Canada Bread earnings ease in quarter
October 28, 2010
by Eric Schroeder
TORONTO — Net earnings at Canada Bread Co., Ltd. in the third quarter ended Sept. 30 were C$13,980,000 ($13,614,000), equal to C$0.55 per share on the common stock, down 44% from C$25,050,000, or C$0.99 per share, in the same period a year ago.
Earnings from operations before restructuring and other related costs were C$32,429,000 ($31,582,000), down 12% from C$36,915,000. Canada Bread said earnings were affected by lower sales volumes and increased marketing and promotional activities in the fresh bakery business to support new product launches.
Sales totaled C$411,364,000 ($400,597,000), down 3% from C$424,555,000 in the same period a year ago, reflecting lower sales volumes and currency translation impacts of a stronger Canadian dollar on sales denominated in U.S. dollars and British pounds.
“Our fresh bakery business benefited from price increases implemented earlier in the year, although rising wheat prices may require further pricing action,” said Richard Lan, president and chief executive officer. “While our frozen bakery business was impacted by continued weaker markets, initiatives are under way to increase volumes and reduce costs. We are also investing in promotions to support exciting new product innovation under the Dempster’s brand that will support our continued leadership and growth in the higher nutrition bakery segment.”
Earnings from operations within the Fresh Bakery segment fell 9% to C$30,397,000 ($29,599,000) on a 1% decline in sales to C$285,232,000 ($277,752,000).
“During the quarter, brand investment included marketing and promotional expenses to support Dempster’s Smart 16, a line extension of Dempster’s Smart, which includes 16 whole grains and reduced sodium; the launch of Dempster’s rye bread in Ontario in the fourth quarter of 2010; and extensions in Dempster’s Oven Fresh line,” Canada Bread said.
The company said construction of a new large scale fresh bakery facility in Hamilton, Ont., is proceeding on plan.
Earnings from operations within the Frozen Bakery segment fell 44% to C$2,032,000 ($1,979,000) from C$3,655,000. Sales in the division eased 8% to C$126,132,000 ($122,840,000) from C$137,270,000.
“While volumes in the North American frozen business were largely consistent with last year, earnings declined mostly due to increased factory overhead costs,” Canada Bread said. “Earnings in the U.K. operations were consistent with last year. Management continues to focus on increasing volumes in the North American frozen business. Cost improvements under way in the U.K. include the transfer of a production line to an existing low-cost scale facility in Maidstone, England, in the second quarter that consolidates the majority of croissant production into one site.
For the nine months ended Sept. 30, Canada Bread posted net earnings of C$47,394,000 ($46,175,000), or C$1.86 per share, down 24% from C$62,469,000, or C$2.46 per share, in the same period a year ago. Net sales were C$1,195,358,000 ($1,164,744,000), down 6% from C$1,273,598,000 in the same period a year ago.