Maple Leaf Foods profit jumps as charges drop

Company sees food inflation impact in first half of 2013

Maple Leaf Foods, one of Canada’s biggest bakers and meat processors, reported a jump in quarterly profit on Tuesday as restructuring charges and other costs fell, and said it expects volatile earnings in the first half of 2013 as it raises prices.

The Toronto-based company, best known for its Maple Leaf and Schneiders brand meats and Dempster’s bread, has been hurt by soaring grain prices caused by a severe drought in the United States, which drove up the cost of raising hogs and its baking costs.

"The effects of food inflation driven by the North American droughts of 2012 will be felt mostly in the first half of 2013. As a result, we expect some short-term volatility in our earnings as we pass those cost increases on in the marketplace," CEO Michael McCain said in a statement.

"Beyond this, our strategic initiatives will accelerate in 2013 and contribute to continued margin growth."

The company, which is closing older meat plants and modernizing others under a multi-year plan to boost earnings, said net profit for the fourth quarter rose to $56.8 million, or 39 cents per basic share, from $9.2 million, or six cents a share, a year earlier.

Diluted earnings per share jumped to 38 cents from six cents.

Restructuring costs fell to $12.8 million, or seven cents a share, in the period ended Dec. 31, from $32.2 million, or 17 cents a share, in the same quarter last year.

Revenue dropped three per cent to $1.2 billion.

Octagon Capital Corp. analyst Bob Gibson said the quarterly results showed strong margins, but otherwise had few surprises.

On an adjusted basis, operating earnings rose to $91.3 million from $57.4 million last year, reflecting improvements in the its meat and bakery groups, the company said.

Adjusted earnings per share rose to 38 cents from 21 cents a year earlier.

Sales in the company’s meat products unit fell five per cent to $740.8 million, while adjusted operating earnings soared 75 per cent to $48 million.

Price increases and a more profitable sales mix helped boost earnings, along with lower costs from a reduced line of products, Maple Leaf said.

Bakery group sales fell 2.4 per cent to $390.6 million, but adjusted operating profit nearly doubled to $31.4 million. The company has cut costs by closing older bakeries and moving production to a new facility in Hamilton, Ont. – Reuters


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