February 24, 2006

Maple Leaf fourth-quarter profits slashed by energy prices

Maple Leaf Foods Inc., Canada's biggest food processor is expected to raise prices after reporting huge declines in fourth-quarter profits.

Maple Leaf Foods Inc. said it has already begun raising prices of between 3 to 5 percent for processed meat products in response due to higher energy costs which have cut profits by half.

It takes time for companies to pass increased costs to the market and the company is in the midst of doing so, said Michael McCain, president and chief executive officer.

Companies would usually lose no time in passing cost increases onto consumers.

Mr. McCain said Maple Leaf is not alone in being pressured by rising energy costs, adding that most food companies in North America are raising prices in the first half of 2006.

The company is expecting strong consumer sentiments to the higher prices especially since further price hikes are likely to follow in the months ahead.

Maple Leaf's pork business in Japan, which accounts for about 5 per cent of revenue, was also severely hit. Maple Leaf said margins were cut due to a strengthened yen against the Canadian dollar.

Increased advertising also ate into profits last year but the company said all three were manageable short-term factors. Nevertheless, the company's stock fell 18 percent on the report.