Canada Bread: Reports Results for Second Quarter 2009

Toronto / CA. (cb) Canada Bread Company Limited reported its financial results for the second quarter ended June 30, 2009. Net earnings per share of 0,89 CAD compared to 0,26 CAD last year. Adjusted Operating Earnings increased to 33,1 million CAD from 12,4 million CAD. North American bakery margins improved due to a decline in commodity prices. Adjusted Operating Earnings are defined as earnings from operations before restructuring and other related costs and other income. Adjusted Earnings per Share (Adjusted EPS) are defined as basic earnings per share adjusted for the impact of restructuring and other related costs.

«We are very pleased with the earnings growth we achieved in the second quarter», said Richard Lan, President and CEO. «With margins improved after the commodity price hyperinflation of last year, we are now focused on accelerating our growth through new innovation, targeting expansion in new high growth categories and pursuing improvements that will bring increased efficiency through the supply chain».

Financial Overview

Sales for the second quarter decreased by 0,3 percent to 435,9 million CAD compared to 437,4 million CAD last year due to a moderate change in mix from specialty to staple products and lower volumes in the United States and United Kingdom.

Earnings from operations before restructuring and other related costs and other income (Adjusted Operating Earnings) increased to 33,1 million CAD in the quarter compared to 12,4 million CAD last year, while net earnings increased to 22,5 million CAD compared to 6,5 million CAD last year. The financial results for the second quarter 2008 were significantly below historical levels due to an unprecedented spike in input costs including flour, dairy and energy which impacted profitability. The following is a summary of Adjusted Earnings per Share:

Per share Q2/2009 Q2/2008 YTD 2009 YTD 2008
EPS 0,89 CAD 0,26 CAD 1,47 CAD 0,74 CAD
Restructuring and other related costs 0,00 CAD 0,04 CAD 0,02 CAD 0,08 CAD
Adjusted EPS (does not add due to rounding) 0,89 CAD 0,30 CAD 1,49 CAD 0,81 CAD

Business Segment Review

Following is a summary of Adjusted Operating Earnings by business segment –
(1) means «does not add due to rounding» – YTD means «Year to Date»:

(in million CAD) Q2/2009 Q2/2008 Q2Change YTD2009 YTD2008 YTDChange
Fresh Bakery 25,4 12,5 103,7% 38,2 25,1 51,9%
Frozen Bakery 07,8 (0,1) n/a 16,3 06,8 139,8%
Adjusted Operating Earnings (1) 33,1 12,4 167,3% 54,5 31,9 70,6%

Fresh Bakery

Fresh bakery products, sweet goods, sandwiches, and specialty fresh pasta and sauces. Fresh Bakery sales in the second quarter increased 0,9 percent to 290,3 million CAD compared to 287,6 million CAD in the same period last year, mainly driven by favourable sales mix.

Adjusted Operating Earnings increased to 25,4 million CAD in the second quarter compared to 12,5 million CAD last year. The fresh bakery and pasta operations recorded improved margins as a result of lower commodity prices; however, this benefit was partly mitigated by a weaker Canadian Dollar, which increased the cost of U.S. Dollar priced flour and other ingredients.

Frozen Bakery

North American and U.K. frozen bakery products; including frozen par-baked and specialty bakery products. Frozen Bakery sales decreased by 2,8 percent to 145,7 million CAD from 149,8 million CAD in the same period last year, due to a moderate change in mix from specialty to staple products and lower volumes.

Adjusted Operating Earnings in the quarter increased to 7,8 million CAD compared to a loss of 0,1 million CAD last year. North American bakery operations continued to realize improved margins due to lower commodity prices, mostly wheat and fuel, and lower utility costs. Earnings from the U.K. bakery operations were largely consistent with last year. Sales of bagels were restored to levels achieved prior to the oven fire at the Rotherham plant in early 2008 and contributed to improved mix. However, margin improvement achieved in the quarter was offset by higher marketing and promotional expenses to support growth in the bagel market (Source).

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