Weston fresh baking profit down sharply in quarter

by Eric Schroeder
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TORONTO — Operating income of the U.S. fresh baking business of George Weston Ltd. in the second quarter ended June 20 was C$9 million ($8.3 million), down sharply from C$92 million in the same period of fiscal 2008. Sales were C$145 million ($134 million), down 86%.

Results for the business, previously part of the company’s Weston Foods segment, were reported as discontinued operations, reflecting the Jan. 21 sale of the business to Grupo Bimbo S.A.B. de C.V. for gross and net proceeds of C$3,092 million.

Overall, Weston Foods had an operating profit of C$56 million ($52 million) in the second quarter ended June 20. This compared with income of C$45 million in the same period a year earlier. Net sales were C$395 million ($365.4 million), down 27% from C$501 million.

For the six months ended June 20, operating profit was C$29 million ($26.8 million), down from C$86 million in the same period of fiscal 2008. Net sales were C$832 million ($768.9 million), down 18% from C$1,012 million.

"Fresh bakery sales decreased approximately 0.6% in the second quarter of 2009 compared to the same period in 2008," Weston said. "On a year-to-date basis, sales increased 2.7% compared to the same period in 2008, driven by price increases in key product categories combined with changes in sales mix. Volumes in the second quarter of 2009 were flat and volumes decreased slightly year-to-date mainly due to declines in certain categories offset by growth led by the D’Italiano brand and private label products. The introduction of new products such as D’Italiano Thintini and Country Harvest Vitality contributed positively to branded sales during the second quarter and year-to-date 2009."

Frozen bakery sales rose 2.2% in the second quarter of 2009 and 4% year-to-date, driven mainly by price increases and changes in sales mix.

"Biscuit sales, principally wafers, ice cream cones, cookies and crackers, increased approximately 6.4% in the second quarter of 2009 and 4.6% year-to-date compared to the same periods in 2008 driven by price increases combined with changes in sales mix and volume growth," Weston said.

Looking ahead to the remainder of 2009, W. Galen Weston, chairman and president, said the second half will be challenging.

"Unfavorable economic conditions are expected to put pressure on both margins and volumes for the remainder of 2009," Mr. Weston said. "To help offset these economic pressures, the company is continuing its efforts to reduce cost through improved efficiencies and productivity and by optimizing the product mix to meet changing consumer buying preferences in difficult economic times."

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