TORONTO - Maple Leaf Foods Inc. (TSX:MFI) said Thursday it will raise prices on its meat products as the company deals with restructuring costs and a virus in the U.S. hog industry.
The Toronto-based company, which is in the midst of a seven-year revamp of its operations, announced the move as it reported a loss of $124.6 million in the first quarter, or 89 cents per share, on $711.3 million in sales.
That compared with a loss of $30.6 million, or 22 cents per share, on $689.4 million in sales in the same quarter last year.
Maple Leaf said its performance was partly due to the Porcine Epidemic Diarrhea Virus, which has spread across the U.S. killing millions of piglets through dehydration.
The virus does not affect humans or the food they consume, but is estimated to have wiped out about 10 per cent of the U.S. pig population and has been blamed for recent increases in bacon and pork prices.
Farmers have struggled to control the virus, because little is known about how it spreads and there is not yet a federally approved vaccine in the U.S.
"Pork markets have been impacted in an unprecedented way due to a virus in the U.S. hog industry, which has renewed pressure from a sharp rise in raw material costs," said president and CEO Michael McCain in a release.
"We have accelerated price increases in the second quarter to recover margins, and expect the effects of this to be transitory as the industry is forecasting a return to more normal conditions later in 2014."
On an adjusted basis, the losses were 24 cents per share, deeper than the loss of 17 cents analysts expected, according to the average compiled by Thomson Reuters.
Maple Leaf says the virus in the U.S. hog industry has driven up costs and the company has had to increase prices.
"Pork markets have been impacted in an unprecedented way due to a virus in the U.S. hog industry, which has renewed pressure from a sharp rise in raw material costs," said president and CEO Michael McCain in a release.
"We have accelerated price increases in the second quarter to recover margins, and expect the effects of this to be transitory as the industry is forecasting a return to more normal conditions later in 2014."
The company is continuing a seven-year restructuring plan to improve the profits of the overall business, which is primarily focused on meat products.
Maple Leaf announced last month that it has closed its wiener production plant in Hamilton as part of a broader plan to move the operations to a bigger plant in the same city. It plans to close four other meat plants by the end of the year.
The company has said once its restructuring plan is finished, it will operate 13 meat plants instead of 22, and two distribution centres instead of 19.
RBC Capital Markets analyst Irene Nattel said Maple Leaf still faces uncertainty that could affect its share price this year, as it works to get its new facilities up and running in time to lower costs.
"In the interim, investors should expect messy financial results and likely ongoing operating losses," she wrote in a note.
In February, Maple Leaf agreed to sell its 90 per cent stake in Canada Bread to Grupo Bimbo, a Mexican company that is offering about $1.83 billion to buy out Maple Leaf and minority shareholders.
Maple Leaf also sold its Rothsay rendering business, which had operations in several provinces, to Texas-based Darling International, and found buyers in Ontario for its commercial turkey farms, hatchery operation and breeding farms.
The company has about 18,000 employees across North America, the United Kingdom, and Asia. Maple Leaf sells products under its banner name, well as popular brands like Dempsters, Villaggio and Tenderflake.
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