Input costs, plant start-up costs hinder Weston Foods

by Jeff Gelski
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TORONTO – Higher commodity costs, other input costs and plant start-up costs led to a 3% decrease in adjusted EBITDA for Weston Foods in the third quarter ended Oct. 4. Adjusted EBITDA of C$102 million ($90.2 million) compared to C$105 million in the previous year’s third quarter.

Non-adjusted EBITDA was C$72 million in the third quarter, which compared to C$106 million in the previous year’s third quarter. Contributing to the decrease were an insured inventory loss of C$11 million due to a weather event, a multi-employer pension plan settlement payment of C$8 million and a fair value loss on commodity derivatives of C$9 million.

Sales of C$574 million ($508 million) were up 2.1% from C$562 million in the third quarter of the previous year. Foreign currency translation had a positive impact of 2.1%.

“Our outlook for Weston Foods is a slight decline in adjusted operating income in the fourth quarter when compared to the same period in 2013, and before including the impact of the 53rd week,” said Pavi Binning, president of Toronto-based George Weston Ltd., in a Nov. 18 earnings call. “Over the last six months I’ve had the opportunity to take a close look at the North American bakery landscape and our position within it.

“We are currently developing strategic plans to position the business for growth over the medium to long-term. While the traditional bakery market continues to be challenging, there are areas of growth available to us. We will provide some more color on our plans when we report our quarter four results early next year.”

He added start-up problems at an Ontario bakery are easing.

“One of the things that is important to bear in mind, when you start up a new bakery, and it has new equipment, there is depreciation cost, which is higher if the old assets have been fully written off, but certainly the situation is improving,” Mr. Binning said.

For the 40 weeks ended Oct. 4, adjusted EBITDA was C$237 million for Weston Foods, which was down from C$255 million in the same time period of the previous year. Non-adjusted EBITDA was C$210 million, down from C$249 million, and sales were C$1,454 million, up from C$1,399 million.

Companywide in the third quarter, Toronto-based George Weston Ltd. recorded  adjusted EBITDA of $1,101 million, up from C$741 million, non-adjusted EBITDA of C$936 million, up from C$735 million, and sales of C$13,974 million, up from C$10,377 million, Excluding the sales from the recently acquired Shoppers Drug Mart, third-quarter sales were C$10,587 million.
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