Leading Canadian food processing company Maple Leaf Foods has posted a 4% increase in sales to C$1.3bn (US$0.83bn) for its Q2 ended 30 June, compared to US$1.2bn for the same period last year.

The Toronto-based firm said that the result was especially positive result considering the "substantial decline in many key underlying commodity values". Earnings from operations of C$51.3m increased 24% from C$38.9m last year, principally due to very strong results in the Bakery Products Group and higher Meat Products earnings. Net earnings for the Q2 reached C$22.6m (C$0.19/share), up 27% from C$12.8m (C$0.12/share) in 2001.

Earnings for the H1 were C$39.5m (C$0.33/share) compared to C$27m (C$0.26/share) last year on the same basis.

"Maple Leaf achieved another quarter of solid earnings growth, as we continue to leverage the value of our assets, improve operating performance and shift our operations and sales mix to higher value-added products," said Michael H. McCain, president and CEO: "We are particularly pleased with the growth of our Bakery Products Group, which realized a 133% increase in earnings quarter-over-quarter, as well as increased earnings in our Meat Products Group, which more than offset lower earnings in the Agribusiness Group."

Other income for the Q2 of C$3.9m compared to C$1m for the same period last year, reflecting increased earnings from real estate operations. Interest expense for the quarter of C$15m fell from C$17.1m for the prior year due to lower debt and interest rates. Year-to-date interest expense was C$28.4m compared to C$33.4m in 2001.

The company's cash flow from operating activities for the Q2 was C$78.9m down from C$90.9m in 2001, reflecting higher cash earnings, offset by higher investments in working capital.

Meat Products Group

Meat Product Group sales for the Q2 fell 9% to C$751m from C$827m last year. While volumes increased from last year, sales values were impacted by reduced prices for pork and poultry products as a result of low commodity prices. Year-to-date sales of C$1.5bn were consistent with last year. Earnings from operations increased 43% to C$14.7m year on year. Earnings for the H1 were up 25% to C$27.1m.

Maple Leaf Pork continues to benefit from its focus on shifting product and sales mix to increasingly higher value-added products. Consumer Foods earnings also increased in the second quarter, driven in part by market share improvements in its Top Dogs brand of hot dogs, and the success of a new line of Top Dogs MegaBites. Earnings declined in the Maple Leaf Poultry operations, the result of industry-wide margin pressure due to a surplus in supply and lower prices, a market condition that is expected to continue for the balance of the year.

Agribusiness Group

Agribusiness Group sales for the Q2 increased 8% to C$241m compared to C$224m last year, while year-to-date sales were C$462m compared to C$425m last year. Operating earnings were down 24% at C$17.5m compared to C$22.6m for the same period last year. Earnings for the H1 were C$34.8m compared to C$37.5m for the prior year. The decrease in profitability was primarily due to lower hog prices, which impacted the group's hog production operations. However, the company's Vertical Coordination strategy offset this impact with increased profitability at the Maple Leaf Pork and Maple Leaf Consumer Foods operations. Earnings in the feed business declined slightly due to unsettled spring weather and a slow down in feeding rates.

Bakery Products Group

Bakery Product Group Q2 sales of C$287m increased 65% from C$174m in 2001 and year-to-date sales increased to C$552m from C$338m last year. The increase was principally due to strong performance in fresh and frozen bakery operations and significant contributions from Multi-Marques Inc. (Quebec) and the New York Bagel Company (United Kingdom), both of which were purchased in the H2 2001 and continue to exceed expectations. In addition, on 11 April 2002, the company acquired the remaining shares of Ben's Bakery Limited in Atlantic Canada, which also contributed to increased sales and profitability quarter-over-quarter. Excluding the effect of these acquisitions, Q2 sales were up 8%.

Earnings from operations for the Q2 were up 133% to C$19.2m from C$7.2m for the same period last year. H1 earnings were C$31.2m, a 101% increase from last year.

On 18 July 2002 Canada Bread acquired Delta, British Columbia-base Olafson's Baking Company. With annual sales of about C$30m, Olafson's specializes in the production of premium value added bakery products, which are highly complementary with Canada Bread's existing product line. The acquisition of Olafson's will expand the range of products Canada Bread can offer its national customers and provides a strong platform for growth.

The company declared a dividend of C$0.04 per share payable on 30 September to shareholders of record on 20 September 2002.