Toronto - Maple Leaf Foods,Inc. announced its financial results for the second quarter ended June 30, 1998. Following three years of aggressive strategic repositioning and change, the Company reported lower financial results in the first and second quarters of 1998, reflecting the short-term impact of those changes.
Mr. Archibald McLean, Vice-Chairman and Chief Executive Officer of Maple Leaf Foods said: "While we are disappointed with the Company's recent financial results, we are not discouraged by them. Our current focus is on execution against specific goals for major strategic initiatives, each of which we are confident will contribute to strong sales and profit growth in the years ahead."
Net earnings for the quarter were $4.3 million ($0.05 per share), down from $13.9 million ($0.15 per share) last year. The year-to-date net loss of $49.6 million ($0.53 per share) reflects the pre-tax special charge of $82.9 million that was taken in the first quarter. Net earnings for the first two quarters last year was $17.8 million ($0.19 per share).
Sales for the quarter were $822 million compared to $926 million last year. Year-to-date sales were $1.56 billion compared to $1.77 billion last year. Operating earnings for the second quarter were $19.8 million compared to $34.1 million last year. Year-to-date operating earnings, before the special charge, were $30.9 million compared to $51.2 million last year. The quarter and year-to-date declines in sales and earnings were primarily due to lost sales and margins at Maple Leaf Meats as a result of the labor disputes.
The recovery period, following resolution of the labor disputes, began in the second quarter for the Meat Products Group and is expected to continue through the next few quarters. During the second quarter the Company re-opened three meat facilities that had been closed during the labor dispute. Recovery initiatives are centered around recapturing prepared meats volumes that were lost due to supply chain interruptions during the labor dispute, re-establishing market share of live hogs in Ontario, and restoring plant efficiencies at each of the three facilities that were closed during the labor dispute. Construction of the new Brandon fresh pork facility is progressing on schedule. The Poultry operations recorded satisfactory results due principally to continued growth in sales of branded Maple Leaf Prime products.
Earnings in the Bakery Products Group were disappointing. In Canada, earnings decreased from last year primarily due to the impact of re-structuring three regional fresh bakeries into one national operation, along with the negative impact caused by route franchising in Western Canada. Each of these initiatives has solid long-term benefits. Recent steps that have been taken to further rationalize fresh bakery production, such as the announced closure of the Winnipeg and Berwick bakeries, are expected to contribute positively to earnings towards the end of the year. In addition, earnings were affected by poor results recorded by Multi-Marques Inc., a major Quebec bakery company in which the Company has a 25% interest. Results in the United States also decreased from last year, although steps are being taken to improve performance.
During the second quarter, the Company announced plans to sell its Franchise Operations, consisting of Country Style Donuts and Buns Master Bakeries, pursuant to an initial public offering which is ongoing.
Agribusiness Group earnings were generally strong, however, they continued to be adversely affected by lower hog prices in Quebec where the Company has a substantial interest in hog growing operations. International Trading earnings improved despite lower volumes to Asia and a lack of supply of fresh pork due to the labour dispute.
Interest expense for the quarter of $12.2 million increased by 7% from last year, due to higher borrowings arising from capital expenditures and the costs of the labor disputes.
The Company has extended its offer for Schneider. In a decision dated May 10, 1998, the Ontario Court dismissed all of the plaintiffs' claims and all of the defendants' counterclaims leaving the arrangements between the Schneider family and Smithfield Foods Inc.in place. On June 1, 1998, Maple Leaf Foods announced that it would appeal the decision. Two other shareholders of Schneider Corporation also appealed the decision.
Meat Industry Insights News Service
P.O. Box 553
Northport, NY 11768
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