Toronto - Maple Leaf Foods Inc announced its financial results for the first quarter ended March 31, 1998.
In prefacing the results, Mr. Archibald McLean, Vice-Chairman and Chief Executive Officer of Maple Leaf Foods said: “It was a difficult quarter for Maple Leaf Foods, with results adversely affected by several factors, the most significant being labour disputes at Maple Leaf Meats. We are pleased to report, however, that all of these labour disputes have been resolved.”
The Company recorded a net loss for the quarter of $53.9 million ($0.58 per share) after booking a special charge of $82.9 million before tax. The special charge relates to the costs of labour disputes and future restructuring. Net earnings before these items was $0.02 per share compared to $0.04 per share last year.
Sales for the quarter of $739 million represents a decrease of $108 million from sales of $847 million last year. Earnings from operations, before unusual items, were $11.1 million compared to $17.2 million last year. These declines were primarily due to lost sales and margin at Maple Leaf Meats as a result of the labour disputes.
In the Meat Products Group, the first quarter saw very favourable pork market conditions as a result of sharply lower hog prices. Unfortunately, the Company was largely unable to participate in this favourable market. The Burlington fresh pork facility was on strike throughout the quarter, and the Edmonton fresh pork facility was permanently closed in late 1997. Only the Winnipeg fresh pork facility was in operation during the quarter. Processed meats sales and earnings were negatively impacted by supply irregularities and disruptions resulting from the temporary third party co-packer network which had been established.
Employees at the Burlington fresh pork facility have returned to work. Both the North Battleford and Hamilton processed meats facilities will re-open in stages throughout the second quarter. The Company expects it will take three to six months before full operational efficiency and volumes are recovered.
The development of the new Brandon fresh pork facility is proceeding as planned. Site work commenced on April 20th. Early in April 1998, the Company announced that it will invest $4 million to convert the Lethbridge fresh beef facility to a fresh pork facility to produce specialty products for the Japanese market. In addition, about $30 million will be invested in the Burlington fresh pork facility that will improve productivity, reduce cost and increase capacity and employment at the facility.
The Company announced yesterday that its offer for Schneider Corporation was extended to 12:01 am on May 27, 1998. Court proceedings on the Schneider litigation concluded on Friday, April 24th, and a decision is expected shortly.
In the Bakery Products Group, earnings were lower than last year although sales increased. Consolidation of the three previously separate fresh bakery companies in Canada into a single national structure adversely affected profitability in the quarter. In addition, as the Company moved towards franchising of its dealers in Western Canada, some disruption in delivery of product occurred, affecting sales volumes and profitability. We expect these short-term issues to return to normal by the end of the second quarter. In the United States, a delayed start up at the new Roanoke, Virginia, facility negatively impacted results, although improvement is expected through the balance of the year.
Agribusiness Group earnings were generally strong; however, they were 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. As the Company's fresh pork operations come back on line, earnings are expected to improve.
Interest expense for the quarter of $10.6 million increased by 7 percent from last year, due to higher borrowings arising from capital expenditures and the costs of the labour disputes.
In the first quarter the Company recorded a special charge of $82.9 million before taxes ($58.4 million after taxes) consisting of a number of unusual items. Included in the pre-tax amount is $37 million of labour dispute-related costs and payments made to employees upon settlement of the strike at the Burlington fresh pork facility. The balance of the special charge relates to other restructuring initiatives currently underway or planned, including completion of centralization of administration in all three business groups and realignment of manufacturing capacity.
The Company declared a dividend of $0.04 per share payable on June 30, 1998 to shareholders of record on June 12, 1998.
Mr. McLean concluded: “The Company has experienced a period of uncertainty over the last several months. With many difficult issues now behind us, we are confident that results in the second half of the year will reflect the improving competitiveness of the business.”
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