WINNIPEG (Reuters) — Maple Leaf Foods reported a disappointing quarterly loss, hurt by weak returns on raising pigs.
North American hog farmers have been hard pressed to survive losses in the past year because of pig prices that were inadequate to cover the at-times soaring costs of feed tied to last year’s U.S. drought.
Maple Leaf and its privately held Canadian rival, Olymel, have each bought large corporate hog farms to secure future supplies.
“They’ve got a lot more pigs there that are losing money,” said Robert Gibson, an analyst at Octagon Capital.
Maple Leaf chief executive officer Michael McCain said hog production returns are one of the key reasons for the company’s year-over-year decline. The weak results follow a disappointing first quarter, when the company also posted a surprising loss tied to high feed costs and lower meat sales.
Net earnings for the second quarter fell to nil, or a loss of two cents a share, from a profit of $26 million, or 17 cents, a year earlier.
Sales of $1.214 billion were down 3.7 percent.
Maple Leaf’s protein group, which includes both its meat products and agribusiness units, posted a $9.8 million adjusted operating loss in the quarter, down from year ago adjusted operating earnings of $33.4 million. Adjusted operating earnings are a non-International Financial Reporting Standards measure used by Maple Leaf.
Its bakery group was a bright spot, with adjusted operating earnings rising nearly five percent year over year to $32.7 million.
Maple Leaf, maker of Dempster’s Bread and Klik luncheon meat, reported earnings of two cents, down sharply from 23 cents last year, when adjusted to exclude one-time costs such as restructuring.
Analysts had on average expected Maple Leaf to earn 15 cents a share on sales of $1.278 billion, according to Thomson Reuters.
The Toronto-based company is carrying out a $560 million multi-year program to upgrade its meat operations to compete with U.S. rivals.