Milling & Baking News - August 10, 2021 - 16

TUES | 08 10 202 1
Weston Foods sale process on
track for completion this year
TORONTO - The sale of Weston Foods,
the baking division of George Weston
Ltd., is likely to be announced this fall,
said Richard Dufresne, president and
chief financial officer of George Weston.
Mr. Dufresne updated the investment
community about the Weston Foods
sale process during a call with analysts
July 30 in connection with the release of
second-quarter George Weston financial
results. While improved from the second
quarter of fiscal 2020, Weston Foods sustained
an operating loss during the most
recent period.
" On the sale of Weston Foods, the process
is well underway, and we are engaged
with a broad group of prospective buyers, "
Mr. Dufresne said. " We received indications
of interest from a number of financial
and strategic buyers and are currently
going through the second phase of the
process. We expect to be in a position to
announce the transaction this fall. "
Asked by an analyst whether the challenging
economics of the baking business
at present may hurt the current valuation
of Weston Foods, Mr. Dufresne suggested
prospective buyers understand baking is
facing temporary challenges that will be
resolved over time.
" If you look at the people who are
interested in the process, most of them
have experience in our industry and are
actually facing the same issues as us, " he
said. " So we feel confident that they will
see through this. "
Weston announced on March 23 plans
to launch a sales process for Weston
Foods. The company has more than 5,000
employees and operates 40 baking plants
and other facilities in Canada and the
United States.
Mr. Dufresne said the timing of the
announced sale may depend on whether
the bidding process becomes highly competitive
but said the sale should be completed
before the end of December.
Operating loss of the Weston Foods division
of George Weston Ltd. in the second
quarter ended June 19 was C$6 million
16
MILLING & BAKING NEWS
($4.8 million), an improvement relative to
a C$49 million loss during the same period
in 2020. Of the C$43 million in diminished
operating loss, Weston attributed C$20
million to better underlying operating
performance and the remaining C$23
million to special items. For the 24 weeks
ended June 19, Weston Foods had an
operating loss of C$6 million ($4.8 million),
versus C$48 million a year earlier.
Weston Foods sales in the second
quarter of 2021 were C$431 million
($346 million), an increase of C$19 million,
or 4.6%, versus the same period in
2020. Excluding the unfavorable impact
of foreign currency translation, sales
rose 12.1%, which Weston attributed to lapping
the negative impact of the COVID-19
labor costs and limited labor availability
posed new challenges for the company.
" Sales grew in foodservice and retail
as government-mandated lockdowns
were lifted in many regions of Canada
and the United States, " the company said.
" In addition to the increase in sales, lower
pandemic-related costs and continued
" We received
indications of interest
from a number of
financial and strategic
buyers. "
- Richard Dufresne, George Weston Ltd.
pandemic in the second quarter of 2020.
" Sales were impacted by an increase in
volumes in foodservice and retail categories,
partially offset by the unfavorable
impact of changes in sales mix, " Weston said.
On a year-to-date basis, sales were
C$903 million ($724 million), a decrease
of $44 million, or 4.6%, compared to the
same period in 2020. Sales included the
unfavorable effects of foreign currency
translation of approximately 4.7%. Excluding
this factor, sales increased by 0.1%.
Overall business conditions improved
for Weston Foods during the second quarter
compared with a year earlier. That said,
even as the business challenges posed by
the COVID-19 pandemic receded with the
end of government-mandated lockdowns,
challenges of higher input costs, higher
productivity improvements contributed
to the year-over-year earnings growth.
In the second quarter, Weston Foods was
faced with higher-than-expected input,
labor and distribution costs. The higher
costs, together with labor availability
challenges, negatively impacted sales and
earnings. "
The company said it has " taken steps,
including pricing, to help mitigate the
impact of cost inflation. "
During the call, Mr. Dufresne said the
inflationary storm took hold swiftly and
is likely to adversely affect results in the
second half of the year.
" Both the inflation and labor availability
challenges are notable for the speed,
breadth and severity of their impacts on the
industry, and both relate to a surge in global
demand as the economy began to recover
from the negative impact of COVID, " he said.
Adjusted net income of George Weston
Ltd. in the second quarter ended June 19 was
C$272 million ($218 million), or C$1.78 per
share on the common stock, up 96% from
C$139 million, or C$0.91 per share, in the second
quarter last year. Sales were C$12.9 billion
($10.3 billion), up 4.6% from $12.4 billion
in the second quarter last year. Year-to-date
adjusted net income at George Weston was
C$515 million ($413 million), or C$3.37 per
share, up 36% from $378 million, or C$2.45,
in the first half of 2020. Sales were C$25.3
billion ($20.3 billion), up 2.4%. MBN
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Milling & Baking News - August 10, 2021

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