October 21, 2011
Maple Leaf to develop prepared meats network
Maple Leaf Foods, Inc. plans to invest approximately CAD560 million (US$549 million) in the construction of a 402,000 square foot prepared meats facility in Hamilton, Ontario, which is worth CAD395 million (US$387 million) to develop what the company envisions a "prepared meats network."
Maple Leaf will also invest in plants in Winnipeg, Saskatoon and Brampton. Facilities located in North Battleford, Kitchener, Hamilton, Toronto, Moncton and a separate facility in Winnipeg will close by the end of 2014 as production is consolidated into the new or one of the expanded facilities.
The efforts are part of the company's value creation plan that is expected to result in EBITDA margins of 9.5% in 2012 and 12.5% in 2015. As a result, the company expects to have restructuring costs of about CAD170 million before taxes.
"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 chief executive officer. "We are creating, through one of the largest single-investments in the Canadian food industry, a prepared meats production and distribution network that will markedly increase our competitiveness and close the cost gap with our US peers."
The company will also simplify its distribution network by consolidating four distribution centres into two. The two facilities will include a new facility in Ontario and an existing facility in Saskatoon. Distribution centres in Moncton, Burlington, Kitchener and Coquitlam will close by 2014.
"We have made excellent progress in executing on our near-term components of the value creation plan first announcement last September, progress that is reflected in the company's recent performance, including nine consecutive quarters of earnings growth," McCain said. "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."