Maple Leaf Foods’ third-quarter, year-to-date earnings drop substantially
Construction costs, high feed costs and pork market volatility contribute to woes
Maple Leaf Foods reported a hefty drop in its third-quarter and year-to-date operating earnings, with a third-quarter decline from $47.9 million to $18.6 million, and a year-to-date drop from $102.3 million to $12 million. The company on October 30 announced its third quarter financial results, with the quarter ending September 30.
The costs associated with five start-up plants, higher feed prices and pork market volatility contributed to the Canadian food and agribusiness company's financial setbacks, Maple Leaf Foods President and CEO Michael H. McCain said.
"This is a very challenging period of transition for the Maple Leaf organization, as the short-term impact of volatile protein market conditions, combined with the significant cost of change, has been material," said McCain. "We have five significant operational start-ups occurring simultaneously, during a year when commodity markets have not been friendly. However, these transitory conditions do not detract from the underlying strength of the business or the strategic direction. Our commercial performance is solid and we are satisfied with the progress we are making in implementing our prepared meats strategy."
Maple Leaf Foods' protein group, which includes the operations of the company's meat products and agribusiness groups, saw its adjusted operating earnings suffer a loss of $20.1 million for the third quarter, compared to the $18.9 gain for the third quarter of 2012. Protein group sales for the third quarter declined 2.8 percent to $757.3 million for the third quarter from the $778.8 million recorded during the third quarter of 2012.
Earnings in primary pork processing continued to be negatively affected by the devaluation of the Japanese yen, which lowered profitability on export sales. North American primary pork processing spreads also contracted as live hog costs outpaced an increase in pork prices. Earnings in fresh poultry were consistent as lower primary processing spreads were offset by lower selling, general and administrative costs.
Earlier in October, Maple Leaf Foods sold Rothsay, its rendering and biodiesel business, to Texas-based rendering company Darling International. Maple Leaf Foods will use the proceeds from the Rothsay transaction to pay down its debt.