Seven new frozen lines now operational at Weston Foods

by Eric Schroeder
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George Weston production line
Weston Foods has added seven new frozen bakery production lines to its facility.

TORONTO — Seven new frozen bakery production lines installed at Weston Foods to add incremental capacity in cakes, donuts and pies are now operational, contributing to gains in earnings and sales at the company in the third quarter. Adjusted EBITDA in the Weston Foods segment of George Weston Ltd. totaled C$101 million ($75.2 million) in the third quarter of fiscal 2016 ended Oct. 8, up 4% from the same period in fiscal 2015. Sales increased nearly 4% to C$673 million ($500.8 million) from C$649 million.

Pavi Binning, George Weston
Pavi Binning, president and c.e.o. of George Weston

“Weston Foods continued to deliver results in line with our expectations, reflecting the impact of increased capital expenditures and incremental investments to support growth initiatives,” Pavi Binning, president and chief executive officer of George Weston, said during a Nov. 22 conference call with analysts. “All seven new frozen lines that I talked to previously are now operational. We expect volumes from these production lines to continue to grow as we move forward.”

Mr. Binning said some of the replacement capital spend that George Weston budgeted for 2016 has been deferred, and this is reflected in the company’s revised capital outlook for this year of C$210 million. He said a portion of George Weston’s maintenance capital is coming in lower than originally projected as the company achieves efficiencies.

Weston Foods expects growth generated by new capacity and productivity improvements to drive an increase in adjusted EBITDA in 2016 when compared to 2015, Mr. Binning said, and the increase in adjusted EBITDA is expected to be greater in the second half of the year, as new plant capacity and capability come on-line.

“Depreciation is projected to increase in 2016 when compared to 2015 and more than offset the improvement in adjusted EBITDA,” he said. “The competitive retail landscape continues to intensify, particularly in fresh baking, and this will put added pressure on the business.”

George Weston bread loaves
Volumes remained soft in commercial bread.

Mr. Binning said volumes remained soft in commercial bread, though he did note there are some pockets of growth in fresh bakery, including tortillas, bagels, rye bread and breakfast bread.

“There are some opportunities here (in fresh), but they don’t offset the decline in white and wheat bread,” he said.

Overall, George Weston posted third-quarter net earnings attributable to common shareholders of C$268 million ($199 million), equal to C$1.97 per share on the common stock, which compared with C$161 million a year ago. Sales increased 1.5% to C$14,605 million ($10,872 million).
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