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Maple Leaf Sees Earnings Soar

by 5m Editor
29 July 2011, at 9:38am

CANADA - Maple Leaf Foods saw its earnings from operations before restructuring and other related costs increase by 54 per cent to C$77.5 million in the second quarter of the year.

The Canadian processing giant saw its net earnings rise to C$24.6 million from C$4.9 million.

"Maple Leaf Foods delivered outstanding results and our ninth consecutive quarter of earnings growth," said Michael H. McCain, President and CEO.

"We are successfully managing the impact of rising costs through price increases and cost reduction initiatives, and our value creation plan is on track and contributing to earnings. We are making steady progress in increasing our profitability and delivering on our commitments."

Sales for the second quarter of 2011 fell by three per cent to C$1,238.2 million compared to C$1,271.4 million last year, primarily due to business divestitures.

After adjusting for the impact of divestitures and the impact of a stronger Canadian dollar, sales increased by four per cent.

Adjusted Operating Earnings rose to C$77.5 million compared to C$50.4 million last year, largely due to improved performance in the Protein Group. Adjusted Earnings per Share increased to C$0.30 compared to C$0.16 last year.

Net earnings increased to C$24.6 million (C$0.17 basic earnings per share) compared to net earnings of C$4.9 million (C$0.02 basic earnings per share) last year.

Net earnings in the quarter included C$16.6 million of pre-tax costs related to restructuring activities (2010: C$7.5 million).

The Meat Products Group that includes value-added prepared meats, chilled meal entrees and lunch kits; and fresh pork, poultry and turkey products sold to retail, foodservice,industrial and convenience channels saw sales for the second quarter fall by seven per cent to C$762.2 million from C$815.7 million in the second quarter last year.

This, Maple Leaf said was largely due to the sale of the company's Burlington, Ontario primary pork processing operation in November 2010.

After adjusting for the impact of this divestiture and the impact of a stronger Canadian dollar that reduced the sales value of exports, sales increased by three per cent compared to last year.

Higher market prices in fresh pork, combined with price increasesand higher value sales mix in the prepared meats business contributed to stronger sales.

These benefits were partly offset by lower sales volumes, primarily in prepared meats, due to lower export and retail sales volumes.

Adjusted Operating Earnings in the Meat Products Group for the second quarter rose by 29 per cent to C$16.1 million compared to C$12.5 million last year, driven by margin expansion in prepared meats and stronger primary pork processing results.

Prepared meats margins strengthened as price increases offset the impact of rising input costs, although the business experienced some volume decline.

Margins also benefited from operational improvements and the contribution of higher-margin products, such as the Natural Selections™ and the newly launched Schneiders® Country Naturals™sliced meat lines.

Primary pork processing margins increased as a result of strong export sales, and improved product mix and operating efficiencies. Earnings from poultry processing operations declined compared to those of last year as a result of higher live birds costs that compressed industry-wide poultry processor margins.

During the quarter the Company continued to progress in the implementation of its value creation plan.

This plan includes initiatives to reduce costs and increase supply chain efficiencies through product and packaging simplification, price management, network consolidation, and investments to reduce costs and build scale.

Initiatives underway to standardise product ingredients, sizes and packaging and eliminate non-value added product lines contributed to margin growth in the quarter.

The company closed and subsequently sold a prepared meats plant in Berwick, Nova Scotia and consolidated the production into other existing plants.

The company has also announced the scheduled closure of a prepared meats plant in Surrey, British Columbia, in the second half of 2011 and began transferring production to other facilities in June 2011.

The Agribusiness Group that consists of Canadian hog production and animal by-product recycling operations saw sales for the second quarter rise by 31 per ce nt to C$70.9 million from C$54.1 million last year mostly reflecting higher sales values in the by-products recycling business.

Adjusted Operating Earnings in the Agribusiness Group in the second quarter increased by 140 per cent to C$32.7 million compared to C$13.6 million last year, driven by the benefit of higher prices for by-products and hogs. Earnings in the by-products recycling business increased due to higher market prices in both rendering and bio-diesel operations. Hog prices also increased 15% since last year and outpaced increases in the Company's net cost of grain.

Sales in the Bakery Products Group for the second quarter were consistent with previous year at C$405.1 million compared to C$401.6 million last year.

In the United Kingdom, the Company sold a small scale bakery in Cumbria in April 2011 and closed a bakery in London in May 2011, with production consolidated into its bakeries in Maidstone and Walsall.