October 13, 2006

 

Canada's Maple Leaf Foods makes major switch to further processing

 

 

Toronto-based Maple Leaf Foods, Canada's largest pork processor, would restructure over the next three years to scale down its businesses in fresh pork, feed and rendered products and shift its focus to fresh and cooked pork products, the company said.

 

The revamped Maple Leaf, which hopes to emulate Smithfield Foods' vertical integration approach, would offer a diverse range of products and brands, Chief Executive Officer Michael McCain said.

The company would sell off all but two of its slaughter plants, and reduce its annual slaughter from 7 million pigs to between 4 million and 5 million.

 

15 of the company's 17 feed mills would be sold off, along with some of its rendering assets.

 

However, the company would still export fresh pork in profitable markets, McCain said.

 

The strong Canadian dollar had been blamed for the recent poor performance of the company.

 

As Canadian pork has now become more expensive in international markets, there is a need to shift to higher-margin value-added products, such as cooked food, McCain said.

 

The restructuring is expected to cost the company CAN$80 million (US$70.6) to CAN$120 million (US$106 million) over three years.

 

The employee base would only be slightly affected as jobs switched from slaughtering to further processing. 

 

The planned construction of a CAN$110 million (US$97 million) pork slaughter plant in Saskatoon, Saskatchewan was also cancelled and an existing plant in the same area closed.  Instead, a further-processing plant in the city may be expanded, Maple Leaf said.

 

Maple Leaf's sales have been averaging CAN$6 billion (US$5.3 billion) annually. In its most recent quarter, profits from its meats business took a 39-percent plunge to CAN$31.4 million (US$27.7 million) from CAN$51.8 million (US$45.7 million).