An unexpected rise in the cost of meat is partially to blame for lower Maple Leaf Foods’ fourth quarter results, says chief executive officer Michael McCain.
Maple Leaf announced Feb. 28 net earnings of $9.2 million for the quarter, down from $30.6 million last year, although its adjusted operating earnings on the full year rose 21 percent to $259 million over 2010.
McCain said the numbers interrupt 10 quarters of year-over-year growth, the result of increased expenses in its bakery business and meat costs that were “countercyclical and unexpected for us in the marketplace.”
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He said they are temporary issues. The company will increase prices on its processed products and margins in poultry processing look better.
“We think that the margin pressures in the meat business will continue in the first quarter, particularly in the first half of the first quarter, but the pricing action that we have in the marketplace is mostly effective in middle to late February,” he said.
“We’ll start to feel the full impacts near the end of the quarter, which gives us the confidence in believing it will have restored our margins in the protein business by the second quarter.”
McCain said the bakery business saw higher wheat prices in the first half of the year “before they settled back slightly.”
“Wheat costs are slightly more than 20 percent of our total aggregate input costs, and we have to price every year for all of the other factors, not the least of which is looking at energy costs today versus a year ago,” said McCain.
Fourth quarter results include $32.2 million of pre-tax costs related to restructuring expenses.
The company plans to spend $1 billion to close older plants and expand and modernize others.
It will close a bakery in the United Kingdom and is investing millions in a bakery in Hamilton, Ont.
It plans to make Winnipeg “the centre of excellence for bacon.”
It will close its bacon plant in North Battleford, Sask., and open a fully cooked linked sausage operation in Saskatoon.
