March 1, 2012

 

 

In order to pass on higher meat costs which took a bite out of fourth quarter results, Maple Leaf Foods Inc. said Tuesday (Feb 28) that it is looking to raise prices.

 

Maple Leaf president and CEO Michael McCain said he would look to restore margins after the company was hit by an unexpected increase in meat costs in the last three months of 2011.

 

Speaking during a conference call with financial analysts McCain said the increase in prices will mostly benefit the company in the second quarter.

 

"We do think the margin pressures in the meat business will continue in the first quarter, particularly in the first half of the first quarter," he said. "But the pricing action that we have in the market place is mostly effective in middle to late February."

 

Maple Leaf reported Tuesday a fourth-quarter profit of US$9.2 million, down from US$30.6 million a year ago as the company booked US$32.2 million worth of pre-tax restructuring charges.

 

Sales were up 3% but adjusted operating earnings - an internal measure of performance - fell to US$57.4 million from US$69.9 million in the same period a year earlier as raw material costs, especially for meat, rose.

 

Net earnings per share dropped to US$0.06 from the prior year's US$0.21, with the restructuring taking a US$0.17 per share bite. Adjusted earnings per share were US$0.21, down from US$0.27.

 

The average analyst estimate had been for a profit of US$0.26 per share for the quarter, according to analysts polled by Thomson Reuters.

 

In addition to raising the price of its meat products, Maple Leaf said it would also look to pass on higher wheat costs for its baked goods.

 

"We do believe that these are very temporary impacts that will be addressed through pricing in the near term and a decline in costs," McCain said.

 

Maple Leaf has been cutting costs and restructuring its operations, including the consolidation of its bakery operations and the start up a new bakery in Hamilton. Waterloo Region is being hit hard by the restructuring. About 1,200 jobs will be lost in 2014 when Maple Leaf consolidates production of prepared meets in Hamilton and closes the Schneider meat processing plant in Kitchener in 2014.

 

And 175 workers face the loss of their jobs this May when the company shuts down its poultry processing plant in Ayr.

 

For the full year, Maple Leaf earned US$87.3 million or US$0.58 per diluted share on US$4.89 billion in sales. That compared with a profit of US$35.6 million or US$0.21 per diluted share on US$4.97 billion in sales in 2010.

 

Earlier this month, the company said it was closing a chicken processing plant in Ayr in a move that will result in the net loss of about 100 jobs. The closure is part of a plan to consolidate the company's poultry operations at its Brantford and Mississauga, plants.

 

Maple Leaf is Canada's largest food processor, making and selling such well-known store brands as Maple Leaf, Burns and Schneiders hotdogs, Dempster's bread, Olivieri pasta, as well as Shopsy's deli meats and Mitchell's Gourmet foods.

 

Last year, Maple Leaf announced a plan to cut 1,550 jobs by closing plants in four provinces and streamlining distribution, part of a three-year, US$560-million restructuring plan expected to boost competitiveness and profitability.

 

Maple Leaf has 21,000 employees at its operations across Canada and in the US, Europe and Asia.