Strong fresh bakery results boost Canada Bread earnings

by Eric Schroeder
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TORONTO — Improved performance in the fresh bakery business helped drive strong adjusted operating earnings at Canada Bread in the first quarter of fiscal 2013. Adjusted operating earnings in the quarter ended March 31 totaled C$17,101,000 ($16,975,000), up 118% from C$7,856,000 in the same period a year ago. Earnings from operations before interest and income taxes, meanwhile, were C$4,177,000 ($4,147,000), up from C$1,994,000 in the same period a year ago.

Sales during the first quarter of fiscal 2013 fell to C$368,705,000 ($365,877,000) from C$370,244,000.

“We made good progress in the quarter with improved results across our businesses,” said Richard Lan, president and chief executive officer. “Of note, the most substantial contribution came from improved operating efficiencies, including the contribution of our new Hamilton (Ont.) bakery to earnings. We are focused on delivering higher levels of profitable growth through cost reduction but even more importantly through innovation, category expansion and optimizing our sales mix. We are identifying new opportunities that we can act on commencing this year.”

Adjusted operating earnings within the Fresh Bakery segment during the first quarter of fiscal 2013 increased 101% to C$13,260,000 ($13,179,000) from C$6,589,000, while sales eased 2% to C$242,665,000 ($241,192,000) from C$248,183,000 in the first quarter of fiscal 2012.

Canada Bread said the substantial earnings increase in the fresh bread business was mostly the result of improved operating efficiencies, contribution from the new Hamilton bakery and non-recurrence of SAP start-up costs incurred last year. The company also said it benefitted from price increases and lower advertising and promotional costs.

“During the quarter, approximately C$3 million of duplicative overhead costs were incurred, pending the closure of a third Toronto bakery,” Canada Bread said. “These costs, expected to be approximately C$5 million in total for the first half of the year, will be eliminated in early June when the bakery is closed and production transferred to the company’s recently constructed Hamilton, Ont., bakery. Earnings improvement in the fresh pasta business resulted from an inventory write-off in the first quarter of last year that did not re-occur.”

Adjusted operating earnings in the Frozen Bakery segment during the first quarter of fiscal 2013 totaled C$3,841,000 ($3,810,000), which compared with C$1,267,000 in the same period a year ago. Sales increased 3% to C$126,040,000 ($125,026,000) from C$122,061,000.

“Higher margins in the North American frozen bakery business were largely due to price increases implemented during the quarter,” Canada Bread said. “Although the U.K. bakery business benefited from higher volumes and the closure of the Walsall facility last year, increased marketing spending during the quarter to support continued growth of the New York Bakery brand offset these improvements.”

In April, Canada Bread entered an agreement to sell a London bakery, and announced plans to close a bakery in Shawinigan, Que.
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