Sara Lee fresh bakery unit income rises

by Eric Schroeder
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DOWNERS GROVE, ILL. — Sara Lee Corp. posted operating income of $16 million within the North American Fresh Bakery unit in the second quarter of fiscal 2010 ended Dec. 26, 2009, led by a $30 million charge for a partial withdrawal liability relating to a multi-employer pension plan. This compared with a loss of $16 million in the same period a year earlier. Adjusted operating income, meanwhile, was $16 million, up 10% from $14 million in the second quarter of fiscal 2009.

Net sales in the segment fell 8% to $499 million from $539 million, primarily due to lower unit volumes, unfavorable sales mix into private label bread and price declines following lower input costs and competitive pressures.

“Branded volumes were soft and as a result, the business will continue to recalibrate pricing to drive sales, building on unit volume trends that were starting to show improvement at the end of the second quarter,” the company said. “The second half of the year is likely to show better unit volume performance and a reinvestment of some of the first half operating income in strategic pricing actions and marketing support for the introduction of innovative new products such as Sara Lee Soft & Smooth bread made with omega-3 DHA and EarthGrains 100% whole grain bread made with Eco-Grain.”

For the six months ended Dec. 26, adjusted operating income in the division was $38 million, up 22% from $31 million in the same period a year ago. Net sales fell 6% to $1,040 million from $1,110 million.

In its International Bakery business, Sara Lee sustained a loss of $1 million, which compared with a loss of $19 million in the second quarter of fiscal 2009. The most recent quarter included charges associated with Project Accelerate as well as for impairment of certain fixed assets in the Spanish bakery business. Adjusted operating income for the second quarter was $12 million, up 11% from $11 million. Sales for the quarter rose 7% to $211 million from $197 million.

“With new product launches, pricing actions and Project Accelerate benefits in Spain, combined with on-going strong performance in France and Australia, the segment expects to show positive trends in the upcoming quarters and for the full fiscal year,” Sara Lee said.

For the six months ended Dec. 26, operating income in the International Bakery business totaled $5 million, which compared with a loss of $4 million in the same period a year earlier. Adjusted operating income, meanwhile, was unchanged, at $25 million. Sales totaled $415 million in the six months, down 3% from $428 million in the same period of fiscal 2009.

Overall, Sara Lee net income for the second quarter was $371 million, equal to 44c per share of common stock, an increase compared with a loss of $17 million in the same period a year ago. For the six months, income was $655 million, or 71c per share, up from $213 million, or 21c per share.

Sales for the quarter were $2,858 million, virtually unchanged from $2,856 million in the second quarter of fiscal 2009. For the six months, net sales were down 4% at $5,446 million.

As a result of the strong second quarter results, Brenda Barnes, chairman and chief executive officer of Sara Lee, said the company has raised its full-year earnings-per-share guidance to $1 to $1.05, up from 82c in fiscal 2009.

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