February 26, 2011

 

Maple Leaf business thrives amid rising costs

 

 

Maple Leaf Foods Inc., a major Canadian food processor, posted a higher quarterly profit Thursday (Feb 24), overcoming rising wheat and meat costs by cutting elsewhere and raising its own prices.

 

Shares of Toronto-based Maple Leaf, a leading pork processor and baker, marketing Schneider's brand meats and Dempster's bread, climbed 1.5%.

 

The quarter looked "very, very positive," said analyst Robert Gibson of Octagon Capital. Earnings per share slightly exceeded trade expectations although revenue fell short.

 

Minneapolis spring wheat futures spiked more than 60% in 2010, largely due to crop failures, while Chicago hog futures climbed by more than a third, pushing costs higher for food processors like Maple Leaf.

 

The company has already passed along some of those costs to consumers, while cost-cutting also added to the bottom line, chief executive Michael McCain said.

 

The closure of some meat plants, starting with two in Nova Scotia and British Columbia, looks to boost meat profit margins in 2011, along with price increases in prepared meats, the company said.

 

Not including adjustments, earnings per share were CAD0.22 (US$0.23), up from CAD0.16 (US$0.16).

 

The company also said it will pay a dividend of CAD0.4 (US$0.41) a share on March 31.

 

Profits rose even though Maple Leaf's sale of its Burlington, Ontario, pork plant held back revenue, which fell 9% to CAD1.21-billion (US$1.24-billion). The lower revenue figure also reflected an additional week in the fourth quarter a year earlier.

 

A deadly meat recall in 2008 hammered the company's shares and earnings, but last year it launched an ambitious plan to rebuild profit by modernising some plants and closing others.

 

The company's yearly profit came in at about half of the previous year's level, at CAD25.8 million (US$26.37 million), after the company took more than CAD70-million (US$71.55-million) in charges during 2010.