TORONTO — As has been the case over the past several quarters, capital investments put in place to help spur future growth at Weston Foods have, for the moment, been a drag on earnings.
Operating income in the Weston Foods segment totaled C$38 million ($29 million) in the second quarter ended June 20, down 16% from C$45 million in the same period a year ago. Adjusted operating income fell 24% to C$39 million ($30 million) from $51 million. Sales, meanwhile, increased 8% to C$464 million ($356.5 million) from $431 million.
|Pavi Binning, president of George Weston Ltd.|
“We’re making investments in areas such as sales and marketing, innovation, and capabilities to support the capital investment,” Pavi Binning, president of George Weston Ltd., said during a July 31 conference call with analysts. “In the second quarter, the reduction in operating income was driven by plant start-up and related overhead of C$5 million, investments in people to support innovation and growth of C$4 million, and higher input cost inflation at pricing of C$3 million.”
Mr. Binning said Weston Foods has installed a new line at its cake facility in Indianapolis, and plans to put two more in by the end of the year. The move will allow the company to close its cake plant in Carrollton, Ga.
“We are transferring production from the (Carrollton) facility that we’re going to close, into the new Indianapolis facility,” Mr. Binning said. “So at the moment that doesn’t give us incremental capacity, but it will when the second two lines go in (in Indianapolis). And it was for economic reasons that we actually decided to close that facility.”
He added that Weston also should begin to see the benefits from a new cracker line recently installed at its Front Royal, Va., plant.
“We’ve invested both in Canada and also in the United States,” he said. “And again, as we move into the latter part of quarter three and quarter four, we should begin to see some ramp-up in terms of those two facilities.”Overall, George Weston posted net earnings of C$51 million ($39 million), equal to C0.32 per share on the common stock, which compared with a loss of C$208 million in the same period a year ago. Sales increased 2.4% to C$10,851 million ($8,338 million).