October 29, 2009

Maple Leaf Foods Inc., has returned to profitability this year after spending much of 2008 dealing with the fallout from a major packaged-meat recall, said Wednesday (Oct 28) it earned US$22.5 million in the third quarter.

The Toronto-based company, one of Canada's largest food producers, said operating income improved at both its meat and bakery groups, pushing net income to 17 cents a share for the quarter ended September 30.

Quarterly revenues for the company dipped to US$1.29 billion from US$1.34 billion last year but beat analyst forecasts of US$1.31 billion revenue and earnings of 14 cents a share.

A year earlier, Maple Leaf's third quarter loss was US$12.9 million or 10 cents a share.

The turnaround helped send Maple Leaf shares up 42 cents or four percent to US$10.88 on the Toronto Stock Exchange.

Maple Leaf attributed the reduced revenue to lower fresh meat prices, the strategic exit or sale of non-profitable hog operations last year, and lower volumes in its Bakery Products Group.

It was the third consecutive profitable quarter for Maple Leaf, bringing nine-month earnings to US$20.2 million, or 23 cents per diluted share. A year earlier, the comparable loss was US$22.3 million or 18 cents per diluted share.

Octagon Capital Corp. analyst Bob Gibson said lower commodity prices and the positive effects of a restructuring of the company's fresh meat business helped it to be more profitable despite lower revenue.

However, Gibson said Maple Leaf's deli sales are still suffering somewhat from last year's listeria-related recall, and although they've come a long way compared to a year ago, they have more room for improvement.

Maple Leaf also said it would continue to focus on its Meat Products Group as it tried to drive up volume growth and improve earnings, which it said were not yet at full potential. Adjusted operating earnings in the meat division were US$18.1 million compared to US$0.8 million for the third quarter last year.

Adjusted operating earnings in the Agribusiness Group increased to US$15.1 million from US$12.3 million last year due to benefits from restructuring. However, Maple Leaf said hog production in North America continues to be unprofitable as a result of lower market prices.