Maple Leaf Foods profit drops in Q1

Canadian food processor Maple Leaf Foods has reported a net earnings drop to C$0.8m ($0.8m) for the first quarter of 2012 from C$10.5m ($10.64m) year-on-year, as the company struggled with weaker bakery and pork volumes.

Sales in the quarter ended 31 March 2012 increased 1% to C$1.16bn ($1.17bn), compared to C$1.14bn ($1.11bn) in 2011, owing to higher pricing across all of the company’s business divisions, which partially offset weaker fresh bakery and fresh pork volumes.

Maple Leaf Foods president and CEO Michael H. McCain said the company experienced a challenging first quarter due to weak fresh bakery volumes, an issue that affected the entire industry.

The bakery products group reported a 1% decline in sales to C$370m ($375.15m), while adjusted operating earnings fell 73% to C$3.3m ($3.3m), due to low fresh bakery sales volumes.

"We are addressing this challenge directly and expect improved results through the remainder of 2012," McCain added.

The company’s meat products division, which offers prepared meats as well as fresh pork, poultry and turkey products, posted 1% increase in sales to C$725.5m ($735.2m), as higher volumes in prepared meats were offset by lower sales volumes in fresh pork.

Adjusted operating earnings fell 17% to C$22.1m ($22.3m), primarily due to challenging industry pork processing market conditions in North America.

The agribusiness division, which involves Canadian hog production and animal by-product recycling operations, saw a 14% increase in sales to C$65.3m ($66.17m), driven by sales volume growth and higher selling prices for bio-diesel.

Adjusted operating earnings increased 36% to C$19.1m ($19.3m), due to strong performance in hog production and by-products recycling operations, primarily bio-diesel.

Maple Leaf plans to implement cost-cutting measures and market the health benefits of bread, alongside anticipating its bakery volumes and margins to grow later in the year, owing to the likely fall of wheat price during the second half.

As a part of its restructuring plan to boost competitiveness and profitability, last year the company announced its plan to cut 1,550 jobs, close plants in four provinces, streamline distribution, and invest C$560m ($561.81m) in infrastructure and technologies over three years.