Maple Leaf: 40% profit drop due to pork recall
The largest meat recall in history, in August last year, cost Canadian meat packer Maple Leaf approximately CAN $59 to $69 million (US $47 million - $55 million) before taxes, the company disclosed today. This led to a 40% profit drop in the fourth quarter of 2008.
This was made public in an announcement, in which Maple Leaf Foods presented its financial results for the fourth quarter and the year, ended December 31, 2008. The recall at the time involved a Listeria contamination in a whole range of products, including a series of pork products.
"The packaged meats recall significantly affected the business by an estimated $59 million to $69 million before taxes, of which $19 million in one-time direct costs has been excluded in calculating adjusted earnings per share," the announcement read.
"Last year was a historically challenging year on many fronts as we managed through unprecedented spikes in global commodity prices, financial market meltdowns, and the largest product recall in Canadian history," said Michael H. McCain, president and CEO.
"Within this context, we are satisfied with the results we were able to deliver. They are a reflection of the diversity of our business, the capability of our people to manage through extreme adversity and the strength of our entire brand portfolio."
"While our profits were down 40% in the quarter, overshadowed by the product recall which, excluding one-time amounts, is estimated to have cost the company $40 million to $50 million before taxes, there were many areas where we showed substantial improvement.
"These included normalising our bakery margins after absorbing the impact of commodity markets earlier in the year, increasing benefits from our protein business restructuring, and steadily regaining consumer confidence in the Maple Leaf brand. Our packaged meats volumes have almost fully recovered, although we must demonstrate that consistently and we continue to experience significant margin compression.
"Overall we are pleased with the early progress made in recovering our packaged meats business, and are even more confident in the direction of our transformational efforts. We look forward to improving trends in 2009."
Total sales figures for the fourth quarter increased by 5.2% to $1.3 billion compared to the same period last year, and sales for the year were consistent at $5.2 billion.
While sales were impacted by the divestiture or exit of non-core businesses and a decline in meat volumes in the second half of 2008 due to the recall, price increases, fluctuations in the Canadian dollar and contributions from acquisitions contributed to sales for the fourth quarter and year to date.
Maple Leaf Foods
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