Canada Packers posts Q3 loss amid 'sharp and unusual' market deterioration
A confluence of unusual headwinds from weaker demand to plummeting hog prices weighed on pork producer Canada Packers Inc.'s third-quarter results.
Chief executive Dennis Organ said the company's losses extended into the third quarter as it contended with "the combination of softer U.S. demand, slower exports and high year-over-year U.S. inventories at a time of steady supply."
But Organ said the downturn is "cyclical."
"The reason I consider it cyclical, one is: I've seen it before multiple times. Two, it's the relationship between demand and supply, which happens in all businesses," he told analysts during an earnings call on Wednesday.
While Organ said he remains confident on a recovery, he said he has "no idea" when the market will return to normal.
The Mississauga, Ont.-based pork producer reported a loss of $28.1 million or 94 cents per diluted share in the quarter ended Sept. 26 compared with a profit of $25.6 million or 86 cents per diluted share a year earlier.
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The results included a $47.6 million non-cash decrease in fair value of biological assets compared with $4.9 million in the same quarter last year. On an adjusted basis, it earned 23 cents per share in its latest quarter compared with an adjusted profit of $1.13 per share a year earlier.
RBC analyst Irene Nattel said Canada Packers' soft earnings were in line with expectations, reflecting a "sharp deterioration in market conditions and the absence of typical seasonal profitability dynamics, driving margin compression."
Lower pork cut-out, which estimates the value of a hog based on the prices for each individual cut of meat from the animal, also weighed on overall sales, the company said.
"Cut-out values declined approximately 15% from a year ago, and the weakness we experienced in the second quarter continued through the third quarter," Organ said.
Wholesale commodity prices for hogs have plunged to a five-year low to roughly US$62 per pound, which also added volatility to the company's financial results.
"While we can't control commodity markets, our attention remains squarely on how we operate," Organ said.
Sales in the quarter totalled $420.7 million, down from $481.8 million a year ago, when they included operations not acquired in its spinoff from Maple Leaf Foods Inc.
