Maple Leaf Foods Inc. reported that its adjusted operating earnings for the first quarter plunged by 20% to US$40.5 million while net earnings for the first quarter were US$800,000, compared to US$10.5 million in the first quarter last year.

"Our first quarter results were challenged, as expected, due primarily to weak fresh bakery volumes, an issue is affecting the entire industry," Michael H. McCain, President and CEO, said in a news release. "We are addressing this challenge directly and expect improved results through the remainder of 2012. Conversely, we are very pleased with the results in our Protein Group, particularly considering the significant decline in commodity industry pork processor margins."

Sales for the Protein Group, which includes the company's Meat Products and Agribusiness operations, increased 2% to US$790.8 million from US$775.5 million for the prior year period. Adjusted operating earnings increased 1% to US$41.2 million compared to US$40.7 million for the first quarter last year.

The Meat Products Group includes value-added prepared meats, lunch kits and fresh pork, poultry and turkey products sold to retail, foodservice, industrial and convenience channels.

Adjusted operating earnings decreased 17% to US$22.1 million compared to US$26.6 million last year, primarily as a result of lower industry pork processing market conditions in North America.

The prepared meats business continued to improve margins in the quarter. Contributing to higher earnings were benefits from the company's network transformation initiatives, including the closure of facilities in Surrey, B.C. and Berwick, Nova Scotia and an on-going program to simplify product mix and focus on more profitable and higher volume products.

Also contributing to higher earnings was an improved retail sales mix, supported by product innovation, and higher overall sales volumes. These improvements were partly offset by higher raw material and inflationary costs that were not yet fully recovered through price increases implemented in 2011 and early 2012.

Earnings increased in the fresh poultry operations as a result of higher volumes and improved pricing of value-added products, particularly the Prime chicken product line, and improved plant operating performance.

Earnings declined in primary pork processing operations as a result of industry packer margins that were 98% lower than last year.