Maple Leaf Foods reports 32% increase in Q2 net earnings

Canada-based Maple Leaf Foods has reported that its net earnings surged 32% to C$32.5m ($32.4m) in the second quarter ended 30 June 2012, compared to C$24.6m ($24.5m) in 2011, helped by higher pricing action and modernisation of its meat operations.

Sales for the quarter rose about 2% to C$1.26bn ($1.25bn), compared to C$1.24bn ($1.23bn) in 2011.

Adjusted operating earnings fell 7.2% to C$71.9m ($71.7m), from C$77.5m ($77.3m) in 2011.

Maple Leaf Foods president and CEO Michael H McCain said after a weak first quarter the results improved significantly due to the strong performance of the company’s fresh bakery and prepared meats businesses.

"We’ve implemented selective price increases, grown our core branded businesses and our value creation initiatives are contributing to margin growth," McCain added.

Maple Leaf Foods’ meat products division, which offers prepared meats as well as fresh pork, poultry and turkey products, posted a 2% rise in sales to C$776m ($774m), due to price increases and a higher value sales mix in the sector, while the adjusted operating earnings grew 5% to C$22.2m ($22.1m).

The agribusiness division, which involves Canadian hog production and animal by-product recycling operations, saw 12% growth in sales to C$79.5m ($79.3m); however, adjusted operating earnings dropped 31% to C$19.1m ($19m), due to higher costs of feed and lower market prices for hogs.

The bakery products division, which offers fresh and frozen bakery products, reported a marginal decline in sales to C$404.7m ($403.6m), but saw 8% increase in adjusted operating earnings to C$32.2m ($32.1m), due to higher pricing action.

For the first half of 2012, net earnings fell 5% to C$33.2m ($33.1m); sales increased 1.4% to C$2.42bn ($2.41bn); and adjusted operating earnings decreased 12% to C$112m ($111.7m).

Maple Leaf Foods noted that it will be cautious in its spending as it faces a challenging commodity market due to drought conditions throughout North America and higher global prices for ingredients.

As a part of its restructuring plan to boost competitiveness and profitability, in 2011 the company announced its plan to cut 1,550 jobs, close plants in four provinces, streamline distribution, and invest C$560m ($558.6m) in infrastructure and technologies over three years.

Maple Leaf Foods said that the restructuring is going as expected and is contributing to the company’s profits.