Maple Leaf Foods Announces Record Results : 1999 Operating Earnings up 42% over 1998
TORONTO, ONTARIO--Maple Leaf Foods Inc. (TSE/ME:MFI) announced today its 1999 fourth quarter and December 31, 1999 year-end results. Mr. Michael H. McCain, President and Chief Executive Officer of Maple Leaf Foods, said: "We are pleased to report that the Company achieved strong fourth quarter earnings and record annual earnings for the year ended December 31, 1999. The combined financial results of the Meat Products Group and the Agribusiness Group benefited from our unique "vertical coordination" pork and poultry value chain business model, particularly in the fourth quarter. While Bakery Products Group earnings remain unsatisfactory, solid operational progress was made against the turnaround plan in the fourth quarter."
Sales for the fourth quarter of $ 919 million were up by 4% from $883 million last year. Sales for the year of $3.6 billion were up 8% from $3.3 billion last year.
Earnings from operations, before unusual items, for the fourth quarter of $44.4 million compared to $45.0 million ($47.4 including Franchise Operations, which were sold early in 1999) last year. Earnings from operations, before unusual items, for the year of $146.5million were up 42% from $103.4 million last year.
Net earnings for the quarter of $22.9 million ($0.23 per share) were up by 19% from $19.2 million ($0.20 per share) last year. Net earnings for the year of $77.2 million ($0.77 per share), compared to a loss of $23.3 million ($0.25 per share) last year.
In the fourth quarter, the Company recorded a number of one-time gains and losses, as well as a special charge against operating earnings, the net effect of which was positive to earnings. The one-time gains and losses are discussed below under Other Information. The Company also recorded a one-time gain on the sale of a business in the second quarter. The special charge taken in the fourth quarter relates to centralization and streamlining of certain administration processes and manufacturing operations, all of which will be undertaken in 2000.
Net earnings for the year before one-time gains and losses and the special charge were $68.8 million ($0.68 per share) which compares to $32.1 million ($0.34 per share), before unusual items, in 1998. Earnings per share of $0.68 in 1999 represents a compound annual growth rate of 23% over the last four years.
Meat Products Group
Meat Products Group sales for the fourth quarter of $527 million compared to $547 million last year. Earnings from operations, before unusual items, for the fourth quarter were $17.6 million compared to $21.9 million last year. Sales for the year of $2.1 billion were up 9% from $2.0 billion last year. Earnings from operations, before unusual items, for the year of $66.5 million were up 124% from $29.7 million last year.
Maple Leaf Pork had a very successful year, although year-over-year earnings were lower as a result of unseasonally high live hog prices relative to the record low prices experienced last year, and the adverse short-term impact of the closure of fresh pork operations in Winnipeg. The closure followed the commencement of operations at the Brandon fresh pork facility. "Against almost any measure, the start-up has been tremendously successful to-date" added Mr. McCain. The plant is currently processing at about 80% of its single shift capacity and is expected to be processing at full single shift capacity by the second quarter of 2000.
Maple Leaf Consumer Foods and Maple Leaf Poultry both recorded strong year-over-year earnings improvement as they continued to achieve excellent market success with their branded, value-added products, including Maple Leaf Top Dogs wieners, Maple Leaf Ready Crisp pre-cooked bacon and Maple Leaf Prime poultry. Maple Leaf processed meats products have fully recovered the market share losses experienced related to the 1997/98 labour-dispute. Sales of Maple Leaf Prime poultry continue to grow at a significant pace.
Maple Leaf Foods International had a highly successful year reporting strong year-over-year earnings growth as it continued to capitalize on its substantial international marketing and distribution capabilities at the same time as many Asian economies began rebounding.
In February 2000, the Company announced it had reached an agreement to purchase Hub Meat Packers Limited of Moncton, New Brunswick and Larsen Packers Limited of Berwick, Nova Scotia. The two companies have combined sales of about $270 million. Closing is subject to regulatory approvals.
Group Bakery Products Group sales for the fourth quarter of $158 million were down from $170 million last year. Earnings from operations, before unusual items, for the fourth quarter of $3.5 million compares to $5.8 million ($8.1 million including Franchise Operations) last year. Sales for the year of $676 million compares to $663 million last year. Earnings from operations, before unusual items, for the year of $9.7 million compares to $ 16.4 million ($ 20.5 million including Franchise Operations) last year.
Canada Bread achieved solid operational gains during the year. While year-over-year earnings were down slightly, earnings for the fourth quarter increased compared to last year. Stronger financial results are expected in 2000 following continued operating improvements. In the United States, Maple Leaf Bakery recorded a loss for the year principally due to the loss of some non-core contracted private label business. Sales of par-baked bread products increased significantly, up 18% for the year over last year. Based on continued sales growth and numerous cost reduction initiatives undertaken late in 1999 and early in 2000, Maple Leaf Bakery is expected to return to profitability early in 2000. In addition to aggressively implementing the turnaround plan, numerous transactional alternatives are being assessed in order to ensure the full value potential of the Bakery Products Group is achieved and properly reflected in the Company's share price.
Agribusiness Group sales for the fourth quarter of $234 million increased by 41% from $166 million last year. Earnings from operations, before unusual items, for the fourth quarter of $23.3 million were up 35% from $17.3 million last year. Sales for the year of $741 million were up 14% from $653 million last year. Earnings from operations, before unusual items, for the year of $70.3 million were up 32% from $53.2 million last year.
The strong growth in sales and earnings were driven by several factors. The Shur-Gain animal feed and nutrition business continued to grow profitably by leveraging its world-class technology and the tremendous strength of the Shur-Gain brand name. Shur-Gain was successful in exiting the Quebec hog growing operations which adversely affected 1998 results. The purchase of Landmark Group, which was completed in October 1999, was accretive to earnings in the fourth quarter. Rothsay Rendering reported highly satisfactory earnings which were comparable to last year in spite of difficult market conditions. Finally, the Agribusiness Group benefited from implementation of our "vertical coordination" pork and poultry value chain business model.
Other income for the fourth quarter of $18.6 million compares to $0.7 million last year. In the fourth quarter the Company realized a gain on insurance proceeds related to a fire in a Chicago, Illinois bakery, realized a gain on the sale of the assets of its majority owned cat litter business, Canbrands International, and recorded a pre-tax expense related to the disposition of a business. These amounts are included in Other Income for the quarter. Other Income for the year also includes a gain on the sale of the Franchise Operations, which was completed in the second quarter.
The Company elected to retroactively change the method used to account for post-retirement benefits, other than pensions, from a cash basis to an accrual basis. As a result of this change in accounting policy, opening deficit at January 1, 1998 increased by $4.0 million, and other long term liabilities increased by $6.5 million and deferred income taxes decreased by $2.5 million as at December 31, 1998.
The Company has not experienced any significant difficulties associated with Year 2000 computer issues.
The Company declared a dividend of $0.04 per share payable on March 31, 2000 to shareholders of record on March 17, 2000.
Mr. McCain concluded, "We are exceptionally pleased with the strategic, operational and financial progress achieved in 1999. With the strength of our branded products, our new product pipeline, the recent opening of our Brandon fresh pork facility, the Landmark Group acquisition, the economic potential of our vertical coordination business model, operational progress in the bakery turnaround and numerous other exciting initiatives that are underway, we look forward to strong and profitable growth in 2000 and beyond."
|Q4 1999 (File Size = 140k)|
1999 Annual Report (PDF File Size = 2.8M)
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