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Maple Leaf Foods allows McCain to boost stake

Reuters — Canadian meat processor Maple Leaf Foods reported a smaller-than-expected profit on Wednesday and also said it would allow its biggest shareholder to take a bigger stake in the company.

The company said CEO Michael McCain and an affiliated company, McCain Capital Inc., could now bump up their stake to as much as 45 per cent in Maple Leaf.

An agreement adopted in 2011 had allowed McCain to take a stake of a 31.9 per cent stake in the company, making him its biggest shareholder.

The amendment agreement also prevents McCain from selling shares to any investor who would, after the purchase, hold a stake of more than 20 per cent in Maple Leaf, the company said.

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With the new provisions in place, Maple Leaf said Wednesday it would now allow its shareholder rights plan, known in the trade as a “poison pill” plan, to expire, also noting “recent changes in securities laws which make other provisions of the rights plan redundant.”

Maple Leaf’s net earnings more than doubled to $76.2 million, or 56 cents per share, in the fourth quarter ended Dec. 31, from C$33.3 million, or 24 cents, a year earlier.

On an adjusted basis, Maple Leaf earned 31 cents per share, missing analysts’ average estimate of 33 cents per share, according to Thomson Reuters I/B/E/S.

Total sales for Canada’s biggest pork processor fell about five per cent to $828.2 million, missing analysts’ average estimate of $860.5 million.

Fourth-quarter margins in prepared meats improved on lower operating costs, Maple Leaf said, while its fresh pork earnings were higher than the year-earlier Q4 on stronger margins in its value-added retail and export channels.

Fresh poultry earnings slipped slightly, Maple Leaf added, as industry processor margins “receded from record levels in the fourth quarter of 2015.”

For the full year, Maple Leaf said, prepared meats sales declined slightly on a price increase in the first quarter but “strengthened as the year progressed.”

Sales in fresh pork increased in 2016 on higher selling prices and favourable exchange rates and pork markets, the company said, while fresh poultry sales  also increased on “stronger volume and an improved sales mix.”

Fourth-quarter and full-year sales in the company’s agribusiness sector, which includes company-owned livestock production operations, were also down due in part to an extra sales week in the fourth quarter of 2015, Maple Leaf said.

The company results come a day after it said it would buy U.S.-based Lightlife Foods, a manufacturer of plant-based protein foods, for US$140 million and related costs.

Reporting for Reuters by Komal Khettry in Bangalore. Includes files from AGCanada.com Network staff.

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