Sara Lee Fresh Bakery income falls 45% on charge

by Eric Schroeder
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DOWNERS GROVE, ILL. — Operating income within the North American Fresh Bakery unit of Sara Lee fell 45% to $33 million in the fiscal year ended June 27, driven down by a $31 million charge in the second quarter related to a partial withdrawal liability relating to a multi-employer pension plan. Adjusted operating income, meanwhile, was $70 million, up 11% from $63 million in fiscal 2008.

Net sales in the segment rose 9% to $2,200 million from $2,028 million, driven by higher prices and higher unit volumes.

For the fourth quarter, operating income was $24 million, down 18% from $29 million, reflecting severance costs, unfavorable sales mix and the costs to close a Marquette, Mich.-based bread and bun bakery in late June due to excess capacity. Adjusted operating income was $30 million, down 5% from $32 million. Net sales in the quarter were $560 million, up 1% from $554 million.

"Unit volumes increased 0.7% in the fourth quarter, driven by volume growth in non-branded bakery products due to the gain of non-branded business in additional retail stores, as well as consumer trade-down to private label breads," the company said. "Unit volumes for the segment were up 3.2% for the full year."

In its International Bakery business, Sara Lee sustained an operating loss of $193 million, which compared with a loss of $346 million in fiscal 2008. The most recent fiscal year results included $207 million in non-cash impairment charges for goodwill balances and other long-lived assets at the Spanish bakery business, while the fiscal 2008 results included $400 million in impairment charges. Adjusted operating income for the year was $52 million, down 14% from $60 million.

Sales for the year fell 15% to $790 million from $929 million.

For the fourth quarter ended June 27, the International Bakery business sustained a loss of $200 million, which compared with a loss of $385 million in the same period a year ago. Adjusted operating income, though, rose 4% to $15 million from $14 million. Net sales were $187 million, down 23% from $243 million in the fourth quarter of fiscal 2008.

"Unit volumes decreased 11.3% in the fourth quarter, primarily resulting from significantly lower unit volumes in the Spanish fresh bakery business as consumers continued to trade down to private label breads in the very challenging economy, as well as from loss of business from a large customer and lower refrigerated dough exports," Sara Lee said. "Unit volumes for the year were down 11.6%."

Overall, Sara Lee Corp. had income of $364 million in fiscal 2009, equal to 52c per share on the common stock. This compared with a loss of $79 million in fiscal 2008. Sales for the year were $12,881 million, down from $13,212 million. For the fourth quarter ended June 27, Sara Lee sustained a loss of $14 million, which compared with a loss of $672 million in the same period a year ago. Both years contained significant impairment charges. Sales totaled $3,164 million, down from $3,507 million.

"Our 2009 results reflect the significant progress we have made in transforming Sara Lee and focusing the company on core businesses with large and growing brands in important categories," said Brenda C. Barnes, chairman and chief executive officer. "We’ve dramatically improved efficiencies and productivity across the board, while fostering a culture of innovation and collaboration. We’ve built a solid foundation and will continue to invest in the future."

The company said it expects 2010 full-year earnings per share guidance to be in the range of $1.03 to $1.09 per share, and expects five out of six businesses to show an increase in adjusted operating segment income in 2010.

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