Q3 loss for Maple Leaf Foods over meat recall

31.10.2008 12:02 Shopping - Source: cbc.ca

Maple Leaf Foods Inc.'s third-quarter profit turned into a loss as the Canadian meat producer took a $14-million financial hit because of the major meat recall in the summer.

Maple Leaf Foods, which processes a wide variety of meat products, lost $12.9 million, or 10 cents a share, for the three months ended Sept. 30. That compared with a profit of $220,000, or a penny a share, for the same period last year.

In August, Maple Leaf Foods closed a Toronto meat processing plant temporarily after a listeriosis outbreak was traced back to the facility. In the end, 20 people died from the infection and approximately 4,000 became ill from consuming tainted meat.

Maple Leaf said the crisis cost the company $14 million in terms of plant cleanup and lost sales through adverse publicity.

"The headline for the third quarter was managing the unprecedented recall at our Toronto packaged meats plant and doing what was right to protect consumers and maintain public trust. While the recall is complete, our actions had a very substantial near-term impact," said Maple Leaf's president and chief executive officer Michael McCain.

Maple Leaf said its operating profit — once the costs of the recall, a restructuring of its pork operations and an adjustment for the sale of a division last year are added back — was $41.1 million, 6.4 per cent higher than the same quarter in 2007.

The company's total sales rose in the quarter to $1.34 billion, up 3.3 per cent versus the third quarter of 2007.

Not surprisingly, Maple Leaf's meat products division has borne the brunt of the company's financial downturn in the past quarter.

That area saw its operating profit evaporate almost entirely, making only $800,000, down from a gain of $13.6 million for the same time last year.

Maple Leaf's agribusiness division did manage to turn a $3.5-million loss in last year's third quarter into a $12.3-million profit for the same period one year later.

The protein group also made money in the quarter, $3 million more than for the same three-month period in 2007.

Maple Leaf said it will spend the remainder of the year trying to get consumers to return to buying its products after the listeriosis outbreak.

"Our focus through the remainder of 2008 will be on stabilizing our business and continuing to restore confidence, including implementing an enhanced food safety program that will be among the best in North America," McCain said.

On a more positive note, Maple Leaf said that its restructuring, in which a third pork processing plant was closed, was complete and should begin yielding economies of scale savings for the company.

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