July 29, 2010 / 1:14 PM / in 7 years

UPDATE 3-Maple Leaf profit falls sharply on swap charge

* Net earnings C$3 mln vs C$4.9 mln year ago

* Adj EPS C$0.17 vs consensus C$0.15

* Rev C$1.27 bln vs consensus C$1.3 bln

* Shares in Toronto down 8 Canadian cents (Adds company comments from conference call, analyst’s comment)

By Rod Nickel

WINNIPEG, Manitoba, July 29 (Reuters) - Maple Leaf Foods Inc MFI.TO, one of Canada’s largest food processors, said on Thursday quarterly profit fell 39 percent after it took charges related to interest-rate swaps.

Maple Leaf’s profit dropped to C$3 million ($2.9 million) or 2 Canadian cents a share, in the second quarter ended June 30, from C$4.9 million, or 4 Canadian cents, for the same period a year earlier.

The lower earnings reflect a charge of C$20.7 million due to the change in fair value of long-term interest rate swaps.

Maple Leaf shares on the Toronto Stock Exchange slipped 8 Canadian cents to C$9.23 on Thursday.

Adjusted for restructuring and other costs, including the interest-rate swap charge, earnings per share beat expectations.

“It’s in the ballpark with what most of us were expecting but maybe the Street wanted knock-the-ball-out-of-the-park earnings,” said Robert Gibson, analyst at Octagon Capital, referring to the slip in the company’s share price.

Maple Leaf’s adjusted earnings rose 20 percent to C$52 million helped by improving markets for Maple Leaf’s poultry operations. On a per share basis, they were 17 Canadian cents, compared with 12 Canadian cents in the year-before quarter.

Analysts on average had forecast adjusted earnings per share of 15 Canadian cents on revenue of C$1.3 billion, according to Thomson Reuters I/B/E/S.

Revenue fell to C$1.27 billion from C$1.32 billion a year earlier, due to the impact of a strong Canadian dollar on U.S. and British bakery operations and weaker sales volumes in prepared meats.

Raw pork costs have risen 40 to 50 percent from the year-earlier quarter, said President and Chief Executive Michael McCain, which spurred the company to raise prices and led to reduced sales volume for prepared meats.

Bakery earnings were lower, with Canada Bread CBY.TO (89.8 percent owned by Maple Leaf) reporting lower quarterly profit Thursday. [ID:nN29210588]

Construction of a new bakery in Ontario is under way, with commissioning scheduled to begin in mid-2011, said Chief Financial Officer Michael Vels.

The company has interest “from a variety of parties” in its Burlington, Ontario, pork processing plant, which Maple Leaf intends to sell this year, Vels said.

$1=$1.03 Canadian Reporting by Rod Nickel; Editing by Frank McGurty and Peter Galloway

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