OTTAWA (Reuters) - Fourth-quarter profit at George Weston Ltd (WN.TO) lagged analysts’ estimates as the Canadian food processor and distributor was hurt by a stronger loonie and poor results from supermarket chain Loblaw Cos (L.TO), which it controls.
Weston, North America’s largest baked goods maker, said on Thursday that it earned C$151 million from continuing operations, or $1.07 cents a share, in the quarter.
That reversed a net loss of $428 million, or $3.42 a share, in the same period a year earlier when Loblaw took a big writedown for an acquisition.
Adjusted earnings fell to 89 cents from C$1.14 per share, the Toronto-based company said. The mean analyst estimate was for a profit of 99 cents a share, according to Reuters Estimates.
At the company’s Weston Foods bakery unit, adjusted earnings before interest, tax, depreciation and amortization rose nearly 10 percent to $111 million.
At Loblaw, profit on that basis fell nearly 16 percent to $347 million as the country’s largest supermarket chain chopped prices to stave off competition.
Overall sales increased 1.5 percent to $7.7 billion, though Weston Food sales fell 5.5 percent to C$932 million as a stronger Canadian dollar hurt U.S.-dollar-denominated sales.
Weston Foods said it expects challenging market conditions in 2008 amid higher ingredient costs, which it plans to offset with ongoing cost-cutting and higher prices.
“There’s a significant amount of commodity cost, year-over-year cost inflation coming,” said Chief Financial Officer Robert Vaux on a conference call.
“Our intention, and the signal sent by basically all industry participants, is that the first thing is to focus on productivity improvement, the second thing is to take pricing as necessary to maintain margins.”
Vaux said the company wants to maintain its 2007 adjusted margin of approximately 8.9 percent in 2008.
Weston shares dipped 37 cents to $50.03 on the Toronto Stock Exchange after the results. The stock has lost about 30 percent of its value in the past year.
“We would remain cautious on Weston shares as our analysis indicates that the negative earnings momentum at Loblaw...will persist through 2008 and that shares of both Loblaw and Weston are likely to remain under pressure,” RBC analyst Irene Nattel said in a recent note. She cut her Weston stock price target to $64 from $68 to reflect Loblaw’s recent weak results.
Reporting by Susan Taylor; Editing by Peter Galloway