• Net profit slides 7.1%
  • Operating profit drops 14.7%
  • Net sales rise 1.2%

Canadian food manufacturer and grocer George Weston has recorded a decline in first-half profits thanks to costs from retail division Loblaw.

In the six months ended 16 June, net profit dropped 7.1% to C$367m (US$366.4m) as higher costs dragged operating profit from Loblaw down 18.5% to C$525m. George Weston's operating profit slid 14.7% C$597m. 

However, net sales edged up 1.2% to C$14.85bn amid price increases on certain products.

George Weston reiterated that it expects its full-year results to be lower than in 2011 due to costs at its Loblaw division.

"For the full year 2012, George Weston Limited anticipates adjusted basic net earnings per common share to be down year-over-year, primarily due to the impact of the incremental costs and ongoing customer proposition investments at Loblaw," the company said.

Show the press release

George Weston Limited - 2012 Second Quarter Results(1).

TORONTO, July 31, 2012 /CNW/ - George Weston Limited (TSX: WN) ("GWL") and its subsidiaries (collectively the "Company") today is announcing its unaudited results for the 12 weeks ended June 16, 2012.

The Company's Q2 2012 Quarterly Report to Shareholders, including the Company's unaudited interim period condensed consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the 12 and 24 weeks ended June 16, 2012, is available in the Investor Centre section of the Company's website at www.weston.ca and has been filed with the System for Electronic Document Analysis and Retrieval ("SEDAR") and will be available at www.sedar.com.

CONSOLIDATED RESULTS OF OPERATIONS
George Weston Limited's second quarter 2012 adjusted basic net earnings per common share(2) were $1.06 compared to $1.34 in the same period in 2011, a decrease of $0.28. The decrease was primarily attributable to a decline in the operating performance of Loblaw Companies Limited ("Loblaw"). The decline in the operating performance of Loblaw was primarily due to an increase in labour and other operating costs, incremental costs related to investments in information technology ("IT") and supply chain(3), a decline in gross profit and a charge related to the transition of certain Ontario conventional stores to the more cost effective and efficient operating terms of collective agreements ratified in the third quarter of 2010. Increased labour costs and the decline in gross profit included incremental investments in Loblaw's customer proposition that were not covered by operations.

 

The Company's basic net earnings per common share were $0.99 compared to $1.13 in the same period in 2011, a decrease of $0.14, or 12.4%. Adjusted basic net earnings per common share(2) declined $0.28 and excluded the year-over-year favourable net impact of certain items, primarily certain foreign currency translation gains and the fair value adjustment of the forward sale agreement for 9.6 million Loblaw common shares, partially offset by the accrual of a multi-employer pension plan ("MEPP") withdrawal liability incurred by Weston Foods in the second quarter of 2012.

The Company uses non-GAAP financial measures. See the "Non-GAAP Financial Measures" section of this News Release for more information on these non-GAAP financial measures.

 

Weston Foods sales in the second quarter of 2012 decreased by 1.7% to $400 million from $407 million in the same period in 2011. Foreign currency translation positively impacted sales by approximately 1.6%. Excluding this impact, sales decreased 3.3% mainly due to a decrease in volumes of 3.9% compared to the same period in 2011. Pricing across certain product categories contributed positively to sales growth by 0.6%.

Weston Foods operating income in the second quarter of 2012 was $12 million compared to $55 million in the same period in 2011, a decrease of $43 million. The decrease was mainly due to the accrual of a MEPP withdrawal liability of $35 million recorded in the second quarter of 2012.

Weston Foods adjusted operating income(2) remained flat at $65 million in the second quarter of 2012 compared to the same period in 2011. Weston Foods adjusted operating margin(2) was 16.3% compared to 16.0% in the same period in 2011. Adjusted operating income(2) in the second quarter of 2012 was positively impacted by the benefits realized from productivity improvements and other cost reduction initiatives. These benefits were offset by higher commodity and other input costs and lower sales volumes compared to the same period in 2011.

 

 

Original source: George Weston