Maple Leaf Foods is investing $560 million in infrastructure and technologies over the next three years to restructure and expand its prepared meats network, reduce operating costs and increase productivity.
The changes, combined with other strategic value creation initiatives, 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 $395-million, 402,000-square-foot prepared meats facility. Maple Leaf will also invest in existing plants in Winnipeg, Saskatoon and Brampton. 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 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.
The company's value creation plan is expected to result in EBITDA (earnings before interest, tax, depreciation and amortization) margins of 9.5% in 2012 and 12.5% in 2015. 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.
The 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.