TORONTO — Despite experiencing significant volatility due to COVID-19, Weston Foods finished fiscal 2020 on a high note. Now, company executives hope new government restrictions won’t put too much of a damper on Girl Scout cookie sales or the debut of a new donut platform heading into the new fiscal year.
Operating income in the Weston Foods segment totaled C$3 million ($2.4 million) in the fiscal year ended Dec. 31, 2020, down sharply from C$72 million in fiscal 2019. Adjusted EBITDA, meanwhile, fell 10% to C$200 million ($158 million) from C$223 million. Sales decreased 4.3% to C$2.06 billion ($1.63 billion) from C$2.16 billion.
The full-year comparisons were in contrast to the fourth quarter, a period in which Weston Foods experienced strength behind a boost from a 53rd week.
Operating income in the fourth quarter ended Dec. 31 totaled C$35 million, up 30% from C$27 million in the same period a year ago. Adjusted EBITDA also was higher, climbing 41% to C$79 million from C$56 million, reflecting productivity and cost-saving initiatives and benefits realized from Weston Foods’ transformation program, partially offset by the decline in sales and some COVID-19-related expenses. Sales increased narrowly to C$523 million from C$522 million.
In a March 2 conference call with analysts, Richard Dufresne, president and chief financial officer, said Weston Foods delivered sequential improvement in top- and bottom-line performance during the third and fourth quarters, giving management confidence in the sales and earnings potential of the business as it ended 2020. But sales in the latter part of the fourth quarter were increasingly negatively impacted by the reintroduction of government-mandated closings and stay-at-home orders, which now has the company taking a more cautious outlook toward the beginning of fiscal 2021.
“We expect that Q1 will be more difficult for Weston Foods as lockdowns continue to negatively affect sales,” Mr. Dufresne said. “I note, in particular, that Q1 is Girl Scouts cookie season in the US, an important part of our business. For obvious reasons, Girl Scouts in the US are not actively selling cookies in person, at cookie kiosks or door-to-door. Despite having pivoted the model to online, we expect sales to suffer this year.”
Weston Foods is excited about the potential of One Touch, a new donut platform that launched in February. With One Touch, Weston is able to ship frozen donuts that only need to be thawed. The donuts allow retailers to be in the donut business without having finishing facilities or capabilities at store level, Weston said.
“I’m pleased to report that starting in February of 2021, Weston Foods launched One Touch donuts in approximately 100 stores of key customers,” Mr. Dufresne said. “Initial feedback from those customers and end customers has been positive. This test period is now complete. Weston Foods is now working on scaling up production, which will take a few months.”
Mr. Dufresne said Weston Foods remains committed to its strategy of winning new business in key categories and markets and strengthening its operational processes.
“Assuming a return to less severe lockdown measures and government-mandated closures in key markets by the end of Q1, and excluding the impact of foreign currency translation, Weston Foods expects sales in 2021 to be modestly higher compared to 2020, and adjusted EBITDA to be higher compared to 2020,” he said.
Overall, George Weston posted net earnings of C$1.06 billion, down 5.6% from C$1.12 billion a year ago. Sales increased 9.2% to C$54.71 billion from C$50.11 billion.