Investing $560 Million to Establish World-Class Prepared Meats Network
TORONTO, Oct. 19, 2011 /PRNewswire/ - 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."