Canadian food group George Weston posted a significant drop in second-quarter earnings today (31 July), hurt by foreign exchange losses on investments and charges due to the end of a note offer.
Earnings for the 12 weeks to 20 June dropped to C$4m (US$3.7m) from C$118m a year earlier. Operating income fell 6.2% to C$288m.
“The decrease at Weston Foods was mainly due to higher restructuring costs, higher pension costs and the timing of certain expenses. Pricing and other actions mitigated the impact of higher costs related to certain ingredients, primarily flour and oils, and other input costs,” the company said.
Excluding items, the company said its performance in the second quarter was “strong”. Sales however were up 2.2% from a year earlier to C$7.5bn.
The company’s Weston Foods division saw sales drop 21.2% for the quarter to C$395m, primarily due to the sale of the Weston’s dairy and bottling operations in the fourth quarter of 2008.
The company said it expects the second half of 2009 to be “challenging” and that “unfavourable economic conditions” are expected to put pressure on both margins and volumes for the remainder of 2009.
However, Loblaw, George Weston’s retail arm, booked improving sales and margins for the second quarter of 2009.
The company reported a 2.5% rise in same-store sales for the three months to 20 June. Same-store sales in the first six months of the year was up 2.4%.
Net earnings jumped almost 38% to C$193m during the second quarter. Operating profit climbed 22.7% to C$324m, with quarterly operating margin standing at 4.5%. First-half operating margin was 3.9%. Turnover grew 2.8% to C$7.23bn.
However, Loblaw said last week said it did not expect those trends to continue due to declining market volumes, decreasing inflation and intensified competitive activity.