Maple Leaf Foods prepared meats improves performance

by Bryan Salvage
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TORONTO — Maple Leaf Foods Inc.’s prepared meats performance for the second quarter ending June 30 shows improvement, but it remains below prior-year levels in the wake of last year’s Listeria recall. However, the company’s protein restructuring contributed to improved hog production, primary pork processing results were $0.12 compared to a loss of $0.01 last year, and adjusted operating earnings increased 131% to $43.6 million compared to $18.9 million last year.

Adjusted operating earnings were higher due to higher margins in the Bakery Products Group as input costs improved, operational improvements, a good sales mix in primary processing, and the benefits of restructuring in both hog and fresh pork operations.

Second-quarter sales decreased 2.5% to $1,320.8 million compared to $1,355.3 million last year due to lower volumes in primary processing and prepared meats and lower market prices for fresh pork. Offsetting second-quarter overall improvements was the company’s prepared meats business in the wake of last year’s listeria recall. Adjusted operating earnings in the Meat Products Group, which includes value-added prepared meats; chilled meal entrées and lunch kits; value-added fresh pork, poultry and turkey products, were $1.7 million in the second quarter of 2009 compared to $5.7 million last year.

Although gross margins on prepared meat products improved compared to the first quarter of 2009 as the company reduced its investment in trade spending and promotions, higher raw material costs resulted in lower earnings compared to the same period last year as the company was not able to increase prices in a business recovery environment.

Lower earnings in prepared meats were partly mitigated, the company said, by strong results in primary pork processing as Maple Leaf continued to benefit from the restructuring of its primary pork processing operations. The Brandon and Winnipeg operations are now running efficiently and at lower costs compared to last year. An improved sales mix and a weaker Canadian dollar benefited earnings in pork processing despite poor industry market conditions. Earnings from the company's poultry operations were largely consistent compared to last year.

Adjusted operating earnings in the second quarter for the Agribusiness Group, which includes hog production and animal by-products recycling, increased to $16.3 million from $7.6 million last year. Results improved following the sale or exit of non-core hog production operations in Ontario as part of the company's protein restructuring, and operational improvements in core operations in Manitoba. The company owned almost 215,000 hogs in the quarter, representing approximately 20% of the supply into the Brandon processing plant.

Second-quarter results also included $3.0 million in government support to compensate hog producers for losses in prior years. Results from rendering operations were strong but down from the prior year period as volumes and commodity prices declined.

On July 28, Maple Leaf Foods Inc. declared a dividend of $0.04 per share payable on Sept. 30 to shareholders of record on Sept. 8, 2009.

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