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File photo of Weston Bakery truck trailers sitting at a George Weston Ltd. owned facility in Toronto. (Louie Palu/The Globe and Mail)
File photo of Weston Bakery truck trailers sitting at a George Weston Ltd. owned facility in Toronto. (Louie Palu/The Globe and Mail)

George Weston profit soars 50% Add to ...

George Weston Ltd. cited improvements in its two operating segments Tuesday for a big increase in third-quarter earnings that beat analyst expectations.

The Toronto-based concern said net earnings attributable to shareholders soared 50 per cent to $264-million or $1.94 per share, compared with $176-million or $1.26 in the same 2010 period.

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Revenue for the three months ended Oct. 8 was $10.06-billion, up from $9.8-billion in the prior-year period, which ended Oct. 9.

The increase was primarily because of improvements in the performance of its two operating segments, Weston Foods and Loblaw Cos. Ltd., the company said.

Weston also cited lower interest expenses and income taxes for the improved profit.

Adjusted basic net earnings were $1.44 per share, up 14.3 per cent from adjusted basic net earnings that were also $1.26 per share in the 2010 period.

Analysts, on average, had expected earnings of $1.41 per share, on revenue of $10-billion, according estimates compiled by Thomson Reuters.

George Weston, controlled by the Weston family, is a fresh and frozen baked-goods company that owns brands like Wonder and D’Italiano breads. George Weston also owns about 63 per cent of Loblaw, Canada’s largest grocery store chain.

Like others in the food business, George Weston Ltd. has been facing increases in raw material and others costs and started charging 3.5 per cent more this spring.

However, the company said in July that it would take a wait-and-see approach before deciding whether to put through further price increases.

Combined with higher transportation costs, George Weston has said higher expenses could have a negative impact of up to $65-million this year, and the company has warned it could increase prices even more by the end of the year if costs continued to rise. But the company said it was being cautious on prices since it didn’t want to significantly damage demand for its goods.

Economists have estimated Canadians will be paying between 5 and 7 per cent more for groceries on average by the end of the year, due to bad crops around the world, more farmers selling their corn for ethanol fuel rather than food and the effect of the economic recovery driving prices higher.

On a segmented basis, Weston Foods sales in the quarter increased by 10.3 per cent to $545-million, supported by volume growth of 5.7 per cent compared with the same period in 2010.

The acquisition of Keystone Bakery Holdings LLC and ACE Bakery Ltd. in the third and fourth quarters of 2010 positively impacted sales growth and volume growth by approximately 10 per cent and 7.5 per cent, respectively, offset by a negative foreign currency impact of two per cent.

Excluding the acquisitions and foreign currency translation, sales increased by 2.3 per cent due to a 4.1 per cent increase in prices across key product categories, partially offset by a 1.8-per-cent decrease in volume.

Loblaw sales in the third quarter of 2011 increased by two per cent to $9.7-billion, with same store growth – a key metric of performance in retail – up 1.3 per cent.

Sales growth in food was moderate, sales in drugstore declined marginally, gas bar sales growth was strong, sales in general merchandise, excluding apparel, declined moderately and sales in apparel increased moderately, George Weston said.

Loblaw sales were also helped by an increase in its financial services segment revenue driven by increased credit card transaction values, which resulted in higher interchange fee income when compared with the 2010 period.



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