TORONTO — A decline in sales and coronavirus (COVID-19) related costs coupled with the unfavorable year-over-year impact of adjusting items led to an operating loss of C$49 million ($36.7 million) in the Weston Foods segment of George Weston Ltd. in the second quarter ended June 13. The loss compared with operating income of C$12 million in the same period a year ago.

Adjusted EBITDA, meanwhile, fell 87% to C$7 million ($5.2 million) from C$49 million. Sales decreased 14% to C$412 million ($308.2 million) from C$479 million.

Commenting during a July 28 conference call with analysts, Richard Dufresne, president and chief financial officer of George Weston Ltd., said the second quarter “was financially difficult for Weston Foods,” and came on the heels of a strong first quarter in which Weston built on momentum established during the second half of 2019.

The onset of COVID-19 sent certain retail categories and foodservice channels into a bit of a tailspin, Mr. Dufresne said.

“At the onset of the crisis, many food retailers temporarily closed in-store bakeries and bakery display cases, which negatively impact retail sales,” he explained. “Similarly, government-mandated closures of nonessential businesses and physical distancing protocols negatively impacted the foodservice channel.

“In addition to the decrease in sales, through the second quarter, Weston Foods’ COVID-19-related spending continued, including temporary pay premiums and pay protection safeguards and increased health and safety measures to protect its colleagues.”

Mr. Dufresne said Weston Foods is continuing with its transformation program, has updated its capital expenditure forecast and has reduced SG&A to mitigate costs in response to the COVID-19 pandemic. As a result, third-quarter sales are off to a good start, he said.

“While Weston Foods faced significant challenges in the second quarter, the demand for quality baked goods remained strong,” he said. “The business remains committed to its strategic priorities, and we believe that demand for baked goods will remain solid going forward.”

Luc Mongeau, president of Weston Foods (Canada) Inc., said new capacity scheduled to come online in 2020 in artisan and donuts and bagels is on track, and new capacity is now in place to handle decorated cupcakes in the second half of fiscal 2020.

Overall, George Weston suffered a net loss attributable to shareholders of C$245 million in the second quarter, which compared with earnings of C$194 million, equal to C$1.19 per share on the common stock, in the same period a year ago. Sales increased to C$12.36 billion from C$11.6 billion.