February 29/Ottawa/The Ottawa Citizen-- Maple Leaf Foods Inc. reported a 70% drop in fourth quarter profits, missing analyst expectations as unexpectedly high food costs cut into meat and poultry margins and forced the food processor to hike its prices.

For the period ended December 31, Maple Leaf earned $9.2 million, compared with $30.6-million a year ago. This included $32.2 million in costs related to restructuring activities, compared with $19.7 million in 2010.

"We had a challenging fourth quarter," Michael Mc-Cain, chief executive with Maple Leaf, said on a conference call discussing the results.

There were four main reasons why the company posted disappointing results: unexpectedly high meat prices, lower processing margins compared with near-record highs in the same period last year, higher raw materials costs not fully offset by the bakery business, and higher operating costs in the bakery, McCain said.

"These are temporary issues affecting our business," he said.

In particular, Maple Leaf was not prepared for meat costs to rise in the fourth quarter, as they have typically declined about 7.8% in the quarter each year since 2007.

"When forward pricing is established in the marketplace, the unexpected meat costs yields a compressed margin," he said. "We expect to offset this with price increases in the first quarter of 2012."

Meanwhile, Canada Bread Co. Ltd., Maple Leaf's 90%-owned bakery products operation, posted a 36% drop in earnings in its fourth quarter, also dinged by higher input costs.

 From the March 1, 2012, Prepared Foods' Daily News.