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Maple Leaf Turns from Quarterly Loss to Profit

05 May 2015

CANADA - Meat and agribusiness firm, Maple Leaf Foods, reports a positive results for its operating earning in the first quarter of 2015.

In its financial results for the first quarter ending 31 March 2015, Maple Leaf Foods Inc. reports Adjusted Operating Earnings for the first quarter were C$10.4 million, an improvement of C$40.3 million, compared to a loss of C$29.9 million last year.

Adjusted EBITDA margin improved to 4.7 per cent from a negative 1.1 per cent last year, while Adjusted Earnings per Share for the quarter was C$0.05 (from a loss of C$0.24 last year).

Net loss from continuing operations for the first quarter was C$2.8 million. This compares with a loss of C$124.6 million last year.

The final production run at the last of the Company's closing legacy facilities occurred yesterday, 30 April, marking the end of the duplicative supply chain network.

Michael H. McCain, President and CEO (pictured), said: “We had a very strong quarter, returning to profitability in adjusted earnings per share. “We recorded a C$40 million improvement in our adjusted operating earnings year over year, restored our margins and made excellent progress in recovering our prepared meats volume from last year’s unprecedented environment.

“We were able to reduce our operating costs as we come to the final stage of our network transition, and today, with the last production run at our last legacy plant, we are bringing an end to our duplicative supply chain.

“Our final phase is to bring our new state of the art facilities to full operational effectiveness. All of this keeps us on track to reach our strategic financial target.”

Financial overview

Maple Leaf Foods Inc. sales from continuing operations of C$780.2 million for the first quarter was an increase of 9.7 per cent from last year, or 8.5 per cent after adjusting for the impact of foreign exchange.

The increase was primarily a result of higher pricing in the Meat Products Group, partially offset by lower volumes. Adjusted Operating Earnings for the first quarter was C$10.4 million compared to a loss of C$29.9 million last year. The Meat Products Group benefited from price increases in the prepared meats business and improved export margins in the fresh pork business, which were partially offset by lower volumes in the prepared meats business.

Adjusted Earnings per Share was C$0.05 in the first quarter of 2015 compared to a loss of C$0.24 last year.

Net loss from continuing operations for the first quarter was C$2.8 million (loss of C$0.02 per basic share attributable to common shareholders(5)) compared to a loss of C$124.6 million (loss of C$0.89 per share) last year. This included C$10.8 million (C$0.06 per share) of pre-tax expenses related to restructuring and other related costs (2014: C$21.8 million, or C$0.12 per share). The decrease was primarily due to non-recurring finance costs that were incurred last year in relation to the repayment of the Company's outstanding debt and lower selling, general and administrative costs.

Several items are excluded from the discussions of underlying earnings performance as they are not representative of ongoing operational activities. 

Meat Products Group

This includes value-added prepared meats, lunch kits and snacks and fresh pork and poultry products sold under leading Canadian brands such as Maple Leaf®, Schneiders® and many leading regional brands.

Sales in the Meat Products Group for the first quarter increased 10.1 per cent to C$776.4 million, or 8.8 per cent after adjusting for the weaker Canadian dollar. The improvement was driven by price increases implemented in the prepared meats business during the second quarter of 2014 in response to higher raw material costs, increased volumes in the fresh pork business and improved sales mix in the fresh poultry business.

These were partially offset by lower volumes in the prepared meats business. Adjusted Operating Earnings for the first quarter increased to C$7.9 million compared to a loss of C$27.4 million last year, primarily as a result of improved margins. The prepared meats business benefited from price increases and a reduction in transitional costs, partially offset by lower volumes.

Transitional costs primarily related to commissioning activities at the new prepared meats facility in Hamilton, the largest in the Company's network, and duplicative overhead costs from legacy plants scheduled to be closed. The reduction in transitional costs was mainly attributable to a decrease in duplicative overhead costs resulting from the closure of three legacy facilities in 2014 and the largest legacy facility in the Company's network on 27 February 2015.

Earnings in the fresh pork business improved due to increased export margins, primarily in Japan, and growth in the Canadian retail market, which more than offset a decline in pork processing margins. Earnings in the fresh poultry business increased as a result of improvements in poultry processing margins and operating efficiencies.

Agribusiness Group

This includes Canadian hog production operations that primarily supply the Meat Products Group with livestock as well as toll feed sales.

Agribusiness Group sales for the first quarter declined to C$3.8 million compared to C$5.9 million last year, due to lower toll feed sales.

Adjusted Operating Earnings in the first quarter increased to C$2.5 million compared to a loss of C$0.3 million last year as the hog production operations benefited from hog prices, net of hedging activities, which was offset by additional costs incurred relating to the prevention of the Porcine Epidemic Diarrhoea (PED) virus.

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