Agribusiness Presentation Scott McCain, President & COO, Agribusiness Group 1
Scott McCain President & COO, Agribusiness Group President and COO, Maple Leaf Agribusiness Group since 1995 Over 25 years experience in manufacturing and agrifood industry Started career with McCain Foods in Manufacturing and Operations Promoted to Vice President Production, McCain Foods in 1990 2
Agenda Operations Overview Animal Nutrition Hog Production Rendering Key Value Drivers Low Cost Producer Innovation 3
Maple Leaf Foods Pro Forma Results LTM September 30, 2004 Sales: EBITDA: Operating Earnings: $6.5 billion $405.3 million $273.3 million Meat Products Group Agribusiness Group Bakery Products Group Sales: EBITDA: Operating Earnings: $4.3 billion $163.6 million $97.0 million Sales: EBITDA: Operating Earnings: $0.9 billion $118.5 million $95.6 million Sales: EBITDA: Operating Earnings: $1.3 billion $123.2 million $80.7 million Shur-Gain Landmark Feeds Elite Swine Rothsay Animal Nutrition Hog Production Rendering 4
Overview Animal Nutrition Landmark Feeds and Shur-Gain Canada s leading animal nutrition companies with strong brand equity Combined 115 year history of building strong producer relationships 21 multi-species mills producing 1.6 million tonnes annually Approximately 36% market share in regions where we operate A global leader in dairy, swine and poultry nutrition Most advanced R&D facility in Canada R&D Facility, Burford, Ontario 5
Overview Animal Nutrition Largest Network in Canada Regional Feeder Mills High Efficiency Mills 6
Overview Hog Production Elite Swine Canada s largest hog producer; sixth largest in North America Large-scale production efficiencies with benefits of private ownership Hog production and management services company One stop shop for producers including animal nutrition, genetics, engineering and management services 100% of feed purchased from Landmark / Shur-Gain Approximately 95% of market hogs purchased by Maple Leaf Pork 7
Hog Production - Elite Swine Sows under management up 33% since 2001 Market Hogs Under Management (Thousands) Sows Under Management (Thousands) 2221 124 124 1776 93 105 1187 863 2001 2002 2003 2004 2001 2002 2003 2004 8
Overview - Rothsay Rendering Canada s largest rendering company; 30,000 customers Recycles animal and poultry by-products Provides an essential service to the agrifood, grocery and food service industries Revenue from pick-up fees and sales of finished products Significant investments establish strong competitive advantage and food safety assurance Species segregated plants $35 million in environmental upgrades Product innovation developing new higher value markets 9
Rendering - Rothsay Largest Independent Renderer Foxtrap, NFLD = Winnipeg, MB Rothsay Locations Montreal, PQ Ruminant facility Non-ruminant (pork and poultry only) Dundas, ON Moorefield, ON Truro, NS 10
Rendering Model Farms Abattoirs Restaurants / Grocery Stores Tallow / Feed Fats Animal Feed Chemical Industry BioDiesel Proteins Animal Feed Natural Fertilizers 11
Agenda Operations Overview Animal Nutrition Hog Production Rendering Key Value Drivers Low Cost Producer Innovation 12
Key Value Drivers Agribusiness Group plays key role in Maple Leaf portfolio strategy Low cost supplier to Maple Leaf value chain operations Quality control to meet pork and poultry specifications Provides strong and stable earnings from third-party sales Highly mature market Market leader in animal nutrition, hog production and rendering Drive margin growth through cost reduction, improved efficiencies; standardized business processes using Six Sigma Grow market share and profitability through innovation and R&D 13
Low Cost Producer Over $185 million invested since 1997 Major Capital Investments Agribusiness Group Capital Expenditure New feed mills in Souris, Manitoba; 40.0 St. Mary s, Ontario; Strykersville, NY 35.0 35.0 31.0 250,000 tonne feed mill under construction in Moncton, NB Environmental controls at Rothsay $ million CAD 30.0 25.0 20.0 15.0 16.4 13.7 21.8 19.6 22.2 25.6 Rothsay Elite Swine 10.0 Animal Nutrition 5.0-1997 1998 1999 2000 2001 2002 2003 2004 (1) Depreciation 13.3 12.7 14.5 17.2 18.0 16.5 18.8 15.8 (1) Nine months (January to September 2004) 14
Low Cost Producer - Animal Nutrition Closed two inefficient mills; three more scheduled in 2005 World-class new feed mills reinforce regional market leadership Highly computerized and automated Average 2-3 employees per shift Feed production costs reduced by up to 50% Pre-mix plant in Landmark most efficient in Canada Highly accurate measurement of vitamins and minerals reduces costs; increases feed performance and bio-security 15
Low Cost Producer Hog Production Adjusting to the High Canadian Dollar Six Sigma optimizing livestock performance and nutrition programs SG&A reduction through back-office consolidation Faster growth and barn turnaround; reduce costs including medication, mortality, labour Benefit from reduced feed costs Factoring the exchange rate into producer contracts Bundling producer services with standardized fee structure 16
Low Cost Producer Hog Production Canada s Competitive Advantage 22.00 20.00 18.00 Canada 16.00 14.00 US 12.00 10.00 80 82 84 86 88 90 92 94 96 98 00 02 03 Sources: Informa Economics USDA and National Agricultural Statistics Service 2003 Average Pigs Per Sow Canada 20.47 U.S. 16.90 17
Innovation - Animal Nutrition Differentiate ourselves through innovation and R&D Excel at customer service and on-farm performance Web-based swine and dairy models allow field sales to customize on-farm animal nutrition programs Focus on animal nutrition and health; species specific programs Reduce R&D to implementation time from years to months 18
Innovation - Animal Nutrition Hog weight gain has increased 41% Feed requirement has declined 16% 850 800 750 700 650 600 550 500 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 3.1 3.0 2.9 2.8 2.7 2.6 2.5 2.4 2.3 Daily Weight Gain Feed per Unit Gain 19
Innovation - Rendering BioDiesel Project: a new application for recycled tallow Environmentally sustainable, clean burning fuel $7 million expansion of Montreal rendering plant underway to increase annual capacity from 4 MM to 35 MM litres Renew: lawn fertilizer made from recycled protein meal Performs as well or better than chemical fertilizers Natural environmentally friendly alternative; launch in Spring 2005 20
Summary Leading brands and market shares in highly mature markets Investment in new mills and environmental controls solidifies market positions and improves margins Important role in Maple Leaf s Protein Value Chain Retains profits in the Company Ability to manage and control quality and consistency of finished products Innovation key to driving sales and earnings growth in highly mature businesses 21
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