TORONTO - Maple Leaf Foods Inc. says it's selling nearly as much packaged meat as it was before an outbreak of listeriosis sent sales plummeting last year, and CEO Michael McCain hopes consumer confidence in the company will soon exceed its pre-outbreak levels.
McCain said Wednesday that packaged meat sales volumes have rebounded to within a few percentage points of where they were before Listeria-tainted meat linked to Maple Leaf's Toronto plant left 22 people dead last year. The outbreak and subsequent product recall pushed packaged meat sales down by as much as 50 per cent.
The improvement in packaged meat sales has allowed the benefits of the food processing company's restructuring, begun several quarters ago and focused primarily on its fresh meat operations, to finally shine through.
"We have made substantial progress and this, for the very first time, is making the progress of our restructuring in hog production and primary processing visible in the quarter even though this has been ramping up for much of the last 12 months," McCain said in a conference call with analysts.
In an attempt to focus on its higher, value-added meat and meals business, Maple Leaf has been scaling back its hog processing and fresh pork operations.
Maple Leaf's third-quarter results, released Wednesday, showed the extent to which the company has bounced back from last year's tainted meat tragedy. The company earned $22.5 million or 17 cents a share compared with a loss of $12.9 million or 10 cents a share a year earlier.
Quarterly revenues dipped to $1.29 billion from $1.34 billion last year but beat analyst forecasts of $1.31 billion in revenue and earnings of 14 cents a share.
Maple Leaf was able to report the impressive turnaround despite the impacts of languishing pork prices, McCain said.
"The hog markets are as challenging in this quarter... as may have ever been experienced in the last decade in hog production, yet our performance in hog production actually improved over a year ago due to the benefits of restructuring," he said.
In fact, compared with any of the last three years, McCain said Maple Leaf's protein business posted a nearly three-fold increase in the third quarter of 2009.
However, he added that hog production remains unprofitable due to market conditions.
Maple Leaf chief financial officer Michael Vels said the company has been able to improve its debt ratio to within its target range due to significant changes in the business after last year's tainted meat recall.
"Since the recall of last year, we significantly cut back on our capital, reduced our operating costs, issued equity and tightened up our working capital management, so we've seen fairly significant cash savings," Vels said.
The turnaround helped send Maple Leaf shares up 29 cents or 2.8 per cent to $10.75 in Wednesday trading on the Toronto Stock Exchange.
The company's bakery business posted adjusted operating earnings of $32.7 million, up from $30.6 million last year. The increase was driven by lower commodity costs but was partly offset by disappointing results in the fresh sandwich business and U.K. bakery operations.
Maple Leaf said it is actively working on initiatives to improve the sandwich business and recently appointed a new management team, as it is an important part of the company's growth.
Maple Leaf also said it would continue to focus on its Meat Products Group as it tries to drive up volume growth and improve earnings, which it said were not yet at full potential. Adjusted operating earnings in the meat division were $18.1 million compared with $800,000 for the third quarter last year.
Adjusted operating earnings in the Agribusiness Group increased to $15.1 million from $12.3 million last year due to benefits from restructuring.
Canada Bread Co. (TSX:CBY), a publicly traded subsidiary of Maple Leaf, reported separately that saw third-quarter net income of $25.1 million or 99 cents per share, compared with $19.7 million or 77 cents per share in the third quarter of 2008. Sales declined to $424.6 million from $443.1 million last year.
