Menu Foods Income Fund says its pet food business is on the way to recovering from the impact of a series of major recalls, although on a smaller scale.

The pet food maker said it lost $2.2 million or 10.8 cents per unit for the three months ended March 31 compared with a loss of $17.5 million or 91.8 cents per unit a year ago. Quarterly revenue was $55.6 million, down from $64.5 million.

Investors cheered the news as the fund's units closed up 12 cents or 9 per cent at $1.40 on the Toronto Stock Exchange.

"We have made considerable progress and our prospects look better today than at any other time during this past year," president and CEO Paul Henderson stated. "As we move the business forward, we do so focusing on our core competency -- the manufacture of high quality wet pet food. We will continue to work to solidify our customer base and further adjust our cost structure in line with our ongoing business."

Last month, Menu Foods reached a "comprehensive cross-border agreement in principle" on litigation arising from its tainted pet food scandal.