Toronto / CA. (cb) Canada Bread Company Ltd. announced its financial results for the third quarter ended September 30. «We achieved solid results for the quarter against challenging market conditions with unprecedented increases in commodity prices for flour and dairy. Our results reflect our efforts to improve manufacturing and distribution efficiencies and price increases implemented in 2006», said Richard Lan, President and CEO. «Our UK business continues to be a growth engine for our Company, and the recent acquisition of La Fornaia significantly enhanced the range of premium, specialty bakery products we can provide our customers in the UK and Europe».
Sales for the third quarter increased 13 percent to 385,8 million CAD from 342,3 million CAD last year, primarily driven by the contribution of acquisitions in the U.K. Excluding acquisitions, sales increased by four percent.
1.000 Canadian Dollar (CAD) = 725,179 Euro (EUR)
1.000 Euro (EUR) = 1.378,97 Canadian Dollar (CAD)
Earnings from operations for the third quarter increased 27 percent to 34,1 million CAD compared to 26,8 million CAD last year due to increased contribution from acquisitions in the U.K. and improved operating earnings in the Frozen Bakery business. The Company continues to offset higher input costs through a combination of reducing manufacturing and overhead costs and limited price increases.
Net earnings for the quarter increased to 21,1 million CAD compared to a loss of 2,7 million CAD in the prior year. The prior year loss was impacted by a non-recurring tax adjustment of 21,2 million CAD taken to write down future tax assets related to the U.S. frozen bakery business. Excluding the non-recurring tax adjustment, net earnings increased by 14 percent from 18,5 million CAD in the prior year. Year-to-date net earnings before restructuring and other related costs and non-recurring tax adjustment of 61,7 million CAD compared to 60,8 million CAD last year. Year-to-date net earnings as reported were 60,2 million CAD compared to 39,6 million CAD last year.
Frozen Bakery sales in the third quarter increased 31 percent to 142,3 million CAD from 108,5 million last year. A significant portion of the increase reflected the contribution from acquisitions in the United Kingdom. Organic growth was five percent in the third quarter driven by growth in the UK bagel business and price increases in North America. Earnings from operations increased to 9,2 million CAD in the third quarter from 1,3 million CAD last year. The North American frozen bakery business achieved a solid quarter-over-quarter improvement in the earnings against a low base for the comparative period as it increased volumes, improved operating efficiencies and addressed issues that impacted its bakery in Roanoke, Virginia last year. This plant, which is the Company´s largest par-baked facility, is undertaking a major warehouse expansion that will significantly increase its storage capacity and further reduce costs.
The U.K. bakery business benefited from the contribution of acquisitions and continued organic growth, offset in part by higher flour and butter costs. The Company is currently expanding freezer capacity at its Rotherham bagel plant and installing a new high-speed croissant line at its Maidstone bakery to support continued growth in these core categories. During the quarter, the Company acquired La Fornaia, a leading producer of an extensive range of hand formed specialty bakery products, from traditional Italian ciabatta and filled focaccia to a range of organic, multi-seed breads and rolls. This acquisition extends the company´s product offering in the premium specialty bakery market and enhances its new product innovation capabilities.
Cash Flow and Financing
Cash flow from operating activities of 30,9 million CAD for the third quarter compared to 49,3 million CAD in the prior year period decreased primarily as a result of an increase in net working capital balances. Year-to-date cash flow from operating activities was 88,1 million CAD, an improvement of 18,2 million CAD over the prior year driven by increased net earnings and an improvement in net working capital balances in the current year.
Interest expense for the third quarter was 1,4 million CAD compared to 0,8 million CAD for the same period last year. Year-to-date interest expense was 4,1 million CAD compared to 2,6 million CAD last year as a result of increased debt incurred to finance acquisitions in 2006 and 2007.
Capital expenditures on plant and equipment for the third quarter were 22,1 million CAD compared to 12,2 million CAD last year. This significant increase in capital expenditures reflects a substantial capacity expansion in the UK croissant and ciabatta facilities and the construction of new warehouse capacity at the Company´s bakeries in Roanoke, Virginia and Rotherham, UK to increase internal capacity and reduce warehousing and distribution costs.
About: Canada Bread Company Ltd., which is 88 percent owned by Maple Leaf Foods Incorporated, is a leading manufacturer and distributor of fresh bakery products, frozen par-baked products and fresh pasta and sauces. The Company had 2006 sales of 1,3 billion CAD and employs approximately 9.000 people at its operations across North America and in the United Kingdom.