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Maple Leaf Foods Reports Third Quarter Results

by 5m Editor
29 October 2008, at 6:20am

CANADA - Maple Leaf Foods Inc. today reported its financial results for the third quarter ended September 30, 2008.

  • Adjusted Earnings per Share were $0.13 compared to $0.06 last year
  • Improved commodity markets, protein restructuring and price increases all contributed to improvements in underlying results
  • Net earnings (loss) per share of ($0.10) compared to $0.01 last year, including direct costs of a major packaged meats recall at the Bartor Road facility
  • The recall is complete and actions are underway to restore sales and volumes

Note: Adjusted Earnings per Share measures are defined as earnings per share from continuing operations before one-time direct product recall, restructuring and other related costs and certain non-recurring tax adjustments. Adjusted Earnings per Share and Operating Earnings measures include on-going effects of the product recall, such as lower sales and higher supply chain costs.

"The headline for the third quarter was managing the unprecedented recall at our Toronto packaged meats plant and doing what was right to protect consumers and maintain public trust," said Michael H. McCain, President and CEO. "While the recall is complete, our actions had a very substantial near-term impact. In other areas of our business, results improved considerably and as expected we are starting to see material benefits from the restructuring of our protein operations. Our focus through the remainder of 2008 will be on stabilizing our business and continuing to restore confidence, including implementing an enhanced food safety program that will be among the best in North America."

The following is a summary of Adjusted Earnings per Share (EPS) defined as EPS from continuing operations before one-time direct product recall, restructuring and other related costs and certain non-recurring tax adjustments. On-going effects of the product recall, such as lower sales and higher supply chain costs are included in Adjusted Operating Earnings and Adjusted Earnings per Share.

 Third Quarter Year-To-Date
 ---------------------------------------
 2008 2007 2008 2007
 ---- ---- ---- ----
 EPS from continuing
 operations $(0.10) $0.01 $(0.18) $0.00
 Product recall, restructuring
 and other related costs (i) $0.24 $0.05 $0.34 $0.31

 ---------------------------------------
 Adjusted EPS (ii) (iii) $0.13 $0.06 $0.17 $0.31

 Discontinued operations $1.71 $1.80

 ---------------------------------------
 ---------------------------------------

 EPS before one-time direct
 product recall, restructuring
 and other related costs and
 certain non-recurring tax
 adjustments (ii) (iii) $0.13 $1.77 $0.17 $2.10
 ---------------------------------------
 ---------------------------------------

 (i) Includes the per share impact of one-time direct product recall,
 restructuring and other related costs net of tax and minority
 interest and the recognition of a tax benefit of $5.1 million in Q2
 2007 related to the sale of the animal nutrition business.
 (ii) These are not recognized measures under Canadian GAAP. Management
 believes that this is the most appropriate basis on which to
 evaluate results, as product recall, restructuring, and other
 related costs are not representative of continuing operations.
 (iii) Does not add due to rounding.

 Business Segment Review
 -----------------------
 Following is a summary of operating earnings from continuing operations
before one-time direct product recall, restructuring and other related costs
and other income ("Adjusted Operating Earnings") by business segment:

 ($ millions) Third Quarter Year-to-Date
 ------------------------ ------------------------
 2008 2007 Change 2008 2007 Change
 ---- ---- ------ ---- ---- ------
 Meat Products Group $ 0.8 $ 13.6 (94.0%) $ 31.5 $ 50.1 (37.0%)
 Agribusiness Group (i) 12.3 (3.5) 453.2% 17.2 2.0 752.5%
 ------------------------ ------------------------
 Protein Group 13.1 10.1 30.2% 48.7 52.1 (6.6%)
 Bakery Products Group 30.6 32.6 (6.3%) 56.4 93.6 (39.8%)
 Non-allocated Costs (ii) (2.6) (4.1) 36.1% (12.0) (4.6)(158.5%)
 ------------------------ ------------------------
 ------------------------ ------------------------
 $ 41.1 $ 38.6 6.4% $93.1 $141.1 (34.1%)
 ------------------------ ------------------------
 ------------------------ ------------------------

 (i) Agribusiness Group excludes the results of the animal nutrition
 business that are reported as discontinued operations.
 (ii) Non-allocated costs include costs related to the Company's IT system
 conversion, certain shared services and consulting expenses related
 to restructuring initiatives. Management believes that not
 allocating these costs provides a more comparable assessment of
 segment operating results.

 Meat Products Group (value-added processed packaged meats; chilled meal
 entrees and lunch kits; value-added pork, poultry and turkey products;
 and global meat sales.)

Adjusted Operating Earnings for the third quarter were $0.8 million compared to earnings of $13.6 million last year. This decline was principally a result of lower sales and higher supply chain costs related to the product recall, which Management estimates impacted Adjusted Operating Earnings by approximately $14 million in the quarter. In addition earnings declined due to lower poultry processor margins and higher input costs in the packaged meats business. These negative impacts outweighed the contribution of higher earnings in the primary pork processing business due to improved pork processing margins and benefits from consolidating primary pork operations in Western Canada and expanding the Brandon facility. Year-to-date Adjusted Operating Earnings were $31.5 million compared with $50.1 million last year.

Progress continued in the strategic reorganization of the Company's protein operations. This restructuring will increase profitability and reduce currency and commodity exposure by reducing the Company's fresh pork processing operations and focusing growth in its higher margin packaged meat and meals businesses. The double shift expansion at the Brandon pork processing plant was completed in the third quarter and is now processing approximately 83,000 hogs per week. Brandon is the only pork processing plant that the Company will retain, providing a low cost, high quality pork supply for its packaged meats business. As part of this consolidation, Maple Leaf closed its Winnipeg processing facility in the third quarter, increasing the total number of pork plants closed to three. The marketing of the Burlington pork plant, which processes over 2 million hogs annually, is well underway and the Company expects to conclude this process in the next few months.

Agribusiness Group (swine production and animal by-products recycling)

Adjusted Operating Earnings from the Agribusiness Group were $12.3 million compared to a loss of $3.5 million in 2007. Earnings from rendering operations benefited from higher commodity prices during most of the quarter, and higher earnings from bio diesel sales. Hog production losses were significantly reduced from last year and from the run rate for the first half of the year due to the divestiture of the Alberta and Ontario hog production businesses, a lower cost of production and improved efficiencies in the restructured Manitoba operations. In the third quarter the Company marketed approximately 224,000 hogs, down from 353,000 last year, and the restructuring of these operations is virtually complete. For the year-to-date, Adjusted Operating Earnings of $17.2 million compared to $2.0 million in 2007.

Other Matters

On October 23, 2008, Maple Leaf Foods Inc. declared a dividend of $0.04 per share payable on December 31, 2008 to shareholders of record on December 8, 2008. Unless indicated otherwise, by the corporation, in writing at or before the time the dividend is paid, each dividend paid by the corporation in 2008 or a subsequent year is an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System."

An investor presentation related to the Company's third quarter financial results is available at www.mapleleaf.com and can be found under Investor Relations on the Quarterly Results page. A conference call will be held at 10:00 a.m. EDT on October 29, 2008 to review Maple Leaf Foods' third quarter financial results. To participate in the call, please dial 416-641-6111 or 866-696-5911. For those unable to participate, playback will be made available an hour after the event at 416-695-5800 / 800-408-3053 (Passcode 3272764 followed by the number sign).

A webcast presentation of the third quarter financial results will also be available at http://investor.mapleleaf.ca via a link http://events.startcast.com/events/91/B0028.

Forward-Looking Statements

This document contains, and the Company's oral and written public communications often contain, forward-looking statements that are based on current expectations, estimates, forecasts and projections about the industries in which the Company operates and beliefs and assumptions made by the Management of the Company. Such statements include, but are not limited to, statements with respect to our objectives and goals, as well as statements with respect to our beliefs, plans, objectives, expectations, anticipations, estimates and intentions. Words such as "expect", "anticipate", "intend", "attempt", "may", "will", "plan", "believe", "seek", "estimate", and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. In particular, these forward-looking statements are based on a variety of factors and assumptions including, but not limited to: the condition of the Canadian and United States economies; the magnitude of the rate of change of the Canadian dollar versus the U.S. dollar; the availability and prices of raw materials, energy and supplies; product pricing; the competitive environment and related market conditions; improvement of operating efficiencies; continued access to capital; the cost of compliance with environmental and health standards; adverse results from ongoing litigation; no expected actions of domestic and foreign governments and the general assumption that none of the risks identified under "Risk Factors" in the Company's 2007 Annual Information Form will materialize. These assumptions have been derived from information currently available to the Company including information obtained by the Company from third-party industry analysts. These assumptions may prove to be incorrect in whole or in part. In addition, actual results may differ materially from those expressed, implied or forecasted in such forward-looking statements. Factors that could cause actual results or outcomes to differ materially from the results expressed, implied or forecasted in such forward-looking statements are discussed more fully in the Company's Management's Discussion and Analysis for the year ended December 31, 2007, which is available on SEDAR at www.sedar.com. The Company does not intend, and the Company disclaims any obligation to update any forward-looking statements, whether written or oral, or whether as a result of new information, future events or otherwise except as required by law.

Further Reading

- You can view the full report by clicking here.

5m Editor