Maple Leaf Foods rides retail demand to second-quarter profit

Maple Leaf Foods Inc. overcame a steep drop in restaurant and food supply sales last quarter to furnish a $25-million profit thanks to a revenue boost in pork, retail consumption and Asian demand.

The meat giant raised sales by 7% $1.09 billion in the second quarter as consumers of its pork and plant-based protein products stayed home and stocked up, on top of more exports to China.

"The strength of retail volumes was fully offset by the decline in food service," said chief financial officer Geert Verellen. But an overall increase in demand and production of pork--yielding meat sales growth of 5.8%--alongside 41% sales growth for plant-based protein shored up income.

"There is a steady slope of recovery in food service, but we're clearly a ways away from coming anywhere close to being flat to a year ago," said chief operating officer Curtis Frank.

Plant-based protein, which includes grain-based protein and vegan cheese products, has made up a rapidly growing portion of revenue for the past year, but still comprises less than 6% of total sales.

Maple Leaf said it shelled out $19 million on COVID-19 costs such as personal protective equipment and sanitation protocols, mitigated by savings on travel, training and promotions.

The bulk of pandemic expenses related to the $2 hourly bonus paid to processing plant workers from late March through June, the company said.

Maple Leaf announced it would nix the so-called hero pay late last month, prompting some backlash from the union representing frontline employees.

CEO Michael McCain said Thursday the company continued to drive down costs "without sacrificing the health and safety of our people," and expressed his "profound gratitude to our frontline team members."

Maple Leaf earned $25.7 million in the quarter ended June 30 on higher revenues led by a 41% gain from its plant protein group.

The company says its net income amounted to 21 cents per share for the three-month period, compared with a loss of five cents per share or $6.3 million a year earlier.

Adjusted profits were 35 cents per share, up 6% from 33 cents per share in the second quarter of 2019 as stronger sales were largely offset by the COVID-19 costs and strategic investments in plant protein.

Maple Leaf Foods was expected to report 25 cents per share in adjusted profits on $1.12 billion in revenues, according to financial markets data firm Refinitiv.