A frozen hamburger manufacturer has ceased production and is now under receivership.
Last week, an Ontario court appointed FTI Consulting Canada as the receiver of all the assets, undertaking and properties of New Food Classics, headquartered in Burlington, Ont.
NFC produced frozen beef burgers, as well as “a selection of cooked products and specialty appetizers” in processing plants in Saskatoon and St. Catharines, Ont.
It served customers that included Loblaw, Walmart and Sysco.
The company had reorganized its operations in 2011, closing two plants in Calgary, moving its head office out of that city and relocating production operations to its Sask-atchewan and Ontario facilities. However, it did maintain a sales office in Calgary.
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According to a prefiling report submitted by FTI Consulting in January, the company’s expenses to retrofit and open the St. Catharines plant were approximately $10 million over budget.
The rising cost of raw materials and inflexible contracts were also blamed for the company’s financial burden.
“During 2011, the wholesale price of beef has increased by approximately 40 percent and the price of fossil fuels and electricity have on average increased by five percent,” the report said.
“The company was unable to pass on the impact of increased costs for raw materials to their customers in 2011 as a result of the fixed price contracts.”
The report said the problem was compounded by a high turnover in staff when the company moved its head office. Only one employee made the move.
“As a result of the complete turnover of accounting staff and the change in accounting platforms, NFC’s management was unable to fully identify the substantial losses that the company was incurring in 2011 or rectify the situation in a timely manner before it had a material adverse impact on the company’s financial situation.”
NFC had received creditor protection in January, but last week its chief executive officer and board of directors resigned and the St. Catharines and Saskatoon plants closed.
About half of the company’s almost 300 employees worked in Saskatoon.
A buyer for the company had been sought before it fell under receivership, but bids were deemed unsatisfactory.
FTI Consulting, in its latest report to the courts dated Feb. 21, said it was necessary to shut down operations because of the resignations, a lack of funding and “the perishable nature of NFC’s inventory.”
“The monitor is hopeful that a buyer for the closed NFC manufacturing facilities can be quickly identified among the parties that participated in the transaction process, and that the manufacturing facilities can be sold on a turn-key basis in a short period of time, rather than liquidated,” the report said.
