Prepared meats propel Maple Leaf earnings

by Keith Nunes
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TORONTO — Maple Leaf Foods, Inc. saw its earnings improve during the third quarter of fiscal 2011 due to the performance of its prepared meats operations. For the quarter, ended Sept. 30, the company earned C$43,007,000 ($43,253,998), equal to C$0.29 per share on the common stock. The results compared favorably to the same period during the previous year when the company recorded a loss of C$19,856,000 ($19,974,771).

Sales for the quarter were C$1,262,153,000 ($1,269,702,753), a slight decline compared with the third quarter of fiscal 2010 when revenues were $1,293,211,000.

“Our third quarter reflects strong earnings growth in our protein business, and we are particularly pleased with the performance of our consumer-facing prepared meats operations,” said Michael H. McCain, president and chief executive officer. “We are managing high commodity costs through pricing, cost reduction and continuing to drive higher value product innovation. Our strategic value creation initiatives are also contributing to results and we are on track to deliver sustained earnings growth.”

Within Maple Leaf’s Meat Products Group third-quarter sales declined 7% compared with the previous year to C$777.2 million. Adjusted operating earnings were C$20.8 million, a slight increase compared with C$19.5 million the business unit recorded in 2010.

Prepared meats earnings increased as a result of price increases implemented earlier in the year to offset rising input costs, improved sales product mix and early benefits from the company’s cost reduction efforts. Earnings in Maple Leaf’s primary pork processing operations declined slightly, as the benefits of strong exports and better product sales mix were offset by compression in primary pork processor margins in North America and the unfavorable impact of a stronger Canadian dollar. Earnings from poultry processing operations declined significantly driven by a continued rise in live birds costs as a result of increased feed prices.

Sales for the company’s Bakery Products Group increased to C$417 million compared with C$411.1 million during 2010. After adjusting for the sale of the company’s fresh sandwich product line in February of 2011 and currency translation on sales in the U.S. and U.K., sales increased 5%, primarily due to price increases implemented earlier in 2011, according to the company. A modest increase in overall sales volumes reflected higher retail sales volume in fresh bakery operations and continued strength in bagel volumes in the U.K. bakery business following the re-launch of the New York Bakery Co. brand earlier in the year. Sales volumes in North American frozen bakery operations declined slightly compared to last year, the company said.

Adjusted operating earnings in the Bakery Products Group for the third quarter were C$28.1 million, compared with C$28.3 million last year. Maple Leaf said it experienced some margin compression as price increases implemented earlier in the year were not sufficient to fully offset the impact of the continued rise of raw material costs. Lower costs resulting from improved operating efficiencies in the company's frozen bakery business and lower selling, general and administrative expenses contributed to earnings.

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