Maple Leaf Foods' first-quarter E.P.S., sales up
April 29, 2009
by Bryan Salvage
TORONTO — For Maple Leaf Foods Inc. first quarter, ended March 31, 2009, adjusted E.P.S. was $0.05 compared to $0.04 last year, adjusted operating earnings decreased 5% to $32 million, there were lower margins in its packaged meat business although volumes improved and sales for the first quarter increased 6.3% to $1.3 billion compared to $1.2 billion last year.
"Results in the first quarter were overshadowed by depressed margins inour packaged-meat operations, as we continue to recover from the major product recall last year," said Michael H. McCain, president and chief executive.
First-quarter sales reflected price increases and favorable foreign currency changes on fresh-meat sales. Operations earnings before restructuring and other related costs and other income decreased by 4.5% to $31.6 million compared to $33.1 million last year, as significant declines in packaged-meat earnings were mitigated by benefits from the restructuring of pork processing and hog production operations and bakery business price increases.
Adjusted operating earnings in the Meat Products Group declined to $11.4million in the first quarter compared to $25.0 million last year. Packaged-meat-product margins were significantly lower than last year due to the impact of volume recovery efforts following last year's listeria-related product recall.
Higher raw-material costs and the impact of foreign exchange on raw-material costs could not be passed on in this environment of business recovery and significant promotional costs were incurred to support volume recovery objectives. Management plans to implement actions to restore margins in the next few months, including taking appropriate price action, reducing internal costs and resuming more normalized investment in promotions. Marketing and innovation activities will be focused on shifting the product mix to offer a greater variety of value propositions.
Fresh-pork operations earnings improved significantly in the first quarter due to double-shifting the pork-processing plant in Brandon, Manitoba, the consolidation of ham-boning operations and the closure of less-efficient plants were realized. A weaker Canadian dollar resulted in higher sales prices for fresh pork and increased earnings from international sales.
During the first quarter, the company suspended actively marketing its pork processing business in Burlington, Ontario, due to difficult credit markets. The sale process for this business will resume once credit markets stabilize and an appropriate sale value can be realized. The business is profitable and contributed to cash flow and earnings for the quarter, the company said. Earnings from the poultry operations were consistent with last year.
Adjusted operating earnings for the Agribusiness Group in the first quarter increased to $2.1 million from a loss of $2.8 million last year. While earnings from by-products recycling operations were consistent with last year, results in hog production improved significantly due to lower production following the sale or exit of non-core operations in Ontario and Alberta. Restructuring and simplification of the core operations in Manitoba resulted in operational improvements, such as lower cycle times and improved feed efficiency and hog quality.