February 20, 2004

 

 

Canada's Maple Leaf to Boost Pork Sales Amid Bird Flu, BSE Outbreaks

 

Canada's Maple Leaf believed that with the current Asian bird flu outbreaks coupled with the mad cow disease incident in the United States might boost pork sales this year.

 

Shares in Canadian Maple Leaf Foods Inc. gained four per cent Wednesday after quarterly results beat analysts' expectations.

 

Maple Leaf stock closed up 45 cents $11.45 Wednesday, after hitting a 52-week high of $11.60 on the Toronto stock market.

 

"We are paying very careful attention to changes in the global market for protein, driven primarily by the beef markets in the United States, with the single case of BSE which was discovered a couple of months ago, and secondarily by the outbreak of the avian flu circumstance in Asia," company president and CEO Michael McCain said in a conference call.

 

"Both of these are very difficult to read in terms of the impact on our business. That said, because of the additional demand that will create for pork in the Japanese market, we believe that it has a tendency to be positive for us."

 

In the wake of the two animal-related illnesses, Japan has cut off its beef imports from the United States and many Asian countries have had mass chicken slaughters.

 

The company reported Wednesday that it increased quarterly profits by 4.2 per cent on flat revenues as poultry sales offset lower earnings at its bakery products group.

 

National Bank analyst David Newman said he was pleased with the results despite the fact that sales declined in company's three divisions - meat products, agribusiness and bakery - and that pork margins decreased.

 

He suggested that fad protein diets helped drive meat sales.

 

"Obviously there's been a big uptick in meat consumption in general because of the Atkins diet," Newman said, referring to a weight-loss regime that recommends loading up on proteins and cutting down on carbohydrates.

 

"That's obviously having a bit of an impact."

 

The company's biggest problem remains dealing with the rising loonie and renegotiating contracts with its pork producers to reflect the "new normal" in the currency markets, McCain said. He said the new contracts would be "painful" for the company's producer partners.

 

The company's $510-million takeover of rival meatpacker Schneider Corp., expected to be finalized in March, should also be beneficial to the company's bottom line, Newman said.

 

Maple Leaf said Wednesday it earned $27 million or 23 cents per share in the quarter ended Dec. 31. That compared to earnings of $25.9 million or 22 cents per share in the year-earlier quarter.

 

Revenues were unchanged at $1.3 billion.

 

Quarterly earnings from operations for the company's meats and agribusiness segment increased by 43 per cent, while earnings from bakery products dropped by 18 per cent.

 

For the year, Maple Leaf had earnings of $35.1 million, or 27 cents per share, on revenues of $5 billion. That compared to earnings of $84.7 million, or 71 cents per share, on revenues of $5.1 billion in 2002.

 

The company estimated the rising loonie compared to the U.S. dollar cost Maple Leaf about $25 million over the year. Another $17 million was lost on restructuring costs related to plant closures in the bakery business and Atlantic feed mill operations.

 

Maple Leaf employs about 18,000 people in Canada, the United States, Europe and Asia.