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Maple Leaf reports “significant improvements”

by 5m Editor
26 February 2007, at 11:37am

TORONTO - Maple Leaf Foods Inc. has reported its financial results for the fourth quarter and year ended December 31, 2006.

"Our combined operations achieved significant improvements in the fourth quarter, resulting in a 27% increase in earnings before restructuring and other related costs. Although a strong result compared to last year, it does not reflect our true earnings potential or meet the financial targets we have set for the Company." said Michael McCain, President and CEO. "We are moving forward aggressively with a major reorganization of our protein businesses to re-align the Company's focus on value-added meats and meals and bakery consumer products. We expect 2007 will be a year of change as we align operations to the new protein business model. The reward for investors will be a simpler, more profitable Company with leading market shares in the higher margin, high growth meats and meals and bakery sectors of the global food industry, reduced exposure to currency and commodities, and lower earnings volatility."

The new strategy for the Company's protein business announced in the fourth quarter of 2006 involves simplifying hog production operations, reducing hogs processed annually from over 7 million currently to approximately 4.5 million, divesting of non-core operations including animal nutrition and non-core global businesses, and focusing on growth and innovation in the value added meats and meals and bakery businesses, where the Company has strong market positions and brand leadership.

In the fourth quarter of 2006, the Company recorded restructuring and other related costs of $44.9 million ($34.3 million after tax and minority interest), of which $29.8 million is related directly to the protein reorganization. The balance is related to the closure of a poultry facility in Nova Scotia, the closure of a bakery in Langley, B.C. and the write-off of an investment in a Caribbean flour operation.

Sales for the fourth quarter of $1.5 billion were consistent with the same period last year, while sales for the year decreased 4% to $5.9 billion, primarily due to the impact of currency. Earnings from operations before restructuring and other related costs for the fourth quarter increased 27% to $65.4 million, while operating earnings before restructuring and other related costs for the year decreased to $223.9 million compared to $263.0 million. Management believes that this is the most appropriate basis on which to evaluate operating results, as restructuring and other related costs are not representative of continuing operations.

Meat Products Group (branded value-added prepared meat products; fresh, frozen and branded value-added pork products; fresh, frozen and branded value-added chicken and turkey products; and global food marketing, distribution and trading)

Meat Products Group sales for the fourth quarter decreased 6% to $942 million compared to $998 million last year, while sales for the year decreased 9% to $3.7 billion compared to $4.1 billion last year. This decrease was due primarily to currency changes, a decline in volumes to Japan, and a 2% reduction in the number of hogs processed. Volumes in the Consumer Foods business also declined marginally as the Company exited non-profitable products.

Earnings from operations before restructuring and other related costs for the fourth quarter increased significantly to $37.9 million from $10.4 million last year. Consumer foods operations achieved strong earnings growth in the quarter, benefiting from an improved sales mix and margins as a result of price increases implemented to offset higher raw material costs. Fresh pork operations benefited from initiatives to increase manufacturing efficiencies and reduce costs, improved sales and customer mix. The fresh poultry operations recorded a substantial increase in earnings, largely due to an improvement in underlying commodity prices.

Earnings from operations before restructuring and other related costs for the year increased to $74.4 million from $59.9 million in 2005. The consumer foods operations achieved excellent results in 2006, supported by its leading brands and market shares, and rising demand in both the food service and retail markets for fully cooked meats and meal solutions. The business also benefited from lower raw material costs earlier in the year, price increases to offset higher energy and related costs, and synergies related to the Schneider Foods acquisition. During the year, Maple Leaf extended its leadership in the value-added meats and meals category with the very successful launch of Schneiders Fully Cooked Sausages, Maple Leaf Grilled Meat Strips, and expansion of the very popular Maple Leaf Fully Cooked Roasts product line. Growth in the consumer foods group more than offset a year-over-year decline in the earnings of the fresh pork operations that was largely related to the ongoing impact of a high Canadian dollar on global competitiveness. Earnings from fresh poultry operations increased in 2006, as industry-wide processor margins recovered from the depressed levels of the prior year.

ThePoultrySite News Desk

5m Editor