MISSISSAUGA, Ontario –  During a period of lower market value for the pork business in Canada, Maple Leaf Foods Inc. reported a drop in the first quarter profit for the period ended March 31, 2018, compared to the previous year. 

Net earnings for the first quarter decreased 7.3 percent to C$27.9 million ($0.22 per basic share) compared to C$30.1 million ($0.23 per basic share) in 2017. 

"As anticipated, it was a more challenging start to the year in 2018 although we were pleased to have delivered EBITDA margins of 10.1 percent in these conditions, which reflects our balanced portfolio, brand strength and value-added product mix," said Michael H. McCain, Maple Leaf president and CEO.

The adjusted EBITDA margin in 2017 was 10.8 percent.

Despite some trouble in the pork market, first quarter sales increased to C$817.5 million ($635.9 million) from C$811.2 million ($631 million) in 2017, or 0.8 percent after adjusting for the impact of foreign exchange and acquisitions.

The Lightlife and Field Roast brands, contributed to sales increases in the quarter. Maple Leaf Foods acquired both plant-based protein companies last year. Sales of value-added fresh pork were impacted by lower market values and a transitory reduction in hog supply from Porcine epidemic diarrhea virus (PEDv) in 2017. 

“Prepared meats sales were very strong, with volumetric growth in both domestic and US markets. We had higher volumes across most of our portfolio, except fresh pork, due to temporary volume reductions that tie back to the impact of the PED virus in Manitoba last year,” Chief Financial Officer, Deborah Simpson said during a May 2 conference call.

On a segment basis, the company reported adjusted operating earnings of C$52.8 million ($41.1 million) compared to C$59 million ($45.9 million) in the first quarter of 2017.

Maple Leaf Foods also mentioned strong commercial and operating performance across the business that could help counterbalance the current market status.

"We realized excellent commercial and operating gains in the prepared meat portfolio, offset by the much-anticipated headwinds of market conditions,” McCain said. “We are now launching the most extensive food and brand renovation in our history, which will be one of our strategic growth foundations for years to come."

A key long-term strategy for the company is a brand renovation change that focuses on products consumers perceive as clean label, new packaging and new in-store displays.

McCain said the company will start to target the individual brand strategies next week, but the results of the rebranding won't be seen for a couple of years.

“This renovation has involved the repositioning of more than 600 SKUs (stock-keeping units), which is a monumental effort,” McCain said. “There will be some additional ramp-up and start-up costs in the second quarter, but most of the marketing spend represents a shift in timing.  In summary, we will have flagship brands carefully targeted, uniquely positioned to meet consumer expectations in very specific areas of consumption and demand.”

McCain also addressed the global trade situation with pork which could be a key future challenge.

“I think it’s important to recognize that it’s a global market,” he said. “So, if you create a hole here, it usually creates — if a door closes here, a window opens over there, right?”

He said he does not see a trade dispute being a big risk to Maple Leaf and added that it may have minimal impact.

“It’s similar to how these things impact other CPG companies, plus or minus, 100 basis points in a quarter,” he said.