Maple Leaf Foods closes fiscal year with growth, momentum
Maple Leaf Foods Inc. reported its financial results for the fourth quarter and full year ended December 31, 2015. It reported net earnings from continuing operations in the quarter of $33.3 million and $41.6 million for the year, compared to net losses of $23.0 million and $213.8 million, respectively in the same periods last year. Sales from continuing operations increased 10.0% from last year, or 7.0% after adjusting for the impact of foreign exchange, to $873.1 million, due to higher sales in the Meat Products Group and an additional week in 2015.
"We are very pleased with our consistent earnings growth in the year and fourth quarter, driven by our commercial performance and continued progress lowering operating costs in our new plant network," said Michael H. McCain, President and CEO. "We are entering 2016 with momentum, confident that the strategic goals of our transformational investments have been met, with only normal ramp-up inefficiencies in a single facility remaining. Additionally, Maple Leaf is now a North American leader in the evolution of sustainability in our industry and sustainable protein production, which will underpin our growth well into the future. This, combined with a strong balance sheet, exciting innovation and brand leadership, gives us great cause for optimism in the years ahead."
For the full year, sales from continuing operations increased 4.3% from last year, or 2.4% after adjusting for the impact of foreign exchange, to $3,292.9 million, due to higher sales in the Meat Products Group and an additional week in 2015. Adjusted Operating Earnings increased to $109.8 million compared to a loss of $75.5 million last year due to improved margins in the Meat Products Group.
For the Meat Products Group, sales of $868.5 million for the fourth quarter increased 10.0% from last year, or 7.0% after adjusting for the impacts of foreign exchange. This improvement was due to increased volume in fresh pork and poultry, a favorable sales mix in fresh poultry and an extra week in the fourth quarter of 2015, which was partially offset by lower selling prices for fresh pork and a slight decline in prepared meats volume.
Adjusted Operating Earnings for the fourth quarter was $54.6 million compared to a loss of $19.1 million last year. Earnings in prepared meats increased as a result of lower operating costs in the Company's new prepared meats plant network, improved sales mix resulting from a higher proportion of retail branded volume, and pricing. This was partially offset by a sharp rise in pork belly prices, which compressed margins. Fresh pork earnings grew due to increased volume and improved export margins. While industry pork processing margins strengthened compared to last year, when they were below the five year average, the benefit to the Company was partially offset by declining by-product values and a sharp rise in belly prices, which affected prepared meats margins. Earnings in fresh poultry increased due to higher volume, stronger industry processing margins, an improved sales mix reflecting higher retail branded volume and increased operating efficiencies.
Sales in the Meat Products Group for 2015 increased 4.5% to $3,277.0 million, or 2.6% after adjusting for the weaker Canadian dollar. Higher sales resulted from increased volume in fresh pork and poultry, pricing in prepared meats that was implemented in the second quarter of 2014, a favorable sales mix in fresh poultry and an extra week in the fourth quarter of 2015. This increase was partially offset by lower selling prices for fresh pork and a slight decline in prepared meats volume.
Adjusted Operating Earnings for 2015 increased to $108.4 million compared to a loss of $80.4 million last year. Earnings in prepared meats benefited from pricing, an improved sales mix, lower overall raw material costs and lower operating costs in the new prepared meats plant network. The Company benefited from the flow through of pricing implemented in the second quarter of 2014 to offset the impact of higher raw material costs driven by the outbreak of the PED virus in U.S. hog production herds. Although on average raw material costs returned to more normalized levels, this decrease was largely offset by the impact of a lower Canadian dollar on the Company's prepared meats business. Lower operating costs resulted primarily from a reduction of duplicative overhead costs, as the Company closed its two remaining legacy plants in the first half of 2015, eliminating the final components of its duplicative supply chain. In addition, during the second half of 2015 the Company continued to make progress in reducing ramp-up inefficiencies in its plant network, primarily at the new prepared meats facility in Hamilton, Ontario.
Fresh pork earnings increased largely as a result of increased volume and improved Canadian retail and export margins. Industry pork processing margins improved significantly over the same period last year, when they were below the five year average, however the benefit of higher prices was partially offset by declining by-product values. Fresh poultry earnings increased as a result of higher volume, improved poultry processing margins, an improved sales mix resulting from increased retail branded volume and increased operating efficiencies.
Source: Maple Leaf Foods