Maple Leaf Foods Announces Year-End Results Q4 Operating Earnings up 20 Percent over 1997
financial results in the fourth quarter with operating earnings up 20 percent
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 percent 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
Meat Products Group
The Meat Products Group reported sales for the year of $2.0 billion, down 15
percent from $2.3 billion for 1997. Operating earnings, before unusual items,
for the full year increased to $29.7 million, up 48 percent 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
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.
Bakery Products Group
The Bakery Products Group reported sales for the year of $663 million compared
to $668 million for 1997. Operating earnings, before unusual items, for the
full year of $20.5 million, were down 54 percent from 1997 operating earnings
of $44.5 million.
The factors that had the greatest impact on results continued to be: lower
fresh bread volume in Western Canada; reduced gross margins in Atlantic Canada;
and lower earnings from the Company's 25 percent interest in Multi-Marques. In
the fourth quarter, an agreement was reached with the Great Atlantic and
Pacific Company of Canada, Limited to supply bakery products to A&P and
affiliated grocery stores in Ontario, beginning in February 1999. This
agreement, together with the purchase of Hamilton Bakery, which was completed
in the fourth quarter, will have a positive effect on the Company's Ontario
fresh bakery performance. Strategic gains continued to be made by our U.S.
bakery operation, Maple Leaf Bakery U.S.A.
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 percent from 1997 operating earnings of
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
percent from last year. Interest expense for the full year of $49.1 million was
up 12 percent from last year.
In December, the Company completed its offering of 6 percent 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 composition of 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.
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
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