George Weston profits plunge on massive restructuring plan

George Weston Ltd. launched a multi-year transformation plan in its most recent quarter as its profits fell by two-thirds in a difficult year for the company.

“Weston Foods experienced a challenging year in 2017 and we recognized the need to accelerate our change agenda,” chief executive Galen Weston told a conference call Friday to discuss the company’s latest results. “As a result, the business has embarked on an ambitious three-year transformation plan.”

The plan, which began in November, includes restructuring the organization and simplifying operations, said Luc Mongeau, president of the Weston Foods division. “This will better position us for future growth and produce a reliable and growing stream of earnings,” he said, adding the company is already seeing encouraging results from restructuring activities, including moving to a single sales team.

The company’s fourth-quarter profit fell as a result of special items, including the cost of a $25 Loblaw gift card program offered as a goodwill gesture to customers for the company’s involvement in an alleged industry-wide price-fixing scheme.

Net income attributable to common shareholders dropped to $28 million or 22 cents per share. That was down from $82 million or 64 cents per share in the fourth quarter of 2016.

Excluding certain items, George Weston’s adjusted net earnings available to common shareholders were up by $24 million to $228 million or $1.78 per common share. Analysts had estimated $1.67 cents per share of adjusted earnings, according to Thomson Reuters data.

George Weston’s results were affected by the admission that it and its main subsidiary, Loblaw, had participated in what they say is an industry-wide arrangement to co-ordinate the price of bread for at least 14 years.

The grocery chain offered Loblaw gift cards to customers to compensate for manipulating the cost of bread contrary to the Competition Act. The cards reduced George Weston’s fourthquarter profit by $39 million or 30 cents per share.

The quarter also included $75 million or 58 cents per share in costs related to a merging of the Loblaw and Shoppers Drug Mart loyalty points programs and increased restructuring items totalling $78 million or 61 cents per share.

Partially offsetting the negative special items were favourable items related to asset impairments, changes to tax rates and tax assets and an agreement for the previously announced future sale of 9.6 million Loblaw common shares.