Weston Foods adjusted operating income rises 3.5%

by Eric Schroeder
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TORONTO — Operating income for the Weston Foods division of George Weston Ltd. was C$60 million ($60 million) in the first quarter ended March 24, up sharply from C$19 million in the same period of fiscal 2011. The change in restructuring and other charges, the fair value adjustment of commodity derivatives and share-based compensation net of equity derivatives had a year-over-year favorable impact of C$39 million on operating income in the quarter, Weston said. Adjusted operating income, meanwhile, rose 3.5% to C$59 million ($59.1 million) from C$57 million.

Net sales were C$425 million ($425.7 million), up 4% from C$410 million a year ago.

George Weston said fresh bakery sales decreased approximately 0.5% in the first quarter compared with the same period in 2011, mainly due to lower sales volumes, primarily due to continuing market softness in a difficult sales environment.

“The decline in volumes was partially offset by higher pricing across key product categories, primarily as a result of price increases implemented in the beginning of the second quarter of 2011,” Weston said. “The introduction of new products, such as the Premiere Fournee de Weston line of artisan inspired breads and the relaunch of the Wonder and Gadoua MultiGo lines of breads that are free of artificial additives including preservatives, colors and flavors, contributed positively to branded sales in the first quarter of 2012.”

Frozen bakery sales increased approximately 0.8% in the first quarter, mainly due to higher pricing across key product categories, partially offset by lower sales volumes.

Biscuit sales, principally for wafers, ice cream cones, cookies and crackers, increased approximately 11.8% in the first quarter of 2012, due primarily to higher sales volumes combined with higher pricing in certain product categories. Volumes increased in the first quarter of fiscal 2012 behind growth in cookie sales, including Girl Scouts products.

Looking ahead to the full year, the company said it expects to deliver sales in line with 2011.

“Higher commodity and input costs experienced in the first quarter are expected to continue in the second quarter of 2012, putting increased pressure on operating margins when compared to the same periods in 2011,” Weston said. “Weston Foods will continue its efforts to reduce costs through improved efficiencies and ongoing cost reduction initiatives in an effort to achieve full-year operating margins in line with those in 2011.”

Overall, net income at George Weston rose 4% in the first quarter to C$171 million ($171 million), equal to C$0.89 per share on the common stock, up from C$165 million, or C$0.74 per share, in the same period of fiscal 2011. Sales rose 1% to C$7,224 million ($7,212 million) from C$7,148 million.

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