"We fully expected the first half of 2008 to be very difficult for Maple Leaf due to the extreme inflation and volatility in commodity markets." said Michael H. McCain, President and CEO.

"We are focused on persevering through these unprecedented market conditions, maintaining our focus on executing the structural changes we have committed to and passing on price increases to offset the effects of commodity inflation. While the first half has been pressured, we believe the second half of 2008 will show a substantial recovery as markets stabilize and the early benefits of restructuring are realized."

Earnings from continuing operations before restructuring and other related costs ('Adjusted Operating Earnings') decreased by 64.1% to 18.9 million Canadian dollars ($) for the quarter. High wheat and fuel costs compressed margins in the Bakery Products Group as price increases implemented earlier in the year were not sufficient to cover high input costs.

Hog production operations continued to be affected by lower hog prices and higher feed costs. In the protein business, declining poultry processor margins and a higher Canadian dollar were only partly offset by improved pork processor margins. Also included in earnings for the quarter were costs of $3.1 million (2007: $0.4 million) related to consulting and systems conversion initiatives.

Earnings per share from continuing operations before restructuring and other related costs and certain non-recurring tax adjustments ('Adjusted EPS') for the quarter were a loss of $0.01, compared to earnings of $0.13 last year. Year-to-date earnings per share, on a comparable basis, were $0.03 compared to $0.25 last year.

Business Segment Review

Meat Products Group

Second Quarter: 2008 $5.7 million; 2007, $15.0 million; Change (62.0%)
Year-to-date: 2008 $30.7 million; 2007 $36.5 million; Change (15.8%)

This includes value-added processed packaged meats; chilled meal entrees and lunch kits; value-added pork, poultry and turkey products; and global meat sales.

Adjusted Operating Earnings for the second quarter were $5.7 million compared to $15.0 million last year, primarily due to a decline in fresh poultry margins as a result of higher feed and related live bird costs and the effect of a stronger Canadian dollar, which offset improvements in pork processor margins. In the fresh pork business, although results improved over last year, the Company did not realize the full benefit of improved industry margins due to volatility of hog prices in the period. The packaged meat and meals business was impacted by inflationary pressures and costs of investment in innovation. The Company will continue to increase prices to manage rising costs.

The restructuring of the Company's protein operations, which involves significantly reducing the size of its hog and fresh pork operations and expanding its value added meat and meals businesses, is proceeding on schedule and is expected to be completed by the end of 2009. Early benefits were realized from lower manufacturing overheads due to the closure of three sub-scale processing plants, double-shifting the front-end processing at the Brandon pork plant, and reduced administration expenses. The financial benefits from these initiatives have to date been offset by start-up costs, but management expects the restructuring to contribute on a net basis to earnings in the second half of the year.

Two new distribution warehouses in Western Canada were commissioned during 2008, allowing the consolidation of existing warehouses and third party storage into these facilities, in Coquitlam and Saskatoon. Although start-up costs associated with the commissioning of these facilities are expected, reduced costs and improved efficiencies should contribute to earnings towards the end of the year.

Further Reading

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