Maple Leaf Foods: 3Q results, increased sales

Maple Leaf Foods Inc. sales from continuing operations of $820.1 million for the third quarter was an increase of 8.2% from last year, or 7.6% after adjusting for the impact of foreign exchange, due to higher pricing in the Meat Products Group.

Sales from continuing operations of $2,363.2 million for the first nine months increased 7.1%, or 6.1% after adjusting for foreign exchange, due to the same factor.

“We continue to make important advances towards our strategic goals,” said Michael H. McCain, president and CEO. “We have benefited from improved margins during a period of unprecedented volatility and high costs in the raw materials market. We are managing the related impact on demand and see the volume decline as short term. While the ongoing cost of duplicate supply chains and start-ups continues to be material, we are achieving milestones every quarter. Product transfers into the new Heritage facility in Hamilton continue, facilitating one more plant closure in the quarter.”

Adjusted Operating Earnings for the third quarter was a loss of $19.8 million (loss of $20.3 million last year) and $61.8 million for the nine months (loss of $80.4 million last year).
Adjusted Earnings per Share for the quarter was a loss of $0.13 (loss of $0.19 last year) and $0.49 for the nine months (loss of $0.66 last year)
Net loss from continuing operations for the third quarter was $26.7 million (loss of $24.5 million last year) and $190.8 million for the nine months (loss of $93.5 million last year)
The company ended production at its plant in Moncton, leaving three remaining plants to close to complete its supply chain transformation

Adjusted Operating Earnings for the third quarter was a loss of $19.8 million compared to a loss of $20.3 million last year. The Meat Products Group benefited from improved pork processing margins and price increases, while impacted by ongoing transitional costs and lower volumes. For the first nine months, Adjusted Operating Earnings was a loss of $61.8 million compared to a loss of $80.4 million last year, with improved processing margins and price increases more than offsetting the ongoing transitional costs in the period.

Adjusted Earnings per Share was a loss of $0.13 in the third quarter of 2014 compared to a loss of $0.19 last year. For the first nine months, Adjusted Earnings per Share was a loss of $0.49 compared to a loss of $0.66 last year.

Net loss from continuing operations for the third quarter was $26.7 million (loss of $0.19 per basic share attributable to common shareholders) compared to a loss of $24.5 million (loss of $0.18 per share) last year. This included $14.3 million ($0.07 per share) of pre-tax expenses related to restructuring and other related costs (2013: $11.4 million, or $0.06 per share).

For the first nine months, net loss from continuing operations was $190.8 million (loss of $1.35 per share) compared to a net loss of $93.5 million (loss of $0.67 per share) last year. This amount included $56.0 million ($0.30 per share) of pre-tax expenses related to restructuring and other related costs (2013: $62.7 million or $0.33 per share), as well as financing costs of $98.6 million related to the repayment of the Company’s long-term notes payable in April 2014.

Meat products group

Includes value-added prepared meats, lunch kits and snacks, and fresh pork, poultry and turkey products sold under leading Canadian brands such as Maple Leaf, Schneiders and many leading sub-brands.

Sales in the Meat Products Group for the third quarter increased 8.4% to $814.7 million, or 7.8% after adjusting for the weaker Canadian dollar that benefited pork exports. The increase was driven by higher values for fresh pork as well as price increases implemented in the prepared meats business during the second quarter of 2014 in response to higher raw material costs. As expected, the business is experiencing a period of lower demand and volume in response to this pricing action. This is being actively managed and volumes are expected to recover in the next one to two quarters.

For the first nine months, sales increased 7.5% to $2,345.7 million, or 6.5% after adjusting for the impact of foreign exchange, largely due to the same factors noted above.

Adjusted Operating Earnings for the third quarter improved to a loss of $18.2 million compared to a loss of $21.6 million last year, as a result of increased margins in the Meat Products Group, which benefited from price increases in the prepared meats business and higher earnings in the fresh pork business, reflecting increased pork processing margins which more than offset a decline in volume resulting from lower hog supply in Western Canada. Earnings in the poultry business increased slightly as a result of improved poultry processing margins.

The prepared meats business incurred transitional costs of approximately $25.2 million during the third quarter of 2014, consistent with the second quarter of 2014 and an increase from $14.6 million in the third quarter last year. These costs largely related to commissioning activities at the new prepared meats facility in Hamilton, the largest in the Company’s network, and duplicative overhead costs from legacy plants scheduled to be closed.

For the first nine months, Adjusted Operating Earnings was a loss of $61.3 million compared to a loss of $43.6 million last year. The decline in earnings was due to the same factors noted above, including higher transitional costs and increased raw material costs, which had not been fully offset by price increases implemented in the second quarter. Raw material prices continued to remain higher than last year due to the outbreak of disease in hog production herds in the U.S.

Agribusiness Group

Includes Canadian hog production operations that primarily supply the Meat Products Group with livestock as well as toll feed sales.

Agribusiness Group sales for the third quarter declined to $5.4 million compared to $6.3 million last year, due to lower pricing on toll feed sales. Sales for the first nine months declined to $17.6 million from $24.4 million.

Adjusted Operating Earnings in the third quarter declined to a loss of $1.6 million compared to a gain of $1.6 million last year as the hog production operations experienced additional costs related to prevention of the PED virus. In addition, there was a nonrecurring gain in the third quarter last year related to a reversal of a provision for a hog supply arrangement no longer required. For the first nine months, Adjusted Operating Earnings increased to $3.3 million from a loss of $28.3 million last year, as the higher market prices for hogs, net of hedging activities, exceeded higher hog production costs.

For more info: Maple Leaf Foods