Maple Leaf Foods profit depressed by impact of hog virus
Meat packer in midst of restructuring that will lead to closing of 4 more plants
The virus sweeping through the hog industry has pushed up pork prices, hurting earnings for Canadian meat-packer Maple Leaf Foods Inc.
The company today reported a first-quarter loss of $124.6 million, or 89 cents per share, compared with a loss of $30.6 million, or 22 cents per share, in the same quarter last year.
Sales were $711.3 million, an increase of 3.2 per cent as the volume of meat products sold increased.
U.S. pork prices are up 7-10 per cent from this time last year because of the spread of porcine epidemic diarrhea, which kills young pigs, but does not affect humans. The rise of the U.S. dollar compared to the loonie also made raw materials more expensive.
Maple Leaf Foods president and CEO Michael McCain said Maple Leaf was raising consumer prices as a result, but not enough to offset the higher costs faced by the company.
"We have accelerated price increases in the second quarter to recover margins, and expect the effects of this to be transitory as the industry is forecasting a return to more normal conditions later in 2014," he said.
McCain said Maple Leaf expects a return to less volatile hog prices later this year.
The company is in the midst of a seven-year restructuring geared at improving profits in the business. It closed a wiener production plant in Hamilton last month and will move operations to a larger plant in the same city.
But more closings are coming — with four plants to shut down later this year and expansion of its plants in Saskatoon and Hamilton. Maple Leaf is attempting to set in place a low-cost supply chain that will include 13 meat plants instead of 22 and two distrubution centres instead of 19.
In February, Maple Leaf agreed to sell its 90 per cent stake in Canada Bread to Grupo Bimbo, a Mexican company that is offering about $1.83 billion to buy out Maple Leaf and minority shareholders.
Maple Leaf also sold its Rothsay rendering business, which had operations in several provinces, to Texas-based Darling International, and found buyers in Ontario for its commercial turkey farms, hatchery operation and breeding farms.
The company has about 18,000 employees across North America, the United Kingdom, and Asia. Maple Leaf sells products under its banner name, well as popular brands like Dempsters, Villaggio and Tenderflake.
With files from the Canadian Press