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Maple Leaf Sees Sales Rise

by 5m Editor
30 April 2009, at 12:28pm

Canadian meat processor, Maple Leaf Foods, saw sales for the first quarter increase by 6.3 per cent to C$1.3 billion compared to C$1.2 billion last year.

This. the company said. reflected price increases and the benefit of favourable foreign currency changes on fresh meat sales.

Earnings from operations before restructuring and other related costs and other income and expenses fell by 4.5 per cent to C$31.6 million compared to C$33.1 million last year, as significant declines in packaged meat earnings were mitigated by benefits from the restructuring of pork processing and hog production operations and price increases across the bakery business.

"Results in the first quarter were overshadowed by depressed margins in our packaged meat operations, as we continue to recover from the major product recall last year," said Michael H. McCain, President and CEO.

"While volumes improved, which was our first priority, margins will take longer to restore. Our bakery businesses have largely rebounded from the commodity impacts of last year, and our protein restructuring is yielding ongoing benefits.

"Although we are in the midst of a deep global recession, our product portfolio delivers good value at reasonable prices. As our business has stabilised, we are now focused on sustaining the volume recovery, improving margins and realizing higher growth rates in our core categories."

Adjusted Operating Earnings in the Meat Products Group fell to C$11.4 million in the first quarter of 2009 compared to C$25.0 million last year.

Margins in packaged meat products were significantly lower than last year due to the impact of volume recovery efforts following last year’s product recall.

Higher raw material costs and the effect of foreign exchange on raw material costs could not be passed on in this environment of business recovery, and significant promotional costs were incurred to support volume recovery objectives.

Over the next several months, the Maple Leaf management will be implementing actions to restore margins, including appropriate price action, reducing internal costs and resuming more normalized investment in promotions.

In response to the economic recession, marketing and innovation activities are focused on shifting the product mix to offer consumers a greater variety of value propositions.

Earnings from fresh pork operations improved significantly in the first quarter, as the benefits from double shifting the pork processing plant in Brandon, Manitoba, the consolidation of ham boning operations and the closure of less efficient plants were realised.

A weaker Canadian dollar resulted in higher sales prices for fresh pork and increased earnings from international sales. In the first quarter, the Company announced that due to difficult credit markets, it has suspended actively marketing its pork processing business in Burlington, Ontario.

The sale process for this business is expected to resume when credit markets stabilise and an appropriate sale value can be realised. The business is profitable and contributed to cash flow and earnings for the quarter. Earnings from the Company’s poultry operations were consistent with last year.

Adjusted Operating Earnings for the Agribusiness Group in the first quarter of 2009 increased to C$2.1 million from a loss of C$2.8 million last year.

Results for the first quarter last year included $8.4 million in government support.

While earnings from by-products recycling operations were consistent with last year, results in hog production improved significantly due to lower production following the sale or exit of non-core operations in Ontario and Alberta.

Restructuring and simplification of the core operations in Manitoba resulted in operational improvements such as lower cycle times and improved feed efficiency and hog quality.