TORONTO, Oct. 12, 2006 (Canada NewsWire via COMTEX News Network) — Maple Leaf Foods (MFI:TSX) today announced that it will not proceed with the construction of a new primary pork processing facility in Saskatoon, Saskatchewan.
“We sincerely regret that we cannot proceed with this investment,” said Michael McCain, President and CEO. “It is predicated on factors such as cost and changes in the global pork industry that have significantly impacted the profitability of our fresh meat business and require us to significantly redefine our strategy. Saskatchewan is an excellent place to do business and very important to our valued added processed meats strategy, which is core to our future growth. We will continue to make investments that will support our ongoing economic contribution to the Province.”
Maple Leaf Foods employs over 1,700 people in the Province of Saskatchewan at its fresh and further processed meats and bakery operations in North Battleford and Saskatoon. The Company will continue to invest in its operations in the province, where a significant portion of Maple Leaf’s further processed meat production is concentrated, as well as new business expansion consistent with its strategy that will create new employment in future.
The Company had previously announced its plans to construct a $110 million plant to replace its existing facility in Saskatoon. Bid proposals received on the project in the spring of 2006 far exceeded the capital costs estimated for this project. While the Company had undertaken additional design and engineering work to align the scope of the project to offset escalating construction costs in Western Canada, specifications could not be changed to the extent required to meet the Company’s financial requirements.
In addition, the Canadian primary pork industry has been impacted by the significant strengthening of the Canadian dollar and challenges in the global pork industry. Maple Leaf recently completed a detailed analysis of its protein value chain operations in the context of currency and industry challenges to determine the best strategy to improve profitability and growth in its protein business. As a result, the Company will undertake a significant reorganization to focus on producing raw material products that meet the needs and requirements of its further processed and value added businesses, maintaining balance and optimization from external sales channels. The Company will operate only the highest scale, lowest cost facilities in primary processing, sizing these operations to meet the requirements of its value added and further processed meat businesses.
Maple Leaf plans to wind down operations at its existing primary processing plant located on 11th Street in Saskatoon within the next three years, and will comply with an existing agreement to turn the property over to the City by September of 2009. The Company will manage this process to minimize any impact on its producer partners and customers, and will seek to provide alternative jobs for its employees at other Maple Leaf operations. This includes creating new jobs through ongoing investment at its neighbouring McLeod Street plant, which is the newest and most modern of the Company’s further processed meats operations.
Maple Leaf Foods Inc. is a leading Canadian food processing company committed to delivering quality food products to consumers around the world. Headquartered in Toronto, Canada, the Company employs approximately 24,000 people at its operations across Canada and in the United States, Europe and Asia. The Company had sales of $6.1 billion in 2005.
This document contains, and the Company’s oral and written public communications often contain, forward-looking statements that are based on current expectations, estimates, forecasts and projections about the industries in which the Company operates and beliefs and assumptions made by the management of the Company. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed, implied or forecasted in such forward-looking statements. The Company does not intend, and the Company disclaims any obligation to update any forward-looking statements, whether written or oral, or whether as a result of new information, future events or otherwise. Refer to the Company’s annual report, management proxy circular, annual information form and other filings with the Ontario Securities Commission and Toronto Stock Exchange for further information on risks and uncertainties that could cause actual results to differ materially from forward-looking statements.
SOURCE: Maple Leaf Foods Inc.
Lynda Kuhn, VP Investor Relations,
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