Foods group IAWS aims to generate $100 million (#108 million) in sales from the first full year of production from the new bakery it is building in Canada in a joint venture with the Tim Hortons restaurant chain.
Tim Hortons has 2,000 outlets across Canada and a further 200 in the United States. The new bakery is due to begin deliveries to these outlets and IAWS's own Cuisine de France outlets in the US next year.
IAWS announced yesterday that the equally-funded joint venture will invest an initial #75 million in a bakery in Brantford, Ontario, which will produce and distribute a range of co-branded par-baked European-style breads.
The investment in Brantford is only the first phase of a possible #225 million outlay by IAWS and Tim Hortons. As additional baking capacity is needed, two further bakeries are planned - one of these is likely to be in Ontario with a third outside the province.
The stock market gave an enthusiastic reception to the announcement from IAWS and sent the shares up 95 cents to #7.90, where they are trading just short of an all-time high. Market sources said the continued expansion of the higher-margin consumer foods business would see this part of the business account for up to 70 per cent of sales within the next three years from the current 50 per cent.
"This is a secure way of taking a position in the market in North America. We are partners with one of the biggest restaurant chains. Tim Hortons, party of US-based Wendy's International group, is the number one chain in Canada by a distance. We will be combining our products and technology with Tim Hortons' outlets. It's a bigger move that we envisaged but it combines our strengths with Tim Hortons' ready-made markets," said IAWS chief executive Mr Philip Lynch. "It gives us a manufacturing base in North America and allows us to unlock the full potential from the Cuisine de France concept there," he added.
Tim Hortons president and chief operating officer, Mr Paul House, said: "Longer term the venture with Cuisine de France provides us with an international partner that has the best baking technology in the world and outstanding success at retail level." He added that Tim Hortons has been selling par-baked bagels for the past five years but "the addition of fresh baked breads moves Tim Hortons into a new growth category."
IAWS has also revealed that it has paid #4.9 million for a 31 acre site at Stone in Staffordshire in the UK for a new Cuisine de France bakery to service the British market. This follows the completion of a #20 million plant at Cuisine de France's headquarters in Dublin.
The major investment in North America, not surprisingly, overshadowed another strong set of financial results from IAWS with pre-tax profits up 20 per cent in the half-year to the end of January to #18.2 million with sales in the first half up more than 12 per cent to #495.5 million. Turnover in the food part of the business rose from #205.2 million to #258.9 million while turnover in the nutrition/agribusiness area was unchanged on #236 million. Thus sales standstill in nutrition and agribusiness is down to lower volumes in the marine proteins and oils business and a decline in feed volumes because of the BSE crisis.
The pre-tax profit figures exclude a #5.1 million profit on the sale of 0.74 acre unoccupied site at Thorncastle Street in Dublin's dockland area. Operating margins grew strongly from 4.7 per cent to almost 5.1 per cent.
Shareholders will get a 15 per cent increase in their dividend to 3.252 cents per share.
