TORONTO - George Weston Limited (TSX:WN) reported an almost 34 per cent increase in is first-quarter earnings, driven mostly by strong sales at its supermarket chain Loblaw Companies Ltd (TSX:L).
Performance at Weston Foods was consistent with the previous year, although benefits from investments in marketing and innovation are expected to materialize over the course of the year.
During a conference call on Tuesday, Weston Foods said it will continue to focus on innovation and has a number of new products in the pipeline. It's hoping to follow up on the success of its new line of gluten-free products and flatbreads.
Weston Foods also hopes to increase sales by promoting the health benefits of grain products to consumers.
Excluding the loss of its distributed products business to Loblaws, Weston Foods increased its sales by 1.4 per cent.
That was driven primarily by modest, price increases to its fresh and frozen foods, but partially offset by a slight decrease in volume. However, the company said they were not seeing customer resistance to the price increases.
"The pricing environment remains tough both in Canada and the U.S.," said Weston president Pavi Binning.
"But as you've seen, we have achieved some modest pricing in Canada, and the objective there was really to cover increased commodity costs."
The majority owner of Loblaw Companies Ltd and Weston Foods also boosted its quarterly dividend 9.2 per cent to 41.5 cents, up from 38 cents.
The company earned $162 million, or $1.19 per share for the quarter, up from $121 million, or 87 cents per share, in the same period a year ago.
Sales improved 3.7 per cent to $7.49 billion from $7.22 billion, driven mostly by Loblaw's investment in improving its store experience.
Improved operating performance at Loblaw also helped drive adjusted basic net earnings per common share up to 88 cents, from 87 cents in 2012. That was partially offset by a higher effective income tax rate.
However, that was two cents lower than the average estimate of analysts compiled by Thomson Reuters and the stock was down 32 cents at $80.77 in afternoon trading on the Toronto Stock Exchange.
The first-quarter results included a boost from foreign currency translation, amendments to the company's defined benefit pension plan and the forward sale agreement for 9.6 million Loblaw common shares.
During the first quarter of 2013, the company announced amendments to certain of its defined benefit plans involving certain employees retiring after Jan. 1, 2015.
As a result, the company recorded a gain of $51 million in the quarter and will realize annual pre-tax savings of approximately $14 million.