Raw material costs hit Maple Leaf results

05-Nov-2010 - Last updated on 05-Nov-2010 at 10:58 GMT

Canadian baked goods and meat producer Maple Leaf Foods, has attributed its 2 per cent rise in adjusted operating earnings in the third quarter of this year to the higher costs of grains and meat proteins.

Earnings reached C$64.5m in the third quarter ended 30 September while sales were flat in 2010 but the meat division, particularly the fresh pork and poultry sectors, reported improved performance. Sales totalling C$1.3bn matched last year’s level, said the Toronto-based group.

The net loss in the quarter, which included $48.1m of non-cash pre-tax adjustments, was $16.1m compared with net earnings of $22.5m last year.

The firm’s president and CEO Michael McCain said: "The rapid rise in raw material costs in both grains and meat proteins is the story for 2010. Notwithstanding this significant inflation, we realised our sixth consecutive quarter of earnings growth, continued margin expansion in the protein segment, and double-digit earnings per share improvement over last year.”

Bakery performance

Sales for Maple Leaf’s bakery division fell 3 per cent to $411.1m from $425.2m last year reflecting mainly currency translation impacts and lower volumes, continued the manufacturer.

Excluding currency impacts on the translation of bakery sales in the US and UK, sales fell by 1 per cent, it added.

The group’s third quarter adjusted operating earnings declined to $27.9m in the third quarter of this year compared with $32.7m in the same period of 2009. Earnings were affected by lower volumes and increased investment in marketing and promotional activities in the fresh bakery business.

Brand investment included marketing communication around Dempster's Smart(R) 16; an extension of Dempster's Smart(R), which includes 16 whole grains and reduced sodium.

It also included support for the launch of Dempster's rye bread line in Ontario; and extensions in Dempster's Oven Fresh, stated the company.

“Management continues to focus on increasing volumes in the North American frozen business while driving cost improvements in baked goods production in the UK,” according to a company statement. “Cost improvements underway in the UK include the transfer of a production line to an existing low-cost scale facility in Maidstone, England in the second quarter that consolidates the majority of croissant production into one site.”

Fresh bakery facility

Maple Foods said that the construction of a new large-scale fresh bakery facility in Hamilton, Ontario, Canada is proceeding on plan. The 375,000 square foot facility is planned to be commissioned in mid 2011 and will allow for the consolidation of production from three Ontario bakeries.

The company expects to incur restructuring charges totalling about $25m, which includes $5m in non-cash items.