February 21, 2008 / 7:11 PM / 10 years ago

UPDATE 3-Maple Leaf battered by hefty restructuring charges

(Adds CEO comments, analyst comments, closing share price)

By Roberta Rampton

WINNIPEG, Manitoba, Feb 21 (Reuters) - Losses at Maple Leaf Foods Inc (MFI.TO) grew in the fourth quarter because of hefty restructuring charges, the strong Canadian dollar and soaring grain prices, the meat processor and baker said on Thursday.

Maple Leaf reported a net loss of C$22.1 million ($21.9 million), or 17 Canadian cents a share, in the quarter, almost double the year-earlier loss of C$11.6 million, or 9 Canadian cents a share.

Sales fell 6 percent to C$1.3 billion as the Toronto-based company got out of some businesses and was hurt by rising costs and the strong Canadian currency in others.

The company is midway through a three-year overhaul to get out of the money-losing fresh pork export trade, focusing instead on further processed meats, meals and baked goods.

“We feel that we are in the lead in this journey. We feel very good about it,” Chief Executive Michael McCain told analysts on a conference call.

McCain said the company had strong results from its core operations and the strongest balance sheet in its history.

Maple Leaf shares dropped 2.5 percent or 33 Canadian cents on the Toronto Stock Exchange on Thursday to C$12.91.

The company said its earnings from continuing operations were up 11 percent in the quarter to C$57.9 million, or 20 cents per share, up from 13 cents per share.

“The operating numbers were better than I was expecting, especially on the protein side,” said Bob Gibson, analyst at Octagon Capital, noting the company was able to increase prices to offset higher costs.

But Gibson said the costs of restructuring the business out of the money-losing fresh pork export trade continued to pile up as Maple Leaf sold hog production operations at a time of unprecedented losses in that sector.

“The hog farmers are losing their shirts,” Gibson said. “Obviously, the prices they’re getting for these operations were not what they thought a year ago.”

After the first quarter, Maple Leaf said it will produce about 750,000 hogs per year, down 42 percent from 2007 levels.

Maple Leaf had C$71.9 million of restructuring charges in the fourth quarter.

It increased its estimate of total costs for its three-year restructuring plans to C$275 million to C$325 million from C$165 million to C$215 million, and costs could increase further, said Michael Vels, chief financial officer.

“The question remains: Can these guys attain their restructuring goals?” said Michael Palmer, an analyst with Veritas Investment Research, noting the company has targeted incremental profits of C$100 million after the overhaul.

“If they can, the stock is cheap. If they can’t, Hormel (HRL.N) or someone else will buy it,” Palmer said.

Maple Leaf’s bakery division grappled with wheat prices that were up 76 percent by the end of 2007 from a year earlier, and have since climbed another 85 percent, McCain said.

Shrinking world grain stocks and booming demand have pushed up prices for most grains, including wheat, to record levels.

The company raised its prices in October, with another hike set for March, and more increases possible later in the year, McCain said.

$1=$1.01 Canadian Reporting by Roberta Rampton and John McCrank; Editing by Rob Wilson

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below