With new bakery, Maple Leaf eyes margin growth
October 6, 2010
by Eric Schroeder
TORONTO — Maple Leaf Foods, which holds an 89.8% stake in Canada Bread, on Oct. 6 unveiled details of a plan to increase near and long-term shareholder value. The plan, which is expected to deliver earnings growth in each of the next five years, includes construction of a new bakery in Hamilton, Ont., that is planned to be commissioned in mid-2011.
As part of its earnings growth plans, Maple Leaf said its expects to 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. Within the company’s bakery division, Maple Leaf said it expects to increase EBITDA margin from a current level of 9.2% to 11.5% in 2012 and 12.5% in 2015.
“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,” Maple Leaf said. “Management is confident it will achieve these targets, with the majority of these gains coming from well-defined cost reductions.”
Michael H. McCain, president and chief executive officer of Maple Leaf, said the company has “a clear and achievable plan” to deliver earnings growth.
“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,” Mr. McCain said. “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.”