990310 Maple Leaf Foods Announces Year-End Results

Toronto - Maple Leaf Foods Inc. announced its 1998 fourth quarter and December 31, 1998 year-end results.

Mr. Michael McCain, President & Chief Executive Officer of Maple Leaf Foods Inc., said: “We are pleased to report a strong rebound in the Company's financial results in the fourth quarter with operating earnings up 20% over 1997”.

Financial Results

Sales for the fourth quarter of $883 million compare to $943 million for the fourth quarter last year. The quarter-over-quarter decline in sales was largely a result of low commodity prices and low fresh bread volumes. Fourth quarter earnings from operations increased 20% to $47.4 million from $39.5 million, before labour dispute-related costs, last year. Operating earnings last year were $27.6 million after labour dispute-related costs. Fourth quarter net earnings increased to $19.2 million ($0.20 per share) from $12.5 million ($0.13 per share) in the fourth quarter last year.

Sales for the full year were $3.3 billion compared to $3.7 billion for 1997. Earnings from operations, before unusual items, for the year were $103 million compared to $117 million last year. Net earnings, before unusual items, for the year of $32.1 million ($0.34 per share) compared to $46.9 million ($0.51 per share) last year. The net loss for the year, after unusual items, was $23.3 million ($0.25 per share). The most significant factors contributing to the year-over-year declines in sales and earnings, before unusual items, were the labour dispute, difficulties experienced in the Bakery Products Group and low commodity prices.

Meat Products Group

The Meat Products Group reported sales for the year of $2.0 billion, down 15% from $2.3 billion for 1997. Operating earnings, before unusual items, for the full year increased to $29.7 million, up 48% from 1997 operating earnings, before labour dispute-related costs, of $20.1 million. Operating earnings last year were $8.2 million after labour dispute-related costs.

Throughout much of the fourth quarter, the Burlington fresh pork facility was processing a record number of hogs weekly. Work is underway on the $11.8 million investment in the Burlington, Ontario facility that was announced last quarter, and the new Brandon, Manitoba fresh pork facility is progressing satisfactorily. Excellent progress continued to be made in recapturing prepared meats volume following the labour dispute. An aggressive schedule for new product launches and marketing initiatives has been developed for 1999. During the fourth quarter, Maple Leaf Meats was divided into two distinct operating entities: Maple Leaf Pork, being the hog slaughter and fresh pork business, and Maple Leaf Consumer Foods, which manages the primary Maple Leaf consumer franchise, including packaged meats.

Maple Leaf Poultry continued to show substantially improved earnings largely driven by the success of Maple Leaf Prime branded products and improvements in plant operations. In January 1999, Maple Leaf Poultry and Cold Spring Farms Limited announced that they had entered into a joint-venture to combine their Ontario turkey processing operations into one facility effective April 2, 1999. Each company will continue to market, sell and distribute its products separately.

Results from Maple Leaf Foods International were very satisfactory, particularly considering the turbulent Asian markets in which they operated. Volumes into Asia were strong in the quarter.

Agribusiness Group

The Agribusiness Group reported sales for the year of $653 million compared to $705 million for 1997. Operating earnings, before unusual items, for the full year of $53.2 million, were down 18% from 1997 operating earnings of $64.7 million.

Shur-Gain reported strong results in the fourth quarter. Earnings for the full year were adversely affected by low hog prices in Quebec where the Company has an interest in hog growing operations, and losses on grain inventories. We are taking steps to reduce our exposure to the hog production business over the next several years. Early in 1999, Shur-Gain announced plans for a new, state- of-the-art 200,000 tonne mill tower in St. Mary's, Ontario. Rothsay Rendering had a challenging year due to declines in commodity prices, but produced satisfactory results due to its low cost producer position.

Other Information and Developments

Other income for the quarter of $0.7 million was down from $9.5 million in the fourth quarter last year. Other income for the full year of $7.5 million was down from $20.1 million in 1997. These declines were due to reduced earnings from associated companies and lower income from real estate and property and equipment sales. Interest expense for the quarter of $13.6 million was up 21% from last year. Interest expense for the full year of $49.1 million was up 12% from last year.

In December, the Company completed its offering of 6% convertible unsecured subordinated debentures due 2005. A total of $91.3 million principal amount of the debentures was sold. The debentures are convertible into common shares of Maple Leaf Foods at any time prior to redemption at a conversion price of $15.00. Proceeds will be used to pursue capital spending and acquisition opportunities in each of the Company's operating groups.

An internal reorganization of corporate executive responsibilities was completed in the fourth quarter resulting in changes to the cf our three reporting groups. The principle changes were moving Maple Leaf Foods International to the Meat Products Group from the Agribusiness Group, and moving Rothsay Rendering to the Agribusiness Group from the Meat Products Group. The segmented numbers and commentary in this report are based on the revised composition of our reporting groups.

Dividend

The Company declared a dividend of $0.04 per share payable on March 31, 1999 to shareholders of record on March 19, 1999.

Mr. Michael McCain concluded: “We feel very positive about the Company's results in the fourth quarter, and we expect to see further steady gains through 1999.”

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