Strong Canadian dollar affects Maple Leaf Foods

by Keith Nunes
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TORONTO — The strengthening of the Canadian dollar impacted the financial performance of Maple Leaf Foods during the first quarter of fiscal 2010. For the quarter ended March 31, the company’s net income was C$8,754,000 ($8,725,339), equal to C$0.06c per share on the common stock, an increase over net income of C$2,871,000, or C$0.02c per share, in the same period a year ago.

Sales for the quarter were C$1,191,507,000 ($1,187,497,786), a slight decline compared with the previous year when sales were C$1,279,299,000. The company attributed the 7% sales decline mostly to the impact of the strengthening of the Canadian dollar on fresh pork sales and the translation of bakery sales in the United States and the United Kingdom to Canadian dollars.

“Our first-quarter results reflect a modest growth in earnings,” said Michael H. McCain, president and chief executive officer. “Our protein business continues to show substantial year over year improvement in performance, although the unexpected early rise in meat raw material costs has temporarily slowed the improvement curve. The bakery business experienced a weaker quarter due to performance in the U.K. and the North American frozen bakery business. However, we are seeing signs of improvement in both these areas as volumes recover and our cost reduction initiatives take hold.”

Sales within Maple Leaf’s Meat Products Group for the first quarter declined to C$768.2 million from C$822.2 million during the same period last year, as the stronger Canadian dollar reduced the sales values of fresh pork. Additionally, sales volumes were lower in prepared meats due to the exit of a non-core business and normalized levels of promotional activity compared to the first quarter last year, according to the company.

Adjusted operating earnings in the Meat Products Group increased to C$14.2 million compared with C$11.4 million last year, largely due to improved markets and efficiencies in the fresh poultry operations. The company said performance in the prepared meats business improved over last year as a result of better pricing and mix and cost-reduction initiatives, partly offset by lower volumes. First-quarter margins were impacted by a sharp increase in raw material prices that occurred late in the fourth quarter of 2009.

Bakery Products Group sales declined to C$381.5 million from C$412.5 million last year, due to the unfavorable impact of the stronger Canadian dollar and lower sales volumes in the North American frozen and U.K. bakery operations. Operating earnings for the first quarter decreased to C$16.7 million compared with C$19.5 million last year due primarily to lower sales volumes in both the U.K. and the North American frozen bakery businesses.
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