March 10, 2011 / 11:40 AM / in 7 years

UPDATE 3-Premium Brands to beef up product prices to tackle higher costs

* Q4 EPS C$0.13 vs C$0.19, last year

* Q4 rev up 40.3 pct to C$156 mln

* Says retail segment to raise prices in Q2

* Says price increase in range of 3-6 pct

* Shrs down 6 pct (Rewrites; updates share paragraph, adds details on price increase in paragraph 4)

March 10 (Reuters) - Specialty food maker Premium Brands Holdings Corp , which has been grappling with high input costs, said its quarterly earnings fell more than a fourth, and will raise prices in its retail segment to offset increases in costs of beef and other commodities.

Food prices have soared as consumers in emerging economies have grown richer, and erratic climate conditions have hurt supplies. Wheat prices have surged 60 percent this year, and there have been increases in beef, cheese, and cooking oil costs.

Prices will go up in the company’s retail segment, which sells products such as processed meat, meat snacks, sandwiches, deli products and baked goods, from the second quarter.

“The magnitude (of price increase) will be in the range of 3 to 6 percent and the categories mostly affected will be breads and the processed meats,” the company said in a conference call with analysts.

The company, which operates in retail and food service segments, expects commodity costs to remain at historically high levels till the fourth quarter of 2011 due to short supply.

These costs ate into Premium Brands’ gross margins in the latest fourth quarter, which fell to 22.6 percent from 26.4 percent.

For the fourth quarter ended Dec 25, the company earned C$2.4 million, or 13 Canadian cents a share, down from C$3.3 million, or 19 Canadian cents a share, a year ago.

According to Thomson Reuters I/B/E/S, two analysts on average were expecting the company to earn 28 Canadian cents a share.

Premium Brands, which agreed to buy Canada Bread’s sandwich business in January, said revenue rose 40.3 percent to C$156 million.

Selling, general and administrative expenses rose 26 percent to C$24.6 million. While cost of goods sold rose 48 percent to C$120.8 million.

The Richmond, British Columbia-based Premium Brands’ shares were trading down 61 Canadian cents at C$15.73 on Thursday on the Toronto Stock Exchange. They touched a low of C15.33 earlier in the session.

The shares have gained about 14 percent in value since the company reported lower third-quarter profit in November. (Reporting by Arnika Thakur in Bangalore; Editing by Don Sebastian, Jarshad Kakkrakandy)

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