Maple Leaf earnings up in quarter, but remain weak

by Staff
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TORONTO — Maple Leaf Foods Inc. posted earnings of C$2,871,000 ($2,388,000), equal to C$0.02 per share on the common stock, in the first quarter ended March 31, which compared with a loss of C$10 million in the same period a year ago. Results continued to be adversely affected by a major product recall that occurred last year.

Adjusted operating earnings, which are defined as earnings from operations before restructuring and other related costs and other income, totaled C$31,599,000 ($26,280,000), down from C$33,098,000 in the same period a year ago.

Sales for the first quarter rose 6% to C$1,279,299,000 ($1,063,982,000) from C$1,203,263,000.

"Results in the first quarter were overshadowed by depressed margins in our packaged-meat operations, as we continue to recover from the major product recall last year," said Michael H. McCain, president and chief executive. "While volumes improved, which was our first priority, margins will take longer to restore. Our bakery businesses have largely rebounded from the commodity impacts of last year, and our protein restructuring is yielding ongoing benefits. Although we are in the midst of a deep global recession, our product portfolio delivers good value at reasonable prices."

Adjusted operating earnings in the Meat Products Group declined to C$11.4 million in the first quarter compared with C$25 million last year. Packaged-meat-product margins were significantly lower than last year due to the impact of volume recovery efforts following last year’s listeria-related product recall.

Maple Leaf said it plans to implement actions over the next several months to restore margins, including taking appropriate price action, reducing internal costs and resuming more normalized investment in promotions. Marketing and innovation activities will be focused on shifting the product mix to offer a greater variety of value propositions, Maple Leaf said.

Fresh-pork operations earnings improved significantly in the first quarter due to double-shifting the pork-processing plant in Brandon, Man., the consolidation of ham-boning operations and the closing of less-efficient plants were realized, the company said. Also during the first quarter, Maple Leaf suspended actively marketing its pork processing business in Burlington, Ont., due to difficult credit markets. Earnings from poultry operations were consistent with last year.

Within its Agribusiness Group, adjusted operating earnings in the first quarter increased to C$2.1 million. This compared with a loss of C$2.8 million in the same period a year ago.

"While earnings from byproducts recycling operations were consistent with last year, results in hog production improved significantly due to lower production following the sale or exit of non-core operations in Ontario and Alberta," Maple Leaf said. "Restructuring and simplification of the core operations in Manitoba resulted in operational improvements, such as lower cycle times and improved feed efficiency and hog quality."

Adjusted operating earnings in Maple Leaf’s Bakery Products Group rose to C$19.5 million from C$17.2 million, reflecting price increases implemented in the first half of 2008 and better product mix.

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