Maple Leaf Foods 2Q net earnings, sales down

by Bryan Salvage
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TORONTO – In the face of raw material cost increases, currency impacts and prepared meats price increases, among other thingss, Maple Leaf Foods Inc. announced for the second quarter ended June 30 its net earnings were $3.0 million (US$2.9 million) compared to $4.9 million (US$4.7 million) last year. Sales for the second quarter decreased 4% to $1,271.4 million (US$1,227.4 million) compared to $1,320.8 million (US$1,275 million) last year.

However, adjusted operating earnings increased 20% to $52.2 million (US$50.4 million) from $43.6 million (US$42.1 million) last year. Adjusted earnings per share increased 42% to $0.17 (US$0.16) compared to $0.12 (US$0.12) last year.

"We are very pleased with the continued steady improvements across our business in spite of challenging market conditions." said Michael McCain, president and chief executive officer. "The protein business saw healthy improvements in financial performance while facing significant raw material cost increases. We expect this trend of improvement to continue."

Sales declined due to currency impacts on U.S. and U.K. bakery operations and fresh pork sales, as well as lower sales volumes in prepared meats. These impacts were partly offset by higher sales values of fresh pork.

Adjusted operating earnings increased year-to-year mostly due to better performance in the Meat Products Group, the company said. Maple Leaf’s Meat Products Group Includes value-added prepared meats, chilled meal entrées and lunch kits; and fresh pork, poultry and turkey products sold to retail, foodservice, industrial and convenience channels. Includes leading Canadian brands such as Maple Leaf, Schneiders and many leading sub-brands.

Meat Products Group sales for the second quarter declined 2% to $815.7 million (US$787.6 million) from $830.4 million (US$801.7 million) in the second quarter last year. Price increases in the prepared-meats business had the expected effect of reducing volumes in the short-term as consumers adjust to new price levels. What’s more, the impact of a stronger Canadian dollar on fresh pork sales and the exit of a non-core business category reduced sales. These impacts were partly offset by improved pork markets and increased net pricing in prepared meats.

Adjusted operating earnings in the Meat Products Group increased to $14.4 million (US$13.9 million) compared to $1.7 million (US$1.6 million) last year reflecting better results in the company's fresh-poultry operations due to improved markets and operating efficiencies. Prepared-meats business earnings were impacted by higher meat prices and lower volumes. Meat prices continued to be significantly higher than the prior year, following very material increases in December 2009.

During the second quarter, the company began implementing price adjustments and will complete this process in the third quarter. As a result, increased raw-material costs were only partly recovered during the second quarter. Earnings from pork primary processing declined as export margins were reduced by the stronger Canadian dollar. This decline was partly offset by improved North American industry market conditions.

During the second quarter, the company initiated the process to sell its primary pork processing plant in Burlington, Ontario, which processes approximately two million hogs annually.

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