010249 Maple Leaf Foods Reports ResultsFebruary 27, 2001
Toronto - Maple Leaf Foods Inc. reported its financial results for the fourth quarter and year-ended December 31, 2000.
Mr. Michael McCain, President and Chief Executive Officer of Maple Leaf Foods, said: “We are pleased with the significant year-over-year earnings increases achieved by our Bakery and Agribusiness Groups. Although the Meat Products Group has had a difficult financial year, we are pleased with the Group's continued operational improvements, and the significant reduction in operating losses at the Brandon fresh pork facility in the fourth quarter.”
Sales for the fourth quarter of $1.1 billion increased by 19% from $898 million last year. This increase was largely due to pork sales from the Brandon, Manitoba fresh pork facility and the Landmark Group and Hub Meat Packers acquisitions. Full year sales of $3.9 billion were up 12 % from $3.5 billion last year. Earnings from operations, before unusual items, for the fourth quarter of $26.1 million decreased from $44.8 million last year. Full year earnings from operations, before unusual items, of $90.1 million was down from $146.9 million last year. Net earnings for the quarter, were $12.6 million ($0.12 per share) compared to $22.9 million ($0.23 per share) last year. Full year net earnings were $36.8 million ($0.34 per share) compared to $77.2 million ($0.77 per share) last year.
Meat Products Group
Meat Products Group sales for the fourth quarter of $685 million increased by 30% from $527 million last year. Full year sales of $2.4 billion were up 15% from $2.1 billion last year. Earnings from operations for the fourth quarter of $1.6 million, which is net of operating losses of $6.9 million at the Brandon pork facility, compared to earnings of $17.6 million last year. Full year losses from operations of $11.2 million compared to earnings from operations of $66.5 million last year. Quarterly start-up costs and operating losses this year at the Brandon pork facility totaling $58.0 million have been reduced from $20.0 million in the first quarter to $6.9 million in the fourth quarter ($24.0 million was capitalized in the first two quarters).
Solid operating improvements continued to be achieved at the Brandon facility due, in part, to further progress in building the size and skill base of its core employee group. Operating losses declined to a level in the fourth quarter in line with management's expectation. First shift capacity utilization continued to grow through the fourth quarter and we expect first shift capacity will be reached early in 2001.
In addition to the Brandon operating losses, Maple Leaf Pork's results continued to be adversely affected by high live hog prices and low margins in the pork industry generally.
Maple Leaf Consumer Foods' recorded lower results over last year due, in part, to margin pressures from high meat costs. Maple Leaf Poultry recorded strong financial results in the fourth quarter with Maple Leaf Prime chicken and turkey product sales continuing to show strong market growth. Maple Leaf Foods International recorded improved results in the fourth quarter.
In January 2001, the Company announced it had reached an agreement to purchase the fresh pork operations of Schneider Corporation located in Winnipeg, Manitoba. Having obtained regulatory clearance, the transaction is expected to close in early March 2001. Bakery Products Group
Bakery Products Group sales for the fourth quarter of $165 million increased by 4% from $158 million last year. Full year sales of $651 million compared to $676 million last year. Earnings from operations for the fourth quarter of $5.8 million were up 66% from $3.5 million last year. Full year earnings from operations of $20.4 million were up 111% from $9.7 million last year.
Canada Bread reported its sixth consecutive quarterly increase in operating earnings, following improvements to its operations which were implemented in 1999. Cost reduction and margin improvement momentum, and renewed focus on investment in people, brands and new products are expected to result in continued improvement in financial performance. New product activity is gaining momentum at Canada Bread, highlighted by the launch of Dempster's Originals - white bread made with unbleached flour, and the launch of a line of Dempster's Whole Grain breads early in 2001.
In January 2001, Canada Bread announced that it had reached an agreement to increase its ownership in Multi-Marques Inc. from 25% to 100%. Multi-Marques is a leading Quebec-based bakery business with annual sales of about $300 million. The acquisition is subject to regulatory approval.
In the United States, sales of par-baked bread products once again grew significantly year-over-year. With strong sales momentum, improving product mix and the higher plant utilization rates, Maple Leaf Bakery recorded operating earnings in the fourth quarter and achieved a breakeven earnings result for the year, representing a significant improvement over 1999 Agribusiness Group
Agribusiness Group sales for the fourth quarter of $218 million increased 3% from $212 million last year. Earnings from operations of $18.8 million were down from $23.7 million last year. Full year sales of $846 million were up 18% from $720 million last year. Full year earnings from operations of $80.9 million were up 14% from $70.7 million last year.
Fourth quarter earnings results were adversely affected by a decline in earnings at Rothsay Rendering, which was a result of lower export prices on tallow products and increases in natural gas prices.
The overall increases in sales and operating earnings in 2000 are attributable to solid results from Shur-Gain's animal nutrition operations, benefits from our vertical co-ordination pork value chain strategy and the inclusion of the results of Landmark Feeds and Elite Swine, acquired in the fourth quarter of 1999. Other Information
Other income for the fourth quarter of $11.8 million compares to $18.2 million last year. In the fourth quarter, the Company recognized real estate earnings of $10.7 million on sale of development properties. Full year other income of $34.6 million was down from $39.5 million last year.
Interest expense for the quarter of $16.4 million was up from $12.1 million last year. Full year interest expense of $63.7 million was up from $44.0 million last year. The increases are largely due to higher borrowing levels resulting from the acquisitions of The Landmark Group, in October 1999, and Hub Meat Packers, in May 2000, and higher short- term interest rates.
The Company declared a dividend of $0.04 per share payable March 30, 2001 to shareholders of record on February 26, 2001.
“Our difficult financial results in 2000 relates almost exclusively to a single factor, being the start-up issues surrounding our Brandon fresh pork facility,” said Mr. McCain. “We expect Brandon to become profitable during 2001. Our Bakery Group has successfully executed a turnaround in Canada and a major business start-up in the United States. Our Agribusiness Group, benefiting from our vertical coordination strategy, continues a trend of strong annual earnings growth. We remain confident about the future earnings potential of the Company.”