Milling & Baking News - May 6, 2008 - 16

Financial Results

Higher commodity costs crimp
Q1 earnings at Canada Bread
TORONTO - Rapidly rising wheat
prices combined with higher fuel and
general inflation costs to bog down
earnings at Canada Bread. Net earnings in the first quarter ended March
31 were C$12,211,000 ($11,961,000),
equal to C$0.48 per share. This compared with income of C$17,910,000, or
C$0.70 per share, in the first quarter of
fiscal 2007.
Earnings from operations before
restructuring and other related costs
were C$19,544,000, down 35% from
C$29,961,000.
"The continued rise in wheat prices
together with increase in prices of other
commodities, such as fuel and general
inflation, has had a significant shortterm impact on our margins and financial results," said Richard Lan, president
and chief executive officer. "We expect
to recover these costs and restore margins through ongoing pricing and cost
reduction initiatives, although there

will be a lag effect as we work with our
customers to manage the flow-through
of these price increases."
Sales for the first quarter increased
7% to C$382,869,000 ($375,387,000)
from C$358,337,000 for the prior year
period. The gain in part reflected
higher selling prices across all the
bakery businesses, which was offset
by a small volume decline in the fresh
bread business.
The Fresh Bakery segment's sales
grew 8% to C$237,224,000, while earnings from operations were C$12,689,000,
down sharply from C$22,001,000 in the
first quarter last year.
"The decline was driven by margin compression as price increases for
fresh bread and pasta did not keep
pace with the speed or magnitude of
wheat and other commodity cost increases," Canada Bread said. "Fresh
Bakery also incurred increased costs
related to marketing new products."

Frito-Lay North America profit
climbs 4% in quarter
PURCHASE, N.Y. - Strong sales
helped overcome higher raw material
costs to deliver 4% growth within the
Frito-Lay North America subsidiary of
PepsiCo, Inc. during the first quarter
ended March 22.
F.L.N.A. had operating profit of
$633 million, up from $610 million in

it growth in Lay's and high-singledigit growth in Cheetos and dips.
The gains helped offset double-digit
declines in Quaker rice cakes and a
low-single-digit decline in Doritos,
the company said.
Quaker Foods North America,
another PepsiCo subsidiary, posted
operating profit of $166 million, up
6% from $156 million. Sales in the
quarter were $495 million, up 7%

During the first quarter, Canada
Bread completed the acquisition of Aliments Martel Inc., a manufacturer and
distributor of sandwiches, meals and
sweet goods based in Quebec. With
the purchase, Canada Bread said it is
now the national leader in the Canadian pre-packaged sandwich market.
Frozen Bakery sales rose 5% to
C$145,645,000, while operating
earnings eased to C$6,855,000 from
C$7,960,000.
"Bakery earnings in the U.K. increased marginally over the prior year
driven by higher volumes but this was
offset by margin compression due to
wheat and other inflation in the North
American frozen business," the company said.
During the first quarter, Canada
Bread said it will be closing one of its
bagel plants in Toronto this fall. The
closing is expected to increase capacity utilization at the company's other
plants in the Toronto area. Some of
the production from the plant will be
transferred to Canada Bread's facility in Roanoke, Va. MBN
from the same period a year ago,
reflecting pricing actions and favorable mix. Volume within the unit
grew 3%, driven by ready-to-eat cereal and Quaker Oatmeal, partially
offset by declines in Rice-A-Roni
and Aunt Jemima.
Companywide, PepsiCo net income
rose 5% to $1,148 million, equal to 70c
per share on the common stock, which
compared with $1,096 million, or 65c
per share, in the first quarter of 2007.
Revenue of $8,333 million was a 13%
increase from $7,350 million in the
previous year's first quarter. MBN

Bimbo U.S. operating income tumbles

the previous year's first quarter. Sales
of $2,730 million marked a 7% increase
from sales of $2,553 million in the previous year's first quarter.
The company said the gain in
sales reflected volume growth of 2%,
which was driven by mid-single-dig16 / May 6, 2008

Milling & Baking News

MEXICO CITY - U.S. operating income fell in the first quarter for Grupo
Bimbo S.A.B., pressured by rising raw
materials costs.
U.S. operating income of NP17
million ($1.6 million) for the quarter
ended March 31 was down 80% from
NP83 million ($7.9 million) in the previous year's first quarter. U.S. firstquarter sales reached NP4,283 million, up more than 3% from NP4,142
million in the previous year's first
quarter. New product launches and a
better overall sales mix contributed to
the sales increase.
Gross margin in the United States
declined by 1.7 percentage points from

the same quarter last year due to "the
escalation of raw materials costs that
has outpaced pricing actions," Bimbo
said. The company's operation margin in the United States narrowed by
a more modest 0.4 points, benefiting
from lower operating expenses.
Pricing was moderately higher in
the quarter following two price hikes
over the past year - one in September 2007 and another in early March
of this year.
Companywide, Mexico City-based
Grupo Bimbo had first-quarter operating profit of NP1,281 million, up from
NP1,230 million, and first-quarter
sales of NP19,027 million, up 9%. MBN
bakingbusiness.com / world-grain.com

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Milling & Baking News - May 6, 2008

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