TORONTO — Operating income of Weston Foods decreased 30% to C$79 million ($77 million) in the second quarter ended June 14. The company said it experienced significant increases in the price of flour, fuel and other input items, but was able to increase prices and manage its sales mix towards higher margin products.
According to Weston, the year-over-year change in operating income reflected a charge of C$2 million related to restructuring, an income of C$3 million related to the net effect of stock-based compensation and equity derivatives, a charge of C$34 million related to the commodity derivatives fair value adjustment and an income of C$7 million related to the redemption of the remaining outstanding Weston 3% Exchangeable Debentures.
Weston Foods sales were C$1 billion ($977 million), an increase of 2% from the same period a year ago. Weston said foreign currency translation negatively affected sales growth by about 6%. Price increases and changes in sales mix positively contributed to sales growth of 9% during the quarter.
The company said fresh bakery sales rose about 12% in the quarter driven by price increases in key product categories combined with changes in sales mix.
"Branded volume increases in the Thomas’ and Arnold brands in the United States and the D’Italiano brand in Canada were offset by volume declines in other categories, particularly in private label products," Weston said. "Sales growth in whole grain and whole wheat products exceeded the sales growth of white flour-based products. The introduction of new and expanded products, such as Thomas’ Mini Bagels, Thomas’ 100 Calorie Bagel, Thomas’ 100 Calorie English Muffin, Arnold Double Breads, Gadoua Vitalite and Wonder + Headstart and products under the Weight Watchers licensed brand contributed positively to branded sales growth during the second quarter of 2008 and year-to-date."
Weston said fresh-baked sweet good sales, primarily sold under the Entenmann’s brand, decreased approximately 3% due to price increases and focused promotional activity.
Frozen bakery sales increased about 9% during the quarter, driven by price increases with changes in sales mix.
Biscuit sales, including wafers, ice-cream cones, cookies and crackers, rose about 5% during the second quarter, primarily due to higher volume of Girl Scout cookie sales.
Net income of George Weston Ltd., the parent company of Weston Foods, in the second quarter ended June 14 was C$118 million, equal to 84c per share on the common stock, down 9% from $129 million, equal to 90c per share, in the same period a year ago. Sales were C$7,847 million, up slightly from C$7,739 million.