Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the second quarter ended June 30, 2012.
Adjusted Operating Earnings(1) for the second quarter were $71.9 million compared to $77.5 million last year
Net earnings for the second quarter were $32.5 million, compared to $24.6 million in the second quarter last year
Adjusted Earnings per Share(2) were $0.28 compared to $0.30 last year
"Our results rallied significantly from a weak first quarter due to improved profitability in both our fresh bakery and prepared meats businesses," said Michael H. McCain, President and CEO. "We've implemented selective price increases, grown our core branded businesses and our value creation initiatives are contributing to margin growth.
While we made excellent progress in the quarter, we are heading into challenging commodity markets driven by drought conditions throughout North America that will fuel further food inflation. Our business fundamentals are strong and we will take action to manage ongoing cost increases."
(1): Adjusted Operating Earnings, a non-IFRS measure, is defined as earnings from operations before restructuring and other related costs and associated gains, other income (expense) and the impact of the change in fair value of non-designated interest rate swaps, unrealized (gains) losses on commodity futures contracts and the change in fair value of biological assets.
(2): Adjusted Earnings per Share ("Adjusted EPS"), a non-IFRS measure, is defined as basic earnings per share adjusted for the impact of restructuring and other related costs and associated gains, the impact of the change in fair value of non-designated interest rate swaps, hedge ineffectiveness recognized in earnings, unrealized (gains) losses on commodity futures contracts, and the change in fair value of biological assets, net of tax and non-controlling interest.
Please refer to the section entitled Reconciliation of Non-IFRS Financial Measures at the end of this news release.
Financial Overview
Business Segment Review
Following is a summary of sales by business segment:
The following table summarizes Adjusted Operating Earnings by business segment:
Protein Group
Sales for the Protein Group, which includes the Company's Meat Products Group and Agribusiness Group, increased 3% to $855.5 million in the second quarter of 2012, from $833.1 million for the prior year period. Adjusted Operating Earnings decreased 15% to $41.3 million compared to $48.8 million for the second quarter last year.
Results for the Company's Meat Products Group and Agribusiness Group should be viewed in combination due to the higher number of intercompany transactions and correlated factors within these operations.
Meat Products Group
Includes value-added prepared meats, 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 ®, Schneiders ® and many leading sub-brands.
Meat Products Group sales for the second quarter increased 2% to $776.0 million from $762.2 million for the second quarter last year. After adjusting for the impact of a weaker Canadian dollar, which increased the sales value of pork exports, sales increased 1%.
The increase in sales was primarily due price increases implemented earlier in the year and a higher value sales mix in the prepared meats business.
Adjusted Operating Earnings for the second quarter increased 5% to $22.2 million compared to $21.1 million last year, due to higher prepared meats and fresh poultry results, offset by compressed pork processing margins.
Earnings in the prepared meats business benefited from price increases implemented in 2011 and early 2012 to manage rising inflationary costs and a higher margin sales mix due to strong product innovation and sales execution.
Also contributing to stronger earnings were benefits from the Company's network transformation initiatives, including the closure of two sub-scale facilities last year and continued simplification of the prepared meats product portfolio.
Earnings increased in fresh poultry operations, benefiting from improvements in industry poultry processor margins. The business also benefited from continued growth in higher value products under the Maple Leaf Prime Chicken brand.
Earnings declined in primary pork processing, reflecting unfavourable market conditions in North America and lower margins on export sales, primarily in the Japanese and Korean markets.
Agribusiness Group
Consists of Canadian hog production, animal by-product recycling operations including bio-diesel manufacturing and distribution.
Sales in the Agribusiness Group increased 12% to $79.5 million for the second quarter compared to $70.9 million last year, reflecting higher toll feed sales.
Adjusted Operating Earnings for the second quarter of 2012 decreased 31% to $19.1 million compared to $27.7 million last year. Hog production earnings declined due to higher feed costs and lower market prices for hogs.
Earnings in the by-products recycling operations were impacted by a combination of higher prices paid for raw materials and lower selling prices following declines in certain commodities during the quarter...
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Source: Argentine Beef Packers S.A.
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