Canada Bread: reports results for second quarter 2010

Toronto / CA. (cb) Canada Bread Company Limited said in a statement quarterly profit slipped due to a stronger Canadian Dollar (CAD), a decline in sales in its frozen bakery operations and more costly restructuring. The company´s Q2/2010 ended June 30; highlights include:
Adjusted Operating Earnings were 30,4 million CAD; 33,1 million CAD last year.
Net earnings were 20,7 million CAD compared to 22,5 million CAD last year.
Basic EPS were 0,81 CAD compared to 0,89 CAD last year.

«Our Fresh bakery business delivered steady results however, our second quarter results continued to be affected by a volume decline in our North American Frozen business and our U.K. specialty bakery operations», said Richard Lan, President and CEO. «We are taking steps to reduce costs and build volumes, and expect improvement through the remainder of 2010».

Financial Overview

Sales for the second quarter declined to 402,1 million CAD from 435,9 million CAD in the prior year, mostly due to currency translation impacts of a stronger Canadian Dollar on sales denominated in U.S. Dollars and British Pounds and lower volumes in the Frozen Bakery segment.

Adjusted Operating Earnings in the quarter decreased to 30,4 million CAD from 33,1 million CAD. The earnings decline in the second quarter mostly reflected the impact of lower sales volumes in the Frozen Bakery segment partly offset by increased operating earnings in the Fresh Bakery segment.

Net earnings in the second quarter declined to 20,7 million CAD or 0,81 CAD per share compared to 22,5 million CAD or 0,89 CAD per share last year as a result of lower Adjusted Operating Earnings and higher restructuring costs. Restructuring charges that were recorded in the second quarter mostly related to the restructuring of the specialty baked goods production in the U.K. and the previously announced construction of a new large-scale bakery and the related consolidation of three smaller bakery facilities in Ontario. The benefit of lower interest expenses in the quarter was offset by lower other income.

Fresh Bakery

Includes fresh bakery products, including breads, rolls, bagels, sweet goods, prepared sandwiches, and fresh pasta and sauces sold to retail, foodservice and convenience channels. It includes national brands and many leading regional brands.

Second quarter sales of 282,5 million CAD were slightly lower than sales of 290,3 million CAD in the same period last year, mostly due to increased trade investment in fresh bakery operations due to increased competitive pressure in the Canadian marketplace and lower sales volumes in the fresh sandwich business. Adjusted Operating Earnings in the quarter increased to 27,5 million CAD from 25,4 million CAD in the same period last year as Fresh Bakery operations mostly benefited from a stronger Canadian Dollar, which reduces the cost of U.S. Dollar priced ingredients. These benefits were offset by inflationary costs, higher trade investment and increased brand support.

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. It includes national brands and one regional brand.

Sales declined to 119,5 million CAD from 145,7 million CAD last year, in part due to the unfavourable impact of a stronger Canadian Dollar on the company´s sales in the U.S. and U.K. and lower sales volume in both the North American and U.K. frozen bakery businesses. Adjusted Operating Earnings in the quarter declined to 2,9 million CAD compared to 7,8 million CAD last year, mostly due to the decline in sales volume and related operational inefficiencies. Management continues to expect the impact of lower volumes in North America to be transitory and is taking steps to reduce the cost base in the company´s U.K. operations.

Info: The complete statement is available here.