Maple Leaf Foods second-quarter profits rise to $24.6 million as sales fall

TORONTO – Maple Leaf Foods Inc.’s second-quarter earnings were nearly five times stronger than a year earlier as the food processor cut expenses and boosted prices to deal with rising costs like flour and sugar.

Maple Leaf (TSX:MFI) reported Thursday its net earnings rose to $24.6 million, or 16 cents per share, from $4.9 million or two cents a share in the same period last year.

Adjusted operating earnings were up to $77.5 million from $50.4 million, mostly due to improved performance in the company’s meat processing business. Adjusted earnings per share were 30 cents, up from 16 cents.

Sales fell to $1.24 billion from $1.27 billion, affected mostly by the sale of some businesses.

“We are successfully managing the impact of rising costs through price increases and cost reduction initiatives,” president and CEO Michael McCain said in a release.

“Our value creation plan is on track and contributing to earnings.”

During the quarter, Maple Leaf named Bay Street lawyer Purdy Crawford temporary chairman, filling a position long held by Wallace McCain, who died at age 81 in May after a battle with pancreatic cancer. Meanwhile, a committee comprised of four independent directors will make recommendations on who should fill the position of chairman after Crawford retires next April.

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Maple Leaf and many other food companies have raised prices as they contend with rising costs for ingredients – everything from the flour used to bake bread to sugar for pies and pastries and the pork, beef and chicken used in cold cuts and hot dogs. The Toronto-based company raised its fresh bakery prices by 20 cents per unit at the end of March.

Maple Leaf has been closing several plants around Canada as part of a $1.3-billion restructuring plan designed to reduce costs as the company also grapples with weaker sales, and the high Canadian dollar, which makes its exports more expensive to foreign buyers.

The company recently ended a shareholder dispute by agreeing to bring the CEO of major shareholder West Face Capital onto its board of directors in a move to satisfy complaints about some of the directors’ being too closely involved on a personal level with the McCain family, which holds a controlling vote.

Meanwhile, McCain Capital Corp. announced Thursday that it will follow the wishes of the late Wallace McCain and will transfer the ownership of almost 44 million common shares of Maple Leaf Foods Inc. that it held to his son and chief executive Michael McCain.

The share transfer represents about 31.3 per cent of the issued and outstanding common shares of Maple Leaf Foods.

Also on Thursday, Maple Leaf subsidiary Canada Bread Co. Ltd. reported lower quarterly net earnings of $14.9 million versus $20.9 million in the same period in 2010. Adjusted earnings per share was 97 cents compared with 85 cents in the same quarter last year.

Canada Bread (TSX:CBY) said its adjusted operating earnings were up 14 per cent to $35.1 million.

Maple Leaf Foods Inc., a leading food processing company, headquartered in Toronto, employs some 21,000 people at its operations across Canada and in the United States, the United Kingdom and Asia. It has annual sales of some $5 billion.

Shares in Maple Leaf Foods were up nine cents to $11.16 in morning trading on the Toronto Stock Exchange.