Historic investment to meet growing demand and
strengthen competitiveness of Canadian poultry
sector
Investment Community Conference Call
Today at 5:30 pm EST
TSX: MFI
www.mapleleaffoods.com
MISSISSAUGA, ON,
Nov. 26, 2018
/CNW/ - Maple Leaf Foods (TSX: MFI) today
announced plans to build a $660
million value-added fresh poultry facility in London, Ontario.
The new 640,000 square feet facility is expected to be one
of the most technologically advanced poultry-processing plants in
the world, with leading-edge food safety, environmental, and animal
welfare processes and technologies.
Funding for the project includes a capital investment of
approximately $605.5 million from
Maple Leaf Foods, an investment of $34.5
million from the Government of Ontario and a $20
million investment from the Government of Canada under the Strategic Innovation Fund. In
addition, the Company is receiving a $8
million loan from the AgriInnovate Fund. As part of the
federal funding agreement, Maple Leaf will invest a further
$5 million over the next five years
on projects that accelerate adoption of advanced manufacturing and
production technologies and support the Company's goal to reduce
its environmental footprint by 50% by 2025.
"This world-class facility will enable Maple Leaf to meet
the steadily growing consumer demand for premium, value-added
poultry products, and strengthen Canada's food system," said Michael H. McCain, President and CEO. "It will
incorporate leading edge food safety, environmental and animal care
technologies that advance our vision to be the global leader in
sustainable protein. This is a historic investment in the Canadian
poultry sector, providing significant stakeholder and economic
benefits and ensuring that Canada
has sufficient domestic processing capacity to meet forecasted
poultry production and demand."
This strategic investment will deliver a solid return on
capital and create significant shareholder value. The project is
expected to deliver annualized benefits of $105 million to the Company's Adjusted EBITDA on
a run-rate basis within 12 months of completing start-up, and by
the end of 2023. Based on current sales, adjusted for recent
acquisitions, we estimate this will contribute over 270 basis
points to the current Adjusted EBITDA margin.
The project is expected to be accretive to earnings
beginning in 2022 and contribute to the Company achieving its
Adjusted EBITDA margin target of 14% - 16%.
"Once constructed, this new poultry facility will be
a significant contributor to our overall Adjusted EBITDA margin
target and will provide tremendous long-term strategic value in an
important growing component of our business," added Mr.
McCain.
"Our government is excited to invest in Maple Leaf Foods'
project to help bring new innovations to Canada's food processing industry, keep
Canada competitive in the global
market and create new middle class jobs in Ontario. This new state-of-the-art facility
demonstrates how innovation is creating jobs and helping the
environment with more sustainable poultry processing," said
The Honourable Navdeep Bains, Minister of Innovation, Science
and Economic Development.
"Canada's agri-food
industry is a key driver of innovation and well-paying jobs across
the country. Our government is proud to invest in Maple Leaf Foods,
helping to position Canada as a
globally competitive player in the food processing sector and to
increase the competitiveness and sustainability of our agricultural
sector," said The Honourable Lawrence MacAulay, Minister of
Agriculture and Agri-Food.
"This is the largest investment in the history of
Ontario's agriculture sector, it
demonstrates industry confidence in our growing economy, and it's
another example of how we're making Ontario open for business. It's great to see a
company like Maple Leaf investing here in London. This innovative new plant will
modernize processing, and help make Ontario's chicken farmers more competitive,"
said The Honourable Doug Ford, Premier of Ontario.
Chicken is the most consumed and fastest growing meat
protein in Canada, offering
versatility, nutrition and a lower environmental footprint. There
is particularly high demand for raised without antibiotics and
halal chicken products, where Maple Leaf has the leading national
brands. This scale facility will address constraints in Maple
Leaf's current Ontario network,
enhance operating efficiencies, and expand its value-added product
mix and capacity to meet growing consumer demand.
The decision to proceed followed an extensive review by
the Company's management and Board of Directors, led by a special
working group that conducted a detailed analysis of all the
strategic, capital and operational elements, risks and returns, and
alternatives to optimize return on capital. As an indication of the
rigor of this process, the new facility is approximately 90%
design-engineered, providing a high degree of certainty about
project costs and operational outcomes. Maple Leaf expects to incur
one-time costs of approximately $140
million, including approximately $45
million in net cash restructuring and other related costs.
The Company plans to finance this investment through a combination
of cash flow from operations and debt.
Construction at the London site is expected to begin in the spring
of 2019, with start-up planned to commence in the second quarter of
2021. The new plant will initially support over 1,450 direct full
and part-time jobs, with additional job growth as production
volumes increase over time. Maple Leaf will work closely with local
agencies to recruit and train people and provide skilled jobs in a
safe and inclusive workplace. Construction is expected to generate
approximately 300 jobs, with almost 85% of project expenditures
supporting domestic construction and installation contractors. The
facility is expected to create a further 1,400 indirect jobs in the
supplies and services sector and generate an estimated $1.2 billion of annual economic activity once it
is fully operational.
"I would like to welcome Maple Leaf Foods to London," said His Worship Mayor Matt Brown. "London's commitment to world-class
infrastructure and a robust industrial land strategy put
London in a competitive position
to attract an investment of this magnitude."
Production from the Company's three sub-scale and aging
plants in Ontario will eventually
be consolidated into the new facility. The Company's plant in
St. Marys is expected to close by
late 2021, while its plants in Toronto and Brampton are expected to close by mid-late
2022. Each of these plants is 50 to 60 years old, with location,
footprint and infrastructure constraints that limit opportunities
to expand and modernize to meet growing market demand. Maple Leaf
will work with local communities and government to find alternate
uses for the facilities when they eventually close.
"We deeply regret the impact that these eventual closures
will have on our people and communities," said Mr. McCain. "While
these closures are several years away we are informing our people
well in advance, allowing us to openly communicate and support them
through this long-term transition. We will provide them with job
opportunities at the new facility and other Maple Leaf plants, and
services to help them eventually secure new employment."
Conference Call
An investor webcast and conference call will be held at
5:30 pm EDT on November 26, 2018. To participate in the
call, please dial 1-800-806-5484 or (416) 340-2217. For those
unable to participate, playback will be made available in an hour
at 1-800-408-3053. An investor presentation will be available
at www.mapleleaffoods.com and can be found under the Investor
Relations Section under the presentations & webcasts
tab.
A webcast presentation will also be available at:
https://edge.media-server.com/m6/p/mj7if2xe
Forward–Looking Statements
This release contains statements, made by representatives
of the Company in connection with this release, may contain
forward-looking statements within the meaning of applicable
securities law. These statements are based on current expectations,
estimates, forecasts, and projections about the industries in which
the Company operates, as well as beliefs and assumptions made by
Management of the Company.
Such statements include, but are not limited to,
statements with respect to the new poultry plant and the Company's
strategies, plans, actions and expectations including, among other
things, expectations about technical capabilities of the new
poultry plant, expected shareholder value creation, future
earnings, Adjusted EBITDA margins, project costs, net cash
restructuring and other costs, jobs generated, timing of plant
closures, construction timelines and other expected benefits of the
new poultry plant. Words such as "expect," "anticipate," "intend,"
"attempt," "may," "will," "plan," "believe," "seek," "estimate,"
and variations of such words and similar expressions are intended
to identify such forward-looking information. These statements are
not guarantees of future performance and involve assumptions, risks
and uncertainties that are difficult to predict.
These statements are based on and were developed using a
number of factors and assumptions including, but not limited to:
stability in the Canadian, U.S., U.K. and Japanese economies;
stability in prevailing exchange rates among the Canadian dollar,
the U.S. dollar, the British pound and the Japanese yen; stability
in the availability and pricing of raw materials, energy and
supplies; the ability to implement price increases successfully;
stability in the competitive environment; no future product
recalls; the continued ability of the Company to access cost
effective capital when needed; and no unexpected or unforeseen
events occurring that would materially alter the Company's current
plans. All of these assumptions have been derived from information
currently available to the Company including information obtained
by the Company from third-party sources. Although these assumptions
were considered reasonable by the Company at the time of
preparation they may prove to be incorrect in whole or in part. In
addition, actual results may differ materially from those
expressed, implied or forecasted in such forward-looking
statements, which reflect the Company's expectations only as of the
date hereof. Readers are cautioned not to place undue
reliance on forward-looking statements, as such statements are not
guarantees of future performance.
Factors that could cause actual results or outcomes to
differ materially from the results expressed, implied or forecasted
by the forward-looking statements include risks associated with
implementing and executing complex projects and plans including the
availability and price of labour and construction materials and the
risk of cost over runs; risks posed by food contamination,
pandemics and product recalls; risks associated with the price of
commodities and the inability of the Company to control commodity
prices; risks associated with exchange rate fluctuations; risks
associated with changing consumer tastes, preferences and buying
patterns; and risks posed by competition; the risks associated with
the supply management system for poultry in Canada and the availability of live chickens
for processing; and the risks of attracting and maintaining
sufficient labour for the plant . Additional factors that could
cause actual results or outcomes to differ materially from the
results expressed, implied or forecasted by the forward-looking
statements are discussed more fully in the Company's filings made
with the Canadian securities regulators including in the section
entitled "Risk Factors" in the Company's Management's Discussion
and Analysis for the year ended December 31,
2017. All of such filings are available on SEDAR at
www.sedar.com.
Some of the forward-looking statements may be considered
to be financial outlooks for purposes of applicable securities
legislation including, but not limited to, statements concerning
future Adjusted EBITDA margins, project costs and net cash
restructuring and other costs. These financial outlooks are
presented in order to provide measurable targets that the Company
aims to achieve and for which the Company can use to benchmark its
results. These financial outlooks may not be appropriate for other
purposes and readers should not assume they will be
achieved.
The Company does not intend to, and the Company disclaims
any obligation to, update any forward-looking statements (including
any financial outlooks), whether written or oral, or whether as a
result of new information, future events or otherwise, except as
required by law.
About Maple Leaf Foods
Maple Leaf Foods Inc. is a leading consumer protein
company, making high quality, innovative products under national
brands including Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural
Selections®, Schneiders®, Schneiders® Country Naturals®, Mina®,
SWIFT®, LightlifeTM and Field Roast Grain Meat Co.™.
Maple Leaf employs approximately 11,500 people and does business in
Canada, the U.S. and Asia. The Company is headquartered in
Mississauga, Ontario and its
shares trade on the Toronto Stock Exchange under the ticker symbol
MFI.
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SOURCE Maple Leaf Foods Inc.