Maple Leaf earnings under pressure
by Keith Nunes
TORONTO – Maple Leaf Foods Inc. suffered through another difficult quarter as global pork markets, volatile raw material costs and the costs associated with starting up several of the company’s expanded processed meats plants all hindered earnings during the second quarter of fiscal 2013. Net income for the quarter ended June 30 was C$9,000 ($8,720), a significant decline compared with the same period of the previous year when Maple Leaf Foods earned C$25,988,000 ($25,183,000), equal to C17 cents per share on the common stock.
Sales for the quarter also fell to C$1,214,220,000 ($1,177,156,803), which compared with the second quarter of fiscal 2012 when sales were C$1,280,250,000 ($1,241,171,284).
“Market conditions are expected to improve and our commercial fundamentals are good,” said Michael McCain, president and CEO. “Overall, we are satisfied with our strategic progress, although we are now at the peak of change and expect earnings volatility through this transition.”
The company’s Protein Group, which includes its meat products business and hog production operations recorded an operating earnings loss of C$9.8 million, which compared negatively to operating earnings of C$33.4 million a year earlier. Sales for the Protein Group were C$816.7 million during fiscal 2013 compared with C$855.5 million the previous year.
The company said higher transitional costs compared to last year were incurred as the company implements its strategy to increase the scale of its prepared meats business. In the quarter, commissioning activities at three large plant expansions in Western Canada resulted in higher costs. Earnings also were impacted by higher raw material costs, driven primarily by an increase in pork belly prices. Retail volumes increased from fiscal 2012 but were offset by a decline in lower-margin food service volumes.
For the first half of the fiscal year, Maple Leaf Foods recorded a loss of C$14,733,000. The results compared unfavorably to the first half of 2012 when the company earned C$20,213,000, equal to C13c per share on the common stock.
Sales for the first six months were C$2,327,053,000 compared with C$2,421,073,000 the previous year.