Shares in Maple Leaf Foods tumbled today (29 October) after the Canadian meat processor, which reported improved earnings despite a dip in sales, pushed back a profitability target into next year.
Maple Leaf reported net income of C$18.7m (US$14.2m) for the quarter to 30 September, compared to a loss of C$26.8m a year ago.
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Adjusted operating income, which excluded changes in the fair value of biological assets and losses on futures contracts, increased to C$29.8m, up from a loss of C$19.8 a year ago.
However, Maple Leaf booked an adjusted EBITDA margin of 7.1%, an improvement on the second quarter and on the same time last year. However, the company had set a target for margins to reach 10% this year.
"We continued to build on a consecutive trend of quarter-over-quarter growth in Adjusted EBITDA margin, delivering 7.1% in the third quarter compared to 6% last quarter and a significant turnaround from 0.5% last year," president and CEO Michael McCain said. "We are making meaningful progress on eliminating inefficiencies driven by the ramp-up of our new facilities, though not at the pace we had hoped for. We estimate these contributed over 320 basis points of margin in the quarter. Delivering on our strategic margin goal of consistent double digits will be achieved through reaching stable end-state production in our new network, which we expect will extend into 2016."
Third-quarter sales fell to C$818.8m from C$820.1m due to lower sales in the agribusiness group.
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By GlobalDataFor the first nine months of the year, Maple Leaf posted a profit of C$8.3m (US$6.3m) compared with last year's C$190.8m loss after booking C$21.5m in restructuring and related costs.The improvement was primarily due to non-recurring financing costs that were incurred last year in relation to the repayment of the company's outstanding debt.
Adjusted operating income rose to C$39.9m from a loss of $69.2m on the back of improved margins and "favourable market conditions" for meat products.
Sales were up at $2.42bn from $2.36bn due to higher sales in Maple Leaf's meat products division.
Shares in Maple Leaf were down 6.54% at C$21.02 at 11:30 EDT.
