Financial Results

Sales for the third quarter increased 13% to $1.20 billion from $1.06 billion last year reflecting top-line growth in all operating groups.  Earnings from operations for the third quarter of $30.2 million were up 28% from $23.7 million last year.  The Bakery Products Group and the Agribusiness Group both reported increased earnings while the Meat Products Group reported a loss from operations.    Net earnings for the quarter were $10.2 million  ($0.10 per share) compared to $15.7 million  ($0.15 per share) last year; however, in the third quarter of 2000, net earnings included a $12.9 million ($0.13 per share) after tax gain on the sale of short-term investments.  On a comparable basis, earnings per share in the third quarter of 2001 of $0.10 compares to $0.02 last year. 

Year-to-date earnings from operations of $99.9 million are up 56% from last year.  Year-to-date net earnings were $32.7 million ($0.31 per share) compared to $24.2 million last year ($0.22 cents per share), or $11.3 million ($0.09 per share) excluding the gain on the sale of short-term investments.

“Our performance for the quarter was substantially greater than a year ago , reflecting the progress we are making operationally in all aspects of the business”, said Mr. Michael H. McCain, President & Chief Executive Officer of Maple Leaf Foods. “However, the underlying improvements were tempered this period due to an unexpected short-term market condition relating to Japanese pork tariffs.  We are, nevertheless, highly satisfied with the continued improvement which is being made toward achieving the appropriate returns from the major investments made over the past several years.”

Meat Products Group

Meat Products Group sales increased 18% to $792.3 million primarily as a result of the inclusion of the results for the Winnipeg fresh pork facility, which was acquired in the first quarter of this year. Year-to-date sales of over $2.3 billion compared to $1.8 billion last year.  Operating losses for the quarter were $4.5 million compared to a loss of $4.0 million last year. Year-to-date operating earnings of $15.0 million compared to a loss of $12.8 million the year before.

Maple Leaf Pork continues to achieve operational improvements across all of its facilities, and has substantially increased its spending on new product development activity.  Operating earnings for the third quarter, along with those of Maple Leaf Foods International, were negatively impacted by  a significant short-term disruption to the Japanese pork market.   Unexpectedly high Japanese pork imports in the first and second quarter, stimulated largely in response to the foot and mouth outbreak in Europe, triggered  Japanese “safeguard duties” on a range of pork products.  As a result, Japanese imports were reduced acutely in the third quarter, and margins in other markets were pressured as product intended for that market was sold elsewhere.  Management believes that this market disruption adversely impacted the Meat Product Group’s earnings by over $10 million in the third quarter.    While the safeguard duties will remain in place until the end of March 2002, the outlook for the remainder of the year is for steadily improving sales to Japan.  Additionally, we have been actively working to diversify our customer base long term, predominantly into U.S. markets.

In July, Maple Leaf Poultry launched Maple Leaf Prime Naturally, Canada’s first 100% vegetable grain fed chicken, produced from chickens fed exclusively the Company’s proprietary Nutri-Prime feed and processed using Maple Leaf Poultry’s Flav-R-Loc production process.  Initial consumer response has been very positive, although financial results for the quarter were negatively affected by start-up manufacturing and procurement costs associated with the product launch.   Maple Leaf Consumer Foods posted strong results in the quarter.

Bakery Products Group

Bakery Products Group sales increased 5% to $178.3 million from $169.1 million last year.  Year-to-date sales increased 6% to $515.8 million from $485.6 million last year. Operating earnings for the quarter rose 77% to $10.6 million from $6.0 million, bringing year-to-date operating earnings to $24.1 million, an increase of 64% over last year. The substantial increase in operating earnings for the quarter was driven by strong growth in par-baked bread sales and profitability of Maple Leaf Bakeries (USA) and continued performance improvements at Canada Bread.

Progress was made during the quarter on several expansion projects in the Bakery Products Group.  The US$11 million expansion to the Roanoke, Virginia bakery is proceeding on plan, with completion scheduled for December.  Canada Bread’s acquisition of the remaining 75% of the outstanding shares of Multi-Marques closed on October 12, 2001.  This acquisition strengthens Canada Bread’s position as the leading commercial bakery in Canada.  In September, Maple Leaf Foods acquired its second bakery facility in the United Kingdom with the purchase of the leading branded bagel producer in the U.K., New York Bagel Company.  Maple Leaf Foods International opened the Company’s first U.K. bakery facility in 1998. 

The Bakery Products Group now has annualized sales of over $1.0 billion and manufacturing facilities in Canada, the United States and the United Kingdom.

Agribusiness Group

Agribusiness Group sales of $227.3 million increased 3% from $220.2 million last year.  Year-to-date sales increased to $652.8 million from $627.7 million last year.  Operating earnings for the quarter of $24.1 million were up 11% from $21.7 million last year, while year-to-date operating earnings of $60.9 million were down from $62.1 million last year.

The Company’s Vertical Coordination pork and poultry value chain strategy contributed to Agribusiness Group posting quarter-over-quarter gains in sales and operating earnings.  Both Landmark Feeds and Shur-Gain reported continued strong earnings from their animal nutrition operations.  The Elite Swine hog production operation had solid results driven in part by high hog prices. Rothsay Rendering reported improved earnings in the quarter due to declining natural gas prices and stronger commodity markets, although both of these factors have negatively impacted year-to-date performance.

Other Information

Other income for the quarter was $4.0 million compared to $18.0 million last year.  The primary  component of other income in the quarter was a $3.5 million dividend received from a passive investment in a flour mill located in the United States.  In the third quarter 2000, a sale of short-term investments resulted in a net gain before taxes of $17.2 million.  Interest expense for the quarter of $16.0 million decreased from $17.7 million last year due to decreasing interest rates. Year-to-date interest expense of $49.5 million was up from $47.3 million last year due to higher average borrowing levels, offset partly by declining interest rates.

Cash Flow

The Company’s cash flow from operations for the quarter of $6.1 million is higher than last year due principally to higher cash earnings.  Capital investment for the year-to-date of $52.2 million was lower than last year’s level of $86.7 million.  The company has a significant number of capital projects in progress, the largest one being Maple Leaf Bakery’s US$11 million expansion to its Roanoke, Virginia frozen par-baked facility, which will result in an increase in capital investment in the fourth quarter.

The Company declared a dividend of $0.04 per share payable on December 31, 2001 to shareholders of record on December 14, 2001.

Maple Leaf Foods Inc. is a leading Canadian-based food processing company. Headquartered in Toronto, Canada, the Company employs more than 13,000 people at its operations across Canada and in the United States, Europe and Asia.

A conference call will be held at 2:30 p.m. (Toronto time) on October 26, 2001 to review Maple Leaf Foods’ financial results for the third quarter ended September 30, 2001.  The call will be hosted by Michael H. McCain, President & Chief Executive Officer; Tom P. Muir, Chief Financial Officer and Michael H. Vels, Executive Vice-President, Finance.

To participate in the call, please dial in to 1-800-633-8493.  For those unable to attend, the call will be taped and posted for one month.  You may access the tape by dialing 1-800-558-5253, passcode 19889653 or review the transcript on our website.  

Q3 2001 Report (PDF File Size = 212KB)