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George Weston Ltd. reports Q1 profit compared with loss a year ago


The parent company of baked-goods manufacturer Weston Foods saw sales from food service clients, such as restaurants, slashed in half amid dining room closures as governments work to contain the COVID-19 pandemic.

"Over the last several weeks, the world has changed drastically. Each of us is living a new reality," said Richard Dufresne, chief executive of George Weston Ltd., during the company's quarterly earnings call with analysts Tuesday.

The company, whose operating arms include Weston Foods, Loblaw Companies Ltd. and Choice Properties Real Estate Investment Trust, did not see its businesses significantly impacted from a financial perspective by the outbreak during its first quarter, which ended March 21, he said.

"Looking ahead to the second quarter, the challenges of the COVID-19 pandemic continue."

Loblaw saw an increase in sales, but also in operating costs, he noted. Loblaw is spending about $90 million every four weeks in costs related to the pandemic, including temporary wage increases for workers, the grocer said late last month.

Choice Properties continues to respond to requests for rent deferrals from small-business tenants, said Dufresne, adding 86.6 per cent of its rent was paid as of April.

Weston Foods, which makes bread, cupcakes, doughnuts, biscuits and other baked foods for retail and food-service clients, saw demand for the latter category fall by more than 50 per cent, he said.

Food-service sales represent about 20 per cent of Weston Foods sales — with the remaining 80 per cent coming from retail.

Retail customers continue to by more fresh bread than before, he said, but they are not purchasing items from the bakery case or celebratory ones, such as cakes.

The increase in packaged bread sales doesn't offset the decreases Weston Foods is seeing in other categories and from its food service division.

The bakery segment is also facing increased costs of about $1 million per week since the start of the second quarter, he said. In an effort to mitigate the spending, the division is taking additional cost-cutting measures, among other steps.

The company currently has four bakeries closed — three related to positive COVID-19 cases and one due to decreased demand, he said.

It's difficult to predict how the company and its three operating segments will perform for the balance of the year amid the pandemic-related uncertainty, he said, noting the company withdrew its financial guidance early last month.

The commentary came as George Weston reported a profit in its latest quarter compared with a loss a year ago when it took a large one-time charge.

The profit available to common shareholders totalled $582 million or $3.78 per diluted share for the first quarter.

That compared with a loss of $488 million or $3.18 per diluted share a year ago when it recorded a fair value adjustment of the trust unit liability of nearly $1.09 billion or $7.07 per share.

Revenue totalled $12.3 billion, up from nearly $11.7 billion a year earlier.

On an adjusted basis, George Weston earned $239 million or $1.55 per share for the quarter, up from $201 million or $1.30 per diluted share in the same period in 2019.

It attributed the increase to an improvement in the underlying operating performance of the company and an increase in the its ownership interest in Loblaw.

This report by The Canadian Press was first published May 5, 2020.

Companies in this story: (TSX:WN, TSX:L, TSX:CHP.UN)

Aleksandra Sagan, The Canadian Press