MISSISSAUGUA, ONT. — Maple Leaf Foods has unveiled plans to build a $660 million value-added fresh poultry facility in London, Ont. Maple Leaf said the new 640,000-square-foot facility will 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.”
The $660 million project will receive funding from several sources, including approximately $605.5 million from Maple Leaf Foods. The government of Ontario has committed to an investment of $34.5 million while the government of Canada under the Strategic Innovation Fund has pledged $20 million. In addition, Maple Leaf will receive an $8 million loan from the AgriInnovate Fund.
As part of its federal funding agreement, Maple Leaf has agreed to invest an additional $5 million over the next five years on projects that accelerate adoption of advanced manufacturing and production technologies and support its 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 chief executive officer. “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.”
Maple Leaf said construction on the plant will begin in the spring of 2019, with start-up scheduled for the second quarter of 2021. Once it is up and running, the facility will support more than 1,450 direct full- and part-time jobs, with additional job growth as production volumes increase over time, Maple Leaf said.
Production from Maple Leaf’s three sub-scale and aging plants in Ontario eventually will be consolidated into the new facility in London. Maple Leaf’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-to-late 2022. Maple Leaf said the three aging plants each are 50 to 60 years old, with location, footprint and infrastructure constraints “that limit opportunities to expand and modernize to meet growing market demand.”
“We deeply regret the impact that these eventual closures will have on our people and communities,” Mr. McCain said. “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.”
Maple Leaf expects to incur one-time costs of approximately $140 million, including approximately $45 million in net cash restructuring and other costs related to the new facility construction. But the strategic investment is expected to 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,” the company said. “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% to 16%.”