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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.”

Financial Results

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.

Bakery Products

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

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 Information

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)