Commodity costs bite into Sara Lee profits

Posted by Josette Dunn on 9th February 2011

Sara Lee yesterday (8 February) posted a slump in underlying quarterly profits as rising commodity costs hit earnings.The US food group, which plans to split in two next year, booked net income from continuing operations of US$107m for its fiscal second quarter, which ended on 1 January. In the previous year’s second quarter, the figure stood at $298m.

On a reported basis, Sara Lee’s net income was $882m, up from $376m a year ago. However, this year’s figure included a gain on the sale of the company’s North American fresh bakery business, which it offloaded in November.

Sara Lee’s second-quarter operating income stood at $206m, down from $269m a year earlier. The company pointed to higher commodity costs but also to the fact that its results compared to a “very strong” second quarter last year, when lower commodity costs “provided a benefit to the company”.

The company’s reported net sales dipped 0.4% to $2.3bn as lower unit volumes and unfavourable foreign exchange rates weighed on the business’s top line.

Shares in Sara Lee were down 0.1% at $16.91 at 10:02 ET.

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