Weston Foods frozen garlic bread
Weston Foods' frozen business underachieved during the quarter.

TORONTO — Operating income in the Weston Foods segment totaled C$24 million ($19.2 million) in the second quarter of fiscal 2017 ended June 17, down 2% from C$26 million in the same period a year ago. Adjusted EBITDA, meanwhile, fell 8.5% to C$54 million ($43.2 million) from C$59 million. Sales increased 2.6% to C$509 million ($407.2 million) from C$496 million.

Galen Weston, Weston Foods
Galen Weston, chairman and c.e.o. of Weston Foods

“Three of the four business segments of Weston Foods are performing in line with expectations, while the frozen business is underachieving against an aggressive plan,” Galen Weston, chairman and chief executive officer, said during a July 28 conference call with analysts. “Contributing factors to the shortfall were a loss of customer in the frozen business and a slower-than-expected ramp-up in filling new capacity. We’ve been able to make some headway in replacing the lost business, but there is still a gap to fill. As a result, we have amended our outlook.

“Weston Foods now expects adjusted EBITDA in the second half of 2017 to trend in a similar fashion to the first half when compared to last year. We remain confident in our ability to fill our frozen capacity, and we’ll update you next quarter on our progress.”

In the questions-and-answers portion of the call, Mr. Weston was asked about the fresh bread category and how Weston has dealt with unseasonable weather in most of Canada.

Weston Foods bread
Weston Foods is seeing a shift away from commercial bread.

“So, it’s been a tough spring and summer for anything related to seasonal barbecue, anything related to seasonal weather,” Mr. Weston said. “We’ve seen that in retail, and we also see it in the fresh bread business with hot dog buns and hamburger buns. Having said that, we feel very good about the way our fresh bread business is performing in what continues to be a slow and steadily declining market. And there’s been no meaningful change in that trend, just continues as it has for the last couple of years.”

He continued, “(There is) really a consumer shift away from commercial bread into different parts of the bread category. So, we’re seeing lots of robust growth in sweet goods, lots of robust growth in artisanal breads. All the trends that you would probably see amongst, sort of, social group tend to be traveling across both the U.S. and Canada.”

Overall, George Weston posted net earnings of C$160 million, equal to C$1.23 per share on the common stock, which compared with C$133 million, or C$1.04 per share, a year ago. Sales increased 3.3% to C$11,435 million.