

"Profitability in the U.S. fresh-baked sweet goods category declined in 2007 and remained a challenge as a result of changing consumer eating and shopping preferences and a high fixed cost manufacturing and distribution structure," Weston said. The company said it is addressing the challenges with previously announced downsizing of its fresh baked goods facility in Bay Shore, N.Y.

Frozen bakery sales increased approximately 4.3% during the fourth quarter and 3.8% for the full year, driven mainly by higher volumes, price increases combined with changes in sales mix. Volumes for the year were flat as volume gains were offset by the decline in volumes caused by the exit from the U.S. frozen food service bagel business.

Biscuit sales, including wafers, ice cream cones, cookies and crackers, were flat in the fourth quarter but fell 11% for the year, due in large part to significantly lower sales volume in certain categories, and the discontinuance of contract manufacturing of biscuits for certain customers during 2006.

Net income from continuing operations of George Weston in the fiscal year ended Dec. 31 was C$563 million, equal to C$3.92 per share on the common stock, up from C$110 million, or C$0.43 per share, in the same period a year ago. Sales were C$32,815 million, up narrowly from C$32,167 million.

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