Maple Leaf earnings increase when adjusted
July 29, 2010
by Jeff Gelski
TORONTO – Although net earnings dropped for Maple Leaf Foods Inc. in the second quarter ended June 30, adjusted operating earnings rose 20%.
Second-quarter net earnings were C$3 million ($2.9 million), which compared to C$4.9 million ($4.7 million) in the previous year’s second quarter. This year’s second quarter included a non-cash, pre-tax charge of $20.7 million due to the change in fair value of long-term interest rates swaps not designated in a formal hedging relationship. The benefits of increased adjusted operating earnings and lower restructuring costs and interest expense partially offset the interest rate swaps.
Adjusted second-quarter operating earnings increased to C$52.2 million from C$43.6 million. Adjusted second-quarter earnings per share increased 42% to C17 cents from C12 cents.
Second-quarter sales were C1,271.4 million, a 4% drop from C$1,320.8 million in the previous year’s second quarter. Sales declined due to the currency impacts on U.S. and U.K. bakery operations and fresh pork sales as well as lower sales volume in prepared meats. Higher sales values of fresh pork partly offset the impacts.
“We are very pleased with the continued steady improvement across our business in spite of challenging market conditions,” said Michael H. McCain, president and chief executive officer of Toronto-based Maple Leaf Foods, when results were given Thursday. “The protein business saw healthy improvements in financial performance while facing significant raw material cost increases. We expect this trend of improvement to continue.
“While our bakery business earnings were off slightly from a year ago, there was a solid recovery in margin towards more normal levels that we expect to continue in the second half of the year.”
The Meat Products segment in the second quarter had sales of C$815.7 million, down from C$830.4 million in the previous year’s second quarter. Price increases in the prepared meats business had the expected effect of reducing volumes in the short term. The impact of a stronger Canadian dollar on fresh pork sales and the exit of a non-core business category reduced sales. Improved pork markets and increased net pricing in prepared meats partly offset the impacts.
Second-quarter adjusted operating earnings for the Meat Products segment were C$14.4 million, which was up from C$1.7 million and reflected better results in the company’s fresh poultry operations due to improved markets and operating efficiencies. Higher meat prices and lower volumes impacted earnings.
The Bakery Products segment in the second quarter had sales of C$401.6 million, down from C$435.4 million due to currency translation impacts of a stronger Canadian dollar on bakery sales in the United States and United Kingdom and lower sales volumes in the U.K. and North American frozen bakery businesses. Second-quarter adjusted operating earnings for the Bakery Products segment were C$26.2 million, down from C$28 million due to lower sales volumes in the U.S. and U.K. frozen operations.
The Agribusiness Group segment in the second quarter had sales of C$54.1 million, down from C$55 million due to lower sales prices in the rendering operations. Second-quarter adjusted operating earnings in the Agribusiness Group were C$13.8 million, down from C$16.3 million, as lower byproduct recycling results were offset partly by improvements in hog production.
The Protein Group segment in the second quarter had sales of C$869.8 million, down from C$885.4 million. Second-quarter adjusted operating earnings in the Protein Group segment were C$28.3 million, up from C$18 million.
Companywide, Maple Leaf Foods had sales of C$2,462.9 million for the six months ended June 30, which compared to C$2,600.1 million in the same time period of the previous year. Adjusted operating earnings for the six months ended June 30 were C$86.1 million, up from C$75.2 million.