TORONTO, Oct. 19, 2011 /PRNewswire via COMTEX/ — Investing $560 Million to Establish World-Class Prepared Meats Network
Maple Leaf Foods (TSX:MFI) today announced significant changes in its prepared meats business to reduce operating costs and increase productivity. This initiative will see the Company invest approximately $560 million in infrastructure and technologies over three years to establish a world-class prepared meats network. These changes, combined with other strategic value creation initiatives underway, are expected to significantly increase the Company’s competitiveness and profitability in the near and longer term.
Included in this investment is the construction of a new $395 million, 402,000 square foot prepared meats facility in Hamilton, which will be competitive with best-in-class facilities in North America. Maple Leaf will also invest in existing plants in Winnipeg, Saskatoon and Brampton, establishing highly efficient category-focused “centres of excellence”. The Company’s plants in North Battleford, Kitchener, Hamilton, Toronto, Moncton and a small facility in Winnipeg will close by the end of 2014 as production is consolidated into new or expanded facilities.
Maple Leaf will also simplify its distribution network by consolidating four distribution centres into two; a new, purpose-built facility in Ontario servicing eastern Canada; and an existing facility in Saskatoon serving as the western Canadian hub. Distribution centres in Moncton, Burlington, Kitchener and Coquitlam will be closed by 2014.
The Company’s value creation plan is expected to result in EBITDA margins of 9.5% in 2012 and 12.5% in 2015. Management is committed to maintaining an investment grade balance sheet throughout the plan implementation. Maple Leaf expects to incur restructuring costs of approximately $170 million before taxes related to these strategic initiatives, of which approximately $120 million represents cash costs.
“The final phase of this plan will establish Maple Leaf Foods as a more streamlined and profitable company, well positioned to deliver significant and sustainable value to its shareholders,” said Michael H. McCain, President and CEO. “We are creating, through one of the largest single investments in the Canadian food industry, a highly efficient, world-class prepared meats production and distribution network that will markedly increase our competitiveness and close the cost gap with our U.S. peers.”
“We have made excellent progress in executing on the near term components of the value creation plan first announced last September, progress that is reflected in the Company’s recent performance, including nine consecutive quarters of earnings growth. We have developed strong positive momentum in the business and we are focused on completing the final phase of the plan and delivering a substantial return on this significant investment.”
The decision to proceed followed an extensive review by the Company’s Board of Directors, which established a special working group led by Jeffrey Gandz and included Gregory Boland, Diane McGarry, James Olson and Gordon Ritchie. This group performed a detailed analysis of all the strategic, capital and operational elements of the plan, including its expected returns and potential risks.
“After a thorough review of the final phase of the plan, the Board unanimously granted its approval,” said Purdy Crawford, Chairman. “We believe it represents the best path for Maple Leaf to create and deliver significant and sustainable value to shareholders.”
This investment will create approximately 1,150 new jobs and provide a strong platform for future growth at Maple Leaf. Facilities closures will result in a net reduction of approximately 1,550 positions, with the majority of the workforce reductions occurring in 2014.
“While this initiative is fundamentally about growth, the closure of facilities will result in the loss of jobs. We regret the impact on our people and communities adversely affected by these decisions. We will seek alternative uses of these facilities to create job opportunities in the affected communities and support our people through this period of change. The new jobs resulting from this strategy will be sustainable and allow our people to develop new skills and experience working with world-class technologies. The investment we are making in existing or new facilities will provide significant economic benefits and strengthen the Canadian food industry,” added Mr. McCain.
An investor conference call will be held at 11:00 am EDT on October 20, 2011. To participate in the call, please dial 416-340-2216 / 866-226-1792. For those unable to participate, playback will be made available an hour after the event at 905-694-9451 / 800-408-3053 (Passcode 7880230#). An investor presentation will be available at www.mapleleaffoods.com and can be found under the Investor Relations Section.
A webcast presentation will also be available at http://investor.mapleleaf.ca via a link http://www.bellwebcasting.ca/audience/index.asp?eventid=67531549
Maple Leaf Foods Inc. (“Maple Leaf” or the “Company”) is a leading Canadian value-added meat, meals and bakery company committed to delivering quality food products to consumers around the world. Headquartered in Toronto, Canada, the Company employs approximately 21,000 people at its operations across Canada and in the United States, Europe and Asia.
This release contains, and remarks made by representatives of the Company in connection with this release, may contain forward-looking statements.
Such statements include, but are not limited to, statements with respect to the Company’s strategies, plans, actions and expectations including expectations about future earnings, EBITDA margins, return on assets, capital expenditures, capital needs, balance sheet strength and other expected benefits of the plan. Words such as “expect,” “anticipate,” “intend,” “attempt,” “may,” “will,” “plan,” “believe,” “seek,” “estimate,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult to predict.
These statements are based on and were developed using a number of factors and assumptions including, but not limited to: stability in the Canadian, U.S., U.K. and Japanese economies; stability in prevailing exchange rates among the Canadian dollar, the U.S. dollar, the British pound and the Japanese yen; stability in the availability and pricing of raw materials, energy and supplies; the ability to implement price increases successfully; stability in the competitive environment; no future product recalls; the continued ability of the Company to access cost effective capital when needed; and no unexpected or unforeseen events occurring that would materially alter the Company’s current plans. All of these assumptions have been derived from information currently available to the Company including information obtained by the Company from third-party sources. These assumptions may prove to be incorrect in whole or in part. In addition, actual results may differ materially from those expressed, implied or forecasted in such forward-looking statements, which reflect the Company’s expectations only as of the date hereof.
Factors that could cause actual results or outcomes to differ materially from the results expressed, implied or forecasted by the forward-looking statements include risks associated with implementing and executing complex projects and plans; risks posed by food contamination, pandemics and product recalls; risks associated with the price of commodities and the inability of the Company to control commodity prices; risks associated with exchange rate fluctuations; risks associated with changing consumer tastes, preferences and buying patterns; and risks posed by competition. Additional factors that could cause actual results or outcomes to differ materially from the results expressed, implied or forecasted by the forward-looking statements are discussed more fully in the Company’s filings made with the Canadian securities regulators including in the section entitled “Risk Factors” in the Company’s Management’s Discussion and Analysis for the year ended December 31, 2010. All of such filings are available on SEDAR at www.sedar.com.
Some of the forward-looking statements may be considered to be financial outlooks for purposes of applicable securities legislation including, but not limited to, statements concerning future EBITDA margins and capital expenditures. These financial outlooks are presented in order to provide measurable targets that the Company aims to achieve and for which the Company can use to benchmark the results of the plan. These financial outlooks may not be appropriate for other purposes and readers should not assume they will be achieved.
The Company does not intend to, and the Company disclaims any obligation to, update any forward-looking statements (including any financial outlooks), whether written or oral, or whether as a result of new information, future events or otherwise, except as required by law.
SOURCE Maple Leaf Foods Inc.