Sara Lee 3Q profit rises on price increases, weaker dollar

Sara Lee Corp. posted an 82 percent increase Tuesday in third-quarter earnings on higher sales prices and the weak dollar, but still-soaring commodity prices limited the gains and disappointed Wall Street.

The maker of Jimmy Dean sausages, Hillshire Farm deli meats and Sara Lee breads reported a 10 percent increase in revenue, led by strong international sales, but saw profits pressured by the high costs that have plagued food manufacturers.

The results, including net earnings of $211 million, fell short of analyst estimates and Sara Lee said fiscal 2008 earnings and revenues also would come in below expectations.

Shares in the Downers Grove-based company fell 90 cents, or 6.1 percent, to $13.86 -- down about 15 percent since the beginning of the year.

"A variety of external market pressures, including volatile commodity prices, continue to affect the industry," chairman and CEO Brenda Barnes said.

However, she said on a conference call, pointing to the jump in sales: "Despite the historically high prices of wheat and fuel and volatile green coffee market we delivered results."

Earnings for the January-through-March period amounted to 30 cents per share and were up from $116 million, or 16 cents per share, a year ago. Adjusted earnings rose to 22 cents per share from 13 cents per share but were two cents below the consensus estimate of analysts surveyed by Thomson Financial.

Revenue increased to $3.24 billion from $2.94 billion, led by international sales which leaped 18 percent compared with a 4 percent gain in North America.

Baked goods and international beverages were top performers in the quarter, including an 11 percent climb in sales for the North American bakery business.

But steep industrywide costs continue to slow its lengthy turnaround efforts, particularly in such areas as its food service unit, which supplies goods to restaurants. Revenues from that division were flat despite higher prices as consumers stayed home more often, and profits declined 9 percent.

Christopher Growe, an analyst for Stifel Nicolaus, said the company's heavy spending on marketing -- over $100 million in the last year -- is providing a needed boost at a difficult time for food companies.

"This should stimulate stronger sales momentum, particularly as prices go higher," he said in a note to investors.

Sara Lee said it expects fiscal 2008 adjusted earnings of 95 cents to 99 cents per share, excluding 18 cents per share received in the first quarter from the 1999 sale of its tobacco business. Analysts had estimated full-year adjusted earnings of $1 per share.

Sara Lee sold its low-profit Mexican meats joint venture in the quarter and also announced recently that it is eliminating about 300 jobs, or around 1 percent of its North American work force. The cuts include about 100 jobs at its suburban Chicago headquarters and 200 elsewhere.

Through the first nine months of its fiscal year, Sara Lee reported net earnings of $593 million, or 82 cents per share, up from $387 million, or 52 cents per share, a year earlier. Revenues were $9.7 billion, up from $8.9 billion.