July 29, 2008 / 1:22 PM / 10 years ago

George Weston quarterly profit drops on charges

TORONTO (Reuters) - George Weston Ltd (WN.TO) reported a lower quarterly profit on Tuesday, due in part to restructuring and other charges at its Weston Foods and Loblaw (L.TO) divisions.

George Weston, North America’s largest baked goods maker, earned C$118 million ($115 million), or 84 Canadian cents a share, in its second quarter ended June 14. That compares with a profit of C$129 million, or 90 Canadian cents, in the year-earlier period.

Analysts, on average, had expected George Weston to earn 96 Canadian cents a share, before exceptional items, according to Reuters Estimates.

During the quarter, George Weston took a charge of 2 Canadian cents per common share for restructuring plans at both its Weston Foods and Loblaw grocery-store divisions.

It also took a charge of 17 Canadian cents a share related to the hedging of commodity prices at Weston Foods.

Toronto-based George Weston said the second quarter was “challenging” as Loblaw fell behind in plans to operate as an effective selling organization and Weston Foods faced cost pressures in the price of flour, fuel and other input items.

George Weston said operating income was C$340 million, up 3.7 percent from C$328 million, while sales grew 1.4 percent to C$7.8 billion, from C$7.7 billion in the comparable period last year.

Operating income at unit Weston Foods fell 29.5 percent to C$79 million from C$112 million. Operating income at Loblaw grew 21 percent to C$261 million from C$216 million.

Galen Weston, the company’s chairman and president, said on a conference call on Tuesday that Loblaw was on track with cost-cutting efforts and would continue investing in foundational infrastructure.

Second-quarter profit at Loblaw, which reported results on Friday, slipped after excluding one-time charges, eroded by weaker than expected sales growth and price cuts.

The company said it expects operating margins at Weston Foods to remain under pressure as the cost of key input items continues to rise.

“The industry appears to be pricing the commodity increases through,” Robert Vaux, chief financial officer, said during the same conference call. “Going forward we’ve got to approach things on a relatively cautious basis.”

Shares of George Weston slipped C$1.08, or 2.4 percent, to C$43.19 in afternoon trading on the Toronto Stock Exchange.

($1=$1.03 Canadian)

Additional reporting by Frank Pingue; Editing by Bernadette Baum

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