WINNIPEG, Manitoba (Reuters) - Maple Leaf Foods said on Wednesday that it will spend C$560 million ($549 million) over three years to build a new meat-packing plant, while modernizing or closing other plants, resulting in a net loss of 1,550 jobs.
It said most of the job cuts will occur in 2014.
Maple Leaf Chief Executive Michael McCain said the changes will reduce operating costs and boost productivity, helping the company compete with North American rivals at a time when it has faced pressure from a strong Canadian dollar.
The moves are the final step in a C$1.29 billion plan, announced a year ago, to generate double-digit earnings growth in each of the five following years.
“It is to our knowledge the single largest investment in the Canadian food industry in history and it will introduce new and leading-edge manufacturing technologies to this country,” McCain told reporters.
Maple Leaf’s plans do not come as a surprise, said analyst Robert Gibson of Octagon Capital.
“(This) gives a bit of color as to what plants are going to be closed, but everybody knew ... they were going to have to spend hundreds of millions of dollars over the next two years.”
The company’s shares on the Toronto Stock Exchange closed 1.5 percent lower at C$10.40 on Wednesday.
The company’s move to modernize its meat processing facilities comes as U.S. companies such as Tyson Foods and Smithfield Foods increase market share in Canada, while the high Canadian dollar has squeezed Maple Leaf, Gibson said.
Maple Leaf has come under pressure in the past year from key shareholders, but said it had unanimous board support for its plans.
A deadly listeria contamination of some of the company’s deli meats in 2008 hit both its shares and earnings.
One of its biggest shareholders, Ontario Teachers’ Pension Plan, sold off its stake last year. In February, Maple Leaf gave a seat on its board to activist investor West Face Capital, which has been critical of the company’s corporate governance.
Maple Leaf said it will build its new C$395 million prepared meat plant in Hamilton, Ontario, and that it will open in 2013.
It will also upgrade existing plants in Winnipeg, Manitoba, in Saskatoon, Saskatchewan and in Brampton, Ontario.
Plants in Toronto, in North Battleford, Saskatchewan, in Kitchener and Hamilton, Ontario, in Moncton, New Brunswick in and Winnipeg will close by the end of 2014, with production moved into new or expanded facilities.
McCain said the company will work to find other uses for its closed plants.
Maple Leaf will also close distribution centers in Moncton, as well as in Burlington and Kitchener, Ontario, in and Coquitlam, British Columbia by 2014, leaving an existing facility in Saskatoon as the western distribution hub. The company said it will build a new facility in Ontario for Eastern Canada.
Reporting by Rod Nickel; Editing by Jeffrey Hodgson and Peter Galloway