Maple Leaf Foods 3Q earnings decline due to recall

by Keith Nunes
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TORONTO — Maple Leaf Foods, Inc. experienced a loss of C$12,919,000 ($10,260,260) during the third quarter of fiscal 2008, ended Sept. 30. The loss compared unfavorably to net income of C$220,424,000, equal to $1.72 per share on the common stock, in the same period a year ago.

"The headline for the third quarter was managing the unprecedented recall at our Toronto packaged meats plant and doing what was right to protect consumers and maintain public trust," said Michael H. McCain, president and chief executive officer. "While the recall is complete, our actions had a very substantial near-term impact.

"In other areas of our business, results improved considerably and as expected we are starting to see material benefits from the restructuring of our protein operations. Our focus through the remainder of 2008 will be on stabilizing our business and continuing to restore confidence, including implementing an enhanced food safety program that will be among the best in North America."

Sales for the quarter were C$1,344,334,000 ($1,079,144,000) during the third quarter of fiscal 2008 compared with C$1,301,099 for the same period during fiscal 2007.

Maple Leaf’s Meat Products Group adjusted operating earnings for the third quarter of C$800,000 ($642,659) compared with earnings of C$13,600,000 this past year. The decline was principally a result of lower sales and higher supply chain costs related to the product recall due to Listeria contamination, which Maple Leaf management estimated impacted adjusted operating earnings by approximately C$14 million during the quarter.

In addition earnings declined due to lower poultry processor margins and higher input costs in the packaged meats business. The negative impacts outweighed the contribution of higher earnings in the company’s primary pork processing business due to improved pork processing margins and benefits from consolidating primary pork operations in Western Canada and expanding the Brandon, Manitoba, facility.

Maple Leaf’s Bakery Products Group experienced a slight loss during the third quarter of fiscal 2008, declining to C$30,600,000 ($24,600,000) from adjusted operating earnings of C$32,600,000 during fiscal 2007. The decline was attributed to high commodity costs during the first half of fiscal 2008 and the inability of price increases to offset the increase in costs.

For the first nine months of fiscal 2008, Maple Leaf Foods had a loss of C$22,282,000 ($17,196,000) compared with net earnings of C$229,216,000 for the same period during fiscal 2007. Sales for the period were C$3,902,898,000 ($3,138,222,000) during fiscal 2008 compared with C$3,936,007,000 for fiscal 2007.

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