Baker Canada Bread Company has announced rise in sales for the first quarter ended 31 March 2005, due primarily to growth in its fresh bakery business, but net earnings slipped, hit by restructuring costs.

Total sales were C$317m (US$258m), compared with $305m in the same period a year earlier, while net earnings were $11.9m, compared with $12.5m

“Our first quarter operating earnings reflect continued strong results, with increased sales and volume across our fresh and frozen bakery operations,” said Richard Lan, president and CEO of Canada Bread. “Canada Bread is benefiting from increasing demand for bread products and particularly strong demand in premium nutrition categories and in the foodservice sandwich market. We continue to see opportunity for growth.”

The company recorded restructuring expenses in the quarter of $4.7 million ($3.2 million after tax) to account for several business restructuring initiatives, principally the closure of a bakery in Peterborough, England.

Net earnings for the quarter before restructuring costs were $15.1 million ($0.59 per share) compared to $12.5 million last year. Management believes this is the most appropriate basis on which to evaluate operating results, as restructuring costs are not representative of ongoing operating earnings, the company said.

Strong sales of premium nutrition multigrain and specialty breads, operating cost reductions, and price increases that offset inflationary cost increases all contributed to increased earnings for the first quarter. Fresh pasta and sauce earnings increased significantly driven by new US product distribution.

Frozen bakery sales were up 1% to $96.0m, due mainly to ongoing growth in the UK bakery operations. Operating earnings were down 26% to $7.0 million compared to the first quarter last year primarily due to increased distribution and input costs, including fuel and other costs. This more than offset an increase in sales volumes, particularly in foodservice. In response to these cost increases, the company is negotiating and implementing price increases. The company commenced sales of its new FroBake products in the US late in the quarter, with good early market response.

In order to meet the growing consumer demand for bagels in the UK, the company has completed construction of a new bagel facility in Rotherham, UK. This new facility is now operational and will increase production capacity, improve the quality of product and lower production costs. With the commissioning of this new facility, the company is closing its bakery in Peterborough, England.