Canadian processor Maple Leaf Foods has reported a big jump in profits in the fourth quarter of 2012, driven by strong earnings growth in the company’s prepared meats and fresh poultry businesses.
Adjusted operating earnings for the Q4 increased 58.9% to $91.3m compared to the same period in 2011, helping drive earnings for the year up 8% to $280m. Net earnings were up from $9.2m in Q4 2011 to $56.8m in the fourth quarter of 2012, resulting in net earnings of $122.7m for the full year, up from $87.3m last year.
This was despite a 3.3% decline in overall sales in the fourth quarter, which fell from $1,245.3m in Q4 2011 to $1,204.8m in Q4 2012. Overall, sales for the year dipped 0.6% to $4,864.8m, down from $4,893.6m in 2011.
Maple Leaf’s Meat Products Group saw sales drop 5.3% to $740.8m in the fourth quarter, although adjusted operated earnings increased by a significant 75.2% to $48.1m, driven by “stronger earnings growth in the prepared meats and fresh poultry businesses, which was partly offset by lower earnings in the primary pork processing operations”, the company said.
It put the improved profitability of its prepared meats business down to better prices and the decision to discontinue lower-margin foodservice business, as well as cost reductions resulting from a simplification of the company’s product portfolio. Higher earnings in the fresh poultry operations were attributed to improved sales of higher-value products.
Profitability in primary pork processing declined as a result of “weaker industry margins”, said the company, although it added that there was still an improvement from the previous year.
The company said this reflected “stronger earnings growth” in its prepared meats and fresh poultry businesses, although this was “partly offset” by lower earnings in its primary pork processing operations.
The strong performance of the company’s meat businesses in the fourth quarter helped drive a 26.3% increase in adjusted operating earnings for the full year to $121.3m.
“We are very pleased with our results for the fourth quarter and 2012 in total. They reflect steady, ongoing progress in realising earnings growth towards our financial targets,” said Michael H McCain, president and CEO.
“The challenging market conditions in primary pork processing margins and consumer bread demand were significant headwinds for the year; however, we achieved an 8% increase in operating profits for the year and 59% in the fourth quarter despite these challenges. This is a strong testament to the strength of our business and our strategic initiatives, and the extraordinary contribution of our people.”
Looking forward, McCain admitted that the company had not yet felt the full effects of last year’s droughts and was likely to be hit by food inflation in the first half of 2013. “As a result, we expect some short-term volatility in our earnings as we pass those cost increases on in the marketplace,” he said.
However, he added that he expected to see “continued margin growth” over the year.