May 8, 2008 / 11:51 AM / in 10 years

Mega Brands posts smaller first-quarter loss

TORONTO (Reuters) - Canada’s biggest toy maker, Mega Brands Inc MB.TO, reported a smaller first-quarter loss on Thursday, but it was hurt by charges related to a product recall, as well as lower sales and cost pressures.

The company lost $9.6 million, or 26 cents a share, in the period ended March 31. That compares with a loss of $23.9 million, or 73 cents a share, in the same period last year.

Net sales fell 12.2 percent to $79.1 million compared to $90.1 million.

Mega Brands said voluntary product recall and other charges amounted to $35.2 million. It announced two new recalls in March after reports of magnets coming loose from several toys manufactured in China.

Magnets that are swallowed can attract each other and cause intestinal tears and blockages, which can be fatal.

Analysts had expected a loss of 17 cents per share, before exceptions, according to Reuters Estimates.

Mega Brands said that it has completed the integration of its North American distribution activities as well as other efficiency measures that should generate $12 million in annualized savings starting toward the end of the second quarter.

The company said it is continuing to explore the sale of its stationery and activities business, which had sales of more than $200 million last year.

Reporting by Leah Schnurr; editing by Janet Guttsman

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