Toronto-based Maple Leaf Foods has warned of possible job cuts and price hikes to cover the rising cost of wheat and corn, which has spiked with growing demand for ethanol. The Canadian food processor indicated its intention to increase focus on its value-added meats and bakery business in an effort boost profits.
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“We are moving forward aggressively with a major reorganisation of our protein businesses to re-align the company’s focus on value-added meats and meals and bakery consumer products,” said Michael McCain, president and CEO. “We expect 2007 will be a year of change as we align operations to the new protein business model. The reward for investors will be a simpler, more profitable company with leading market shares in the higher margin, high growth meats and meals and bakery sectors of the global food industry, reduced exposure to currency and commodities, and lower earnings volatility.”
Posting its fourth-quarter results yesterday (22 February), Maple Leaf reported a loss of C$11.6m (US$10.01m), down from a year-ago profit of $18.2m. During the quarter, Maple Leaf registered $44.9m in restructuring charges and other costs.
For the full year, profit fell to $4.5m, or $0.03 per share, down from $94.2m, or $0.72 cents per share, a year ago.
Fourth-quarter revenues remained virtually unchanged at $1.5bn, although for the full year sales were down 4% at $5.9bn, against $6.1bn a year ago.
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By GlobalDataMaple Leaf has gone through an extensive restructuring process, which has seen closures, management layoffs and changes to marketing and information structures in an attempt to cut costs. The food exporter said that it took these measures in an effort to make up for the shortfall it has seen as a consequence of the strong Canadian dollar.
In a conference call with analysts, McCain said that rising grain prices have pushed up the cost of meat production and would result in the company passing these costs on to consumers with price hikes.
“We’re pricing to inflation as a result of the wheat and corn market spikes that are evident throughout the marketplace,” he said. The challenge now facing the meat industry, McCain noted, was to pass the increased costs due to ethanol production on to consumers.
Maple Leaf employs 24,000 people at 120 production plants across Canada and the US, Europe and Asia. It produces meat, bakery and pasta products under the brands Maple Leaf, Schneiders, Dempster’s and Olivieri.
