maple leaf foods

THE WESTAIM CORP., $0.73, Toronto symbol WED, owns Jevco Insurance Co., which sells insurance to high-risk drivers, as well as owners of motorcycles, snowmobiles and recreational vehicles. Jevco operates in Ontario, Quebec and Alberta. Westaim bought Jevco for $264.2 million in March 2010. Westaim jumped 9% this week after it agreed to sell Jevco to Intact Financial Corp. (Toronto symbol IFC); Intact is a recommendation of Stock Pickers Digest, our newsletter that focuses on aggressive investing. Westaim will receive $530 million when the sale closes in the fall of 2012. That’s equal to 1.3 times its market cap of $423.7 million....

MAPLE LEAF FOODS INC. $12 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 139.5 million; Market cap: $1.7 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.3%; TSINetwork Rating: Average; www.mapleleaf.ca) is starting to see the benefits of its a major restructuring plan, which mainly involves closing older meat-processing plants and bakeries and shifting their operations to modern facilities. Excluding all unusual items, earnings per share would have risen 38.4%, to $1.01 in 2011 from $0.73 in 2010.

Sales for the year fell 1.5%, to $4.9 billion from $5.0 billion. If you disregard operations that the company sold and unfavourable foreign currency rates, sales would have risen by 4.7%.

The company plans to raise its selling prices, which will help it offset rising ingredient costs. The savings from the restructuring plan, which Maple Leaf expects to complete in 2014, will also help it absorb these higher costs.

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MAPLE LEAF FOODS INC. $12 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 139.5 million; Market cap: $1.7 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.3%; TSINetwork Rating: Average; www.mapleleaf.ca) is starting to see the benefits of its a major restructuring plan, which mainly involves closing older meat-processing plants and bakeries and shifting their operations to modern facilities. Excluding all unusual items, earnings per share would have risen 38.4%, to $1.01 in 2011 from $0.73 in 2010. Sales for the year fell 1.5%, to $4.9 billion from $5.0 billion. If you disregard operations that the company sold and unfavourable foreign currency rates, sales would have risen by 4.7%. The company plans to raise its selling prices, which will help it offset rising ingredient costs. The savings from the restructuring plan, which Maple Leaf expects to complete in 2014, will also help it absorb these higher costs....

CANADIAN TIRE CORP., $65.95, Toronto symbol CTC.A, rose 3% this week after the retailer reported better-than-expected earnings. In 2011, the company earned $467.0 million, or $5.71 a share. That beat the consensus estimate of $5.43 a share. The latest earnings are also up 5.2% from $444.2 million, or $5.42 a share, in 2010. Sales in 2011 rose 12.7%, to $10.4 billion from $9.2 billion in 2010. That’s largely due to the company’s August 2011 purchase of The Forzani Group Ltd., which sells sporting goods through over 500 stores in Canada, including SportChek and Athlete’s World. If you exclude the cash held by Forzani, Canadian Tire paid $739.9 million for this acquisition....

BANK OF NOVA SCOTIA, $51.73, Toronto symbol BNS, has agreed to buy 51% of Banco Colpatria, Colombia’s fifth-largest bank, with 175 branches and 308 automated teller machines. Bank of Nova Scotia will pay $500 million U.S. plus 10 million common shares. That gives the deal a value of roughly $1 billion U.S., which is equal to 85% of the $1.2 billion (Canadian), or $1.11 a share, that the bank earned in the three months ended July 31, 2011. After the deal closes in December 2011, Bank of Nova Scotia will merge its existing wholesale banking operations in Colombia, which focus on corporate clients, with Banco Colpatria....

MAPLE LEAF FOODS INC. $11 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 144.4 million; Market cap: $1.6 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.5%; TSINetwork Rating: Average; www.mapleleaf.ca) is Canada’s largest food-processing company. It mainly makes its products, which include fresh and prepared meats and poultry, under the Maple Leaf and Schneider brands. This business accounts for roughly 65% of its revenue. The company also makes fresh and frozen bread, pastries and pasta through its 90.0% stake in Canada Bread Co. Ltd., which supplies 30% of Maple Leaf’s revenue. The remaining 5% comes from its agribusiness division, which raises hogs for the company’s processed-meat operations. This division also recycles animal by-products into other materials, such as soaps and biodiesel fuel. In 2006, Maple Leaf began to shift its focus to more-profitable processed foods, and cut back its fresh pork production. It also sold its animal-feed business and most of its fresh-meat operations....

Maple Leaf Foods and its subsidiary, Canada Bread, are in the middle of multi-year restructuring plan. A big part of this restructuring involves closing smaller plants and moving their operations into larger facilities with better machinery. The plan’s cost has held back Maple Leaf’s earnings and share price. However, these moves will cut its costs, and help it better deal with rising prices for raw materials, such as pork, wheat and corn, as well as the higher Canadian dollar, which has hurt exports. In addition, the resulting productivity improvements will help it compete with large multinational food producers. We like both companies, but Maple Leaf offers better value. At its current price, its stake in Canada Bread is worth roughly $7.20 per Maple Leaf share. That means you get Maple Leaf’s meat-processing operations, which account for nearly two-thirds of its revenue, for just $3.80 a share....

When we’re looking for stocks to recommend in our newsletters and investment services, our stock market research puts a lot of importance on the amount of goodwill that a company carries as an asset on its balance sheet. Goodwill is an accounting entry that reflects the price that the company paid for its acquisitions, minus the value of the tangible assets, like land and equipment, that it received as part of the acquisition. The term means “value as a going concern.” However, goodwill acquired in an unwise acquisition can lose value overnight. When that happens, the company has to write it off against earnings. At worst, the company might have to write off most, if not all, of its goodwill....

Maple Leaf Foods and its subsidiary Canada Bread are cutting costs so they can better compete with larger, U.S.-based food companies. Both companies are closing smaller plants and merging their operations with larger facilities. We like both, but Maple Leaf offers better value. MAPLE LEAF FOODS INC. $11 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 140.0 million; Market cap: $1.5 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.4%; TSINetwork Rating: Average; www.mapleleaf.ca) is Canada’s largest food-processing company. It mainly makes its products, which include fresh and prepared meats and poultry, under the Maple Leaf and Schneider brands. Maple Leaf also owns 90.0% of Canada Bread. In the three months ended March 31, 2011, Maple Leaf earned $10.5 million. That’s down 47.0% from $19.9 million a year earlier. Earnings per share fell 42.9%, to $0.08 from $0.14, on more shares outstanding. Without one-time items, such as restructuring costs, earnings per share would have jumped 157.1%, to $0.18 from $0.07. Sales fell 3.7%, to $1.15 billion from $1.19 billion a year earlier, mostly because the company sold some operations. If you exclude contributions from these businesses, sales would have risen 3.7%....

IGM FINANCIAL INC. $49 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 259.7 million; Market cap: $12.7 billion; Price-to-sales ratio: 4.8; Dividend yield: 4.2%; TSINetwork Rating: Above Average; www.igmfinancial.com) had $134.1 billion of assets under management on March 31, 2011. That’s up 8.7% from $123.4 billion a year earlier. The rebounding stock market was the main reason for the gain. IGM’s fee income varies with the value of the mutual funds and other securities it manages, so the company’s revenue and earnings gain when the value of these assets rises. IGM Financial is a buy....