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Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the fourth quarter and the year ended December 31, 2010. Fourth quarter and full year highlights follow:
- Adjusted Operating Earnings increased 24% to $71.4 million in the fourth quarter and 13% to $222.0 million for the year
- Fourth quarter adjusted Earnings per Share increased 42% to $0.27 and by 33% to $0.76 for the year
- Net earnings in the quarter were $30.2 million compared to $21.9 million last year; net earnings for the full year, which included $71.3 million of non-cash pre-tax charges, were $25.8 million compared to $52.1 million last year
Note: Adjusted Operating Earnings measures are defined as earnings from operations before restructuring and other related costs, other income and the impact of the change in fair value of non-designated interest rate swaps. Adjusted Earnings per Share (“Adjusted EPS”) measures are defined as basic earnings per share adjusted for the impact of restructuring and other related costs and the impact of the change in fair value of non-designated interest rate swaps, net of tax and non-controlling interest. Please refer to the section entitled Reconciliation of Non-GAAP Financial Measures at the end of this news release.
“Maple Leaf Foods delivered strong earnings growth in the fourth quarter, despite a sharp increase in raw material prices” said Michael H. McCain, President and CEO. “These results reflect the benefits of cost reductions and price increases intended to help us keep pace with global food inflation, and some early benefits from the initial execution of our strategic plan. We expect the progress we are making in reducing our cost structure, simplifying our product lines, and streamlining our operations will contribute to earnings throughout 2011.”
Sales for the fourth quarter of 2010 decreased 9% to $1,212.0 million compared to $1,324.9 million last year, primarily due to the sale of the Company’s Burlington pork operation during the quarter and the effect of an additional week in the fourth quarter last year. For the full year ended December 31, 2010, sales were $4,968.1 million, compared to $5,221.6 million in 2009.
Adjusted Operating Earnings increased to $71.4 million compared to $57.8 million last year due to improved performance in the Meat Products Group. Full year Adjusted Operating Earnings increased to $222.0 million compared to $196.1 million in 2009. Net earnings increased to $30.2 million or $0.22 basic earnings per share in the fourth quarter compared to net earnings of $21.9 million or $0.16 basic earnings per share last year.
Meat Products Group
Includes value-added prepared meats, chilled meal entrees and lunch kits; and fresh pork, poultry and turkey products sold to retail, foodservice, industrial and convenience channels. Includes leading Canadian brands such as Maple Leaf(R), Schneiders(R) and many leading sub-brands.
Sales for the fourth quarter declined 10% to $762.6 million from $842.2 million compared to the same period last year. Excluding the impacts of an extra week in the fourth quarter of 2009, the divestiture of the Burlington pork processing facility and the exit of a non-core product line, sales increased by 4%. Higher market prices for fresh pork and increased net pricing in prepared meats were partly offset by lower volumes.
Adjusted Operating Earnings in the Meat Products Group for the fourth quarter increased 63% to $39.5 million compared to $24.2 million last year, driven by strong performance in fresh pork processing operations due to improved pork pricing spreads. Strong pork results were partly offset by lower earnings in prepared meats. Prepared meats results declined due to lower volumes and higher input costs, although margins increased due to higher pricing. Earnings from the fresh poultry business were consistent with last year, as strong industry processor margins that continued through 2010 began to abate in the fourth quarter. For the year, Adjusted Operating Earnings in the Meat Products Group increased 62% to $89.7 million compared to $55.4 million last year.
Maple Leaf is implementing a number of near-term initiatives to increase margins in the prepared meats business as part of the Company’s value creation plan. These initiatives aim to reduce complexity and costs by, among other things, standardizing ingredient formulations, product sizes and specifications across all categories. Some early benefits were realized in 2010. The implementation of the value creation plan also involves a number of significant changes in the Company’s prepared meats plant network. These changes will reduce costs through the closure of sub-scale plants and the consolidation of production volumes in other facilities. To this end, in November 2010, Maple Leaf announced the closure of its prepared meats facility in Berwick, Nova Scotia and, in early 2011, announced plans to close its prepared meats facility in Surrey, British Columbia. These closures are expected to result in lower costs and contribute to earnings later in 2011. The Company is also implementing price increases across its prepared meats business in response to rising meat costs.
Consists of Canadian hog production and animal by-product recycling operations.
Sales increased 11% to $56.2 million from $50.7 million in the fourth quarter last year due to higher sales values in the bio-diesel and core rendering businesses.
Adjusted Operating Earnings in the Agribusiness Group in the fourth quarter were consistent with the prior year. Earnings in hog production were slightly behind last year as government support to compensate producers for prior year losses received in Q4 2009 was not repeated in 2010. Earnings from the by-products recycling operations increased slightly due to improved pricing and operating efficiencies.
Adjusted Operating Earnings for the year increased 6% to $50.8 million from $48.0 million in 2009.
Bakery Products Group
Includes fresh and frozen bakery products, including breads, rolls, bagels, specialty and artisan breads, sweet goods, prepared sandwiches, and fresh pasta and sauces sold to retail, foodservice and convenience channels. It includes national brands such as Dempster’s(R), Tenderflake(R), Olivieri(R) and New York Bakery Co(R), and many leading regional brands.
Sales in the fourth quarter declined 9% to $393.3 million from $432.0 million in the prior year. Excluding the impact of the extra week in 2009, sales declined by 2% as lower volumes and foreign exchange translation were partly offset by improved product mix.
Adjusted Operating Earnings in the Bakery Products Group for the fourth quarter were consistent with last year. Adjusted Operating Earnings for the year decreased to $93.2 million compared to $102.2 million in 2009.
Adjusted Operating Earnings in the fresh bakery business increased in the fourth quarter due to lower commodity costs and the favourable impact of a stronger Canadian dollar on wheat and ingredient purchases. A significant rise in wheat prices that began in the fourth quarter has continued in 2011, and as a result the business will be implementing price increases late in the first quarter. Performance in the North American frozen bakery operations was lower than 2009, although volume began to strengthen towards the end of the year. A number of initiatives are underway to improve performance. In early 2011, the Company announced it will close a high cost bakery in Laval, Quebec and transfer production to its other bakeries where there is available capacity. Results in the U.K. bakery operations were consistent with last year. Management is proceeding with initiatives to reduce costs and consolidate volumes into fewer bakeries and in the first quarter of 2011 announced plans to close a bakery facility in Cumbria, U.K. Also, in the first quarter of 2011, a significant promotion of the Company’s bagel brand in the U.K. was launched to support market growth in the bagel category.
Construction of the Company’s bakery facility in Hamilton, Ontario commenced in August 2010. The project is on target to begin initial production of bakery products in July 2011.
On February 18, 2011, the Company completed the sale of its fresh sandwich business for $8.0 million, subject to post closing adjustments.
On February 24, 2011 Maple Leaf Foods Inc. declared a dividend of $0.04 per share payable on March 31, 2011 to shareholders of record at the close of business on March 10, 2011. Unless indicated otherwise by the Company in writing at or before the time the dividend is paid, these dividends will not be considered an eligible dividend for the purposes of the “Enhanced Dividend Tax Credit System”.
It is currently anticipated that the full amount of the dividends to be paid in the first and second quarters of 2011 and a portion of the dividends to be paid in the third quarter will not be considered an eligible dividend for the purposes of the “Enhanced Dividend Tax Credit System”. A portion of the dividend in the third quarter and the dividend for the fourth quarter are expected to be considered an eligible dividend for the purposes of the “Enhanced Dividend Tax Credit System”.
An investor presentation related to the Company’s fourth and full year financial results is available at http://www.mapleleaf.com/ and can be found under Investor Relations on the Quarterly Results page. A conference call will be held at 2:30 p.m. EDT on February 24, 2011 to review Maple Leaf Foods’ fourth and full year financial results. To participate in the call, please dial 416-340-2219 or 877-240-9772. For those unable to participate, playback will be made available an hour after the event at 416-695-5800 / 800-408-3053 (Passcode 1362310).
A webcast presentation of the fourth quarter financial results will also be available at http://investor.mapleleaf.ca/ 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.
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, expectations, anticipations, estimates and intentions. Specific statements include, but are not limited to, statements with respect to expectations concerning improving trends in operational results and expectations regarding actions to reduce costs, improved efficiencies, restore volumes and/or increase prices. 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, United Kingdom and Japanese economies; the rate of exchange of the Canadian dollar to the U.S. dollar, British pound and Japanese yen; expectations regarding actions to reduce costs, restore volumes and/or increase prices; 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, 2010 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, 2010 including the section entitled “Risk Factors” that will be available on SEDAR at http://www.sedar.com/. The Company does not intend to, 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 21,000 people at its operations across Canada and in the United States, the United Kingdom, and Asia. The Company had sales of $5.0 billion in 2010.
For further information: Lynda Kuhn, SVP Communications, 416-926-2026, http://www.mapleleaf.com/