Earthgrains Co., the American bakery company reported on July 10 that its fiscal first-quarter earnings rose 32.1 per cent as industry-wide price increases and an emphasis on higher-margin products more than offset substantial energy costs. Earlier this month, Earthgrains Co. agreed to be acquired by the American food and consumer goods maker Sara Lee Corp. "We are seeing price increases across all segments (of the baking industry) at this point in time, which is probably, relative to history, a better pricing environment than we see on average," said Mark Krieger, Earthgrains' chief financial officer, in a conference call. "On balance, we are covering our costs when you include both price and favourable mix." Earthgrains reported first-quarter net income of $14.4m compared with $10.9m a year earlier. Net sales for the quarter rose to $611.1m from $599.6m a year earlier. Earthgrains said it expects second-quarter earnings of 35 to 39 cents a share. For the full fiscal year, Earthgrains said it expects earnings of $1.55 to $1.65 a share, before an expected change in standards on accounting for acquisitions. Krieger said its earnings forecasts reflect challenging fuel and energy costs, high employee-related health-care costs and the impact of the dollar's strength against other currencies. Operating income for the company's worldwide baking products segment increased by 7.9 per cent to $35.4m in the quarter. Worldwide refrigerated dough products operating income rose to $8.9m from $4.9m a year earlier, with operating margin for the segment increasing to 13.7 per cent from 8.4 per cent. The Sara Lee acquisition of Earthgrains, to be completed within 30 to 60 days of the July 2 announcement, is part of a larger consolidation in the baking industry that may continue.