* Q2 earnings of C$0.89/share vs loss of C$0.05/share
* Revenue up 0.6 percent to $7.53 billion
* Shares down 1.2 percent
(Adds details, conference call, analyst, share price)
By Solarina Ho
TORONTO, July 30 (Reuters) - George Weston Ltd (WN.TO), Canada's largest food processor and distributor, said on Friday its profit rose on strong operating performances, but the result fell short of expectations and its shares dropped.
Revenues climbed marginally as sales, particularly at its Weston Foods bakery business, fell on currency conversions as well as lower pricing and volumes.
The maker of Wonder bread and Girl Scout cookies was hit again by unrealized foreign exchange losses from the company's U.S. dollar cash and short-term investments held by its foreign subsidiaries.
It also expressed caution for the second half of the year due to labor contract issues. Foreign exchange could continue to hold back earnings, it said.
"It was a very quiet quarter," said Octagon Research analyst Robert Gibson, who raised its price target to C$81.30 from C$75.00 and dropped its 2010 EPS estimates to C$3.06 from C$3.19.
SOFT TOPLINE PERFORMANCES
Weston, the parent of Loblaw Cos (L.TO), Canada's biggest supermarket chain, reported net earnings C$125 million, or 89 Canadian cents a share for the period ended June 19. For the year-earlier quarter, it earned C$4 million, which translated to a loss of 5 Canadian cents a share due to the unrealized foreign exchange losses. The company reported a 5 Canadian cent charge for the quarter compared to the 61 Canadian cent charge a year ago.
On average, analysts were expecting earnings of 95 Canadian cents a share and revenue of C$7.5 billion, according to Thomson Reuters I/B/E/S.
Operating income climbed 35.1 percent to C$389 million, while revenue rose 0.6 percent to C$7.53 billion.
George Weston also factored in a charge of C$23 million related to the closure of a Loblaw distribution center in Quebec. Loblaw had reported lower earnings last week due to infrastructure and technology investments. [nN21179582]
Weston Foods, the fresh bakery segment, recorded a 9.1 percent sales decline, but an 18.7 percent jump in operating margins.
Productivity improvements, disciplined vendor management and other cost reductions helped drive stronger operating income, the company said.
George Weston said during a conference call with analysts that its core businesses -- fresh and frozen foods in particular -- remained "very strong" and that current margins were sustainable.
George Weston shares fell 98 Canadian cents, or 1.2 percent, to C$78.32 on the Toronto Stock Exchange.
(Reporting by Solarina Ho; Editing by Frank McGurty)