Maple Leaf Foods reports 70% drop in Q4 net earnings

Canadian food processing company Maple Leaf Foods reported that its net earnings fell 70% to C$9.2m ($9.22m) for the fourth quarter ended December 31, 2011, compared to C$30.6m ($30.69m) the previous year.

The company attributed the decline to the higher raw material costs which affected its prepared meats and baked goods businesses.

The net earnings for the fourth quarter includes $32.2m of pre-tax charges related to restructuring activities.

Sales, however, increased 3% to C$1.24bn ($1.24bn), compared to C$1.21bn ($1.21bn) during the previous year, as higher prices across all of the company’s business divisions offset weaker sales volumes.

The company’s meat products division, which offers value-added prepared meats, lunch kits as well as fresh pork, poultry and turkey products, posted 3% increase in sales to C$781.8m ($784.33m), compared to C$762.6m ($765.07m) in the previous year..

The agribusiness division, which involves Canadian hog production and animal by-product recycling operations, saw a 13% increase in sales to C$63.5m ($63.70m), compared to C$56.2m ($56.38m) for the same period in 2010.

Bakery products group, which offers fresh and frozen bakery products, reported 2% increase in sales to C$400m ($401.29m), compared to C$393.3m ($394.57m) last year.

Maple Leaf Foods president and CEO Michael McCain said the company has experienced a challenging fourth quarter as a result of unseasonably strong raw material costs, which impacted continued margin growth in prepared meats.

"We also experienced short term higher operating costs in our bakery business," McCain added.

For the full year 2011, the company’s net earnings jumped 145% to C$87.3m ($87.58m), while sales decreased 2% to C$4.89bn ($4.90bn).

Maple Leaf, which has been cutting costs and restructuring its operations, said that it is working to raise prices to help offset higher than expected cost increases.

Earlier this month, Maple said that it will be shutting down its chicken processing facility in Ontario, and move production to two other Ontario-based facilities, with an investment of C$6.5m ($6.52m) to support the production transfers.

Last year, the company announced its plan to cut 1,550 jobs, close plants in four provinces, streamline distribution, and invest C$560m ($561.81m) in infrastructure and technologies over three years, as a part of its restructuring plan to boost competitiveness and profitability.