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George Weston reports lowers profits

Galen Weston calls 2014 a year of transformation for the company

George Weston Ltd. saw net profits decline in the fourth quarter as the maker of bakery products and parent company of Loblaw took a number of sizable charges against earnings.

Sales in the quarter, which at 13 weeks was one week longer than the comparable 2013 period, rose more than 48% to $11.73 billion from $7.9 billion, largely as the result of the Shoppers Drug Mart acquisition.

However, the company said net earnings attributable to shareholders fell to $161 million or $1.17 per diluted share from $177 million or $1.30.

Adjusted earnings were $212 million or $1.58 per share, up sharply from $135 million or 98 cents in the prior-year period, but still short of analyst expectations.

Analysts polled by Thomson Reuters had predicted adjusted net income of $199 million or $1.61 per share on sales of $11.38 billion.

George Weston said charges against earnings included the unfavourable year-over-year impact of the fair value adjustment of the forward sale agreement for 9.6 million Loblaw common shares of $93 million and the amortization of the acquired Shoppers Drug Mart intangible assets of $124 million.

There was also the negative impact of the fair value increment on the acquired Shoppers Drug Mart inventory sold of $69 million. These were partially offset by a $40-million gain from the restructuring of franchise fees.

For the full, 53-week year, the company reported net earnings of $126 million or 64 cents per diluted share on sales revenue of $43.9 billion, down from $614 million or $4.43 per share on sales of $33.6 billion.

Executive chairman Galen Weston described 2014 as "a year of transformation'' for the company.

"Loblaw's acquisition of Shoppers Drug Mart creates a unique retail footprint'' that combines "best-in-class food and health and wellness offerings'' with its "trusted and most recognized brands,'' he said.

Company president Pavi Binning said management was pleased with the quarter, saying Loblaw had delivered ``strong financial and operating performance in both core grocery and pharmacy despite a highly competitive retail environment.''

Meanwhile, Weston Foods delivered volume growth across all business units while financial performance had been comparable with the fourth quarter of 2013 and in line with expectations, he added.

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