Maple Leaf Foods to build $605 million Poultry Facility in London
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.”