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Sara Lee Lowers Earnings Expectations as it Prepares for Spinoffs

Sara Lee Corp. said Thursday that its fiscal fourth-quarter profit fell 41 percent as it continued to sell-off businesses even as revenue rose on strong results from its North American segments and international beverages unit.

The results of the Downers Grove, IL. food company, which is shedding units as it works to split into two businesses, met analysts' expectations, but the company gave fiscal 2012 adjusted earnings and revenue outlooks below Wall Street's estimates. Its stock fell $1.31, or 7.6 percent, to $16 on the news.

Sara Lee's results continue to be affected by its ongoing plan to become leaner by shedding some operations before it splits into two businesses by early next year -- one focused on coffee and the other largely on meat. Just two days ago, Sara Lee said that it will sell its North American refrigerated dough business to Ralcorp for $545 million. Sara Lee said it's planning to realize $180 million to $200 million in costs savings during fiscal 2012 and 2013 as it prepares for the spinoff.

"Our objective of building two simpler, faster and more entrepreneurial businesses is being realized," Executive Chairman Jan Bennink said in a statement. "We have defined the organizational framework for our new companies and are continuing to build and restructure our teams for the future."

Like other food companies, Sara Lee's results were also impacted as it raised its prices to cope with higher ingredient costs. The company has increased prices across nearly all of its product lines and previously announced that it plans to make price increases all year. Sara Lee's leaders have said that they expect a stronger second half of the year as those price hikes take effect and the company releases new products.

During the current quarter, the company's units benefited from the price hikes. Total revenue rose 9 percent to $2.3 billion from $2.11 billion, topping Wall Street's projected $2.28 billion.

North American retail revenue rose 4 percent mostly because of higher prices. Revenue for the North American food service division climbed 9 percent on increased prices and experienced strong sales of Jimmy Dean breakfast sausages, pre-sliced pies and cakes and branded meats distributed through convenience stores.

The international beverage unit reported a 14 percent revenue increase partly on higher prices and increased green coffee export sales from Brazil. International bakery revenue fell 8 percent on competition in Spain and difficult economic conditions.

Sara Lee earned $111 million, or 19 cents per share, for the period ended July 2. That's down from $187 million, or 28 cents per share, a year ago. Adjusted earnings from continuing operations were 20 cents per share.

For the year, Sara Lee earned $1.29 billion, or $2.06 per share. That compares with earnings of $506 million, or 72 cents per share, in the previous year. Annual revenue rose to $8.68 billion from $8.34 billion.

Looking ahead, Sara Lee expects fiscal 2012 adjusted earnings of 89 cents to 95 cents per share on revenue of $8.5 billion to $8.75 billion. The guidance excludes the international bakery segment, which the company plans to sell. Analysts predict earnings of $1.07 per share on revenue of $9.35 billion.

(AP Photo/M. Spencer Green)

Categories: Business, Economics