Canadian food giantMaple Leaf Foods, Toronto, announced significant changes in its prepared meats business to reduce operating costs and increase productivity, officials said. Maple Leaf said it will invest approximately $560 million in infrastructure and technologies during the next three years to establish a "world-class" prepared meats network.
Officials said these changes -- combined with other strategic value creation initiatives -- should significantly increase Maple Leaf's competitiveness and profitability in both the near and longer term.
Maple Leaf said it will build a $395 million, 402,000-square-foot prepared meats facility in Hamilton, Ont. Officials said the company also will invest in existing plants in Winnipeg, Saskatoon and Brampton and establish highly efficient category-focused "centres of excellence.' Company 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 said it also will simplify its distribution network by consolidating four distribution centers 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 centers in Moncton, Burlington, Kitchener and Coquitlam will be closed by 2014.
Officials expect this plan is expected to result in EBITDA margins of 9.5 percent in 2012 and 12.5 percent in 2015.
"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."
He continued, "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."
Maple Leaf said its investment will create approximately 1,150 new jobs. 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," said McCain. "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."