Stockwatch – Q3 Report Leaves George Weston Seeking Growth

Stockwatch – George Weston, the parent company of Loblaw was hit by costs related to the acquisition of Shoppers Drug Mart.

Stockwatch – George Weston Limited (TSE:WN, Mkt cap 12.71B, P/E 118.01, Div/yield 0.42/1.69, EPS 0.84, Shares 128.10M) has reported a drop in its third quarter earnings, prompting the food processing and distribution company to announce that it is working on a new strategic plan to improve its bakery division.

Stockwatch - George Weston reported drop third quarter earnings

Stockwatch – George Weston Limited reported a drop in its third quarter earnings.

The parent company of Loblaw was hit by costs related to the grocery giant’s acquisition of Shoppers Drug Mart, but remained optimistic there are areas of growth available to it in the bakery market.

George Weston said that it earned a profit from continuing operations attributable to shareholders of $53 million or 30 cents per share, compared with a profit from continuing operations of $168 million or $1.21 per share 12 months ago.

Last year, however, the company also earned $58 million from discontinued operations. Once a number of one-time items are taken out – including costs related to the acquisition of Shoppers and restructuring – adjusted earnings from continuing items increased by 24.2% to $1.59 per share from $1.28 per share a year ago.

The arrival of Shoppers Drug Mart to its roster encouraged a revenue boost to the tune of 34.7% to nearly $14 billion for the quarter compared with $10.4 billion a year ago.

Excluding the sales from Canada’s largest pharmacy chain, George Weston’s revenue rose more modestly by 2% to $10.59 billion from $10.38 billion, which is attributed primarily to its Loblaw division.

The results exceeded analysts’ estimates of $1.54 of adjusted earnings and about $14 billion of revenue for the quarter, according to Thomson Reuters.

W. Galen Weston, George Weston’s executive chairman, said he was content with the company’s performance after two full quarters of operations with Shoppers Drug Mart.

George Weston Ltd. continued to advance strategic initiatives and focus on long term value creation for shareholders,” he added.

Stockwatch – George Weston generated $734 million in cash flow in the third quarter. The company made $198 million in interest payments, and invested $342 million in capital expenditures. This left $194 million of free cash flow. Weston ended the quarter with $1.3 billion in cash and cash equivalents on its balance sheet.

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George Weston Limited Ends Fourth Quarter With Higher Earnings

George Weston restructuring includes the acquisition of Shoppers Drug Mart by its unit Loblaw and the creation of a real estate investment trust.

George Weston Limited (TSE:WN, Mkt cap 10.29B, P/E  17.77, Div/yield 0.41/2.06, EPS 4.53, Shares 127.90M), Canada’s largest food processing and distribution company, has reported an increase in its fourth-quarter profit to $232 million from $112 million. During the quarter, the company continued with its restructuring, including the acquisition of Shoppers Drug Mart by its unit Loblaw and the creation of a real estate investment trust.

Earnings benefited from a lower income tax rate but the weaker performance of Weston Foods and Loblaw Companies Ltd partially offset these gains, the company said.

George Weston - acquisition of Shoppers Drug Mart by its unit Loblaw and the creation of a real estate investment trust.

George Weston restructuring includes the acquisition of Shoppers Drug Mart by its unit Loblaw and the creation of a REIT.

George Weston also recorded an improvement in adjusted basic net earnings per share, which advanced to $1.11 in October-December 2013 from $1 in the same quarter a year ago, exceeding market forecasts by $0.14. During the period the company incurred a $32 million restructuring charge associated with the reduction of some 275 store-support positions.

Basic net earnings came in at $1.37, an increase from $0.41, thanks to the fair value adjustment of the sale agreement for 9.6 million Loblaw common shares and other items.

Revenues improved to $7.9 billion in the quarter from $7.7 billion a year earlier, with Weston Foods sales rising to $413 million from $399 million last year and Loblaw sales up 2.3% to $7.6 billion. Revenues generated by the food retailer, in particular, were positively impacted by the timing of the Thanksgiving holiday but were hindered by the ice storm that battered Eastern Canada, as well as by a strike in Western Canada.

This year, the company expects to achieve modest sales growth but to see a drop in adjusted operating income as a result of continued investments, including plant start-up costs and marketing and innovation initiatives.

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.