Toy maker Mega Brands Inc. reported sharply lower net profit but higher sales for the third quarter.
Profits fell to about $16.3-million or 5 cents a share for the three months ended Sept. 30. That was down from $72-million or $1.97 a share for the same period last year.
The company, which reports in U.S. dollars, said Friday its net sales rose nine per cent to $128.3-million compared to $118-million.
Last year's profit was fattened by a $72-million gain from a favourable lawsuit settlement as well as an unrealized $4.2-million foreign exchange loss on debentures.
Mega Brands said sales its toys rose 18 per cent, led by Halo and Dragons Universe in the Boys category and sustained growth in the Preschool category.
North American net sales moved higher and international sales were up 18 per cent led by growth in key European markets.
"Our sales momentum is positive for the peak toy selling season and into next year with all of our key product initiatives performing well at retail and a strong line-up of new products set for launch in spring and fall of next year," said Marc Bertrand, president and CEO.
"We are on track with our plan and continue to strengthen our product portfolio for the years to come."
A single analyst polled by Thomson Reuters expected adjusted earnings would decrease to three cents per share in the third quarter from $1.97 a year ago on $127-million in revenues.
Mega Brands has had some good product and financial results to crow about after several recalls of its magnetic toys reduced sales and nearly forced the company into bankruptcy.
It has high hopes for the rollout of its Thomas & Friends toys on the international market, and more retail shelf space ahead of the holiday shopping season.
Its presence in the girls' toy aisle should get a boost next spring with the development of construction toys based on the popular Japanese Hello Kitty brand.
The company said the troubled the stationary and activities business has stabilized and it hopes to claw its way back to $500-million (U.S.) of annual sales within five years.
The maker of Mega Bloks construction toys broke a streak of 22 years of profitability in 2007. Sales sunk to $339-million last year from a peak of $547-million in 2006.
A recapitalization plan reduced its debt by about $286.6-million from the sale of equity to current major shareholders and new investors.
Mr. Bertrand called the company's growth plans realistic and achievable.
Mega Brands recently won a long-standing legal dispute with Lego after the European Court of Justice ruled the Danish company doesn't own a trademark to the plastic building blocks they both manufacture.
The court ruled that Lego's bricks can't be legally protected by trademark law because their two rows of interlocking studs are a functional, technical shape that cannot become the property of any one company.
The plastic blocks were the first toy manufactured by Mega Brands in 1984 and remain its best selling product.
Mega Brands designs, manufactures and markets toys and stationery products in more than 100 countries.
The Montreal-based company has some 1,300 employees with offices, manufacturing facilities and distribution centres in 14 countries.
North America was its largest market, accounting for 68 per cent of consolidated sales in 2009.