Media Centre
2007/07/27

Maple Leaf Foods Reports 2007 Second Quarter Financial Results

TORONTO, Jul 27, 2007 (Canada NewsWire via COMTEX News Network) -- Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the second quarter ended June 30, 2007.

"We are very pleased with our performance in the second quarter from both an operating and a strategic perspective," said Michael McCain, President and CEO. "Our primary focus is the strategic transformation of the business to a focused, value-added meat, meals and bakery company, and we made excellent progress during the quarter. We finalized the sale of our animal nutrition business, we began the process of consolidating hog processing by closing a plant, and we are on track to complete what is a very complex change process. Operationally we delivered a solid profit performance in the second quarter, which in the context of our activity level and rising grain and meat raw material costs, was an excellent accomplishment."

Sales for the second quarter decreased 3% to $1.3 billion while earnings from continuing operations, before restructuring and other related costs, increased 12% to $52.7 million from $46.8 million last year. Management believes this is the most appropriate basis on which to evaluate operating results, as restructuring and other related costs are not representative of continuing operations. In the second quarter of 2007, the Company recorded restructuring and other related costs as a part of continuing operations of $30.7 million ($27.2 million after tax), of which $27.8 million related to the Company's strategic reorganization of its protein operations.

Earnings per share from continuing operations before restructuring and other related costs, net of taxes, were $0.13, compared to $0.12 last year, while year-to-date earnings per share on a comparable basis were $0.25 compared to $0.20 last year. The Company reported a net loss for the quarter of $1.7 million ($0.01 per share) compared to net earnings of $21.2 million ($0.17 per share) in the prior period.

The results of the animal nutrition business have been reflected separately as discontinued operations in the current and comparative results. Therefore all operating earnings comparisons exclude the results of the animal nutrition business. Following is a summary of earnings per share ("EPS") from continuing operations, before restructuring and other related costs:

   
                                          Second Quarter       Year-To-Date
                                      ---------------------------------------
                                          2007      2006      2007      2006
                                          ----      ----      ----      ----

    Reported EPS from continuing
     operations                        $ (0.05)  $  0.12   $ (0.01)  $  0.20

    Restructuring and other related
     costs, net of tax (ii)            $  0.18   $     -   $  0.26   $     -

                                      ---------------------------------------
    EPS from continuing operations
     before restructuring and other
     related costs (i)                 $  0.13   $  0.12   $  0.25   $  0.20

    Discontinued operations            $  0.04   $  0.05   $  0.08   $  0.10

                                      ---------------------------------------
                                      ---------------------------------------
    Total EPS before restructuring
     and other related costs (i)       $  0.17   $  0.17   $  0.33   $  0.30
                                      ---------------------------------------
                                      ---------------------------------------

    (i) These are not recognized measures under Canadian GAAP. Management
    believes that this is the most appropriate basis on which to evaluate
    results, as restructuring and other related costs are not representative
    of continuing operations.
    (ii) Includes the per share impact of restructuring and other related
    costs net of tax and includes the recognition of a tax benefit of
    $5.1 million in Q2 related to the sale of the animal nutrition business.
    >>

Sale of Animal Nutrition Business

---------------------------------

On July 20, 2007, the Company completed the sale of its animal nutrition business to Nutreco Holding NV for $512 million subject to final closing adjustments. The Company estimates that it will record an after-tax gain in the third quarter of approximately $210 million on the transaction and approximately $190 million ($1.50 per share) after accounting for a $20.7 million goodwill impairment charge related to the transaction, which is recorded in earnings in the second quarter. Earnings attributable to the animal nutrition business are reported as discontinued operations. This sale represents another significant step in the Company's strategic reorganization to focus on its value-added meat, meals and bakery businesses. The transaction will result in a significant de-leveraging of the Company's balance sheet and provide it with flexibility to re-invest in growing its core businesses.

Included in the total assets of the Agribusiness Group prior to the sale was $99 million of goodwill recorded. Of this amount, $78 million has been allocated directly to the animal nutrition business being sold. A further $20.7 million of goodwill was, under the accounting rules, allocated to Maple Leaf's remaining feed and hog operations. The sale of the animal nutrition business places certain restrictions on the operations of two feed mills that have been retained by Maple Leaf to supply feed to its own hog production operations. This has reduced the assessment of future cash flows related to these remaining feed and hog operations. As a result, the Company has determined that this goodwill previously allocated to the remaining feed and hog operations is impaired and has recorded an impairment charge of $20.7 million in the second quarter.

Discontinued Operations

-----------------------

The operating results of the animal nutrition business that were sold have been classified as discontinued operations in the second quarter of 2007 and comparative amounts have been restated on a comparable basis. Earnings per share from discontinued operations were $0.04 for the quarter (2006: $0.05) and $0.08 for the first six months of 2007 (2006: $0.10).

Operating Review

----------------

Operating earnings from continuing operations for the second quarter before restructuring and other related costs increased 12% from last year, reflecting a 9% increase in Protein earnings and a 15% increase in Bakery earnings. For the year to date, Protein earnings from operations increased by 26%, and Bakery Products Group earnings increased by 13%.

Following is a summary of earnings from continuing operations by business segment before restructuring and other related costs:

   
    ($ millions)                  Second Quarter            Year-to-Date
                            ------------------------ ------------------------
                               2007    2006  Change     2007    2006  Change
                               ----    ----  ------     ----    ----  ------
    Meat Products Group      $ 14.8  $ 13.6      9%   $ 36.2  $ 27.3     33%
    Agribusiness Group(1)       4.6     4.2      7%      5.5     5.7     (3%)
                            ------------------------ ------------------------
    Protein Value Chain        19.4    17.8      9%     41.7    33.0     26%
    Bakery Products Group      33.3    29.0     15%     60.8    53.7     13%
                            ------------------------ ------------------------
                             $ 52.7  $ 46.8     12%   $102.5  $ 86.7     18%
                            ------------------------ ------------------------
                            ------------------------ ------------------------

    (1) Agribusiness Group excludes the results of the animal nutrition
    business which are reported as discontinued operations.
    >>

Meat Products Group (value-added processed packaged meats; chilled meal

entrees, soups and lunch kits; value-added pork, poultry and turkey

products; and global meat sales.)

Meat Products Group sales for the second quarter declined 8% to $879 million, primarily due to lower international trading sales, as certain trading businesses have been exited and wound down as part of the Company's strategic re-alignment.

Earnings from continuing operations before restructuring and other related costs increased to $14.8 million from $13.6 million last year. Significant progress was made in the quarter to offset rising fresh meat input costs through price increases. The Company also recorded increased earnings in its fresh poultry operations due to higher industry poultry processor margins and improved operating performance resulting in part from closing its poultry processing facility in Atlantic Canada. While pricing to offset higher fresh meat prices in the consumer foods business was passed through in the second quarter, this did not fully offset the continuous rise in input costs and further price increases are expected through the balance of the year. Industry pork processor margins were slightly lower than last year. Earnings in the Meat Products Group were also affected by higher promotional and advertising costs related to the launch of Maple Leaf Simply Fresh chilled meals.

In the second quarter, Maple Leaf closed a pork processing facility in Saskatoon and announced the closure of two other meat processing facilities. Two of these facilities are primary pork processing operations in Saskatoon and Winnipeg that combined process 30,000 to 37,000 hogs per week. The closure of these two plants supports the expansion of the Brandon plant to a double shift operation. By the end of 2009, Maple Leaf will have consolidated all of its primary pork processing in Brandon. The Company also announced the closure of a value-added meat processing facility in Etobicoke, Ontario at the end of October 2007. These operations are being relocated to the Company's facility in Brampton, Ontario, where the business will benefit from expanded capacity and new processing technology. Closure costs, including severance, decommissioning and asset write-downs, are expected to result in a restructuring charge of approximately $5.0 million before tax. Most of these costs are expected to be charged against earnings in 2007, with $1.5 million charged in the second quarter.

Agribusiness Group (swine production; and animal by-products recycling,

livestock nutrition products)

Agribusiness Group sales from continuing operations for the second quarter decreased to $64 million from $66 million last quarter.

Earnings from continuing operations before restructuring and other related costs for the second quarter increased to $4.6 million from $4.2 million last year. Although hog prices were higher than the prior year, earnings from hog production operations were significantly lower due to the impact of substantially higher feed prices and higher mortality rates due to circo virus. However, mortality rates continue to improve and are expected to normalize by the end of the year. Comparisons for the second quarter were also affected by a one-time adjustment to inventory values last year. The Company had an effective ownership of 18% of the hogs it processed in the second quarter. The restructuring of these operations is well underway, which will reduce the total hogs under management and the cost and complexity of this business, and concentrate its hog production operations in Manitoba, in proximity to the Brandon processing plant. The Company expects to complete its restructuring in Manitoba during 2007 and to sell the remainder of its hog production assets in Ontario and Alberta by mid-2008.

Earnings from rendering operations increased due to higher prices for rendered products that track rising commodity grain prices. As previously described, financial results for the animal nutrition business have been reported as discontinued operations. Maple Leaf has retained ownership of two mills in Western Manitoba and the operating results of these mills are included in the Agribusiness Group.

Bakery Products Group (fresh, frozen and branded value-added bakery

products, including frozen par-baked bakery products; and specialty pasta

and sauces)

Bakery Products Group sales for the second quarter increased 12% to $375 million from $335 million last year. Excluding acquisitions, sales increased by 6% in the second quarter, with increases in both fresh and frozen bakery operations.

Earnings from continuing operations before restructuring and other related costs of $33.3 million increased by 15% from last year, due to increased contributions from acquisitions, primarily in the U.K. and improved operating earnings in the frozen bakery businesses. Significantly higher wheat costs, which are rising along with record high corn prices, impacted margins in the bakery businesses. Profitability in the fresh pasta business declined due to higher manufacturing costs and a sharp rise in dairy and flour costs. Growth in high margin value-added categories, improvements in operating efficiencies across a number of fresh bakery plants and pricing implemented earlier in the year helped to partially offset higher raw material costs as well as some continued industry-wide volume decline in the fresh bread segment. Price increases across the Bakery Products Group are anticipated through the balance of the year.

The U.K. bakery operations continued to benefit from organic growth in the specialty bakery market as well as the contribution of acquisitions earlier in the year. The Company is currently expanding freezer capacity at its Rotherham bakery to increase production capabilities, and also increasing manufacturing capacity in its croissant bakeries. Earnings from the North American frozen bakery operations increased, benefiting from ongoing price increases. The Roanoke plant, which is the Company's largest par-baked facility, is undertaking a major warehouse expansion that will significantly increase its storage capacity and reduce costs.

Restructuring and Other Related Costs

-------------------------------------

In the second quarter, the Company recorded a charge for restructuring and other related costs from continuing operations of $30.7 million (2006: $nil). Including full-year amounts charged to earnings during 2006, the following is a summary of restructuring and other related costs incurred in 2006 and 2007:

    
    ($ millions)
                                   ------------------------------------------
                                       2006             2007
                                   ----------------------------------  Total-
                                    Full-year    Q1      Q2      YTD  to-date
                                   ------------------------------------------
    Protein value chain
     restructuring                      47.5     4.1     3.8     7.9    55.4
    Retention payments                   2.0     3.3     3.3     6.6     8.6
    Bakery plant closure                 5.5     2.2       -     2.2     7.7
    Poultry plant closure                2.3     3.1     2.9     6.0     8.3
    Impairment of a non-core
     equity investment                   7.3       -       -       -     7.3
    Goodwill impairment related
     to the sale of the animal
     nutrition business                    -       -    20.7    20.7    20.7
                                   ------------------------------------------
                                        64.6    12.7    30.7    43.4   108.0
    Discontinued operations                -     0.4     1.8     2.2     2.2
                                   ------------------------------------------
    Total restructuring                 64.6    13.1    32.5    45.6   110.2
                                   ------------------------------------------
                                   ------------------------------------------
    Cash incurred and to be
     incurred                           25.4     8.2     6.6    14.8    40.2
    Non-cash                            39.2     4.9    25.9    30.8    70.0
                                   ------------------------------------------
                                        64.6    13.1    32.5    45.6   110.2
                                   ------------------------------------------
                                   ------------------------------------------
    >>

The Company has revised its estimates of total restructuring costs upwards by $25 million primarily to reflect the goodwill impairment recorded in the second quarter relating to the remaining feed and hog operations. The Company now estimates it will incur total restructuring costs of $165 million to $215 million between 2006 and 2009. The Company's estimate of total cash restructuring costs has not changed from its previous estimate of $55 million to $75 million.

Cash Flow and Financing

-----------------------

Total debt, net of cash balances, totaled $1.3 billion at the end of the second quarter, compared to $1.1 billion last year. Cash used in operations for the second quarter was $0.4 million compared to a source of funds of $15.0 million last year. Cash flow from operating activities for the year-to-date was a use of cash of $18.0 million compared to $3.7 million in the first six months of 2006.

Total interest expense allocated to continuing activities for the quarter of $25.4 million compared to $22.5 million last year, largely due to increased debt balances resulting from strong investing activity. At the end of the second quarter, 71% of indebtedness was not exposed to interest rate fluctuations, compared to 82% in the previous year.

Capital expenditures on plant and equipment from continuing operations for the second quarter increased to $59.3 million compared to $43.5 million last year. The significant increase in capital expenditures reflects a number of initiatives that are in progress. The Company is undertaking a substantial capacity expansion in the U.K. bagel and croissant facilities, and the construction of a new warehouse at the Company's bakery in Roanoke, Virginia to increase internal capacity and reduce warehouse and distribution costs. In the second quarter, Canada Bread acquired assets previously owned by Interstate Bakery located in Lakewood, Washington for US$10 million, including a manufacturing facility and fresh bakery equipment. The Company is considering several options to utilize this purchase to continue to improve efficiencies in its western manufacturing operations. As well, the Company continued its capital investment to support the launch of the Maple Leaf Simply Fresh product line.

Forward-Looking Statements

--------------------------

This document may contain forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based upon a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Maple Leaf Foods' control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Maple Leaf does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise. Any forward-looking information in this press release speaks as of the date of this press release. Additional information about these assumptions and risks and uncertainties is contained in the filings with securities regulators including the annual information form and Management's Discussion and Analysis accompanying the financial statements in the reports to shareholders. These filings are available on the Company's website at www.mapleleaf.ca.

Other Matters

-------------

Maple Leaf Foods declared a dividend of $0.04 per share payable on September 28, 2007, to shareholders of record on September 7, 2007. Unless indicated otherwise in writing at or before the time the dividend is paid, each dividend paid by the corporation in 2007 or a subsequent year is an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System.

Maple Leaf Foods Inc. is a leading food processing company, headquartered in Toronto, Canada. The Company employs approximately 22,500 people at its operations across Canada and in the United States, the United Kingdom and Asia. The Company had sales of $5.9 billion in 2006.

An investor presentation related to the Company's second quarter financial results is available at www.mapleleaf.com and can be found on the Quarterly Results page under Investor Relations. A conference call will be held at 1:00 p.m. EDT on July 27, 2007 to review Maple Leaf Foods' second quarter financial results. To participate in the call, please dial 416-641-6113 or 866-226-1792. For those unable to participate, playback will be made available an hour after the event at 416-695-5800/800-408-3053 (Passcode 3228320 followed by the number sign).

A webcast presentation of the second quarter financial results will also be available at http://investor.mapleleaf.ca via a link http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=88490&eventID=1597727

    
           Consolidated Financial Statements
           (Expressed in Canadian dollars)

           MAPLE LEAF FOODS INC.

           Three and six months ended June 30, 2007 and 2006



    MAPLE LEAF FOODS INC.
    Consolidated Balance Sheets
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                             As at        As at        As at
                                           June 30,     June 30, December 31,
                                              2007         2006         2006
    -------------------------------------------------------------------------
                                        (Unaudited)   (Unaudited)
    ASSETS
    Current assets
      Cash and cash equivalents        $    50,249  $    33,562  $    64,494
      Accounts receivable (Note 5)         207,449      179,564      201,743
      Inventories                          427,259      383,435      388,242
      Future tax asset - current             9,415       14,217        2,128
      Prepaid expenses and other
       assets                               23,856       16,523       11,158
      Assets held for sale
       (Note 4(iii))                       271,874       98,217      280,439
      -----------------------------------------------------------------------
                                           990,102      725,518      948,204

    Investments in associated companies      1,068       39,421       15,499

    Property and equipment               1,140,469    1,072,842    1,099,000

    Other long-term assets                 278,608      269,769      279,001

    Future tax asset - non-current          18,270       33,320       23,464

    Goodwill (Note 11)                     802,403      768,958      824,741

    Other intangibles                       85,521       86,097       85,817

    Assets held for sale (Note 4(iii))           -      173,764            -
    -------------------------------------------------------------------------
                                       $ 3,316,441  $ 3,169,689  $ 3,275,726
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Accounts payable and accrued
       charges                         $   565,025  $   543,631  $   594,685
      Income and other taxes payable        21,144        6,365       18,056
      Current portion of long-term debt     85,454      105,119       91,084
      Liabilities related to assets
       held for sale (Note 4(iii))          61,433       59,105       74,474
      -----------------------------------------------------------------------
                                           733,056      714,220      778,299

    Long-term debt                       1,257,611    1,054,883    1,185,970

    Future tax liability                     7,013       52,099       29,867

    Other long-term liabilities            249,269      213,372      196,911

    Long-term liabilities related to
     assets held for sale (Note 4(iii))          -          332            -

    Minority interest                       83,269       95,843       90,237

    Shareholders' equity                   986,223    1,038,940      994,442
    -------------------------------------------------------------------------
                                       $ 3,316,441  $ 3,169,689  $ 3,275,726
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes to the consolidated financial statements are an
    integral part of these statements.



    MAPLE LEAF FOODS INC.
    Consolidated Statements of Earnings
    (In thousands of Canadian dollars, except share amounts)

    -------------------------------------------------------------------------
                                Three months ended          Six months ended
                                           June 30,                  June 30,
    (Unaudited)                  2007         2006         2007         2006
    -------------------------------------------------------------------------

    Sales                 $ 1,318,773  $ 1,356,465  $ 2,634,908  $ 2,642,762

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings from
     continuing operations
     before restructuring
     and other related
     costs                $    52,667  $    46,831  $   102,526  $    86,655
    Restructuring and
     other related costs
     (Note 2)                 (30,715)           -      (43,425)           -
    -------------------------------------------------------------------------

    Earnings from
     continuing
     operations           $    21,952  $    46,831  $    59,101  $    86,655
    Other income (Note 6)       1,501           72        1,969        1,954
    -------------------------------------------------------------------------

    Earnings from
     continuing operations
     before interest and
     income taxes         $    23,453  $    46,903  $    61,070  $    88,609
    Interest expense           25,352       22,518       49,943       44,663
    -------------------------------------------------------------------------

    Earnings (loss) from
     continuing operations
     before income taxes  $    (1,899) $    24,385  $    11,127  $    43,946
    Income taxes (Note 8)       1,749        7,105        7,965       12,884
    -------------------------------------------------------------------------

    Earnings (loss) from
     continuing operations
     before minority
     interest             $    (3,648) $    17,280  $     3,162  $    31,062
    Minority interest           2,810        2,545        4,354        5,000
    -------------------------------------------------------------------------

    Net earnings (loss)
     from continuing
     operations           $    (6,458) $    14,735  $    (1,192) $    26,062

    Net earnings from
     discontinued
     operations - net of
     income tax (Note 4(ii))    4,787        6,451        9,984       12,396

    -------------------------------------------------------------------------
    Net earnings (loss)   $    (1,671) $    21,186  $     8,792  $    38,458
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings (loss)
     per share (Note 10)
      from continuing
       operations         $     (0.05) $      0.12  $     (0.01) $      0.20
      from discontinued
       operations                0.04         0.05         0.08         0.10
    -------------------------------------------------------------------------
                          $     (0.01) $      0.17  $      0.07  $      0.30
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Diluted earnings (loss)
     per share (Note 10)
      from continuing
       operations         $     (0.05) $      0.11  $     (0.01) $      0.20
      from discontinued
       operations                0.04         0.05         0.08         0.10
    -------------------------------------------------------------------------
                          $     (0.01) $      0.16  $      0.07  $      0.30
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number
     of shares (millions)       127.7        127.8        127.4        127.8

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes to the consolidated financial statements are an
    integral part of these statements.



    MAPLE LEAF FOODS INC.
    Consolidated Statements of Retained Earnings
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                                    Six months ended June 30,
    (Unaudited)                                            2007         2006
    -------------------------------------------------------------------------

    Retained earnings, beginning of period          $   204,415  $   231,807
    Net earnings for the period                           8,792       38,458
    Dividends declared ($0.08 per share;
     2006: $0.08 per share)                             (10,224)     (10,227)
    Premium on repurchase of share capital (Note 9)           -       (4,574)

    -------------------------------------------------------------------------
    Retained earnings, end of period                $   202,983  $   255,464
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes to the consolidated financial statements are an
    integral part of these statements.



    Consolidated Statements of Comprehensive Income (Loss)
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                Three months ended          Six months ended
                                           June 30,                  June 30,
    (Unaudited)                  2007         2006         2007         2006
    -------------------------------------------------------------------------

    Net earnings (loss)
     for the period       $    (1,671) $    21,186  $     8,792  $    38,458

    Other comprehensive
     income (loss) (Note 14)

      Change in accumulated
       foreign currency
       translation
       adjustment              (6,704)       1,330       (7,590)       2,094
      Change in unrealized
       derivative gain on
       cash flow hedges         5,491            -       10,814            -
    -------------------------------------------------------------------------
                          $    (1,213) $     1,330  $     3,224  $     2,094
    -------------------------------------------------------------------------
    Comprehensive income
     (loss)               $    (2,884) $    22,516  $    12,016  $    40,552
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes to the consolidated financial statements are an
    integral part of these statements.



    MAPLE LEAF FOODS INC.
    Consolidated Statements of Cash Flows
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                Three months ended          Six months ended
                                           June 30,                  June 30,
    (Unaudited)                  2007         2006         2007         2006
    -------------------------------------------------------------------------

    CASH PROVIDED BY (USED IN)
    Operating activities
    Net earnings (loss)
     from continuing
     operations           $    (6,458) $    14,735  $    (1,192) $    26,062
    Add (deduct) items not
     affecting cash:
      Depreciation and
       amortization            34,889       32,818       69,982       65,374
      Stock-based
       compensation             3,414        2,228        7,085        4,819
      Minority interest         2,810        2,545        4,354        5,000
      Future income taxes      (7,472)       4,670      (10,883)       1,816
      Loss (gain) on sale
       of property and
       equipment                  377          (27)         (82)        (568)
      Loss on sale of
       investments                  -          137            -          145
      Goodwill impairment
       (Note 11)               20,713            -       20,713            -
    Change in other
     long-term receivables        128          469       (2,182)       2,056
    Increase in pension
     asset                    (11,668)     (11,821)     (28,092)     (24,262)
    Change in restructuring
     provision                  3,712         (545)       7,433       (1,090)
    Other                      (6,632)       2,175       (3,423)       4,261
    Change in operating
     working capital          (38,447)     (42,015)     (78,619)     (82,548)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) operating
     activities of
     continuing
     operations           $    (4,634) $     5,369  $   (14,906) $     1,065
    Cash provided by
     (used in) operating
     activities of
     discontinued
     operations                 4,232        9,677       (3,117)      (4,735)
    -------------------------------------------------------------------------
                          $      (402) $    15,046  $   (18,023) $    (3,670)
    Financing activities
      Dividends paid           (5,133)      (5,127)     (10,224)     (10,227)
      Dividends paid to
       minority interest         (183)        (293)        (434)        (948)
      Net increase in
       long-term debt          45,102       48,533      119,164       35,488
      Increase in share
       capital (Note 9)        12,887       10,440       15,102       13,383
      Shares repurchased
       for cancellation
       (Note 9)                     -       (2,028)           -       (8,257)
      Other                      (729)         297        7,377        2,354
    -------------------------------------------------------------------------
    Cash provided by
     financing activities
     of continuing
     operations           $    51,944  $    51,822  $   130,985  $    31,793
    Cash provided by
     (used in) financing
     activities of
     discontinued
     operations                     9          402         (389)         402
    -------------------------------------------------------------------------
                          $    51,953  $    52,224  $   130,596  $    32,195
    Investing activities
      Additions to property
       and equipment          (59,300)     (43,466)    (111,725)     (61,369)
      Proceeds from sale
       of property and
       equipment                1,040          836        1,786        4,225
      Purchase of net
       assets of businesses
       - net of cash
       acquired (Note 12)      (2,628)           -      (13,431)      (5,323)
      Proceeds on sale of
       investments (Note 12)    1,622            -        1,622            -
      Proceeds on disposal
       of business (Note 12)        -            -        5,470            -
      Purchase of Canada
       Bread shares                 -            -       (6,521)           -
      Other                    (2,787)       1,217          121       (6,936)
    -------------------------------------------------------------------------
    Cash used in investing
     activities of
     continuing
     operations           $   (62,053) $   (41,413) $  (122,678) $   (69,403)
    Cash used in investing
     activities of
     discontinued
     operations                  (813)        (969)      (4,140)      (6,062)
    -------------------------------------------------------------------------
                          $   (62,866) $   (42,382) $  (126,818) $   (75,465)
    Increase (decrease)
     in cash and cash
     equivalents              (11,315)      24,888      (14,245)     (46,940)
    Cash and cash
     equivalents, beginning
     of period                 61,564        8,674       64,494       80,502
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period               $    50,249  $    33,562  $    50,249  $    33,562
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes to the consolidated financial statements are an
    integral part of these statements.



    MAPLE LEAF FOODS INC.
    Segmented Financial Information from Continuing Operations
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                Three months ended          Six months ended
                                           June 30,                  June 30,
    (Unaudited)                  2007         2006         2007         2006
    -------------------------------------------------------------------------

    Sales (i)
      Meat Products Group $   878,966  $   954,793  $ 1,774,692  $ 1,878,320
      Agribusiness Group       64,445       66,370      127,349      127,797
      Bakery Products
       Group                  375,362      335,302      732,867      636,645
    -------------------------------------------------------------------------
                          $ 1,318,773  $ 1,356,465  $ 2,634,908  $ 2,642,762
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings from
     continuing operations
     before restructuring
     and other related
     costs (i)
      Meat Products Group $    14,848  $    13,591  $    36,212  $    27,318
      Agribusiness Group        4,554        4,273        5,470        5,639
      Bakery Products
       Group                   33,265       28,967       60,844       53,698
    -------------------------------------------------------------------------
                          $    52,667  $    46,831  $   102,526  $    86,655
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Additions to property
     and equipment (i)
      Meat Products Group $    24,406  $    27,116  $    61,124  $    38,144
      Agribusiness Group        3,986        4,886        6,626        1,342
      Bakery Products
       Group                   30,908       11,464       43,975       21,883
    -------------------------------------------------------------------------
                          $    59,300  $    43,466  $   111,725  $    61,369
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     amortization (i)
      Meat Products Group $    17,204  $    17,013  $    34,590  $    34,006
      Agribusiness Group        4,769        4,455        9,657        8,441
      Bakery Products
       Group                   12,916       11,350       25,735       22,927
    -------------------------------------------------------------------------
                          $    34,889  $    32,818  $    69,982  $    65,374
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                             As at        As at        As at
                                           June 30,     June 30, December 31,
                                              2007         2006         2006
    -------------------------------------------------------------------------
                                        (Unaudited)  (Unaudited)
    Total assets (i)
      Meat Products Group              $ 1,603,563  $ 1,524,483  $ 1,551,502
      Agribusiness Group                   380,635      413,071      422,095
      Bakery Products Group                823,844      706,207      810,940
      Non-allocated assets                 236,525      253,947      210,750
    -------------------------------------------------------------------------
                                       $ 3,044,567  $ 2,897,708  $ 2,995,287
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i) All amounts exclude the results and financial position of the animal
        nutrition business sold on July 20, 2007 (Note 4).

    The accompanying notes to the consolidated financial statements are an
    integral part of these statements.


    1.  SIGNIFICANT ACCOUNTING POLICIES

        The unaudited interim consolidated financial statements should be
        read in conjunction with the annual consolidated financial statements
        for the year ended December 31, 2006. These unaudited interim
        consolidated financial statements have been prepared in accordance
        with Canadian generally accepted accounting principles using the same
        accounting policies as were applied in the consolidated financial
        statements for the year ended December 31, 2006, except for the
        following:

        (a) Accounting changes

            Effective January 1, 2007 the Company prospectively adopted the
            guidance presented in CICA Handbook Sections 1530 "Comprehensive
            Income" ("Section 1530"), Section 3855 "Financial Instruments -
            Recognition and Measurement" ("Section 3855"), and Section 3865
            "Hedges" ("Section 3865").

            On January 1, 2007 the Company recorded the following
            transitional adjustment to the consolidated balance sheet as a
            result of the adoption of the new standards:

            -----------------------------------------------------------------

            Increase in other current assets                      $    1,167
            Decrease in other assets                                 (12,889)
            Increase in future tax assets - long-term                 16,587
            Increase in other current liabilities                     (3,085)
            Decrease in long-term debt                                 3,123
            Increase in other long-term liabilities                  (37,101)
            Accumulated other comprehensive loss - cash flow hedges   32,198

            -----------------------------------------------------------------

            (i)  Comprehensive Income

            In accordance with Section 1530, the Company has presented
            comprehensive income and its components as part of the financial
            statements to show unrealized gains and losses that are not
            included in income. In accordance with the new standard,
            $9.8 million relating to unrealized losses resulting from the
            translation of self-sustaining operations which had previously
            been classified as unrealized foreign currency adjustment within
            shareholders' equity is now presented within accumulated other
            comprehensive income.

            (ii)  Financial Instruments

            In accordance with Section 3855, the Company has classified all
            financial assets as either held for trading, available for sale,
            held-to-maturity or loans and receivables. All financial
            liabilities are classified as either held for trading or as other
            liabilities. Financial assets and liabilities classified as held
            for trading are measured at fair value with changes in fair value
            recognized in net income in the period in which they arise.
            Financial assets classified as available-for-sale are measured at
            fair value with gains and losses recognized in other
            comprehensive income until the underlying financial asset is
            derecognized or becomes impaired. Held-to-maturity investments,
            loans and receivables and other liabilities are measured at
            amortized cost. Gains or losses on financial assets and
            liabilities carried at amortized cost are recognized in earnings
            when the financial asset or financial liability is derecognized
            or impaired. All derivative instruments, including any embedded
            derivatives that are required to be separated from their host
            instruments, are recorded at fair value with changes in fair
            value being recorded in income unless the derivative is
            designated as a cash flow hedge or a hedge of a net investment in
            a self-sustaining foreign operation. The Company completed a
            detailed review of its financial instruments and its contracts
            and determined that the fair value of embedded derivative
            instruments which required separation from their host instruments
            was not significant.

            (iii) Hedge Accounting

            The Company's existing hedging relationships continue to qualify
            for hedge accounting under the new standard. The Company
            continues to designate hedges as either fair value hedges, cash
            flow hedges or hedges of a net investment in a self-sustaining
            foreign operation. For a fair value hedge, changes in the fair
            value of the hedging derivative are recognized in income together
            with the offsetting change on the hedged item attributable to the
            hedged risk. For cash flow and net investment hedges, changes in
            the fair value of the hedging derivative, to the extent
            effective, are recorded in other comprehensive income (loss) and
            are subsequently recognized in income when the hedged item
            affects income. Any ineffectiveness in hedging relationships is
            recognized as income or loss immediately.

            On adoption the Company recognized an increase in other current
            assets of $1.2 million, a decrease in other assets of
            $12.9 million, an increase in other current liabilities of
            $3.1 million, an increase in other long-term liabilities of
            $37.1 million, a decrease in long-term debt of $3.1 million and
            an increase in accumulated other comprehensive loss of
            $32.2 million (net of future taxes of $16.6 million) to recognize
            the fair value of financial instruments designated to hedge the
            Company's commodity, interest rate, and foreign currency
            exposures. The above amounts include an additional adjustment
            identified in the second quarter of 2007 with respect to deferred
            amounts existing on the adoption date of $12.9 million relating
            to previously terminated cash flow hedges which were reclassified
            from other assets to accumulated other comprehensive loss in the
            amount of $8.7 million, net of future taxes of $4.2 million. On
            adoption of the new standard, there was no significant
            ineffectiveness in any of the Company's hedging relationships.
            The following table illustrates the fair values of financial
            instruments by type of hedging relationship:

            -----------------------------------------------------------------
                                                       As at January 1, 2007
                                                                       Other
                                           Current      Current    Long-term
                                            Assets  Liabilities  Liabilities
            -----------------------------------------------------------------

            Futures contracts to hedge
             commodity price exposure   $    1,112   $      203   $        -
            Cross currency interest
             rate swaps to hedge U.S.
             dollar-denominated notes
             payable(i)                         55       25,324      100,037
            Interest rate swaps to hedge
             interest rate exposure              -            -       12,471
            Foreign currency contracts
             to hedge transactions
             denominated in foreign
             currencies                          -          880            -

            -----------------------------------------------------------------
            Total                       $    1,167   $   26,407   $  112,508
            -----------------------------------------------------------------
            -----------------------------------------------------------------
            (i)  The fair value amount includes a currency revaluation loss
                 of $98.7 million that has been recorded in the accumulated
                 foreign currency translation adjustment, a component of
                 accumulated other comprehensive income.

            The fair value of the Company's financial instruments used to
            hedge commodity, interest rate, and foreign currency exposures as
            at June 30, 2007 are as follows:

            -----------------------------------------------------------------
                                                         As at June 30, 2007
                                                                       Other
                                           Current      Current    Long-term
                                            Assets  Liabilities  Liabilities
            -----------------------------------------------------------------

            Futures contracts to hedge
             commodity price exposure   $      379   $      532   $        -
            Cross currency interest
             rate swaps to hedge U.S.
             dollar-denominated notes
             payable(i)                          -       35,203      126,152
            Interest rate swaps to hedge
             interest rate exposure              -        4,299        3,950
            Foreign currency contracts
             to hedge transactions
             denominated in foreign
             currencies                      3,960            -            -

            -----------------------------------------------------------------

            Total                       $    4,339   $   40,034   $  130,102
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (i)   The fair value amount includes a currency revaluation loss
                  of $105.5 million that has been recorded in the accumulated
                  foreign currency translation adjustment, a component of
                  accumulated other comprehensive income.


        (b) Recent accounting pronouncements

            In May 2007 the Accounting Standards Board issued CICA Handbook
            Section 3031 "Inventories". The standard introduces changes to
            the measurement and disclosure of inventory and converges with
            international accounting standards. The standard is effective for
            interim and annual periods relating to fiscal years beginning on
            or after January 1, 2008. The Company has not yet determined the
            impact the adoption of this standard will have on its financial
            statements.

            In October 2006, the Accounting Standards Board issued CICA
            Handbook Section 1535, "Capital Disclosures", which establishes
            standards for disclosing information about an entity's capital
            and how it is managed. The standard is effective for interim and
            annual financial statements relating to fiscal years beginning on
            or after October 1, 2007. The Company does not expect that the
            adoption of this standard will have a material impact on its
            financial statements.

            In October 2006, the Accounting Standards Board issued CICA
            Handbook Section 3863, "Financial Instruments - Presentation".
            The existing requirements related to presentation of financial
            instruments have been carried forward unchanged. The standard is
            effective for interim and annual financial statements relating to
            fiscal years beginning on or after October 1, 2007. The Company
            does not expect the adoption of this standard will have a
            material impact on its financial disclosure and results of
            operations.

        (c) Comparative figures

            Certain 2006 comparative figures have been reclassified to
            conform to the financial statement presentation adopted in 2007
            and the year ended 2006.

    2.  RESTRUCTURING AND OTHER RELATED COSTS

        During the second quarter of 2007, the Company recorded $32.5 million
        in restructuring and other related costs ($28.4 million after tax).
        The portion of these restructuring and other related costs that
        related to continuing operations was $30.7 million and the balance is
        disclosed as part of discontinued operations (Note 4(ii)). The most
        significant item included in restructuring and other related costs
        for the quarter is a goodwill impairment charge of $20.7 million that
        relates to the Company's remaining hog and feed operations (Note 11).
        The balance of these costs related to the closure of a primary pork
        processing plant in Saskatoon, closure of a value-added meat
        processing facility in Etobicoke, Ontario, further costs related to
        the closure of a poultry plant in Nova Scotia, and retention bonuses
        recorded.

        During the first quarter of 2007, the Company recorded restructuring
        and other related costs of $13.1 million ($9.8 million after tax).
        The majority of these costs related to the sale of the Company's
        European seafood and convenience businesses, further costs related to
        the closure of a poultry plant in Nova Scotia and the closure of a
        fresh bakery in British Columbia.

        The following table provides a summary of costs recognized and cash
        payments made in respect of the above-mentioned restructuring
        initiatives in 2007 and the corresponding liability as at June 30,
        2007, all on a pre-tax basis:

                                                                       Asset
                                                                  Impairment
                                                                         and
                                                           Site  accelerated
                                         Severance      closing depreciation
        ---------------------------------------------------------------------

        Balance at December 31, 2006    $   14,172   $    5,031   $        -
          Charges                            2,560        1,931        4,893
          Cash payments                     (1,395)      (2,242)           -
          Non-cash items                         -            -       (4,893)
        ---------------------------------------------------------------------
        Balance at March 31, 2007       $   15,337   $    4,720   $        -
          Charges                            2,093          736        1,320
          Goodwill impairment (Note 11)          -            -       20,713
          Cash payments                     (4,080)      (2,034)           -
          Non-cash items                         -            -      (22,033)
        ---------------------------------------------------------------------
        Balance at June 30, 2007        $   13,350   $    3,422   $        -
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

                                         Retention      Pension        Total
        ---------------------------------------------------------------------

        Balance at December 31, 2006    $    3,015   $        -   $   22,218
          Charges                            3,735            -       13,119
          Cash payments                       (484)           -       (4,121)
          Non-cash items                         -            -       (4,893)
        ---------------------------------------------------------------------
        Balance at March 31, 2007       $    6,266   $        -   $   26,323
          Charges                            3,783        3,900       11,832
          Goodwill impairment (Note 11)          -            -       20,713
          Cash payments                       (653)           -       (6,767)
          Non-cash items                         -       (3,900)     (25,933)
        ---------------------------------------------------------------------
        Balance at June 30, 2007        $    9,396   $        -   $   26,168
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    3.  SUBSEQUENT EVENT

        On July 20, 2007 the Company completed the sale of its animal
        nutrition business. The Company received proceeds of $512 million and
        estimates that it will record an after-tax gain of approximately
        $210 million subject to normal closing adjustments in the third
        quarter. This gain is based on estimated proceeds of $512 million and
        June 30, 2007 carrying values of the net assets sold, and is subject
        to change. This gain excludes a related goodwill impairment loss of
        $20.7 million recorded in the second quarter as part of restructuring
        and other related charges (Note 11).

    4.  DISCONTINUED OPERATIONS

        (i)   On July 20, 2007 the Company sold its animal nutrition
              business, retaining only two mills in Western Canada to meet
              future requirements of its hog production operations. As a
              result, the Company has reclassified the portion of its animal
              nutrition business that has been sold as discontinued
              operations.

        (ii)  The results for discontinued operations were as follows:

        ---------------------------------------------------------------------
                                Three months ended         Six months ended
                                      June 30,                  June 30,
        (Unaudited)              2007         2006         2007         2006
        ---------------------------------------------------------------------

        Sales              $  158,547   $  140,231   $  303,849   $  279,885
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Earnings from
         operations before
         restructuring
         and other related
         costs             $   11,803   $   13,565   $   22,950   $   25,543
        Restructuring and
         other related
         costs                 (1,830)           -       (2,239)           -
        ---------------------------------------------------------------------

        Earnings from
         operations        $    9,973   $   13,565   $   20,711   $   25,543
        Other income              108          138          169          225
        ---------------------------------------------------------------------

        Earnings from
         operations before
         interest and
         income taxes      $   10,081   $   13,703   $   20,880   $   25,768
        Interest expense        2,190        2,362        4,539        4,432
        ---------------------------------------------------------------------

        Earnings before
         income taxes      $    7,891   $   11,341   $   16,341   $   21,336
        Income taxes            3,104        4,890        6,357        8,940
        ---------------------------------------------------------------------

        Net earnings from
         discontinued
         operations        $    4,787   $    6,451   $    9,984   $   12,396
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        In calculating net earnings from discontinued operations, interest
        expense has been allocated to these operations assuming a uniform
        debt-to-equity ratio for all operating companies.


        (iii) Assets held for sale and liabilities related to assets held for
              sale comprised:

        ---------------------------------------------------------------------
                                             As at        As at        As at
                                           June 30,     June 30, December 31,
        Assets held for sale                  2007         2006         2006
        ---------------------------------------------------------------------

        Accounts receivable             $   56,559   $   61,356   $   62,063
        Inventories                         40,650       34,826       39,604
        Future tax asset - current             193          193          193
        Prepaid expenses and other assets      269        1,842          828
        Investments in associated
         companies                           6,877        6,861        6,611
        Property and equipment              85,650       86,091       88,398
        Other long-term assets               2,200        2,915        3,090
        Goodwill                            77,871       77,897       77,922
        Other intangibles                    1,605            -        1,730
        ---------------------------------------------------------------------
                                        $  271,874   $  271,981   $  280,439
        ---------------------------------------------------------------------

        Classified as:
          Current                       $  271,874   $   98,217   $  280,439
          Long-term                              -      173,764            -
        ---------------------------------------------------------------------
                                        $  271,874   $  271,981   $  280,439
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                                             As at        As at        As at
        Liabilities related to assets      June 30,     June 30, December 31,
         held for sale                        2007         2006         2006
        ---------------------------------------------------------------------

        Accounts payable and
         accrued changes                $   57,408   $   55,934   $   71,201
        Income and other taxes payable       3,150        2,531        2,009
        Long term debt                         585          972          974
        Other long term liabilities            290            -          290
        ---------------------------------------------------------------------
                                        $   61,433   $   59,437   $   74,474
        ---------------------------------------------------------------------

        Classified as:
          Current                       $   61,433   $   59,105   $   74,474
          Long-term                              -          332            -
        ---------------------------------------------------------------------
                                        $   61,433   $   59,437   $   74,474
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------



    5.  ACCOUNTS RECEIVABLE

        Under revolving securitization programs, the Company has sold certain
        of its trade accounts receivable to financial institutions. The
        Company retains servicing responsibilities and retains a limited
        recourse obligation for delinquent receivables. At June 30, 2007,
        trade accounts receivable being serviced under this program amounted
        to $238.6 million (June 30, 2006: $241.1 million; December 31, 2006:
        $241.5 million).

    6.  OTHER INCOME (EXPENSE)

        ---------------------------------------------------------------------
                                Three months ended         Six months ended
                                      June 30,                  June 30,
                                 2007         2006         2007         2006
        ---------------------------------------------------------------------
        Proceeds from
         insurance claims  $    1,854   $        -   $    1,854   $        -
        Rental                     85           79          156          116
        Gain (loss) on
         sale of property
         and equipment           (377)          27           82          568
        Gain (loss) from
         real estate
         operations               (61)         (43)        (126)       1,135
        Other                       -            9            3          135

        ---------------------------------------------------------------------
                           $    1,501   $       72   $    1,969   $    1,954
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    7.  PENSIONS

        During the quarter, the Company recorded $4.2 million related to net
        benefit plan income including postretirement benefit costs (2006:
        $3.7 million). For the six months ended June 30, 2007, the Company
        recorded $8.1 million in net benefit plan income including
        postretirement benefit costs (2006: $6.6 million).

    8.  INCOME TAXES

        The Company recorded tax expense of $1.7 million in the second
        quarter of 2007 on a loss from continuing operations of $1.9 million.
        The reason for the variance from the Company's normal effective tax
        rate on earnings of 36.3% is due to: (i) the recognition of a tax
        benefit of $5.1 million related to outside basis differences on
        shares of subsidiaries that will be sold as part of the sale of the
        animal nutrition business, and (ii) the tax effect on restructuring
        and other related costs which was recorded using an effective tax
        rate of 11.6%. The low effective tax rate on restructuring and other
        related costs was caused by the goodwill impairment charge which is
        not deductible for tax purposes.

    9.  SHARE CAPITAL

        The following table sets forth the continuity for shares issued and
        outstanding during the year and the corresponding carrying value:

        ---------------------------------------------------------------------
                                  Number of shares          Share capital $
                           ------------------------  ------------------------
                                 2007         2006         2007         2006
        ---------------------------------------------------------------------
        Balance at
         January 1,       127,135,866  127,704,812   $  769,696   $  765,666
        Exercise of
         options              210,687      252,767        2,215        2,943
        Repurchased for
         cancellation(i)            -     (461,900)           -       (2,773)

        ---------------------------------------------------------------------
        Balance at
         March 31,        127,346,553  127,495,679   $  771,911   $  765,836
        Exercise of
         options            1,250,118      876,473       14,411       10,439
        Repurchased for
         cancellation(i)            -     (150,900)           -         (910)

        ---------------------------------------------------------------------
        Balance at
         June 30,         128,596,671  128,221,252   $  786,322   $  775,365
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i)   The Company repurchased for cancellation 461,900 common shares
              during the first quarter of 2006 and 150,900 common shares
              during the second quarter of 2006 pursuant to a normal course
              issuer bid at an average exercise price of $13.48 per share and
              $13.44 per share respectively. The excess of the purchase cost
              over the carrying value of the shares was charged to retained
              earnings.

    10. EARNINGS PER SHARE

        The following table sets forth the calculation of basic and fully
        diluted earnings per share:

        ---------------------------------------------------------------------
                                      Three months ended June 30,
                                   2007                       2006
        ---------------------------------------------------------------------
                                 Weighted                   Weighted
                                  Average                    Average
                          Net    Number of           Net    Number of
                        Earnings Shares(ii) EPS    Earnings Shares(ii)  EPS
                        ------------------------- ---------------------------
        Basic
          Continuing
           operations   $(6,458)   127.7  $(0.05)  $14,735    127.8  $  0.12
          Discontinued
           operations     4,787    127.7    0.04     6,451    127.8     0.05
        ---------------------------------------------------------------------
                        $(1,671)   127.7  $(0.01)  $21,186    127.8  $  0.17
        Stock options(i)      -      4.1       -         -      2.1    (0.01)
        Diluted
          Continuing
           operations   $(6,458)   131.8  $(0.05)  $14,735    129.9  $  0.11
          Discontinued
           operations     4,787    131.8    0.04     6,451    129.9     0.05
        ---------------------------------------------------------------------
                        $(1,671)   131.8  $(0.01)  $21,186    129.9  $  0.16
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i)   Excludes the effect of 7.7 million options and restricted stock
              units (2006: 9.5 million) to purchase common shares that are
              anti-dilutive
        (ii)  In millions


        ---------------------------------------------------------------------
                                      Six months ended June 30,
                                   2007                       2006
        ---------------------------------------------------------------------
                                 Weighted                   Weighted
                                  Average                    Average
                          Net    Number of           Net    Number of
                       Earnings  Shares(ii) EPS    Earnings Shares(ii)  EPS
                       -------------------------- ---------------------------
        Basic
          Continuing
           operations   $(1,192)   127.4  $(0.01)  $26,062    127.8  $  0.20
          Discontinued
           operations     9,984    127.4    0.08    12,396    127.8     0.10
        ---------------------------------------------------------------------
                        $ 8,792    127.4  $ 0.07   $38,458    127.8  $  0.30
        Stock options(i)      -      3.6       -         -      2.2        -
        Diluted
          Continuing
           operations   $(1,192)   131.0  $(0.01)  $26,062    130.0  $  0.20
          Discontinued
           operations     9,984    131.0    0.08    12,396    130.0     0.10
        ---------------------------------------------------------------------
                        $ 8,792    131.0  $ 0.07   $38,458    130.0  $  0.30
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i)   Excludes the effect of 8.3 million options and restricted stock
              units (2006: 9.5 million) to purchase common shares that are
              anti-dilutive
        (ii)  In millions

    11. GOODWILL

        The Company entered into an agreement to sell the animal nutrition
        business in the second quarter of 2007 and the terms and conditions
        of sale placed certain restrictions on the operations of two feed
        mills and resulted in a change in the Company's assessment of future
        cash flows of its remaining feed and hog operations. As a result, the
        Company has determined that the goodwill related to the remaining
        feed and hog operations is fully impaired and has recorded an
        impairment charge of $20.7 million in the second quarter.

        The sale transaction closed on July 2007 and it is estimated that the
        Company will record an after-tax gain of approximately $210 million
        excluding this goodwill impairment loss (see Note 3) in the third
        quarter.

        In accordance with CICA Handbook Section 3062, "Goodwill and Other
        Intangible Assets", the Company tests goodwill for possible
        impairment on an annual basis and at any other time if an event
        occurs or circumstances change that would more likely than not reduce
        the fair value of a reporting unit below its carrying amount. During
        the second quarter of 2007, the Company completed its annual goodwill
        impairment test for all reporting units and determined that there was
        no additional impairment in any other reporting units.

    12. ACQUISITIONS AND DIVESTITURES

        (a) On February 26, 2007 the Company acquired 100% ownership of the
            shares in Pâtisserie Chevalier Inc. ("Chevalier") for
            $7.9 million. Chevalier is a leading producer of single-portion
            snack cake products in Quebec. As at June 30, 2007 the Company
            has not yet finalized the purchase price allocation.

        (b) During the first quarter, the Company completed the sale of its
            European seafood and convenience businesses in Germany. The sales
            of these businesses will not have a significant impact on ongoing
            earnings or cash flows.

        (c) During the first and second quarter of 2007, the Company
            completed a number of buy and sell transactions of certain hog
            investment companies related to the realignment of its hog
            production business. These transactions did not have a
            significant impact on the financial position of the Company.

        (d) On January 16, 2007, the Company purchased 122,900 additional
            shares in Canada Bread for $6.5 million, increasing the Company's
            ownership interest in Canada Bread from 87.5% to 88.0%.


    13. SUPPLEMENTAL CASH FLOW INFORMATION

        ---------------------------------------------------------------------
                                Three months ended         Six months ended
                                      June 30,                  June 30,
                                 2007         2006         2007         2006
        ---------------------------------------------------------------------
        Net interest paid  $   40,741   $   37,507   $   55,948   $   49,648
        Net income taxes
         paid                  13,352       15,621       25,242       43,059
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    14. ACCUMULATED OTHER COMPREHENSIVE LOSS

        Accumulated other comprehensive loss consists of the following:

        ---------------------------------------------------------------------
                                                    Six months ended June 30,
                                                           2007         2006
        ---------------------------------------------------------------------

        Balance at the beginning of the period
         (Note 1(a)) - net(i)                        $   (9,809)  $  (18,558)
        Transition adjustment as of January 1, 2007
         (Note 1(a))                                    (32,198)           -
        ---------------------------------------------------------------------
        Adjusted balance at the beginning
         of the period                               $  (42,007)  $  (18,558)

          Change in accumulated foreign currency
           translation adjustment - net(i)               (7,590)       2,094
          Change in unrealized derivative gain
           on cash flow hedges - net(ii)                 10,814            -
          -------------------------------------------------------------------
          Other comprehensive income for the period  $    3,224   $    2,094
        ---------------------------------------------------------------------
        Accumulated other comprehensive loss
         as at June 30                               $  (38,783)  $  (16,464)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i)   Balance at the beginning of the period is net of tax of
              $9.1 million. The change in accumulated foreign currency
              translation adjustment is net of taxes of $nil for the six
              months ended June 30, 2007 (change for the quarter of
              $6.7 million net of taxes of $nil).

        (ii)  Unrealized derivative gain on cash flow hedges is net of tax of
              $5.2 million for the six months ended June 30, 2007 (change for
              the quarter of $5.5 million net of taxes of $2.3 million).

              The Company estimates that $4.2 million of net unrealized
              derivative gain included in other comprehensive income will be
              reclassified into net earnings within the next twelve months.
              During the quarter, a loss of approximately $2.7 million (net
              of tax of $1.3 million) was released to income from accumulated
              other comprehensive loss, which is included in the net change
              for the period.


SOURCE: Maple Leaf Foods Inc.
Lynda Kuhn, Senior Vice-President, Communications & Consumer Affairs, (416)926-2026
www.mapleleaf.com

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