Maple Leaf Reports 2002 Second Quarter Financial Results
Operating Earnings Up 24%; Earnings Per Share Up
Toronto, Ontario – Maple Leaf Foods Inc. (TSX:MFI)
today reported its financial results for the second quarter ended June 30,
“Maple Leaf achieved another quarter of solid earnings growth, as we continue to leverage the value of our assets, improve operating performance and shift our operations and sales mix to higher value-added products,” said Michael H. McCain, President and Chief Executive Officer. “We are particularly pleased with the growth of our Bakery Products Group, which realized a 133% increase in earnings quarter-over-quarter, as well as increased earnings in our Meat Products Group, which more than offset lower earnings in the Agribusiness Group.”
In accordance with recent changes in generally accepted accounting principles, effective January 1, 2002 the Company no longer amortizes goodwill, resulting in a positive impact on 2002 earnings. The effect of this is explained more fully in note 1 to these financial statements. All comparative percentage increases noted here are after taking account of this change.
Sales for the second quarter increased 4% to $1.3 billion from $1.2 billion for the same period last year, a positive result considering the substantial decline in many key underlying commodity values. Earnings from operations of $51.3 million increased from $38.9 million last year ($41.4 million before goodwill amortization), an EPS increase of 24%. This increase is principally due to very strong results in the Bakery Products Group and higher Meat Products earnings. Net earnings for the second quarter of $22.6 million ($0.19 per share) increased from $12.8 million ($0.12 per share) in 2001 ($15.0 million or $0.15 per share before goodwill amortization), an increase of 27%. Earnings for the first six months were $39.5 million or $0.33 per share compared to $27.0 million or $0.26 per share last year on the same basis.
Other income for the second quarter of $3.9 million compared to $1.0 million for the same period last year, reflecting increased earnings from real estate operations. Interest expense for the quarter of $15.0 million decreased from $17.1 million for the prior year due to lower debt and interest rates. Year-to-date interest expense was $28.4 million compared to $33.4 million in 2001.
The Company's cash flow from operating activities for the second quarter was $78.9 million compared to $90.9 million last year, reflecting higher cash earnings, offset by higher investments in working capital.
Meat Products Group (branded value-added prepared meat products; fresh, frozen and branded value-added pork products; fresh, frozen and branded value-added chicken and turkey products; and global food marketing, distribution and trading)
Meat Product Group sales for the second quarter decreased 9% to $751 million from $827 million last year. While volumes increased from last year, sales values were impacted by reduced prices for pork and poultry products as a result of low commodity prices. Year-to-date sales of $1.5 billion were consistent with last year. Earnings from operations increased 43% to $14.7 million, compared to $9.1 million for the same period last year ($10.2 million before goodwill amortization). Earnings for the first six months were $27.1 million, an increase of 25% over last year. Maple Leaf Pork continues to benefit from its focus on shifting product and sales mix to increasingly higher value-added products. Consumer Foods earnings also increased in the second quarter, driven in part by market share improvements in its Top Dogs brand of hot dogs, and the success of a new line of Top Dogs MegaBites. Earnings declined in the Maple Leaf Poultry operations, the result of industry-wide margin pressure due to a surplus in supply and lower prices, a market condition that is expected to continue for the balance of the year.
Agribusiness Group (research, development and supply of quality livestock nutrition products and services; pet food; swine production; and animal by-products recycling)
Agribusiness Group sales for the second quarter increased 8% to $241 million compared to $224 million last year, while year-to-date sales were $462 million compared to $425 million last year. Operating earnings were $17.5 million compared to $22.6 million for the same period last year ($23.0 million before goodwill amortization), a decrease of 24%. Earnings for the first six months were $34.8 million compared to $37.5 million for the prior year. The decrease in profitability was primarily due to lower hog prices, which impacted the Group's hog production operations. However, the Company's Vertical Coordination strategy offset this impact with increased profitability at the Maple Leaf Pork and Maple Leaf Consumer Foods operations. Earnings in the feed business declined slightly due to unsettled spring weather and a slow down in feeding rates.
Bakery Products Group (fresh, frozen and branded value-added bakery products, including frozen par-baked bakery products; and specialty pasta and sauces)
Bakery Product Group sales for the second quarter of $287 million increased 65% from $174 million for the same period last year and year-to-date sales increased to $552 million from $338 million last year. The increase was principally due to strong performance in fresh and frozen bakery operations and significant contributions from Multi-Marques Inc. (Quebec) and the New York Bagel Company (United Kingdom), both of which were purchased in the second half of 2001 and continue to exceed expectations. In addition, on April 11, 2002, the Company acquired the remaining shares of Ben's Bakery Limited in Atlantic Canada, which also contributed to increased sales and profitability quarter-over-quarter. Excluding the effect of these acquisitions, sales for the quarter increased by 8%.
Earnings from operations for the second quarter of $19.2 million increased from $7.2 million for the same period last year ($8.3 million before goodwill amortization), an increase of 133%. Earnings for the first six months were $31.2 million, a 101% increase from last year.
On July 18, 2002 Canada Bread announced that it had acquired the Olafson's Baking Company, Inc. of Delta, British Columbia. With annual sales of approximately $30 million, Olafson's specializes in the production of premium value added bakery products, which are highly complementary with Canada Bread's existing product line. The acquisition of Olafson's will expand the range of products Canada Bread can offer its national customers and provides a strong platform for growth.
The Company declared a dividend of $0.04 per share payable on September 30, 2002 to shareholders of record on September 20, 2002.
Maple Leaf Foods Inc. is a leading Canadian food processing company committed to delivering quality food products to consumers around the world. Headquartered in Toronto, Canada, the Company employs more than 14,000 people at its operations across Canada, and in the United States, Europe and Asia. Maple Leaf Foods Inc. reported sales of $4.8 billion in 2001.
A conference call will be held at 3:00 p.m. (Toronto time) on July 24, 2002 to review Maple Leaf Foods' financial results for the second quarter ended June 30, 2002. The call will be hosted by Michael H. McCain, President & Chief Executive Officer; Tom P. Muir, Chief Financial Officer and Michael H. Vels, Executive Vice-President, Finance.
To participate in the call, please dial in to 1-888-740-8770. For those unable to participate playback will be made available an hour after the event at 1-800-558-5253 passcode # 20736878.