Toronto / CA. (cb) Canada Bread Company Limited reported its financial results for the second quarter ended June 30, 2012. Second quarter highlights: Adjusted Operating Earnings for the second quarter were 37,4 million CAD compared to 35,1 million CAD last year, an increase of seven percent. Net earnings for the quarter were 26,8 million CAD compared to 14,9 million CAD last year. Adjusted EPS for the quarter was 1,09 CAD, up from 0,97 CAD in the second quarter of 2011.
«Our results improved from last year and significantly from a weak first quarter, reflecting some improvement in volume and the benefit of price increases in our Frozen Bakery segment to manage higher costs», said Richard Lan, President and CEO. «While the bread category continues to be soft in both North America and the U.K., we will continue to manage this through proactive sales strategies, product innovation and cost reduction».
Financial Overview
Sales for the second quarter were 404,9 million CAD compared to 406,2 million CAD last year. After adjusting for the closure of a bakery and related exit of unprofitable categories in the U.K. and currency translation on sales in the U.S. and U.K., sales increased one percent. The increase was mainly due to stronger volumes and selling prices in the North American frozen bakery operations.
Adjusted Operating Earnings for the second quarter of 37,4 million CAD were seven percent higher compared to earnings of 35,1 million CAD last year as improved pricing, sales mix, and volumes in the Frozen Bakery segment were partially offset by higher inflationary costs and spending in the Fresh Bakery segment, largely attributable to the fresh pasta business.
Net earnings in the quarter were 26,8 million CAD (1,05 CAD basic earnings per share) compared to 14,9 million CAD (0,59 CAD basic earnings per share) last year and included 1,2 million CAD in pre-tax restructuring costs (2011: 12,5 million CAD). Adjusted earnings per share for the second quarter were 1,09 CAD compared to 0,97 CAD last year.
Business Segment Review – Fresh Bakery
Includes fresh bakery products, including breads, rolls, bagels, sweet goods, and fresh pasta and sauces sold to retail, foodservice and convenience channels.
Fresh Bakery sales for the second quarter of 279,2 million CAD were one percent lower than sales of 282,4 million CAD last year, primarily due to increased feature pricing activity in the fresh bakery business and lower volumes in the fresh pasta business. Volumes in the fresh bakery business were comparable to last year.
Adjusted Operating Earnings in the second quarter declined eight percent to 30,5 million CAD compared to 33,2 million CAD last year. While results in the fresh bakery business were consistent with last year, there was a significant improvement from the first quarter of 2012 as a result of increased promotional and marketing activities and warm summer weather. However, an underlying decline in consumer demand continues to impact results. Included in results are 0,8 million CAD in duplicative overhead costs related to the commissioning of a new fresh bakery in Hamilton, Ontario and which are expected to continue until early 2013. The Company expects the new bakery to be accretive to operating earnings commencing in 2013, with the closure of the third Toronto bakery and as volumes consolidate into the new Hamilton facility. Results from the fresh pasta business declined due to higher inflationary and operational costs, and increased advertising and promotional spending.
Business Segment Review – Frozen Bakery
Includes frozen bakery products, including frozen par-baked bakery products, specialty and artisan breads, and bagels sold to retail, foodservice and convenience channels in North America and the U.K.
Frozen Bakery sales for the second quarter were 125,7 million CAD compared to 123,9 million CAD in 2011. After adjusting for the closure of a bakery and related exit of unprofitable categories in the U.K. and currency translation on sales in the U.S. and U.K., sales increased five percent. The sales increase was mainly due to stronger volumes and selling prices in the North American frozen bakery operations.
Adjusted Operating Earnings in Frozen Bakery for the second quarter of 2012 were 6,9 million CAD compared to 1,9 million CAD last year. Profitability continued to improve due to higher pricing and volumes in the North American frozen bakery operations, an improved sales mix in the U.K., and lower overhead costs resulting from the closure of the Walsall, U.K. bakery in the first quarter of 2012. These benefits were partially offset by higher inflationary costs.
