Maple Leaf Foods swings to Q3 profit

by Erica Shaffer
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TORONTO – Downsizing and reorganizing is paying off for Maple Leaf Foods Inc., which reported a profit for the third quarter.

Net earnings for the third quarter ended Sept. 30 were C$18.7 million ($14.13 million), or C$.13 (10 cents) per share compared to a net loss of C$26.8 million ($20.26 million), or C$.19 (14 cents)per share a year ago. Sales for the quarter declined to C$818.8 million ($618.9 million) from C$820.1 million ($619.9 million) a year ago. The company attributed its improved performance in the quarter to lower selling, general and administrative costs and lower restructuring and other related costs. 

Michael McCain, CEO of Maple Leaf Foods Inc.
Michael McCain, president and CEO

“We continued to build on a consecutive trend of quarter-over-quarter growth in Adjusted EBITDA margin, delivering 7.1 percent in the third quarter compared to 6.0 percent last quarter and a significant turnaround from 0.5 percent last year,” Michael McCain, president and CEO, said in a news release. “We are making meaningful progress on eliminating inefficiencies driven by the ramp-up of our new facilities, though not at the pace we had hoped for. We estimate these contributed over 320 basis points of margin in the quarter. Delivering on our strategic margin goal of consistent double digits will be achieved through reaching stable end-state production in our new network, which we expect will extend into 2016. Along with efficiency gains, we are launching a number of exciting initiatives, including a strong platform for more sustainable meat production, to deliver ongoing profitable growth.”

On a segment basis, sales in the company’s Meat Products Group reached $814.8 million ($615.8 million), a decrease of 2 percent when adjusting for the weaker Canadian dollar. Higher volumes in fresh pork and a favorable sales mix with fresh poultry offset lower selling prices for fresh pork and a slight decline in prepared meats volume, the company said.

“Earnings in prepared meats increased as a result of improved margins from lower operating and raw material costs,” the company said. “Earnings in fresh pork increased as a result of improved pork processing margins and higher margins for export and Canadian retail sales, which were partially offset by lower by-product values.”

An increase in the pork cutout drove improvements in pork processing margins and higher margins for export and Canadian retail sales. Earnings in fresh poultry advanced on improved poultry processing margins and increased branded poultry earnings, Maple Leaf said.

Revenues in the Agribusiness Group retreated to $ 4 million ($3.02 million) compared to $5.4 million ($4.08 million) a year ago due to lower external sales volume for feed. Adjusted operating earnings in the quarter advanced to $1.6 million ($1.21 million) compared to a loss of $1.6 million a year ago.

Adjusted operating earnings for the first nine months of 2015 improved to $62.0 million ($46.86 million) compared to a loss of $61.8 million ($46.71 million) last year. Sales from continuing operations for the first nine months increased 2.4 percent to $2.42 billion ($1.81 billion), or 0.9 percent on (after adjusting for the foreign exchange) higher sales in the Meat Products Group.

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