Fletcher’s Fine Foods Ltd. (Nasdaq: FLCHF; Toronto: FFF) announced today that it has completed a strategic alliance with the Quadra Group. Quadra manages 17 farrow to finish hog operations, known as the Quadra Family. These operations are located in Saskatchewan and Manitoba and produce about 250,000 hogs annually. As the first step in this new relationship, Quadra and Fletcher’s have entered into a long-term hog supply agreement that gives Fletcher’s exclusivity over hogs produced by the Quadra Family. In addition, Fletcher’s will advance up to $4 million to facilitate the expansion of the Quadra Family’s hog production operations.
Quadra and Fletcher’s have also entered into formal discussions on the possible exchange of minority ownership positions.
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“Quadra has the vision, infrastructure and management strength needed to become one of the largest hog producers in North America. It has, over the last six years, grown its production from 12,000 hogs per year to 250,000 hogs per year while maintaining a level of operational performance that is within the top tenth percentile of its industry,” said Mr. Paleologou, Fletcher’s VP and CFO. “We are very excited about this strategic partnership and look forward to working with Quadra to expand Western Canada’s hog industry in general, and Quadra’s operations in particular,” added Mr. Paleologou.
“This transaction sets the stage for a new era for both Quadra and Fletcher’s. By aligning our interests through a possible exchange of ownership and a long-term contractual arrangement, which includes downside pricing protection for both entities, we improve each parties’ risk and long term profitability profile,” said Richard Wright, General Manager of the Quadra Group. “We are projecting that the Quadra Family will be producing one million hogs per year within five years and look forward to working with Fletcher’s in achieving this objective,” added Mr. Wright.
“This transaction is consistent with our strategy of promoting growth within Western Canada’s hog industry by providing producers with guaranteed supply agreements and down side pricing protection so that they can secure the financing they need to expand their operations,” said Fred Knoedler, Fletcher’s President and CEO. “In return, we get an incremental supply of hogs at a more stable prices, which will help to stabilize the margins of our fresh pork business,” added Mr. Knoedler.
“The combination of our Peace Pork proprietary hog initiative and our long-term supply agreements with Quadra and the Saskatchewan Wheat Pool provides us with a secure supply of over 600,000 hogs annually. Furthermore, we expect the production from these operations to increase to 1,070,000 hogs annually within the next three years,” said Mr.Knoedler. “In the near future, we should be in the position to operate our Red Deer hog processing plant at its ideal single shift capacity of 8,000 hogs per day. Ultimately, however, our goal is to be operating this plant at its designed double shift capacity of 16,000 per day,” added Mr. Knoedler.
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By GlobalDataFletcher’s has been engaged in the food processing business since 1917 and has manufacturing facilities in Alberta, British Columbia, Oregon, Saskatchewan and Washington.
The Quadra Group is a Saskatchewan based initiative formed to provide rural communities in Western Canada with the opportunity to establish modern hog operations as value added enterprises. Members of the Quadra Family enjoy the strengths and security afforded by a large integrated pork production system.
Statements in this press release, and elsewhere, that look forward in time or include anything other than historical information, involve risks and uncertainties that may affect the Company’s actual results of operations. Those risks and uncertainties are discussed in more detail in the Company’s periodic reports filed with the United States Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
For further information, please contact George Paleologou, Vice President & CFO, Fletcher’s Fine Foods Ltd. at 604-656-3133 or Richard Wright, General Manager of the Quadra Group at 306-867-8916.
