Price increase will continue into 2012 after ‘challenging’ fourth quarter – Maple Leaf Foods

By Mark Astley

- Last updated on GMT

Related tags Maple leaf foods

Food processor Maple Leaf Foods intends to further increase prices across all segments to offset the raw materials price hike that affected earnings in final quarter of 2011.

The Canada-based company, which covers segments including bakery and meat products, recorded reduced net earnings of $9.2m during the fourth quarter compared with $30.6m recorded in Q4 2010.

The earnings drop came despite increased company sales of $1.245bn for the period October to December.

The company recorded sales of $4.89bn for the year – down 2% on the $4.97bn in sales in 2010.

It has attributed its results to a “challenging”​ fourth quarter that saw the price of raw material peak and higher than average bakery plant overheads.

Q4 raw material peak

The company’s Meat Product Group, which includes prepared meats, fresh pork, poultry and turkey products, recorded a sales increase of 3% for Q4 2011 - taking total sales for the segment to $781.8m, compared with the $762.6m in the same period in 2010.

Adjusted operating earnings for the meat products segment in Q4 dropped by 27% to $27.5m - a result it has attributed to a fourth quarter peak in live bird costs.

“In the first quarter of 2012, management intends to implement price increases to address higher raw material costs,”​ said a company statement.

The company’s bakery product segment, which produces a variety of frozen bakery products, reported a fourth quarter sales increase of 2% taking sales for the segment to $400m - an increase on the $393.3m recorded in Q4 2010.

Q4 adjusted operating earnings dropped 28% from $22.4m in 2010 to $16.1m for 2011 – which was, again, attributed to higher input costs that were not fully recovered by price increases.

Bakery overheads

The company added that earnings for the bakery segment were also impacted by overhead costs of approximately $4m related to the company’s new facility in Hamilton, Ontario.

During Q4, the company operated three bakeries in the Greater Toronto area while it consolidated production at the new facility.

Two closed in the first quarter of 2012, with the remaining plant set to close in early 2013.

“During this period the Company is incurring incremental overhead costs, which will be eliminated once all three bakeries are closed,” ​the company statement added.

Maple Leaf Foods president and CEO Michael H. McCain said: “We realised strong earnings growth for the year in our protein operations, which contributed to a 40% rise in our adjusted earnings per share. However, we experienced a challenging fourth quarter as a result of unseasonably strong raw material costs which impacted continued margin growth in prepared meats.”

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