High food prices hit Morinaga's plans for new plant

TOKYO, June 12 (Reuters) - Japanese confectioner Morinaga & Co Ltd (2201.T) said on Thursday it would postpone the construction of a new factory as surging raw material costs are weighing on its earnings.

The firm had originally planned to begin construction by the end of this year after acquiring a plot from beer maker Kirin Holdings Co Ltd (2503.T), but it said it would reconsider the timing while watching the price of flour, milk and other ingredients.

"In a business environment where material costs are rising sharply, we decided it's better to postpone such a large investment," a Morinaga spokesman said.

The firm did not disclose the size of the investment in the new plant. The Yomiuri newspaper said it was likely to be about 40 billion yen ($374.5 million).

Morinaga, which makes candy bars and ice creams, said its raw material costs are likely to rise by 5 billion yen for the year ending in March 2009, when it forecast a 4.2 billion yen operating profit, down 17.3 percent from a year earlier.

As of 0101 GMT, shares of Morinaga fell 0.5 percent to 204 yen, outperforming a 2.2 percent fall of the benchmark Nikkei average .N225. (Reporting by Taiga Uranaka; editing by Sophie Hardach)