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Maple Leaf Foods Reports Results for First Quarter

–Business Stabilized; Focus on Margin and Sales Growth
TORONTO, April 29, 2009 /PRNewswire-FirstCall via COMTEX/ — Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the first quarter ended March 31, 2009.

    -   Adjusted EPS of $0.05 compared to $0.04 last year
    -   Adjusted Operating Earnings decreased 5% to $32 million
    -   Lower margins in packaged meat business; volumes improved
    -   Significant benefits from protein restructuring contributed to
    -   Bakery earnings improved from last year, but short of historic levels

    Note: Adjusted Operating Earnings measures are defined as earnings from
    operations before restructuring and other related costs and other income
    (expense). Adjusted Earnings per Share measures are defined as basic
    earnings per share adjusted for the impact of restructuring and other
    related costs.

“Results in the first quarter were overshadowed by depressed margins in our packaged meat operations, as we continue to recover from the major product recall last year,” said Michael H. McCain, President and CEO. “While volumes improved, which was our first priority, margins will take longer to restore. Our bakery businesses have largely rebounded from the commodity impacts of last year, and our protein restructuring is yielding ongoing benefits. Although we are in the midst of a deep global recession, our product portfolio delivers good value at reasonable prices. As our business has stabilized, we are now focused on sustaining the volume recovery, improving margins and realizing higher growth rates in our core categories.”

    Financial Overview

Sales for the first quarter increased 6.3% to $1.3 billion compared to $1.2 billion last year, reflecting price increases and the benefit of favourable foreign currency changes on fresh meat sales.

Earnings from operations before restructuring and other related costs and other income (expense) (“Adjusted Operating Earnings”) decreased by 4.5% to $31.6 million compared to $33.1 million last year, as significant declines in packaged meat earnings were mitigated by benefits from the restructuring of pork processing and hog production operations and price increases across the bakery business.

    Following is a summary of Adjusted EPS:

                                                            First Quarter
                                                          2009          2008
    Basic EPS                                            $0.02         $0.00
    Restructuring and other related costs                 0.03          0.04
    Adjusted EPS                                         $0.05         $0.04

    Business Segment Review

    Following is a summary of Adjusted Operating Earnings by business segment:

                                                            First Quarter
    ($ millions)                                          2009          2008
    Meat Products Group                                  $11.4         $25.0
    Agribusiness Group                                     2.1          (2.8)
    Protein Group                                         13.5          22.2
    Bakery Products Group                                 19.5          17.2
    Non-allocated Costs (i)                               (1.4)         (6.3)
    Adjusted Operating Earnings                          $31.6         $33.1

    (i) Non-allocated costs comprise costs related to systems conversion and
        consulting fees. Management believes that not allocating these costs
        provides a more comparable assessment of segmented operating results.

    Meat Products Group
    (value-added processed packaged meats; chilled meal entrees and lunch
    kits; value-added fresh pork, poultry and turkey products)

Adjusted Operating Earnings in the Meat Products Group declined to $11.4 million in the first quarter of 2009 compared to $25.0 million last year. Margins in packaged meat products were significantly lower than last year due to the impact of volume recovery efforts following last year’s product recall. Higher raw material costs and the effect of foreign exchange on raw material costs could not be passed on in this environment of business recovery, and significant promotional costs were incurred to support volume recovery objectives. Over the next several months, Management will be implementing actions to restore margins, including appropriate price action, reducing internal costs and resuming more normalized investment in promotions. In response to the economic recession, marketing and innovation activities are focused on shifting the product mix to offer consumers a greater variety of value propositions.

Earnings from fresh pork operations improved significantly in the first quarter, as the benefits from double shifting the pork processing plant in Brandon, Manitoba, the consolidation of ham boning operations and the closure of less efficient plants were realized. A weaker Canadian dollar resulted in higher sales prices for fresh pork and increased earnings from international sales. In the first quarter, the Company announced that due to difficult credit markets, it has suspended actively marketing its pork processing business in Burlington, Ontario. The sale process for this business is expected to resume when credit markets stabilize and an appropriate sale value can be realized. The business is profitable and contributed to cash flow and earnings for the quarter. Earnings from the Company’s poultry operations were consistent with last year.

    Agribusiness Group
    (hog production and animal by-products recycling)

Adjusted Operating Earnings for the Agribusiness Group in the first quarter of 2009 increased to $2.1 million from a loss of $2.8 million last year. Results for the first quarter last year included $8.4 million in government support. While earnings from by-products recycling operations were consistent with last year, results in hog production improved significantly due to lower production following the sale or exit of non-core operations in Ontario and Alberta. Restructuring and simplification of the core operations in Manitoba resulted in operational improvements such as lower cycle times and improved feed efficiency and hog quality.

    Bakery Products Group
    (fresh and frozen branded value-added bakery products, including frozen
    par-baked bakery products, sandwiches and specialty pasta and sauces).

Adjusted Operating Earnings for the Bakery Products Group in the first quarter increased to $19.5 million from $17.2 million last year. Price increases implemented in the first half of 2008 and better product mix were the main contributors to improved margins in the quarter. However, the extent of margin expansion was mitigated by the weaker Canadian dollar which increases the Canadian price of wheat. Additionally, the cost of packaging and other ingredients increased compared to last year.

Adjusted Operating Earnings in the U.K. bakery business declined in the first quarter compared to last year due to unfavourable sales mix as the effect of the economic recession has been more pronounced in the U.K. than in the Company’s other operations. Also, increased promotional activity to increase bagel sales reduced earnings. An oven fire in the first quarter of 2008 at the Company’s Rotherham bagel plant resulted in significant business disruption through the balance of 2008. Production is now stabilized and Management is focused on increasing volumes to full capacity.

During the quarter, the Company launched Healthy Way(R) with ProCardio Recipe(TM) fresh breads and squares across Canada. Healthy Way(R) with ProCardio Recipe(TM) is the first line of fresh bakery products targeted specifically to support heart health, and broadens Dempster’s brand leadership in higher nutrition bakery products.

    Other Income

Other income for the quarter was $1.7 million (2008: nil), mostly comprising insurance proceeds for business interruption losses in the U.K. bakery business.

    Other Matters

On April 28, 2009 Maple Leaf Foods Inc. declared a dividend of $0.04 per share payable on June 30, 2009 to shareholders of record on June 5, 2009. Unless indicated otherwise in writing at or before the time the dividend is paid, each dividend paid by the Corporation in 2009 or a subsequent year is an eligible dividend for the purposes of the “Enhanced Dividend Tax Credit System”.

An investor presentation related to the Company’s first quarter results is available at and can be found under Investor Relations on the Quarterly Results page. A web cast of the presentations by the Chairman and CEO to the Annual General Meeting today at 11:00 AM EDT will also be available on the Company’s website. A conference call will also be held at 2:30 p.m. EDT to review Maple Leaf Foods’ first quarter financial results. To participate in the call, please dial 416-641-6111 or 866-696-5911. For those unable to participate, playback will be made available an hour after the event at 416-695-5800/800-408-3053 (Passcode 3783726 followed by the number sign). A webcast presentation of the first quarter results will also be available at via a link:

The Company’s full financial statements and related Management’s Discussion and Analysis are available for download on the Company’s website and will be available on SEDAR at as of May 1, 2009.

    Forward-Looking Statements

This document contains, and the Company’s oral and written public communications often contain, forward-looking statements that are based on current expectations, estimates, forecasts and projections about the industries in which the Company operates and beliefs and assumptions made by the Management of the Company. Such statements include, but are not limited to, statements with respect to objectives and goals, as well as statements with respect to beliefs, plans, objectives, expectations, anticipations, estimates and intentions. Specific statements include, but are not limited to, statements with respect to expectations concerning improving business trends in 2009, expectations regarding the impact of the recession on the business, expectations regarding the timing and extent of margin recovery in the packaged meats business, and expectations concerning the timing of the sale of the pork processing business in Burlington, Ontario. Words such as “expect,” “anticipate,” “intend,” “attempt,” “may,” “will,” “plan,” “believe,” “seek,” “estimate,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict.

In addition, expectations concerning performance of the Company’s business in general are based on a number of factors and assumptions including, but not limited to: the condition of the Canadian, United States and United Kingdom economies; the rate of exchange of the Canadian dollar to the U.S. dollar and Japanese yen; expected recovery of sales following the product recall; the availability and prices of raw materials, energy and supplies; product pricing; the availability of insurance; the competitive environment and related market conditions; improvement of operating efficiencies whether as a result of the protein business transformation or otherwise; continued access to capital; the cost of compliance with environmental and health standards; no adverse results from ongoing litigation that would not be covered by insurance; no unexpected actions of domestic and foreign governments and the general assumption that none of the risks identified under “Risk Factors” in the Company’s Annual Management’s Discussion and Analysis for the year ended December 31, 2008 will materialize. All of these assumptions have been derived from information currently available to the Company including information obtained by the Company from third-party sources. These assumptions may prove to be incorrect in whole or in part. In addition, actual results may differ materially from those expressed, implied or forecasted in such forward looking statements, which reflect the Company’s expectations only as of the date hereof.

Factors that could cause actual results or outcomes to differ materially from the results expressed, implied or forecasted by forward-looking statements are discussed more fully in the Company’s Annual Management’s Discussion and Analysis for the year ended December 31, 2008 including the section entitled “Risk Factors” that is available on SEDAR at The Company does not intend, and the Company disclaims any obligation to update any forward-looking statements, whether written or oral, or whether as a result of new information, future events or otherwise except as required by law.

Maple Leaf Foods Inc. is a leading food processing company, headquartered in Toronto, Canada. The Company employs approximately 24,000 people at its operations across Canada and in the United States, the United Kingdom, and Asia. The Company had sales of $5.2 billion in 2008.

    Consolidated Interim Financial Statements
    (Expressed in Canadian dollars)


    Three months ended March 31, 2009 and 2008

    Consolidated Balance Sheets
    (In thousands of Canadian dollars)

                                             As at        As at        As at
                                          March 31,    March 31, December 31,
                                              2009         2008         2008
                                        (Unaudited)  (Unaudited)

    Current assets
      Cash and cash equivalents        $   263,260  $    55,516  $   365,518
      Accounts receivable                  178,448      204,602      139,144
      Inventories                          401,380      381,902      377,414
      Income and other taxes recoverable    26,700            -       20,971
      Future tax asset - current            19,438       38,834       19,787
      Prepaid expenses and other
       current assets                       22,390       15,127       32,289
                                       $   911,616  $   695,981  $   955,123
    Property and equipment               1,188,043    1,160,221    1,169,435
    Other long-term assets                 330,042      315,735      329,070
    Future tax asset - non-current          29,183       31,933       24,854
    Goodwill                               877,044      857,655      876,261
    Other intangible assets                 99,951       93,521       97,358
                                       $ 3,435,879  $ 3,155,046  $ 3,452,101


    Current liabilities
      Bank indebtedness                $     8,875  $    10,206  $     8,894
      Accounts payable and accrued
       charges                             586,655      565,328      600,924
      Income and other taxes payable             -       14,577            -
      Current portion of long-term debt    183,142       12,523      179,244
      Other current liabilities             12,358        9,998       28,456
                                       $   791,030  $   612,632  $   817,518
    Long-term debt                       1,209,874      997,952    1,200,224
    Future tax liability - non-current      42,941       83,388       37,903
    Other long-term liabilities            167,590      232,794      179,039
    Non-controlling interest                75,236       81,039       74,447
    Shareholders' equity                 1,149,208    1,147,241    1,142,970
                                       $ 3,435,879  $ 3,155,046  $ 3,452,101

    Consolidated Statements of Earnings
    (In thousands of Canadian dollars, except share amounts)

                                                 Three months ended March 31,
    (Unaudited)                                           2009          2008
    Sales                                          $ 1,279,299   $ 1,203,263

    Cost of goods sold                               1,112,087     1,047,337
    Gross margin                                   $   167,212   $   155,926

    Selling, general and administrative expenses       135,613       122,828
    Earnings from operations before the following: $    31,599   $    33,098

    Restructuring and other related costs               (5,334)       (7,722)

    Other income (expense)                               1,679           (15)
    Earnings from operations before interest and
     income taxes                                  $    27,944   $    25,361

    Interest expense                                    21,343        21,663
    Earnings from operations before income taxes   $     6,601   $     3,698

    Income taxes                                         2,157         2,120
    Earnings from operations before non-controlling
     interest                                      $     4,444   $     1,578

    Non-controlling interest                             1,573         1,588

    Net earnings (loss)                            $     2,871   $       (10)
    Basic and diluted earnings per share           $      0.02   $      0.00
    Weighted average number of shares (millions)         126.6         127.3

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

                                                 Three months ended March 31,
    (Unaudited)                                           2009          2008
    Net earnings (loss)                            $     2,871   $       (10)

    Other comprehensive income

      Change in accumulated foreign currency
       translation adjustment                           (1,347)        6,727
      Change in net unrealized derivative loss on
       cash flow hedges                                  4,521        (3,046)
                                                   $     3,174   $     3,681
    Comprehensive income                           $     6,045   $     3,671

    Consolidated Statements of Retained Earnings
    (In thousands of Canadian dollars)
                                                 Three months ended March 31,
    (Unaudited)                                           2009          2008
    Retained earnings, beginning of period         $   314,649   $   378,604
    Net earnings (loss)                                  2,871           (10)
    Adoption of new accounting standard                   (207)            -
    Dividends declared ($0.04 per share; 2008:
     $0.04 per share)                                   (5,066)       (5,186)
    Retained earnings, end of period               $   312,247   $   373,408

    Consolidated Statements of Cash Flows
    (In thousands of Canadian dollars)
                                                 Three months ended March 31,
    (Unaudited)                                           2009          2008


    Operating activities
      Net earnings (loss)                          $     2,871   $       (10)
      Add (deduct) items not affecting cash:
        Depreciation and amortization                   38,368        35,072
        Stock-based compensation                         4,566         4,263
        Non-controlling interest                         1,573         1,588
        Future income taxes                             (1,938)         (304)
        Loss on sale of property and equipment             109            81
        Amortization of terminated interest rate
         swap                                              598         3,211
        Change in fair value of derivative
         financial instruments                         (12,807)       (2,189)
      Change in other long-term receivables                  -           344
      Decrease (increase) in net pension asset             395        (6,031)
      Asset impairments and change in provision
       for restructuring and other related costs         2,653         3,963
      Other                                              4,402         2,675
      Change in non-cash operating working capital     (79,621)      (24,269)
    Cash provided by (used in) operating
     activities                                    $   (38,831)  $    18,394

    Financing activities
      Dividends paid                               $    (5,066)  $    (5,186)
      Dividends paid to non-controlling interest          (205)         (232)
      Net increase (decrease) in long-term debt           (745)      117,524
      Increase in share capital                              -         1,597
      Purchase of treasury stock                             -        (6,349)
      Other                                                217           515
    Cash provided by (used in) financing
     activities                                    $    (5,799)  $   107,869

    Investing activities
      Additions to property and equipment          $   (57,672)  $   (45,710)
      Proceeds from sale of property and equipment         613         8,021
      Acquisition of businesses - net of cash
       acquired                                              -       (61,572)
      Other                                               (550)          (69)
    Cash used in investing activities              $   (57,609)  $   (99,330)

    Increase (decrease) in cash and cash
     equivalents                                   $  (102,239)  $    26,933
    Net cash and cash equivalents, beginning of
     period                                            356,624        18,377
    Net cash and cash equivalents, end of period   $   254,385   $    45,310

SOURCE Maple Leaf Foods Inc.