Maple Leaf Foods posts $2.9-million quarterly profit as Listeria effects linger

The Canadian Press ~ The News
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TORONTO - Maple Leaf Foods Inc. (TSX:MFI) pulled itself to profitability in the first quarter, and boosted its sales by more than six per cent, as it continued to struggle with the after-effects of last summer's Listeria poisoning.
Chief executive Michael McCain told investors at the company's annual meeting on Wednesday that the food packager was making progress towards returning to normalcy.
The Toronto-based company reported $2.9 million in profit during the quarter, worth two cents per share, compared with a break-even result a year earlier.
Sales increased 6.3 per cent to $1.28 billion compared to $1.20 billion, mostly on price increases and favourable foreign currency conversions based on its fresh meat sales.
''Where this could've been a fatal blow for some companies, we've come through this storm with the organizational, reputation and financial strength to rebuild,'' McCain said.
''Because of last August's tragedy Maple Leaf now owns the Listeria issue. We cannot forget that link and we cannot ask Canadians to forget that link.''
The Listeria outbreak, traced to cold cuts produced in the company's Toronto plant last summer, killed 22 people, triggering a national scare and a public-relations nightmare for one of Canada's oldest and most identifiable food companies.
The tainted deli meats were linked to the Bartor Road processing plant in Toronto. Maple Leaf has said the most likely explanation for the contamination was an accumulation of bacteria deep within its meat slicing equipment.
McCain said in the company's earnings announcement that margins were depressed in its packaged meat operations due to the recall.
However, he reminded investors that the company is relatively recession resistant, and that it could reap the benefits of tightened consumer spending.
''We expect that we'll experience the effects of channel shift as consumers are tending to eat away from home less in favour of food at home,'' McCain said.
He noted the company has boosted its promotions and coupons in order to drive purchases.
Absent from his comments were any references to swine flu, which has captured international attention and caused some countries to ban the import of pork and pork products, even though the virus hasn't been linked to pigs.
Jacques Pomerleau, executive director of Canada Pork International, said that the domestic pork industry is in limbo as it awaits signs of how many countries might restrict imports.
Half of Canada's pork production is exported.
''Nobody is certain about the situation, so we have rumours in the trades that such and such a country could ban Canadian pork ... but the Canadian government hasn't been officially notified,'' said Pomerleau.
''The whole thing is completely uncertain.''
He expects it will become clearer by the end of the week which countries have taken decisive action to ban foreign pork.
Maple Leaf's earnings from operations before restructuring and other one-time costs fell 4.5 per cent to $31.6 million on declines in packaged meat profits.
The results were offset by cost cuts in pork processing and hog production, and price increases across the bakery segment.
Shares in the company gained 17 cents to $8.62 on the Toronto Stock Exchange in afternoon trading.
At Canada Bread Co. (TSX:CBY), 89.8 per cent owned by Maple Leaf, sales rose 7.9 per cent from a year earlier, to $413.1 million from $382.9 million. Net income was $14.9 million or 59 cents per share, compared with $12.2 million or 48 cents per share.
''Excluding acquisitions, sales increased by 5.3 per cent, mostly as a result of price increases implemented across all North American bakery businesses in 2008 in response to escalating input costs, and product mix improvements in the fresh bakery operations,'' Canada Bread stated in a release.
The first quarter ''continued to demonstrate a return to more stable and improved earnings, although margins were impacted by a decline in the Canadian dollar and its effect on wheat costs,'' said president and CEO Richard Lan.
''The improvement in the first quarter reflects actions we have taken to improve business efficiencies and pass through higher input costs as required.''

Organizations: Maple Leaf Foods Inc., TSX, Canada Bread Canada Pork International Toronto Stock Exchange North American

Geographic location: TORONTO, Maple Leaf, Canada Bartor Road

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