maple leaf foods

TIM HORTONS INC. $32 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 181.5 million; Market cap: $5.8 billion; Price-to-sales ratio: 3.0; SI Rating: Average) plans to buy back up to 5% of its outstanding shares in 2009. This could cost it $200 million. (In 2008, it earned $301 million, or $1.64 a share.) Share buybacks reduce the number of shares outstanding, which increases the value of the remaining shares. Tim Hortons has also raised its dividend by 11.1%, to $0.40 a share, for a yield of 1.3%. Tim Hortons is a buy. CANADA BREAD CO. LTD. $39 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 25.4 million; Market cap: $990.6 million; Price-to-sales ratio: 0.6; SI Rating: Above Average) earned $64.9 million, or $2.55 a share, in 2008. That’s down 22.6% from $83.8 million, or $3.30 a share, the previous year. However, these figures include several non-recurring items, including the replacement of a U.K. bagel plant that was destroyed by a fire early last year. If you disregard all unusual costs, earnings per share fell 13.3%, to $2.87 from $3.31. Sales rose 12.9%, to $1.7 billion from $1.5 billion, mainly because Canada Bread raised its prices to offset higher wheat and other input costs....

CAE INC. $7.00 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 254.9 million; Market cap: $1.8 billion; Price-to-sales ratio: 1.1; SI Rating: Average) is slowly expanding its sales outside the cyclical airline industry. It has won a 20-year, $329.5-million contract to build helicopter simulators and train pilots for Canada’s Department of National Defence. To put the contract in context, CAE’s annual revenue is about $1.4 billion. CAE has also teamed up with the Michener Institute for Applied Health Sciences in Toronto, the Universite de Montreal and the Winnipeg Regional Health Authority to develop medical simulators that will help train doctors to perform surgical procedures. CAE stands to make just $5 million from the deal, but the company feels that medical simulators could soon account for 10% of its sales. CAE is a buy....

MAPLE LEAF FOODS INC. $10 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 107 million; Market cap: $1.1 billion; Price-to-sales ratio: 0.2; SI Rating: Average) has finalized the details of several class-action lawsuits it faces related to an outbreak of listeriosis at its Toronto meat-processing plant in August 2008. Maple Leaf will pay a total of $25 million, and has agreed to contribute an extra $2 million if the $25 million is not enough to settle all of the outstanding claims. To put these figures in context, Maple Leaf earned $16.4 million, or $0.13 a share, before unusual items in the third quarter of 2008. The company has strengthened its food safety inspection procedures at all of its plants, which should help it avoid further outbreaks....

MAPLE LEAF FOODS INC. $10 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 126.3 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.2; SI Rating: Average) continues to make progress with its multi-year restructuring plan. This mainly includes a shift to packaged meats under the Maple Leaf and Schneider brands, which generate higher earnings for it than fresh meats. The plan should increase Maple Leaf’s annual operating earnings (profits after regular operating costs) by $100 million by 2010. The company has now agreed to settle several class action lawsuits stemming from the listeria outbreak at its Toronto meat-processing plant. The settlement will cost it $25 million to $27 million. To put these lawsuits in perspective, Maple Leaf lost $0.10 a share (total $12.9 million) in the three months ended September 30, 2008. It earned $0.01 a share ($1.7 million) in the year-earlier quarter. If you exclude the costs to recall contaminated products and other unusual items, per-share earnings rose 116.7%, to $0.13 a share ($16.4 million) from $0.06 a share ($7.7 million). Revenue grew 3.3%, to $1.34 billion from $1.30 billion....

Our long-standing advice is to invest in well established companies and spread your funds out across the five main economic sectors: Manufacturing & Industry, Resources & Commodities, the Consumer sector, Finance and Utilities. Generally speaking, stocks in the Resources & Commodities sector and the Manufacturing & Industry sectors expose you to above-average volatility, while those in the Finance and Utilities sectors involve below-average volatility. Consumer sector stocks tend to fall in the middle. We prefer to zero in on Consumer stocks with the size and brands to overcome short-term setbacks, and succeed over the long term....

TORONTO-DOMINION BANK $43 (Toronto symbol TD) earned $3.8 billion in its fiscal year ended October 31, 2008, down 9.0% from $4.2 billion in the prior year. Earnings per share fell 15.1%, to $4.88 from $5.75, on fewer shares outstanding. These figures exclude several nonrecurring items, such as integration costs of acquisitions. The drop was largely due to higher loan loss provisions, which grew 48.4% to $1.05 billion from $705 million. TD recently sold $1.4 billion worth of new common shares. That strengthened its regulatory capital ratios. Buy. IGM FINANCIAL INC. $31 (Toronto symbol IGM) reported that its assets under management fell 17.0%, to $102.2 billion at November 30, 2008 from $123.2 billion a year earlier. The drop was largely due to falling stock markets, plus net redemptions — including $103.7 million in November, 2008. However, IGM’s decline was less than the roughly 21% drop in assets under management for the entire Canadian mutual fund industry. Best Buy. MAPLE LEAF FOODS INC. $11 (Toronto symbol MFI) has issued $70 million of warrants (6% of its market cap). The cash will help it cover the costs of its recent recall of meat products due to listeria contamination. Buy.

MAPLE LEAF FOODS INC. $10.75, Toronto symbol MFI, has agreed to settle several class action lawsuits stemming from this summer’s listeria outbreak at its Toronto meat-processing plant. The settlement will cost the company between $25 million and $27 million. To put that in perspective, Maple Leaf lost $12.9 million or $0.10 a share in the three months ended September 30, 2008, mainly due to the costs to recall the contaminated products and improve food safety at all of its plants. If you disregard these costs, Maple Leaf would have earned $0.13 a share in the third quarter. Maple Leaf’s stock is up nearly 65% since it fell to $6.54 in October, 2008, thanks to its quick response to this crisis. The settlement of these class-action lawsuits will now let Maple Leaf focus on rebuilding consumer confidence in its products....

TERANET INCOME FUND $9.50, Toronto symbol TF.UN, has received a new takeover offer from the Ontario Municipal Employees Retirement System (OMERS). The new offer of $10.25 a unit is 6.8% less than the previous offer of $11.00. Teranet’s units are now trading for roughly 7% below the new offer. The lower offer reflects a slowing economy in Ontario and falling real estate values. That could hurt demand for Teranet’s electronic land registry services. As well, it’s increasingly difficult to secure loans for corporate takeovers. Teranet recommended that investors accept the first OMERS offer, after it failed to attract other bidders. Teranet has not yet commented on the new offer of $10.25 a unit. However, it’s still unlikely that a new bidder will emerge. As well, Teranet’s second-largest shareholder has accepted the new offer....

This downturn is going a lot further down that I ever expected. I still see it as a financial panic, rather than an indicator of the depth of the recession that now seems to have started. In other words, the market drop reflects a drying up in lending activity and fear of a depression, rather than a drying up in business activity. In the depths of a market downturn, some observers always predict that we are on the verge of another 1930s depression. In the 1930s, however, the U.S. and other governments did all the wrong things. They raised taxes, raised tariffs and did nothing to halt bank failures. The U.S. and other governments are doing all the right things to revive lending and credit, in my view. They are injecting funds into the financial system, arranging takeovers of failing financial companies, and moving to protect depositors. Eventually these efforts will pay off. Lending will then swiftly revive, and the market will go through a sharp recovery. There is no way to tell when that will happen, but you can bet that it will spur widespread disbelief, and warnings that it is just a temporary reprieve and that the downturn will soon resume....

MAPLE LEAF FOODS INC. $8.89 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 126.9 million; Market cap: $1.1 billion; SI Rating: Average) has traced the source of the recent outbreak of listeria contamination to meat slicing equipment at its Toronto processing plant. The outbreak has forced Maple Leaf to recall all of the products produced at its Toronto plant. There is no evidence of listeria contamination at the company 22 other facilities, which continue to operate normally. The recall will cost Maple Leaf $20 million, or 10% of the $199 million or $0.51 a share it earned in 2007. The company also faces several class action lawsuits. This situation is a good example of why we recommend that investors stick with well-established companies. The bad publicity over the recall would probably have forced a smaller, lesser-known company to go out of business....