Maple Leaf Q4 profit soars to $54.6M despite slight decline in sales revenue

Maple Leaf Foods Inc. (TSX: MFI) is raising prices due to cost increases caused by the droughts last year, chief executive Michael McCain said Tuesday as the company reported a fourth-quarter profit of $54.6 million.

The company has already increased some and warned that lower hog production will likely cause higher hog and meat prices in first half of this year.

McCain said the higher prices will likely lead to some short-term earnings volatility in the first half of the year.

“We’ve demonstrated over time that we have the pricing power to pass through those economics, but there can be some unpredictable volatility over a quarter or two as we go through that process,” he told a conference call with financial analysts.

The company said its profit amounted to 38 cents per diluted share for the three months ended Dec. 31, up from $8.4 million or six cents per diluted share in the same 2011 quarter. Revenue fell 3.3 per cent to $1.2 billion from $1.24 billion.

Maple Leaf said lower restructuring costs and higher gross margins were among reasons for the more than six-fold increase in its fourth-quarter profit.

Adjusted earnings were 38 cents per share in the quarter, compared with 21 cents a year ago.

Revenue was slightly below the average estimate compiled by Thomson Reuters, but Maple Leaf’s profit beat estimates of 31 cents per share of adjusted earnings and 27 cents per share of net income.

McCain said this year will see significant changes as the company opens several new operations and overhauls others as part of Maple Leaf’s restructuring. The company expects to spend about $139 million on restructuring costs between this year and 2015.

In its outlook for 2013, the company said it expected $425 million in capital expenditures, up from $306 million in 2012.

Last month the company sold a potato processing product facility in Lethbridge, Alta., to Cavendish Farms for $57.8 million and announced plans to close a bakery in Grand Falls, N.B., and another in Edmonton.

Maple Leaf expects to take a $6.3-million restructuring charge before taxes related to the closures.

For all of 2012, the company earned $115.3 million or 81 cents per diluted share on sales of $4.86 billion, compared with $82.1 million or 58 cents per diluted share on sales of $4.89 billion in 2011.

McCain said the results “reflect steady, ongoing progress in realizing earnings growth.”

“The challenging market conditions in primary pork processing margins and consumer bread demand were significant headwinds for the year,” McCain said.

The company’s meat products and agribusiness operations reported sales of $814.2 million in the fourth quarter, down from $845.3 million last year. For the full year, sales for the Group totalled about $3.3 billion, roughly the same as 2011.

Adjusted operating earnings grew to $60.8 million for the quarter, up from $42.2 million a year ago, while they totalled $189.7 million for the year, up from $177.9 million.

Maple Leaf’s bakery business, which includes the Dempster’s, Tenderflake, and Olivieri brands, saw fourth-quarter sales slip to $390.6 million compared to $400 million in the fourth quarter of 2011. Sales for all of 2012 for the group amounted to $1.57 billion, down from $1.59 billion for 2011.

The unit reported adjusted operating earnings for the fourth quarter grew to $31.4 million from $16.1 million in the last three months of 2011 as growth in the fresh bakery and North American frozen bakery businesses was partly offset by lower earnings in the fresh pasta business.

For the full year, the bakery group earned an adjusted operating profit of $97.6 million, up from $86.3 million in 2011.

The company has some 20,000 employees at operations in Canada, the United States, Europe and Asia is a leading value-added meat, meals and bakery company.