CANADA BREAD CO. LTD. $59 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 25.4 million; Market cap: $1.5 billion; Price-to-sales ratio: 1.0; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.canadabread.ca) is Canada’s secondlargest producer of fresh and frozen baked goods, after Weston Bakery. The company also makes pastas and sauces. The company’s main brands include Dempster, Tenderflake and Olivieri. Canada Bread supplies around a third of Maple Leaf’s total sales.
The company is also investing in new facilities as part of Maple Leaf’s restructuring. In 2011, Canada Bread opened a new $100-million bakery in Hamilton, Ontario. That let it close two outdated facilities in Toronto and shift their production to the new plant. Earlier this year, it closed a third Toronto bakery.
In the second quarter of 2013, Canada Bread earned $24.5 million, or $0.97 a share. That’s down 6.0% from $26.1 million, or $1.03 a share, a year earlier. Excluding unusual items, earnings per share rose 0.9%, to $1.07 from $1.06.
Sales fell 1.8%, to $397.6 million from $404.9 million. Canada Bread’s operations in the U.S. and U.K. supply around 25% of its total sales. If you disregard exchange rates and the recent sale of a business that supplied fresh sandwiches to gas stations and convenience stores, the company’s sales would have declined by just 0.7%.
The shares have also moved up in response to the recent rise in Maple Leaf’s stock. They now trade at 16.6 times Canada Bread’s likely 2013 earnings of $3.56 a share. The annual dividend rate of $2.00 a share yields 3.4%.
However, Maple Leaf’s high 90.0% ownership stake hurts Canada Bread’s liquidity.
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