UPDATE 2-Maple Leaf Foods shares plunge after surprising loss

Thu May 2, 2013 11:32am EDT
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(Updates with CEO interview, share selloff and analyst's comment, byline)

By Rod Nickel and Shounak Dasgupta

May 2 (Reuters) - Shares of Canadian food processor Maple Leaf Foods Inc dove 8 percent on Thursday after it reported a surprising quarterly loss on lower meat sales.

The Toronto-based company had expected a volatile first half, but conditions have been more difficult than it expected, Chief Executive Michael McCain said.

Meat volumes were weaker after the company raised prices and profits from raising and processing hogs were hurt by higher feed costs tied to last year's U.S. drought, the company said. The yen has lost value, McCain said, and pork exporters have not yet raised prices to key Japanese buyers accordingly.

Those two factors hurt earnings from the protein segment by C$24 million, the company said.

Maple Leaf's shares fell as much as 8 percent to a three-month low, before paring losses to a drop of 6.4 percent, or 85 Canadian cents, to C$12.50 on Thursday morning in Toronto.

"Everybody knew that you lose money on every pig you sell," said analyst Robert Gibson of Octagon Capital. "People like myself were surprised by the magnitude of the hit."

The price of corn, which strongly influences wheat, shot to a record high last year after the worst U.S. drought in more than 50 years. While those conditions have improved, U.S. corn planting is off to one of the slowest starts on record, keeping grain prices volatile.   Continued...