The company said that eEarnings increased in core processed meat and meals business but margins declined in the bakery operations due to rising wheat prices.

Earnings from continuing operations before restructuring and other related costs ("Adjusted Operating Earnings") fell by 34 per cent to C$33.1 million for the quarter.

* "Our underlying operations, in particular the value-added meats and bakery businesses, are very well positioned and early successes in the Company's protein restructuring is building a solid base for higher earnings."

Michael H. McCain, President and CEO, Maple Leaf Foods.

Rapid wheat cost increases compressed margins in the Bakery Products group as price increases have not yet offset rising input costs.

Hog production losses also increased sharply as feed prices increased at a faster rate than hog prices, the company said.

It added that partly offsetting these effects, margins increased in the value-added meats business due to price increases and favorable markets, and early benefits of the Company's strategic repositioning of the Protein Group were realised.

Additional Support

Also included in earnings for the quarter were certain other items of note, including government support payments of C$8.4 million received as part of programs to assist the hog production industry, and initial costs of C$6.0 million related to consulting and systems conversions initiatives. Also during the quarter, the average Canadian dollar exchange rates were higher than last year as the Canadian dollar traded above parity before returning to current levels, negatively impacting earnings by approximately C$5.5 million.

Earnings per share from continuing operations before restructuring and other related costs ("Adjusted EPS") for the quarter was C$0.04, compared to C$0.12 last year.

"Operating earnings for the quarter were substantially impacted by continued increases in worldwide prices for wheat, grains and other commodities", said Michael H. McCain, President and CEO.

"These effects, while material, are temporary and are expected to reverse as markets stabilise; through a combination of price increases, some reduction in wheat prices as new crops come to market and livestock price increases as hog supplies tighten. We fully expect these to be difficult but transitory market conditions.

Well Positioned

"Our underlying operations, in particular the value-added meats and bakery businesses, are very well positioned and early successes in the Company's protein restructuring is building a solid base for higher earnings.

"We remain on track to realize our incremental earnings targets from these initiatives and continue to be very positive regarding the re-positioning and growth in our core business."