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Cost-cutting boosts Maple Leaf’s 2007 ledger

Cutting costs and raising prices allowed Maple Leaf Foods to significantly boost its annual net income in 2007, the company reported Thursday.

The Toronto-based company, one of Canada’s main food processing firms, posted net earnings of $207.1 million on sales of $5.21 billion in 2007, up from $4.5 million on $5.32 billion in 2006.

However, for its fourth quarter ending Dec. 31, the company reported a net loss of almost $22.1 million on sales of $1.27 billion, down from a net loss of $11.6 million on higher sales of $1.36 billion in the same quarter in 2006. It cited the impacts of its exit from non-core businesses and of the rising Canadian dollar for the drop in sales.

The company sold its animal nutrition business to Nutreco in 2007 for a net after-tax gain of $204 million, but logged restructuring charges of $122.3 million for the year, including $71.9 million in its Q4 alone.

“The global food industry has been impacted by the ripple effect of an
unprecedented rise in commodity grain costs over the past year,” CEO Michael McCain said in the company’s news release Thursday.

“Our steady
performance in 2007 reflects our efforts to manage this impact through
reducing costs and raising prices.”

Looking ahead, McCain said the company is “well positioned to offset a continued rise in input costs over time,” but it may face “some short-term volatility depending on
the precise timing of matching price action with cost increases, given the
magnitude of the changes.”

But McCain said the company is making “excellent” progress in restructuring its protein (meat) business to boost profits and cut its currency and commodity exposure.

Among the changes he noted were the completed sale last month of most of Maple Leaf’s hog production business in Ontario and “almost all” of its hog production investments in Alberta. The company has concentrated its hog production investments in Manitoba, home to the Brandon pork processing plant where it has introduced a second shift and consolidated its Canadian front-end processing.

At the end of 2007, Maple Leaf noted, it effectively owned just 20 per cent of the hogs that it processed in its facilities.

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