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Maple Leaf Cancels Pork Processing Plant

by 5m Editor
12 October 2006, at 12:52pm

CANADA - Maple Leaf Foods today announced that it will not proceed with the construction of a new primary pork processing facility in Saskatoon, Saskatchewan.

"We sincerely regret that we cannot proceed with this investment," said Michael McCain, President and CEO. "It is predicated on factors such as cost and changes in the global pork industry that have significantly impacted the profitability of our fresh meat business and require us to significantly redefine our strategy. Saskatchewan is an excellent place to do business and very important to our valued added processed meats strategy, which is core to our future growth. We will continue to make investments that will support our ongoing economic contribution to the Province."

Maple Leaf Foods employs over 1,700 people in the Province of Saskatchewan at its fresh and further processed meats and bakery operations in North Battleford and Saskatoon. The Company will continue to invest in its operations in the province, where a significant portion of Maple Leaf's further processed meat production is concentrated, as well as new business expansion consistent with its strategy that will create new employment in future.

The Company had previously announced its plans to construct a $110 million plant to replace its existing facility in Saskatoon. Bid proposals received on the project in the spring of 2006 far exceeded the capital costs estimated for this project. While the Company had undertaken additional design and engineering work to align the scope of the project to offset escalating construction costs in Western Canada, specifications could not be changed to the extent required to meet the Company's financial requirements.

In addition, the Canadian primary pork industry has been impacted by the significant strengthening of the Canadian dollar and challenges in the global pork industry. Maple Leaf recently completed a detailed analysis of its protein value chain operations in the context of currency and industry challenges to determine the best strategy to improve profitability and growth in its protein business. As a result, the Company will undertake a significant reorganization to focus on producing raw material products that meet the needs and requirements of its further processed and value added businesses, maintaining balance and optimization from external sales channels. The Company will operate only the highest scale, lowest cost facilities in primary processing, sizing these operations to meet the requirements of its value added and further processed meat businesses.

Maple Leaf plans to wind down operations at its existing primary processing plant located on 11th Street in Saskatoon within the next three years, and will comply with an existing agreement to turn the property over to the City by September of 2009. The Company will manage this process to minimize any impact on its producer partners and customers, and will seek to provide alternative jobs for its employees at other Maple Leaf operations. This includes creating new jobs through ongoing investment at its neighbouring McLeod Street plant, which is the newest and most modern of the Company's further processed meats operations.

ThePigSite News Desk

5m Editor