Acquisition boosts Weston bottom line

George Weston Ltd. reported strong growth in sales and profit for 2001, mainly because of the acquisition of the Bestfoods Baking Co. Inc. in the United States last July, a deal that made Weston one of the largest bakeries in North America.

The Globe and Mail
February 22, 2002

Acquisition boosts Weston bottom line
Oliver Bertin

GalenWeston.jpg

George Weston Ltd. reported strong growth in sales and profit for 2001, mainly because of the acquisition of the Bestfoods Baking Co. Inc. in the United States last July, a deal that made Weston one of the largest bakeries in North America.

But the results were marred by a writedown in the salmon-farming division, which cut profit in the fourth quarter by $20-million.

Even so, the Toronto-based supermarket and bakery conglomerate reported profit of $240-million or $1.82 a share for the fourth quarter ended Dec. 31, up 28 per cent from $188-million or $1.43 in the same period the year before. Sales rose to $6.2-billion from $5.4-billion.

For the year, the company made a profit of $582-million or $4.42 a share, up 21 per cent from a profit of $481-million or $3.66 in the year-earlier period. Sales rose to $24.7-billion from $22.3-billion.

Don Reid, chief financial officer, told analysts after markets closed that the salmon-fishing operations were seriously affected by an oversupply of fresh salmon on the world market, which knocked prices down by 30 per cent.

To compensate, Weston took a $20-million writedown on its salmon inventory.

Mr. Reid noted that the salmon-farming operations were no longer a significant part of the Weston food-processing group, now that the company has invested so heavily in bakeries.

Mr. Reid described 2001 as a "transition year" because of the many changes that were precipitated by the $2.8-billion Bestfoods purchase. That company has since been renamed George Weston Bakeries Inc.

The western division, including the Orowheat brand, and bakeries in Texas, Colorado, California and Oregon, have since been sold to Grupo Bimbo SA de CV of Mexico for $950-million. That deal is expected to close next month.

To finance the Bestfoods deal, Weston sold off a number of assets, including 4.2 million Loblaw Cos. Inc. shares for $195-million, reducing its ownership to 61 per cent from 63 per cent.

The company also completed the sale of its Connors canned sardine and seafood processing lines for proceeds of $148-million. The company did not go ahead with plans to sell the salmon farms and Neilson dairy divisions.

Weston's annual meeting is May 8, when chairman Galen Weston will take on the duties of president with the resignation of Richard Currie. Mr. Currie has worked about 30 years with the food giant and is credited with turning around the Loblaw grocery chain.

For the year, the supermarket division accounted for sales of $21.5-billion or 87 per cent of sales. It accounted for $1.1-billion of profit or 77 per cent of the total.


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