Sara Lee Lowers Annual Profit Forecast on Europe

Source from:  By Duane D. Stanford 11/06/2008

Nov. 5 (Bloomberg) -- Sara Lee Corp., the maker of frozen cakes and Jimmy Dean sausages, said full-year profit will be less than it previously estimated because of falling foreign currencies and waning demand in Europe. Sara Lee fell the most in more than two decades in New York trading after saying earnings per share may be 77 cents to 84 cents excluding some items for the year ending in June. That compared with an earlier projection of 90 cents to 98 cents. The lower forecast signals Europe's faltering economies are starting to weigh on American companies. Europe makes up about 55 percent of Sara Lee's operating profit, according to Soleil Securities Corp., and the weakening demand and falling euro means it will get less profit from the region. "When it starts getting tough economically there, it usually requires some adjustment in expectations," said Edgar Roesch, a Soleil Securities analyst who recommends holding Sara Lee shares. "There is a lot of price competition, a lot of private label in Europe." Sara Lee fell $1.66, or 14 percent, to $10.20 at 4 p.m. in New York Stock Exchange composite trading, the largest decrease since October 1987. The decline in the value of the euro means sales of coffee, bread and household products in Europe are worth less when converted into the U.S. currency. The company reported today that first-quarter net income increased 15 percent to $230 million, or 32 cents a share, in the quarter through Sept. 27 from $200 million, or 28 cents, a year earlier. The increase was helped by proceeds from the sale of its European tobacco unit, the Downers Grove, Illinois-based company said in a statement. Sales increased to $3.35 billion from $3.05 billion a year earlier, beating the $3.31 billion average estimate of analysts. Chief Executive Officer Brenda Barnes raised prices to counter high grain and energy costs, and the company boosted sales of Ball Park hot dogs and bread in North America, as well as shoe-care products and insecticides in France and Italy. To contact the reporters on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net. Enditem