Maple Leaf Foods blames 'tremendous costs' for 4Q loss
A Maple Leaf Foods employee walks past a Maple Leaf sign at the company's meat facility in Toronto on Monday, Dec. 15, 2008. (The Canadian Press/Nathan Denette)
Published Thursday, February 27, 2014 10:42AM EST
Last Updated Thursday, February 27, 2014 1:07PM EST
TORONTO -- Maple Leaf Foods Inc. (TSX:MFI) is blaming the "tremendous costs" of opening new meat plants, while still running older facilities, for a $14.4 million net loss from continuing operations in the fourth quarter.
"As expected, this is causing short-term earnings volatility, which was compounded by weak protein markets," Michael McCain, president and CEO of Maple Leaf Foods said in a statement.
The company, which specializes meats products such as bacon, sliced deli meats and fresh chicken as well as baked goods through Canada Bread, had an adjusted operating loss of $21.7 million in the quarter.
Its adjusted loss was equal to 25 cents per share -- in contrast to the adjusted profit of six cents per share that analysts had estimated.
Meanwhile, Maple Leaf's revenue for the fourth quarter, which ended on Dec. 31, fell about two per cent or $23.6 million to $1.11 billion.
McCain said that Maple Leaf Foods' three-year plan for building a new distribution network for its prepared meats division peaked in December, due to construction costs at the company's largest single production facility in Hamilton, Ont. It also noted start-up costs at its expanded facilities in Winnipeg and Saskatoon.
"Now the focus changes. From here on, our job is to get the new plants running at peak performance, transfer production from older high cost plants to new low cost plants, and close the older plants down," he said.
"Once completed, later this year, we expect to start seeing significant structural margin expansion."
The fourth quarter was a period of significant changes for the Toronto-based company, which spent months evaluating options for its profitable Canada Bread subsidiary -- Canada's largest producer of baked goods, most known for its Dempster's Bread brand.
Maple Leaf recently agreed to sell its 90 per cent stake in Canada Bread (TSX:CBY) to Grupo Bimbo, a Mexican company that is offering about $1.83 billion to buy out Maple Leaf and minority shareholders.
Including gains from the sale of two other business units during the quarter, Maple Leaf posted $511.3 million of net income for the fourth quarter, or $3.58 per diluted share.
That included $525.8 million from discontinued operations, offset by the loss at Maple Leaf's continuing business.
Revenue from the company's protein group dropped to $747.3 million in the quarter, from $760.3 million a year before, while revenue from the Bakery group dropped to $359.7 million from $370.3 million.
Canada Bread reported separately that it had $33.9 million in net income from continuing operations in the quarter, compared with $24.2 million a year earlier.
Canada Bread received $116.3 million from the sale of its Olivieri business, a part of the Maple Leaf Bakery group that makes pasta products.
Maple Leaf's fourth quarter results also included the Olivier sale as well as the protein group's sale of its Rothsay unit, which processes byproducts from the slaughtering process.
Maple Leaf received $628.5 million from the Rothsay deal during the quarter.