Canada Bread adjusted earnings rise 7% in Q1

by Eric Schroeder
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TORONTO — Improved volumes coupled with the benefit of price increases in the company’s frozen bakery unit contributed to better earnings at Canada Bread Co., Ltd. in the second quarter of fiscal 2012. Adjusted operating earnings in the second quarter ended June 30 totaled C$37,429,000 ($37,388,000), up 7% from C$35,103,000 in the same period a year ago.

Earnings from operations before restructuring and other related costs were C$37,573,000 ($37,531,000), which compared with C$22,556,000 in the same period a year ago. The second quarter of fiscal 2011 included C$12,547,000 in restructuring and other related costs, while the most recent quarter included C$1,205,000 of such costs.

Sales during the second quarter of fiscal 2012 fell to C$404,861,000 ($404,455,000) from C$406,245,000.

“Our results improved from last year and significantly from a weak first quarter, reflecting come improvement in volume and the benefit of price increases in our Frozen Bakery segment to manage higher costs,” said Richard Lan, president and chief executive officer. “While the bread category continues to be soft in both North America and the U.K., we will continue to manage this through proactive sales strategies, product innovation and cost reduction.”

Adjusted operating earnings within the Fresh Bakery segment during the second quarter of fiscal 2012 fell 8% to C$30,507,000 from C$33,211,000, while sales eased 1% to C$279,164,000 from C$282,364,000 in the second quarter of fiscal 2011.

While there was an improvement from the first quarter of 2012 as a result of increased promotional and marketing activities and warm summer weather, an underlying decline in consumer demand continued to affect results, Canada Bread said.

“Included in results are C$0.8 million in duplicative overhead costs related to the commissioning of a new fresh bakery in Hamilton, Ont., and which are expected to continue until early 2013,” Canada Bread said. “The company expects the new bakery to be accretive to operating earnings commencing in 2013, with the closure of the third Toronto bakery and as volumes consolidate into the new Hamilton facility.”

Canada Bread said results from its fresh pasta business declined due to higher inflationary and operational costs, and increased advertising and promotional spending.

Adjusted operating earnings in the Frozen Bakery segment during the second quarter of fiscal 2012 totaled C$6,922,000, up sharply from C$1,892,000 in the same period a year ago. Sales increased 1% to C$125,697,000 from C$123,881,000.

“Profitability continued to improve due to higher pricing and volumes in the North American frozen bakery operations, an improved sales mix in the U.K., and lower overhead costs resulting from the closure of the Walsall, U.K., bakery in the first quarter of 2012,” the company said. “These benefits were partially offset by higher inflationary costs.”

Overall adjusted operating earnings at Canada Bread in the six months ended June 30 were C$46,190,000, down 11% from C$51,827,000 in the same period a year ago. Sales for the six months fell to C$775,105,000 from C$778,005,000.
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