Maple Leaf Foods Reports Third Quarter
Maple Leaf Foods Inc. today reported strong earnings growth for the third
quarter ended September 30, 1999. Sales were up 3.3 per cent and operating
earnings increased 42 per cent over the third quarter of last year. The Meat
Products Group and the Agribusiness Group both reported strong year-over-year
earnings increases. In the Bakery Products Group, Canada Bread reported
increased operating earnings in the third quarter as anticipated earlier in the
year. The improvement in earnings reflects early positive results from the
turnaround effort at Canada Bread.
Sales for the third quarter of $ 866 million were up by 3.3% from $838 million
last year. Year-to-date sales of $2.6 billion were up 10% from $2.4 billion
Earnings from operations for the third quarter of $35.7 million were up 42%
from $25.2 million last year. Year-to-date earnings from operations of $102.1
million were up 82% from $56.0 million, before a special charge, last year.
Net earnings for the quarter were $20.3 million ($0.20 per share) compared to
$7.1 million ($0.08 per share) last year. Year-to-date net earnings were $54.3
million ($0.54 per share), including a $6.6 million ($0.07 per share) gain on
the sale of the Franchise Operations, compared to $12.9 million ($0.14 per
share) last year, before a special charge.
"We're very pleased with the continued improvement in operating earnings this
year. This is the direct result of the significant restructuring and changes we
have made in the business," said Mr. Michael H. McCain, President and Chief
Executive Officer of Maple Leaf Foods, "We look forward to continued strong
results going forward."
Meat Products Group
Meat Products Group sales for the third quarter of $524 million increased by
4.3% from $502 million last year. Year-to-date sales of $1.6 billion were up
13% from $1.4 billion last year. Earnings from operations for the third quarter
of $13.7 million were up 80% from $7.6 million last year. Year-to-date earnings
from operations were $48.9 million compared to $7.8 million last year.
Quarterly operating results were positively impacted by continuing growth of
the Company's value-added branded meat products, such as Maple Leaf Prime
poultry, and strong pork sales into Japan. The Brandon fresh pork facility
startup began in September, and is running ahead of schedule. The plant is
expected to begin contributing to operating earnings by mid 2000.
During the quarter, plans were announced to invest about $15 million to upgrade
and rationalize production in Maple Leaf Consumer Foods' manufacturing
facilities, which will significantly reduce manufacturing costs. Maple Leaf
Consumer Foods' facilities include the former Maple Leaf Meats packaged meats
operations as well as the former facilities of Burns Meats/Gainers and
Principal Marques. There will be no special charge related to this project as
provisions for anticipated costs were made in previous special charges and
Bakery Products Group
Bakery Products Group sales for the third quarter of $169 million were equal to
third quarter sales last year. Year-to-date sales of $518 million compares to
$493 million last year. Earnings from operations for the third quarter of $4.1
million compares to $4.3 million (or $4.0 million excluding Franchise
Operations earnings) last year. Year-to-date earnings from operations were $6.2
million compared to $12.4 million last year.
"We are encouraged that the turnaround initiatives that have been put in place
at Canada Bread are beginning to have some positive impact on financial
results," said Mr. McCain. "We are also very excited about the excellent sales
momentum we are experiencing in our United States par-baked bread bakery
Canada Bread Company, Limited reported a quarter-over-quarter increase in
operating earnings of 36%, primarily as a result of improvements in Canada
Bread's fresh bakery operations. Frozen bakery operations were adversely
impacted during the quarter by short-term operational difficulties, offset by
continuing growth in pasta earnings. In the United States, the loss of some
contracted private label bagel business has adversely affected recent earnings.
This volume, while profitable, was not core volume for Maple Leaf Bakery.
Significant gains continue to be made in sales of par-baked bread products,
which increased almost 20% on a year-to-date basis over last year.
Agribusiness Group sales for the third quarter of $173 million increased by
3.5% from $167 million last year. Year-to-date sales of $507 million were up 4%
from $487 million last year. Earnings from operations of $18.0 million were up
35% from $13.3 million last year. Year-to-date earnings from operations of
$47.0 million were up 31% from $35.9 million last year.
Improvements in the quarter were driven by the Shur-Gain animal feed and
nutrition business, primarily in Quebec and Atlantic Canada. In Quebec,
earnings improved following the successful downsizing of our investment in hog
growing operations. In the Maritimes, earnings were favourably impacted by
strong increases in fish feed sales. Construction of the new mill tower in St.
Marys, Ontario is proceeding on schedule and is expected to be completed by
Rothsay earnings declined marginally due to the impact of lower commodity
prices, however, earnings are expected to improve later this year and in 2000
as incremental production from the new Brandon fresh pork facility contributes
to Rothsay's processing volumes.
In September 1999, the Company announced the purchase of Landmark Group Inc. at
a total investment of about $150 million. The transaction closed in early
October 1999. Landmark Group has been involved in animal agriculture in Western
Canada for more than 40 years. The group includes, Landmark Feeds Inc., a
leading manufacturer and provider of feed for all species of livestock, and
Elite Swine Inc., a Western Canada-based hog marketing, feed and genetics
provider to pork producers.
The transaction re-establishes the Company in the animal feed and nutrition
business in Western Canada, and significantly advances our pork value chain
strategy, both in terms of animal nutrition and enhanced relationships between
Maple Leaf and hog producers. The Landmark/Maple Leaf pork value chain
"vertical coordination" strategy will use a mix of partnerships between Maple
Leaf and hog producers, to aggressively grow the Company's hog supply. This
"vertical coordination" system contrasts with US-style "vertical integration"
involving corporate ownership of the entire pork value chain.
Early in the fourth quarter, the Company's 61% owned subsidiary, Canbrands
International Ltd. which produces the "Yesterday's News" cat box filler, sold
substantially all of its business and assets to Ralston Purina. The Company
will record a gain on the sale in the fourth quarter.
Other income for the third quarter of $9.6 million compares to $1.5 million
last year. The increase is primarily due to earnings from the Company's share
of its real estate joint ventures.
The Company has in place a process designed to minimize the effects of the Year
2000 issue on the Company. As at September 30, 1999 the assessment and
remediation phase related to the Company's internal computer systems was
complete. A process to address the readiness of key third parties such as
suppliers and customers is ongoing and will continue for the remainder of the
year. Contingency plans have been put in place in certain parts of the
Company's operations. It is, however, not possible to be certain that all
aspects of the Year 2000 issue affecting the Company, including those related
to the efforts of customers, suppliers, or other third parties, will be fully
The Company declared a dividend of $0.04 per share payable on December 31, 1999
to shareholders of record on December 17, 1999.
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