October 28, 2011

Maple Leaf Foods Q3 net earnings up

Maple Leaf Foods Inc. third quarter earnings increased to CAD43 million (US$43.3 million) from a loss of CAD19.9 million (US$20 million) the same quarter last year.

Adjusted earnings per share increased to CAD0.34 (US$0.342), including CAD0.07 (US$ 0.0705) per share related to a tax adjustment associated with a prior acquisition, from CAD0.22 (US$ 0.2215) last year. Sales decreased 2% to CAD1262.2 million (US$1270.7 million) compared to CAD1293.2 million (US$1301.9 million) last year.

Meat Products Group sales for the quarter decreased 7% to CAD777.2 million (US$782.4 million) from CAD834.7 million (US$840.3 million) in the third quarter last year, largely due to the sale of the company's Burlington, Ontario, primary pork processing operation in November 2010.

Higher market prices in fresh pork, price increases in prepared meats and value added poultry and improved sales mix in the prepared meats business contributed to higher sales. These benefits were partly offset by lower retail sales volumes in prepared meats.

Adjusted operating earnings in the group totalled CAD20.8 million (US$20.9 million), compared to CAD19.5 million (US$19.6 million) last year, as margin expansion driven by price increases, improved mix and cost reduction in prepared meats was largely offset by weaker primary processing markets. 

Prepared meats earnings and margins increased due to price increases implemented earlier in the year to offset rising input costs, improved sales product mix and early benefits from the company's value creation plan. These benefits were partly offset by lower sales volumes and higher selling, general and administrative expenses.

Earnings in primary pork processing operations declined slightly, as the benefits of strong exports and better product sales mix were offset by compression in primary pork processor margins in North America and the unfavourable impact of a stronger Canadian dollar. Earnings from poultry processing operations declined significantly driven by a continued rise in live birds costs as a result of increased feed prices.

On October 19, the company announced its board of directors approved to invest approximately CAD560 million (US$563.7 million) in its prepared meats manufacturing and distribution network as part of its broader value creation plan. Over the next three years the company will close six plants, consolidating production into four scale facilities and close four distribution centres, consolidating operations at its existing distribution centre in Saskatoon and into a new facility in Ontario.

On September 30, the company completed the sale of its Surrey, B.C., plant and recorded a gain before taxes on the sale of CAD4.1 billion (US$4.12 billion).

Sales in the Agribusiness Group increased 43% to CAD67.9 million (US$68.3 million) compared to CAD47.5 million (US$47.8 million) last year driven by higher sales prices in the by-products recycling business, which reflect higher commodity values. Adjusted operating earnings in the group increased to CAD25.4million (US$25.5 million) compared to CAD15.6 million (US$15.7 million) last year. Lower earnings in hog production resulted from higher feed costs that outpaced increases in hog prices, combined with the unfavourable impact of a stronger Canadian dollar.