Maple Leaf Foods Inc. has reported its financial results for the fourth quarter and the year ended 31 December 2009. Fourth quarter highlights are its net earnings of C$21.9 million compared to a net loss of C$14.6 million. Adjusted EPS has increased to C$0.19 compared to C$0.12 last year due to substantial recovery in the prepared meats business, and the adjusted operating earnings increased to C$57.8 million from C$35.4 million.

Michael H. McCain, President and CEO, commented: "The increased earnings in the fourth quarter reflect significantly better performance in our protein business, offset slightly by a softer quarter in the bakery segment. Our prepared meats results improved substantially, although an unexpected, counter seasonal run-up in raw material costs compressed margins in both primary processing and prepared meats late in the quarter. In our bakery operations, lower wheat costs were more than offset by higher promotional activity to launch new products and poor market conditions affecting our UK business.

"In 2009, we substantially completed the restructuring of our protein operations and focused our company on higher margin consumer packaged goods. Looking ahead, our priority is to increase earnings and margins to levels consistent with our peers. We have work to do on this goal and it will involve achieving the full potential of our prepared meats business, investing in our plant network to reduce costs, and delivering higher levels of organic growth."

Financial overview

Sales for the fourth quarter decreased one per cent to $1,324.9 million compared to $1,339.7 million last year, while sales for the year were consistent at $5.2 billion.

Adjusted Operating Earnings increased to $57.8 million compared to $35.4 million last year, while earnings for the year increased to $196.1 million compared to $128.4 million last year, due to better performance in prepared meats and fresh poultry businesses. This improvement was partly offset by lower pork earnings, higher pension expense, and increased promotional, marketing and other expenses in the bakery operations.

Net earnings increased to $21.9 million or $0.16 per share in the fourth quarter of 2009 compared to a net loss of $14.6 million or $0.12 per share last year.

Meat Products group

This includes value-added prepared meats; chilled meal entrees and lunch kits; value-added fresh pork, poultry and turkey products.

Sales for the fourth quarter were largely consistent with last year. Adjusted Operating Earnings in the Meat Products Group increased to $24.2 million compared to a loss of $2.1 million last year. For the year, Adjusted Operating Earnings were $55.4 million compared to $29.5 million last year.

Earnings in the fourth quarter benefited from an increased contribution from the prepared meats business following a major product recall in August 2008. Although earnings are higher, they compare with a quarter that was materially impacted by the August 2008 product recall, and there still remains significant room to further increase sales and profitability.

Volumes in the prepared meats business continued to trend closer to historical levels, while margins increased compared to the fourth quarter of last year mainly due to lower raw material and packaging costs, the benefit of a stronger Canadian dollar and normalized supply chain operations. While earnings performance has improved compared to the prior year, margins were compressed in the latter part of the fourth quarter as the expected seasonal declines in meat prices did not materialize, with raw material prices rising sharply in December.

Earnings were lower in primary processing due to an increase in live hog market prices that compressed margins. Reduced pork earnings were partly offset by improved fresh poultry results due to better industry processor margins and operating efficiencies.

Agribusiness group

This covers pig production and animal by-products recycling.

Sales increased to $50.7 million from $49.2 million last year. Higher bio-diesel sales were partially offset by the impact of lower commodity prices which reduced the sales values of recycled by-products in the rendering operations.

Adjusted Operating Earnings for the Agribusiness Group in the fourth quarter rose to $14.5 million compared to $13.0 million in the prior year. Adjusted Operating Earnings for the year increased to $48.0 million from $30.1 million in 2008.

Improved earnings in the quarter were driven by higher sales volumes of bio-diesel in the Company's rendering operations. Earnings in the fourth quarter included increased bio-diesel production credits received from the Canadian government. This increase reflects a structural change in the support of renewable fuels that should improve industry-wide economics. Losses in hog production increased compared to last year due to lower hog prices on average and the strengthening of the Canadian dollar which reduces the sales value of hogs.

Further Reading

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