Animal Nutrition

Agribusiness Presentation
Scott McCain, President & COO, Agribusiness Group
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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
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Agenda
Operations Overview
► Animal Nutrition
► Hog Production
► Rendering
Key Value Drivers
► Low Cost Producer
► Innovation
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Maple Leaf Foods
Pro Forma Results LTM September 30, 2004
Sales: $6.5 billion
EBITDA: $405.3 million
Operating Earnings: $273.3 million
Meat Products Group
Sales: $4.3 billion
EBITDA: $163.6 million
Operating Earnings: $97.0 million
Shur-Gain
Bakery Products Group
Agribusiness Group
Sales: $0.9 billion
EBITDA: $118.5 million
Operating Earnings: $95.6 million
Landmark Feeds
Animal Nutrition
Sales: $1.3 billion
EBITDA: $123.2 million
Operating Earnings: $80.7 million
Elite Swine
Hog Production
Rothsay
Rendering
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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
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Overview – Animal Nutrition
Largest Network in Canada
Regional Feeder Mills
High Efficiency Mills
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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
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Hog Production - Elite Swine
Sows under management up 33% since 2001
Market Hogs Under Management
Sows Under Management
(Thousands)
(Thousands)
2221
124
124
2003
2004
105
1776
93
1187
863
2001
2002
2003
2004
2001
2002
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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
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Rendering - Rothsay
Largest Independent Renderer
Foxtrap,
NFLD
=
Winnipeg, MB
Rothsay Locations
Montreal, PQ
Ruminant facility
Non-ruminant (pork and poultry only)
Truro, NS
Dundas, ON
Moorefield, ON
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Rendering Model
Farms
Abattoirs
Restaurants /
Grocery Stores
Tallow /
Feed Fats
Proteins
Animal Feed
Animal Feed
Chemical Industry
Natural Fertilizers
BioDiesel
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Agenda
Operations Overview
► Animal Nutrition
► Hog Production
► Rendering
Key Value Drivers
► Low Cost Producer
► Innovation
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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
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Low Cost Producer
Over $185 million invested since 1997
Major Capital Investments
Agribusiness Group Capital Expenditure
New feed mills in Souris, Manitoba;
St. Mary’s, Ontario; Strykersville, NY
40.0
35.0
35.0
31.0
Environmental controls at Rothsay
25.6
$ million CAD
250,000 tonne feed mill under
construction in Moncton, NB
30.0
25.0
22.2
21.8
19.6
20.0
Rothsay
16.4
13.7
15.0
Elite Swine
10.0
Animal Nutrition
5.0
-
Depreciation
(1)
Nine months (January to September 2004)
1997
1998
1999
2000
2001
2002
2003
2004
13.3
12.7
14.5
17.2
18.0
16.5
18.8
15.8
(1)
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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
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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
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Low Cost Producer – Hog Production
Canada’s Competitive Advantage
22.00
20.00
Canada
18.00
16.00
US
14.00
12.00
10.00
‘80
‘82
‘84
‘86
‘88
‘90
‘92
‘94
‘96
‘98
‘00
‘02 ‘03
2003 Average Pigs Per Sow
Sources:
Canada
20.47
U.S.
16.90
Informa Economics
USDA and National Agricultural Statistics Service
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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
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Innovation - Animal Nutrition
Hog weight gain has increased 41%
Feed requirement has declined 16%
850
3.1
800
3.0
2.9
750
2.8
700
2.7
650
2.6
600
2.5
550
2.4
500
2.3
'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03
Daily Weight Gain
Feed per Unit Gain
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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
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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
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