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Maple Leaf posts Q3 loss on recalls

A massive deli meat recall due to this summer’s nationwide listeriosis scare has officially spilled into Maple Leaf Foods’ books, leading it to a net loss of nearly $13 million in its third fiscal quarter.

The Toronto food processing giant on Wednesday posted a net loss of $12.92 million on $1.34 billion in sales for the quarter ending Sept. 30, down from net earnings of $220.42 million on $1.3 billion in the year-earlier period.

Included in its ledger for the quarter were costs of $42.9 million related to product recalls and company restructuring.

The recalls stemmed from connection of a Maple Leaf meat processing plant on Bartor Road in Toronto to cases of listeriosis poisoning in Canadian consumers during the summer.

“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,” CEO Michael McCain said Wednesday.

The plant was linked to a specific strain of listeria that was confirmed to have sickened 53 people in seven provinces, mostly in Ontario, as of Oct. 17, according to the Public Health Agency of Canada. Out of those 53, 29 people in six provinces have died, with at least 20 of those deaths found to be due at least partly to listeriosis infections.

Maple Leaf shut down the Toronto plant Aug. 20 and recalled all 191 products made there from Jan. 1, 2008 onward. It said in September that the “most likely” source of contamination was a possible collection point for bacteria “deep inside the mechanical operations” of two specific meat slicing machines.

The plant reopened in September after deep cleaning, and federal food safety officials ordered all its products to be held for further testing before release. New samples from one production line were then found to still be contaminated with listeria bacteria, but products from all the other processing lines at Bartor Road up to that point “repeatedly” tested negative and were cleared for retail distribution.

“While the recall is complete, our actions had a very substantial near-term impact,” McCain said in the company’s release Wednesday. “In other areas of our business, results improved considerably and as expected we are starting to see material benefits from the restructuring of our protein operations.”

“Stabilizing”

McCain said the firm’s fourth-quarter focus 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.”

Maple Leaf’s meat products group saw lower Q3 sales and higher supply chain costs due to the product recall as well as to lower poultry processor margins and higher input costs in the packaged meats business.

“These negative impacts outweighed the contribution of higher
earnings in the primary pork processing business due to improved pork
processing margins and benefits from consolidating primary pork operations in
Western Canada” and expanding its pork slaughter and processing plant at Brandon, Man. to handle the consolidated work, Maple Leaf said Wednesday.

In the company’s agribusiness group, earnings from Maple Leaf’s rendering operations got a boost from higher commodity prices during most of the
quarter, and higher earnings from biodiesel sales.

The company’s hog production losses in Q3 were “significantly reduced” from last year and from the run rate for the first half of the year due to the divestiture of its Alberta and Ontario hog production businesses, a lower cost of production and improved efficiencies in its restructured Manitoba operations.

Maple Leaf in its Q3 marketed about 224,000 hogs, down from 353,000 last year, and the restructuring of these operations is “virtually complete,” the company said Wednesday.

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