Maple Leaf’s Plan to Boost Stock
Posted by Jeff Lefler on October 6, 2010
MSN Money (PR Newswire): Maple Leaf’s new plan
TORONTO, Oct. 5 /PRNewswire-FirstCall/ – Maple Leaf Foods (MFI:TSX) today announced details of a comprehensive plan to significantly increase near and longer term shareholder value. The plan, which was unanimously approved by the Company’s Board of Directors at its annual strategy review, builds on a strategic direction previously approved by the Board in September 2009.
Maple Leaf expects the plan will deliver substantial earnings growth in each of the next five years. Specifically, the company expects its plan will increase EBITDA margin by more than 75% over the next four to five years – from a current level of 7% to 9.5% in 2012, and 12.5% in 2015.
The plan includes several initiatives that are expected to increase margins in the near term, of which several require little or no capital investment. Many of these near-term initiatives are well underway, including pricing and normalization of trade promotional activity, simplification of bakery and meat products formulation and manufacturing, early facility rationalization, and the implementation of an integrated SAP system that will provide a base to enhance business performance and further reduce administration and processing costs.
The plan also contemplates a series of plant consolidations, coupled with strategic capital investments in new manufacturing capacity and technology. This will include construction of two large scale facilities: a bakery in Hamilton, Ontario that is planned to be commissioned in mid-2011; and a new prepared meats facility, with construction planned to commence in 2012. These investments are expected to materially increase the profitability and competitiveness of Maple Leaf’s manufacturing facilities and its distribution network.
“Maple Leaf Foods has a clear and achievable plan to deliver significant earnings growth now and through the next five years, yielding a very substantial return to shareholders,” said Michael H. McCain, President and CEO. “The primary driver of this earnings growth will be increased efficiency throughout our manufacturing network, which represents the largest portion of our total cost structure. We expect to achieve this by reducing complexity, consolidating plants and investing in scale and technology. We intend to finance these initiatives through internal cash flow and debt capacity without issuing equity, while maintaining an investment grade balance sheet throughout the process.”
Protein & Bakery EBITDA Targets -------------------------------The plan provides for continued improvement in EBITDA margins and return on assets throughout the period from 2010 to 2015. Management has benchmarked its facilities to best in class operations in North America, and intends to deliver returns that will achieve sales margins consistent with large branded consumer packaged food peers in the United States. Implementation of the plan is expected to achieve annual earnings improvements and deliver EBITDA margins of 12.5% by 2015 as follows:
Protein Bakery Current 6.2% 9.2% 2012 8.5% 11.5% 2015 12.5% 12.5%The significant increase in earnings accruing from the plan will result in returns on assets employed well in excess of the Company’s weighted average cost of capital. Management is confident it will achieve these targets, with the majority of these gains coming from well-defined cost reductions.
“Maple Leaf is committed to creating significant and lasting shareholder value,” concluded Mr. McCain.
Commited to creating significant and lasting shareholder value.
I’ve been offering a way to deliver EBITDA margin increases for the last 18 months within the Fresh Bakery Division (representing a large portion of Maple Leaf’s portfolio).
When does management realize that Franchisees and the National Bread Network will create significant and lasting value for Maple Leaf Shareholders?
