TORONTO — Net earnings at Canada Bread Co., Ltd. in the fiscal year ended Dec. 31, 2008, were C$64,936,000 ($51,896,000), equal to C$2.55 per share, down 23% from C$83,751,000, or C$3.30 per share in fiscal 2007.

Sales rose 13% to C$1,708,330,000 ($1,365,369,000) from C$1,513,179,000.

For the fourth quarter, net earnings rose 12% to C$26,460,000, or C$1.04 per share, from C$23,529,000, or C$0.93 per share in the same period a year ago. Sales were C$444,957,000, up from C$393,270,000.

"Despite a challenging first half of 2008, we ended the year with a return to stability and improved earnings," said Richard Lan, president and chief executive officer. "The recent decline in commodity prices, combined with price increases helped to restore margins in the fourth quarter. Across our businesses we remain focused on building volume through a steadfast commitment to our customers, innovation and new category expansion."

The Fresh Bakery segment’s sales grew by 16% to C$1,094,190,000, while earnings from operations were C$76,529,000, down 13% from C$88,402,000 in fiscal 2007. The

Canada Bread said the decline in earnings reflected the significant impact of high commodity prices earlier in 2008.

"The combined impacts of price increases implemented in December 2007 and March 2008 and declining wheat prices contributed to margin improvement in the fourth quarter, but did not cover losses experienced earlier in the year," the company said. "While commodity prices declined in the fourth quarter of 2008, the concurrent strengthening of the U.S. dollar partially reduced the benefit of lower commodity wheat prices in the Canadian fresh bakery business, impacting margin recovery."

Frozen Bakery sales rose 8% to C$614,140,000, while earnings from operations plummeted 49% to C$21,103,000 from C$41,052,000.

Canada Bread said the earnings decline reflected the significant impact of high commodity prices earlier in 2008 and higher production costs.

"While North American frozen bakery operations benefited from mix improvements, higher utility, maintenance costs and production inefficiencies due to the transfer of production from the Toronto Bagel Plant to other regional plants impacted their earnings during the quarter," the company said. "The U.K. bakery operations experienced higher production costs due to a new bagel oven commissioned at the Rotherham plant to replace an oven destroyed by fire earlier in the year. These start-up costs, as well as business interruption losses throughout the year, were partially offset by an C$8.3 million insurance payment in the fourth quarter that is recorded in other income. In addition, the U.K. business was further impacted by a weak economy, which resulted in decreased sales volumes of its premium specialty bakery products. To further integrate acquisitions and improve capacity utilization, two sub-scale bakery plants were closed and production moved to other plants."