February 27, 2014 / 2:04 PM / 5 years ago

Maple Leaf Foods posts loss on production revamp costs

A sign for the Maple Leaf food processing plant is seen in Toronto August 21, 2008. REUTERS/Mark Blinch

(Reuters) - Canadian food processor Maple Leaf Foods Inc (MFI.TO), which has been replacing production facilities and setting up a new distribution system, reported a quarterly loss that it blamed on the “tremendous” costs of the restructuring.

Maple Leaf’s multi-year program to revamp meat operations to boost profits and better compete with U.S. rivals such as Tyson Foods Inc (TSN.N) is expected to end next year.

The company’s margins on hog production have been weak for several years due to high feed costs.

“We are in a peak phase of executing our prepared meats network strategy, which added tremendous costs and inefficiency in the quarter as we ramped up five new facilities while continuing to operate our parallel older plants,” Chief Executive Michael McCain said in a statement on Thursday.

McCain said the restructuring was causing “short-term earnings volatility.” Weak protein markets also weighed on the company’s results in the quarter ended December 31, he said.

Maple Leaf’s restructuring and other related costs jumped 19 percent to C$15.3 million ($13.8 million) in the quarter, while selling, general and administrative expenses rose 11 percent.

The company sold its Canada Bread Co CBY.TO unit to Mexico’s Grupo Bimbo (BIMBOA.MX) earlier this month for C$1.83 billion in cash to focus on its meats business.

Maple Leaf reported a net loss from continuing operations of C$14.4 million, or 13 Canadian cents per share, for the quarter compared with a net profit of C$41.0 million, or 27 Canadian cents per share, a year earlier.

Sales fell 2 percent to C$1.11 billion.

Reporting by Rod Nickel and Swetha Gopinath; Editing by Ted Kerr and Kirti Pandey

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