Canada Bread earnings up despite dip in fresh bread

by Eric Schroeder
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TORONTO — A small decline in earnings within the fresh bread business was more than offset by gains in the North American frozen and U.K. bakery business, driving an 8% increase in adjusted operating earnings at Canada Bread Company, Ltd. in the year ended Dec. 31, 2013. Adjusted operating earnings in the year totaled C$127,117,000 ($114,093,000), up 8% from C$117,692,000 in fiscal 2012. Earnings from operations before interest and income taxes were C$115,418,000 ($103,535,000), up from C$108,254,000 in the same period a year ago.

Sales during fiscal 2013 fell 2% to C$1,453,586,000 ($1,303,821,000) from C$1,479,243,000.

“We delivered solid results in the (fourth) quarter, benefitting from previous investments and strong gains in our U.K. operations,” said Richard Lan, president and chief executive officer. “We achieved an impressive adjusted EBITDA margin of 12.1% in 2013. This year will be an exciting time of change and opportunity for the organization. With the planned sale of Canada Bread to Grupo Bimbo, which is expected to close in the second quarter, there is significant opportunity to build on the strong platform that this business has established.”

Canada Bread earlier this month agreed to sell all of its common shares to Grupo Bimbo, S.A.B. de C.V. for C$72 ($65) per share, or approximately C$1,830 million ($1,663 million).

Adjusted operating earnings within the Fresh Bakery segment during fiscal 2013 fell 6% to C$88,657,000 from C$93,899,000, while sales fell 3% to C$940,043,000 from C$971,670,000 in fiscal 2012.

Canada Bread said the lower earnings reflected lower volumes partly offset by increased efficiencies at its new Hamilton, Ont., bakery, simplification of its product portfolio, and the reorganization of its distribution network.

During the fourth quarter, Canada Bread sold its Olivieri fresh pasta business for C$116.3 million to Ebro Foods S.A. The operating results and gain on sale of the business were classified as discontinued operations and prior-year amounts were presented as discontinued operations on a comparable basis.

Adjusted operating earnings in the Frozen Bakery segment during fiscal 2013 totaled C$38,460,000, up 62% from C$23,793,000 in the same period a year ago. Sales increased to C$513,543,000 from C$507,573,000.

Canada Bread said the gain in earnings in the Frozen Bakery segment primarily was driven by operating improvements in its North American frozen bakery business, increased volumes in the U.K. bakery business and higher pricing in both businesses. The benefits partly were offset by lower volumes in the North American frozen bakery business and higher raw material and inflationary costs.
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