August 2, 2013

 

Challenging market conditions continued to weigh on Maple Leaf Foods' bottom line, citing weaker hog production returns, global pork markets and volatile raw material markets.

"This was compounded by the costs of transition and start-ups in our new prepared meat manufacturing and distribution network," said president and CEO Michael H. McCain in the statement, adding that all these factors were somewhat offset by strong growth in prepared meats volumes from earlier in the year and improvement in the bakery segment, which the company expects to accelerate.

Indeed for the second quarter that ended June 30, the Canadian food processor reported that it broke even, posting a loss of US$0.02 on a per share basis, compared to net earnings of US$26.0 million, or US$0.17/share, in the year-earlier period.

The latest period included US$15.4 million, or US$0.08/share, of pre-tax expenses tied to restructuring and other related costs. Adjusted earnings per share were US$0.02/share, down from US$0.23 a year ago. Sales of US$1.21 billion for the second quarter declined 3.7% from the same period last year, or 2.2% when adjusting for the impacts of sales and foreign exchange, due to lower volumes that were partly offset by higher pricing. Analysts were expecting earnings of US$0.15 for the latest period, on sales of US$1.28 billion.

In its meat products group, sales fell to US$751.3 million from US$776 million a year earlier on lower volumes, swinging to an adjusted operating loss in the segment of US$11.5 million, while sales in the protein unit, where it saw an adjusted operating loss of US$9.8 million due to poor market conditions and higher costs, declined to US$816.7 million from US$855.5 million in the second quarter of 2012.

In the quarter, in its meat products business, Maple Leaf said higher transitional costs compared to last year weighed on its bottom line as the company makes efforts to increase scale and profitability in its prepared meats business, with commissioning activities taking place at three large plant expansion in Western Canada during the period. Higher raw material costs also hurt profits, driven mainly by an increase in pork belly prices.

In July, the company sold its turkey agricultural operations for gross proceeds of US$48.2 million to focus on its turkey processing business.

In the agribusiness group, adjusted earnings declined sharply to US$1.7 million from US$18.1 million, with sales falling to US$65.4 million from US$79.5 million.