According to the report, Adjusted Operating Earnings increased 20 per cent to C$52.2 million from $43.6 million last year, while Adjusted EPS increased 42 per cent to $0.17 compared to $0.12 last year.

Net earnings, which include a non-cash pre-tax charge of $20.7 million due to the change in fair value of long-term interest rate swaps, were $3.0 million compared to $4.9 million last year.

Michael H. McCain, President and CEO, commented: "We are very pleased with the continued steady improvements across our business in spite of challenging market conditions. The protein business saw healthy improvements in financial performance while facing significant raw material cost increases. We expect this trend of improvement to continue. While our bakery business earnings were off slightly from year ago, there was a solid recovery in margin towards more normal levels that we expect to continue in the second half of the year."

Financial overview

Sales for the second quarter decreased four per cent to $1,271.4 million compared to $1,320.8 million last year. Sales declined due to currency impacts on US and UK bakery operations and fresh pork sales, and lower sales volumes in prepared meats. These impacts were partly offset by higher sales values of fresh pork. Adjusted Operating Earnings increased 20 per cent to $52.2 million compared to $43.6 million last year, mostly due to better performance in the Meat Products Group.

Net earnings, which include a non-cash pre-tax charge of $20.7 million due to the change in fair value of long-term interest rate swaps not designated in a formal hedging relationship, were $3.0 million in the second quarter of 2010 compared to $4.9 million last year. The impact of the interest rate swaps was partly offset by the benefits of increased Adjusted Operating Earnings and lower restructuring costs and interest expense.

Meat Products group

Includes value-added prepared meats, chilled meal entrees and lunch kits; and fresh pork, poultry and turkey products sold to retail, food-service, industrial and convenience channels. Includes leading Canadian brands such as Maple Leaf, Schneiders and many leading sub-brands.

Sales for the second quarter declined two per cent to $815.7 million from $830.4 million in the second quarter last year. Price increases in the prepared meats business had the expected effect of reducing volumes in the short-term as consumers adjust to new price levels. Additionally, the impact of a stronger Canadian dollar on fresh pork sales and the exit of a non-core business category reduced sales. These impacts were partly offset by improved pork markets and increased net pricing in prepared meats.

Adjusted Operating Earnings in the Meat Products Group increased to $14.4 million compared to $1.7 million last year, reflecting better results in the Company's fresh poultry operations due to improved markets and operating efficiencies. Earnings in the prepared meats business were impacted by higher meat prices and lower volumes. Meat prices continued to be significantly higher than the prior year, following very material increases in December 2009. The Company began implementing price adjustments in the second quarter and will complete this process in the third quarter. As a result, increased raw material costs were only partly recovered during the second quarter. Earnings from pork primary processing declined as export margins were reduced by the stronger Canadian dollar. This decline was partly offset by improved North American industry market conditions. During the second quarter the Company initiated the process to sell its primary pork processing plant in Burlington, Ontario, which processes approximately two million hogs annually.

Agribusiness group

Consists of Canadian hog production and animal by-product recycling operations.

Agribusiness group sales declined two per cent to $54.1 million from $55.0 million in the second quarter last year due to lower sales prices in the rendering operations.

Adjusted Operating Earnings for the Agribusiness Group decreased to $13.8 million from $16.3 million as lower by-product recycling results were only partly offset by improvements in hog production. North American hog production operations returned to profitability in the second quarter of 2010 driven by higher hog prices and the Company's earnings improved as a result, although this benefit was partly offset by the stronger Canadian dollar and government support to compensate hog producers for losses received last year in the second quarter.

Further Reading

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