CANADA: Maple Leaf reorganises to boost profitability
Maple Leaf Foods has announced a comprehensive strategy to significantly increase the profitability of its meat products and agribusiness operations. The company will focus on growing its value added fresh and processed meats and meals businesses.
The company said that despite its strong assets, brands and leading market shares across its businesses, the sharp rise of the Canadian dollar and challenging global protein markets have had a negative impact on the performance of the company's protein value chain operations. This has offset stronger results in its processed meats business, Maple Leaf said.
To combat this trend, Maple Leaf has completed a strategic review of its value chain. The company hopes to maximise profitability and recover what it has estimated as C$100m (US$87.9m) in annualised loss in competitiveness due to currency movement.
The company will focus on growing its value added fresh and further processed meat and meals businesses. Through the integration of its fresh and value added further processed operations, the company hopes to optimise the value of all businesses. The company intends to significantly increase the raw materials it directs into further processing; step change its new product innovation, establish a low cost manufacturing base and reduce the scope of its value chain.
The company will divest or discontinue operations and businesses that do not support this balanced, aligned and vertically integrated model. Management estimates that Maple Leaf will incur restructuring charges in the range of C$80m to C$120m over the next three years.
"We have defined a strategy that goes well beyond addressing currency challenges and provides significant value creation opportunities for Maple Leaf and our shareholders," said Michael McCain, president and CEO.
"The result will be a simpler, more focused and profitable meat and bakery company, with significantly less exposure to foreign currency fluctuations and commodity markets. We will build off our considerable strengths in the higher margin, fresh and further processed meats and meals markets through innovation, investment, and acquisitions."
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