990527 Maple Leaf Foods Posts Record First

Toronto - Maple Leaf Foods Inc. announced record first quarter operating earnings for the quarter ended March 31, 1999.

Michael H. McCain, president and chief executive officer of Maple Leaf Foods, said, "The excellent improvement in results reflect the benefits of several years of restructuring which are beginning to produce returns."

Sales for the quarter of $869.4 increased by 18% from $738.6 million last year as all three operating groups reported increased sales. Earnings from operations of $29.3 million increased by 165% from $11.1 million, before unusual items, last year. The Meat Products Group and the Agribusiness Group both reported increased earnings while Bakery Products Group earnings declined from 1998. Net earnings of $10.8 million ($0.10 per share), compared to $1.5 million ($0.02 per share), before unusual items, in the prior year.

Meat Products Group sales of $527.5 million increased by 23% from $429.5 million last year. Earnings from operations increased to $17.8 million compared to $1.5 million last year as all operations within the Group recorded improved results. Maple Leaf Pork benefited from favorable commodity markets and construction is proceeding on the Brandon, Manitoba, hog processing plant with completion anticipated in the fall of this year.

Maple Leaf Consumer Foods earnings improved as a result of increased volumes. Several new products were launched during the quarter including Ready Crisp pre-cooked bacon and Top Dogs nutritionally superior wieners.

Maple Leaf Poultry recorded improved volumes and margins, principally due to continuing strong growth of Maple Leaf Prime branded chicken and improved operating efficiencies. The previously disclosed joint venture agreement to process turkey with Cold Springs Farm Limited was finalized on April 2, 1999, resulting in the closure of the company's Walkerton turkey facility and transfer of production to the new joint venture.

Maple Leaf Foods International recorded strong results due to strong demand from global markets.

Bakery Products Group sales of $175.4 million increased of 12% from $157.2 million last year. However, earnings from operations declined to $0.3 million from $2.4 million last year. Canada Bread Company Limited recorded an increase in sales largely due to the new A&P supply contract, however, the start-up costs of this contract are also reflected in the quarter.

The integration of Hamilton Bakery in Ontario was successfully completed in the quarter. A new management team has been put in place at Canada Bread, and a six-point strategy has been developed and is aggressively being implemented to restore profitability. In the United States, sales of core par-baked bread products were up significantly, offset by the loss of some contracted private label bagel business.

Agribusiness Group sales of $166.6 million increased by 10% from $151.8 million last year, primarily due to increases in feed and pet food sales. Operating earnings of $11.3 million increased by 57% from $7.2 million last year as a result of the sales increases, partly offset by continued losses from the sale of live hogs in Quebec. Construction on a new mill tower in St. Mary's Ontario that will significantly increase feed capacity in Shur-Gain's Ontario business has begun and will be completed late in 1999.

The company has reached an agreement to sell Country Style Food Services Inc., its Franchising Operations, to a group including CAI Capital Partners and Company II, L.P. and Country Style management in a transaction valued at $45 million. Closing is scheduled for May 28, 1999, and a gain on the transaction will be recorded in the second quarter. The transaction is consistent with the company's Core 7 Strategy of focusing on core businesses and presents growth opportunities for Country Style that can be more fully realized on a stand-alone basis.

Other income for the quarter of $0.4 million is lower than the $3.7 million reported last year largely due to reduced earnings from associated companies and the gain on sale of the MTC Animal Health business recorded in January 1998.

The company has in place a process designed to minimize the effects of the Year 2000 issue on the company. As at March 31, 1999, the assessment and remediation phase related to the company's internal computer systems was substantially complete, and over 95% of the company's internal systems are considered to be Year 2000 ready or have contingency plans in place. A process to address the readiness of key third parties such as suppliers and customers is ongoing. It is however not possible to be certain that all aspects of the Year 2000 issue affecting the company, including those related to the efforts of customers, suppliers, or other third parties, will be fully resolved.

The Company declared a dividend of $0.04 per share payable on June 30, 1999 to shareholders of record on June 11, 1999.

Michael McCain added: "We are very pleased that the results for the first quarter, and we are confident the company will have a good year."

This Article Compliments of...