Maple Leaf reinvestment plan spurs job cuts

Maple Leaf Foods Inc. (MFI-T) unveiled a $560-million plan to modernize and concentrate production at its aging meat processing facilities as part of a three year plan that will see half a dozen plants shuttered across the country.

The centerpiece of the strategy calls for the construction of a new $350-million prepared meats factory in Hamilton, Ont., that is set to employ 670 workers by its scheduled completion in 2014. Another $155 million will be invested in new equipment in three plants in Toronto, Winnipeg and Saskatoon. Other Canadian communities will lose factories that can be traced back to the late 1800s.

Hardest hit will be Kitchener, Ont., which will see a sprawling meat processing plant closed and 1,200 jobs lost. The facility dates back to 1890 when John Metz Schneider first sold sausages from a building next to his family home.

Maple Leaf foods acquired Schneider Foods in 2004.

Also slated for closing are plants in New Brunswick, Ontario, Manitoba and Saskatchewan. In addition, distribution centres in Burlington, Ontario and Coquitlam, B.C., will be shut. The moves will eliminate a total of more than 2,500 jobs.

When the new and modernized plants are completed by late 2014, the company will add 1,000 new jobs. Maple Leaf Foods began briefing employees at all of its operations Wednesday afternoon about the changes. Michael McCain, Maple Leaf Food’s Chief Executive Officer, said the job losses and the impact on local communities are “the most difficult component” of the restructuring.

The changes are necessary, he said, to ensure the company can compete with larger and more efficient U.S. meat processors that are gaining market share in Canada. Competition with U.S. players has eaten into Maple Leaf Foods profit margins in recent years and McCain said the new facilities will allow the company to significantly improve a lackluster profit record that has come under shareholder criticism.

McCain said the restructuring marks the largest investment ever in the Canadian food processing industry. He said there has been little incentive to invest in new technologies and production improvements for years because the undervalued Canadian loonie gave domestic businesses an advantage over foreign suppliers.

“Sadly the Canadian food industry didn’t have a burning platform to invest in scale. . . For the most part it has been starved for capital,” he said.

The planned overhaul is the third and final leg of a multi-year restructuring of Maple Leaf’s food business, which also includes its Canada Bread subsidiary and a primary meat processing division. It is also marks the first major strategic initiative since the summer of 2010 when Toronto activist investor West Face Capital Inc. acquired a 10 percent stake in the company.

West Face was initially critical of Maple Leaf Food’s governance practices and weak profitability, but McCain said the hedge fund’s CEO Greg Boland has been a valuable voice at the board and internal strategy sessions.

“Greg has had a very constructive and positive influence,” he said