Maple Leaf suffers C$36.9 million loss in '08

by Eric Schroeder
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TORONTO — Maple Leaf Foods, Inc. sustained a loss of C$36,857,000 ($10,260,260) during the fiscal year ended Dec. 31, 2008, bogged down by higher commodity prices and the impact of a significant recall at the company’s Toronto packaged meats plant. The loss compared unfavorably to net income of C$194,964,000, equal to C$1.53 per share on the common stock, in the same period a year ago. Sales for the year rose narrowly to C$5,242,602,000 ($4,198,324,000) from C$5,209,640,000.

"Last year was a historically challenging year on many fronts as we managed through unprecedented spikes in global commodity prices, financial market meltdowns, and the largest product recall in Canadian history," said Michael H. McCain, president and chief executive officer. "Within this context, we are satisfied with the results we were able to deliver. They are a reflection of the diversity of our business, the capability of our people to manage through extreme adversity and the strength of our entire brand portfolio.

For the fourth quarter, the company sustained a loss of C$14,575,000 ($11,675,000), which compared with a loss of C$22,072,000 in the same period a year ago. Sales were C$1,339,704,000, up from C$1,273,633,000.

Maple Leaf’s Meat Products Group operating earnings for fiscal 2008 were C$29,455,000, down 69% from the same period a year ago. Sales in the segment fell 4% to C$3,303,694,000.

Earnings were adversely affected by the packaged meats product recall that occurred in August 2008. This reflected lower sales and higher supply chain costs, the suspension of price increases to offset rising meat costs, and delays in planned promotional activities. In addition, one-time recall costs were $18.5 million in the fourth quarter and $37.5 million for the total year. Maple Leaf said no further one-time costs are anticipated as the recall has been completed and all recalled product has been destroyed.

"The company has been making steady progress in stabilizing its manufacturing supply chain and rebuilding its packaged meat volumes and brand equity, reflecting a return in consumer confidence," Maple Leaf said. "However, margins in this business will take some time to fully restore. The company is pursuing an aggressive promotion and product innovation program to drive sales and profitability. The company is also implementing enhanced food safety protocols across its packaged meat operations, including extensive testing, sanitization and workplace training that are based on global best practices and exceed regulatory requirements."

The company said earnings from poultry operations declined "due to lower industry processor margins and the cost of a six week strike at the company's Edmonton plant," while the fresh pork processing operations have benefited from the closing of three plants and the consolidation of production into scale plants in Brandon and Winnipeg.

Maple Leaf’s Bakery Products Group posted earnings of C$82,979,000 during fiscal 2008, down from C$119,297,000 in fiscal 2007. Sales rose to C$1,705,909,000 from C$1,510,629,000. The company said the earnings decline reflected the impact of high commodity prices earlier in 2008.

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