TORONTO – Food processor Maple Leaf Foods Inc. (TSX:MFI) said Tuesday that it is looking to raise prices in order to pass on higher meat costs, which took a bite out of fourth-quarter results.
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.
McCain told a conference call with financial analysts that 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 $9.2 million, down from $30.6 million a year ago as the company booked $32.2 million worth of pre-tax restructuring charges.
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Sales were up three per cent but adjusted operating earnings – an internal measure of performance – fell to $57.4 million from $69.9 million in the same period a year earlier as raw material costs, especially for meat, rose.
Net earnings per share dropped to six cents from the prior year’s 21 cents, with the restructuring taking a 17 cent per share bite. Adjusted earnings per share were 21 cents, down from 27 cents.
The average analyst estimate had been for a profit of 26 cents per share for the quarter, according to analysts polled by Thomson Reuters.
In addition to raising the price of its meat products, Maple Leaf also 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.
The company said it expected to close two bakeries in Toronto area in the first quarter of this year and a third bakery in early 2013.
For the full year, the company earned $87.3 million or 58 cents per diluted share on $4.89 billion in sales. That compared with a profit of $35.6 million or 21 cents per diluted share on $4.97 billion in sales in 2010.
Earlier this month, the company said it was closing a chicken processing plant in Ayr, Ont., 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, Ont., plants.
Maple Leaf is Canada’s biggest food processor, making and selling such well-known store brands as Maple Leaf, Burns and Schneiders hot dogs, 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, $560-million restructuring plan expected to boost competitiveness and profitability.
Maple Leaf has 21,000 employees at its operations across Canada and in the United States, Europe and Asia.
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