– Maple Leaf Foods Inc.'s net profit fell by 40 per cent to $15.5-million in the third quarter as restructuring costs and lower meat sales offset a rise in the company's bakery division.
The maker of Shopsy's and Schneiders prepared meats and Dempster's bread is three years into a five-year, $575-million restructuring of its meats business, closing old plants while opening five new ones in a bid to boost profits. At the same time, it has a handful of deals in various stages of completion: the possible sale of its bakery division and the sale of its rendering business and pasta operations.
The Toronto-based company is "not operating at the top of our game," Michael McCain, chief executive of Maple Leaf Foods, said on a conference call with analysts on Wednesday. "2013 was a challenging year by any measure."
The company's chicken and hog processing operations were hit by lower sales, higher costs and falling exports to Japan, but Mr. McCain said the business has strong fundamentals and he is satisfied with the progress of the restructuring.
Here are some third-quarter highlights:
– Sales in the meats group fell by 2.8 per cent to $751-million.
– Bakery products sales fell by 2 per cent to $392-million.
– Bakery net profit rose by 4 per cent, thanks to strong results in the North American frozen division and U.K. bakery operations.
– Maple Leaf Foods' per-share loss from continuing operations is 2 cents, compared with a 6-cent profit in last year's third quarter. (Maple Leaf Foods strips out results of its sold Rothsay division.)
The company recently said it is reviewing options for Canada Bread, a process that could result in a sale of its 90-per-cent-owned bakery division, whose sales have plateaued. Canada Bread last week sold its Olivieri Foods pasta division to Spain's Ebro Foods for $120-million. Canada Bread's brands include Villagio and Ben's.
The Globe and Mail has reported global food companies are interested in Maple Leaf Foods' main meat business, but that a deal will not happen until the restructuring is completed in about 18 months.
Mr. McCain, who owns 33 per cent of the company, said last week that the meats business is not for sale.
CIBC World Markets analyst Mark Petrie said in a research note the Olivieri sale highlights the strong value of Maple Leaf Foods' brands, given the pasta division was likely not a big money maker. He added that the deal likely clears the way for the bread company's sale as most bidders would not be interested in the pasta operations.
Canada Bread is expected to be sold to private equity firms or global food rivals.
Jeff Lefler is president of National Bread Network, which represents Canada Bread franchisees across Canada.
Mr. Lefler said the franchisees, who deliver bread to grocery outlets each day, are closely watching the sale process and hope their good relationship with management continues.
A Canada Bread franchise, which brings a territory of bread retailers to service and the right to bear a Dempster's sign on the side of the truck, sells for $100,000 to $400,000, said Mr. Lefler, who has been a franchisee since 2006 and works in London, Ont. "As franchisees, we have a lot of common goals and a lot of common interests to protect the brand," he said in an interview.
Maple Leaf Foods this week closed a deal to sell Rothsay, its profitable animal parts rendering and biodiesel business, for $645-million to Darling International of Texas. The all-cash price will be used to pay down debt.