Maple Leaf Implementing Comprehensive Value Creation Plan

Oct 6, 2010 | Corporate Member News

Maple Leaf Foods (MFI:TSX) today announced details of a comprehensive plan to significantly increase near and longer term shareholder value. The plan, which was unanimously approved by the Company’s Board of Directors at its annual strategy review, builds on a strategic direction previously approved by the Board in September 2009.

Maple Leaf expects the plan will deliver substantial earnings growth in each of the next five years. Specifically, the company expects its plan will increase EBITDA margin by more than 75% over the next four to five years – from a current level of 7% to 9.5% in 2012, and 12.5% in 2015.

The plan includes several initiatives that are expected to increase margins in the near term, of which several require little or no capital investment. Many of these near-term initiatives are well underway, including pricing and normalization of trade promotional activity, simplification of bakery and meat products formulation and manufacturing, early facility rationalization, and the implementation of an integrated SAP system that will provide a base to enhance business performance and further reduce administration and processing costs.

The plan also contemplates a series of plant consolidations, coupled with strategic capital investments in new manufacturing capacity and technology. This will include construction of two large scale facilities: a bakery in Hamilton, Ontario that is planned to be commissioned in mid-2011; and a new prepared meats facility, with construction planned to commence in 2012. These investments are expected to materially increase the profitability and competitiveness of Maple Leaf’s manufacturing facilities and its distribution network.

Mr. James Hankinson, Chair of the Governance Committee of the Board, said, “After a thorough review of management’s plan and other alternative value creation opportunities, the Board concluded that this plan is the best path to deliver substantial earnings growth and shareholder value. It is achievable and measurable, with well-defined performance milestones. The Board will remain deeply engaged, working with management to ensure we realize that value.”

“Maple Leaf Foods has a clear and achievable plan to deliver significant earnings growth now and through the next five years, yielding a very substantial return to shareholders,” said Michael H. McCain, President and CEO. “The primary driver of this earnings growth will be increased efficiency throughout our manufacturing network, which represents the largest portion of our total cost structure. We expect to achieve this by reducing complexity, consolidating plants and investing in scale and technology. We intend to finance these initiatives through internal cash flow and debt capacity without issuing equity, while maintaining an investment grade balance sheet throughout the process.” 

Protein & Bakery EBITDA Targets

The plan provides for continued improvement in EBITDA margins and return on assets throughout the period from 2010 to 2015. Management has benchmarked its facilities to best in class operations in North America, and intends to deliver returns that will achieve sales margins consistent with large branded consumer packaged food peers in the United States. Implementation of the plan is expected to achieve annual earnings improvements and deliver EBITDA margins of 12.5% by 2015 as follows: 

                    Protein        Bakery 

    Current            6.2%          9.2% 

    2012               8.5%         11.5% 

    2015              12.5%         12.5% 

The significant increase in earnings accruing from the plan will result in returns on assets employed well in excess of the Company’s weighted average cost of capital. Management is confident it will achieve these targets, with the majority of these gains coming from well-defined cost reductions. 

Strategic Capital Investments

The strategic capital expenditures necessary to deliver the plan will be incurred over the next three to five years. The pace of the program will be balanced with margin improvement, with interim targets achieved before committing to new levels of investment, in order that the Company has the underlying cash flow and balance sheet strength required to support the investments with no incremental requirement for new capital from shareholders.

Management’s estimate of both strategic and base (maintenance) capital over the next several years is as follows: 


    ($m)          Strategic          Base


    2010                 80           110


    2011                145           175


    2012                355           130


    2013                195           100


“Maple Leaf is committed to creating significant and lasting shareholder value,” concluded Mr. McCain. “This plan will enable Maple Leaf Foods to further address what we believe is a structural shift in currency which has caused a productivity gap for Maple Leaf – and indeed, many large Canadian manufacturing companies – relative to US competitors,” continued Mr. McCain. “Management is implementing both near and longer term initiatives to improve productivity, deliver higher margins consistent with US branded food companies, and establish sustainable competitive advantage. Our focus is to deliver on our commitments and execute the plan with excellence.”

An investor presentation related to this release is available at and can be found under the Investor Relations section. A conference call and webcast will be held at 11:00 a.m. EDT on October 6, 2010 to review the presentation. To participate in the call, please dial 416-340-2219 / 866-226-1798. For those unable to participate, playback will be made available an hour after the event at 416-695-5800 or 800-408-3053 (Passcode 7574654 followed by the number sign). A webcast presentation will also be available at via a link:

Maple Leaf Foods Inc. is a leading food processing company, headquartered in Toronto, Canada. The Company employs approximately 23,500 people at its operations across Canada and in the United States, the United Kingdom, and Asia. The Company had sales of $5.2 billion in 2009. 

Forward-Looking Statements

This release contains, and remarks made by representatives of the Company in connection with this release, may contain forward-looking statements.

Such statements include, but are not limited to, statements with respect to the Company’s strategies, plans, actions and expectations including expectations about future earnings, EBITDA margins, return on assets, capital expenditures, capital needs, balance sheet strength and other expected benefits of the plan. 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 statements. 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. These assumptions 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.

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; 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. 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, 2009. All of such filings are available on SEDAR at

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 EBITDA margins and capital expenditures. 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 the results of the plan. 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.

For further information: Investors – Lynda Kuhn, SVP Communications, 416-926-2026; Media – Media Hotline, 416-926-2020,

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