TSX: MFI
www.mapleleaffoods.com
Meat Protein delivers strong top-line growth of
6.6% and Adjusted EBITDA Margin of 9.3% in the quarter
Plant Protein progressing toward Adjusted EBITDA
target of neutral or better in the latter half of 2023
MISSISSAUGA, ON, Aug. 3, 2023
/PRNewswire/ - Maple Leaf Foods Inc. ("Maple Leaf Foods" or the
"Company") (TSX: MFI) today reported its financial results for the
second quarter ended June 30, 2023.
"In our second quarter, we successfully executed our playbook,
improving the financial performance of our business and marking a
significant step toward the next inflection point in our journey.
With our supply chain stabilized and pricing now in place to
mitigate current levels of inflation, we are well positioned to
meet our Adjusted EBITDA margin target of 14-16% once pork markets
normalize," said Curtis Frank, CEO
of Maple Leaf Foods.
"In the quarter, we delivered over 6% revenue growth driven by
our portfolio of leading brands, we sequentially improved our
Adjusted EBITDA margins in the Meat Protein business, and we
advanced our strategic plan to achieve Adjusted EBITDA neutral or
better in our Plant Protein business in the second half of
2023."
"Looking forward to 2024 and beyond, we can't help but be
optimistic," continued Mr. Frank. "We are on track to realize the
benefits of the major capital investments we've made at our London
Poultry and Bacon Centre of Excellence facilities as we continue to
advance our vision of becoming The Most Sustainable Protein Company
on Earth."
Second Quarter 2023 Highlights
- Total Company sales grew 6.2% to $1,269.7 million, with an Adjusted Earnings
Before Interest, Taxes, Depreciation and Amortization
("EBITDA")(i) Margin of 8.1%.
- Meat Protein Group sales grew to $1,236.7 million, an increase of 6.6% year over
year. Adjusted EBITDA was $115.3
million, and Adjusted EBITDA Margin was 9.3% an improvement
of 30 basis points from a year ago and 170 basis points from last
quarter.
- Plant Protein Group sales were $36.7
million. Plant Protein Group Adjusted EBITDA improved by
61.3% year over year to a loss of $11.6
million, en route to an Adjusted EBITDA target of neutral or
better in the latter half of 2023.
- Capital expenditures were $52.7
million.
- The London Poultry facility transition is progressing on
schedule. Two legacy facilities have fully transitioned their
production volumes, and the transition from the third facility has
begun. The Company expects London Poultry to be fully ramped up by
the end of 2023.
Outlook Remains Unchanged
- Meat Protein: Expect mid-to-high single digit sales
growth in 2023, and Adjusted EBITDA Margin expansion to achieve a
target range of 14% - 16% when markets normalize.
- Plant Protein: Targeting to deliver Adjusted EBITDA
neutral or better in the latter half of 2023.
- Capital expenditure: For 2023 is expected to be less
than $250 million with up to
$120 million attributable to
Maintenance Capital(i) and the balance
attributable to Growth Capital(i).
(i) Refer to the section
titled Non-IFRS Financial Measures in this news
release.
|
Financial Highlights
|
As at or for
the
|
|
As at or for
the
|
Measure(i)
(Unaudited)
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2023
|
|
2022
|
|
Change
|
|
2023
|
|
2022
|
|
Change
|
Sales
|
|
$
1,269.7
|
|
$
1,195.1
|
|
6.2 %
|
|
$
2,444.6
|
|
$
2,321.7
|
|
5.3 %
|
Net (Loss)
|
|
$
(53.7)
|
|
$
(54.6)
|
|
1.7 %
|
|
$ (111.4)
|
|
$
(40.9)
|
|
(172.2) %
|
Basic Loss per
Share
|
|
$
(0.44)
|
|
$
(0.44)
|
|
— %
|
|
$
(0.92)
|
|
$
(0.33)
|
|
(178.8) %
|
Adjusted Operating
Earnings(ii)
|
|
$
45.9
|
|
$
23.6
|
|
94.3 %
|
|
$
65.2
|
|
$
39.7
|
|
64.0 %
|
Adjusted (Loss)
Earnings per Share(ii)
|
|
$
0.00
|
|
$
0.00
|
|
nm(iv)
|
|
$
(0.12)
|
|
$
0.03
|
|
nm(iv)
|
Adjusted EBITDA - Meat
Protein Group(ii)
|
|
$
115.3
|
|
$
104.1
|
|
10.8 %
|
|
$
202.6
|
|
$
201.6
|
|
0.5 %
|
Adjusted EBITDA - Plant
Protein Group(ii)
|
|
$
(11.6)
|
|
$
(30.0)
|
|
61.3 %
|
|
$
(23.6)
|
|
$
(60.7)
|
|
61.1 %
|
Free Cash
Flow(ii)(iii)
|
|
$
(76.3)
|
|
$
0.2
|
|
nm(iv)
|
|
$
(64.0)
|
|
$
(99.5)
|
|
35.7 %
|
Construction
Capital(ii)
|
|
|
|
|
|
|
|
$
37.3
|
|
$
665.8
|
|
(94.4) %
|
Net
Debt(ii)
|
|
|
|
|
|
|
|
$
(1,807.4)
|
|
$
(1,421.2)
|
|
(27.2) %
|
Adjusted
EBT(ii)
|
|
$
6.7
|
|
$
10.9
|
|
(38.5) %
|
|
$
(7.3)
|
|
$
17.8
|
|
nm(iv)
|
(i) All financial measures
in millions of dollars except Basic and Adjusted Earnings per
Share.
|
(ii) Refer to the section
titled Non-IFRS Financial Measures in this news
release.
|
(iii) Certain comparative
figures have been restated to conform with current year
presentation.
|
(iv) Not
meaningful.
|
Sales for the second quarter of 2023 were $1,269.7 million compared to $1,195.1 million last year, an increase of 6.2%,
driven by higher sales in the Meat Protein Group more than
offsetting a decrease in the Plant Protein Group. For more details
on sales performance by operating segment, please refer to
Operating Review.
Year-to-date sales for 2023 were $2,444.6
million compared to $2,321.7
million last year, an increase of 5.3%, due to similar
factors as noted above.
Net loss for the second quarter of 2023 was $53.7 million ($0.44 loss per basic share) compared to loss of
$54.6 million ($0.44 loss per basic share) last year. The Meat
Protein Group showed improved commercial and operational results
partly offset by market headwinds and cost inflation, along
with increased start up costs. The Plant Protein Group delivered
improved margins along with lower Selling, General, and
Administrative ("SG&A") spending as the segment continues to
reduce costs as part of its short term strategy. In addition,
results were negatively impacted by higher interest expense with
increased rates and higher debt largely to fund strategic capital
expenditures, partly offset by changes in unrealized mark to market
valuation adjustments on biological assets driven by changes in
feed and hog markets, and income tax recoveries.
Year-to-date net loss for 2023 was $111.4
million ($0.92 loss per basic
share) compared to loss of $40.9
million ($0.33 loss per basic
share) last year due to similar factors as noted above.
Adjusted Operating Earnings for the second quarter of 2023 were
$45.9 million compared to
$23.6 million last year, and Adjusted
Earnings per Share for the second quarter of 2023 was $0.00 compared to $0.00 last year. The increase was a result of
commercial and operational improvements partly offset by market
headwinds and cost inflation.
Year-to-date Adjusted Operating Earnings for 2023 were
$65.2 million compared to
$39.7 million last year, and Adjusted
Earnings per Share for 2023 were a loss of $0.12 compared to earnings of $0.03 last year due to similar factors as noted
above.
Adjusted Earnings Before Taxes ("Adjusted EBT") for
the second quarter of 2023 were $6.7
million compared to $10.9
million last year. Adjusted EBT was negatively impacted by
pork market headwinds and cost inflation, partly offset by improved
margins and lower SG&A spending in the Plant Protein Group.
Adjusted EBT was also negatively impacted by higher interest
expense.
Year-to-date Adjusted EBT for 2023 were loss of $7.3 million compared to earnings of $17.8 million last year due to similar
factors as noted above.
For further discussion on key metrics and a discussion of
results by operating segment, refer to the section titled
Operating Review.
Note: Several items
are excluded from the discussions of underlying earnings
performance as they are not representative of ongoing operational
activities. Refer to the section entitled Non-IFRS Financial
Measures at the end of this news release for a description and
reconciliation of all non-IFRS financial
measures.
|
Operating Review
The Company has two reportable segments. These segments offer
different products, with separate organizational structures,
brands, and financial and marketing strategies. The Company's chief
operating decision makers regularly review internal reports for
these businesses. Performance of the Meat Protein Group is based on
profitable revenue growth, Adjusted Operating Earnings,
Adjusted EBITDA, and Adjusted EBT while the performance of
the Plant Protein Group in the short term is focused on obtaining
Adjusted EBITDA neutral or better results.
The following table summarizes the Company's sales, gross profit
(loss), SG&A, Adjusted Operating Earnings, Adjusted EBITDA,
Adjusted EBITDA Margin, and Adjusted EBT by operating segment for
the three months ended June 30, 2023 and June 30,
2022.
|
Three months ended
June 30, 2023
|
Three months ended June
30, 2022
|
($
millions)(i) (Unaudited)
|
Meat
Protein
Group
|
Plant
Protein
Group
|
Non-
Allocated(ii)
|
Total
|
Meat
Protein
Group
|
Plant
Protein
Group
|
Non-
Allocated(ii)
|
Total
|
Sales
|
$
1,236.7
|
36.7
|
(3.7)
|
$
1,269.7
|
$
1,160.2
|
40.8
|
(5.9)
|
$
1,195.1
|
Gross profit
(loss)
|
$
120.2
|
(1.8)
|
(24.7)
|
$
93.6
|
$ 136.0
|
(10.1)
|
(38.7)
|
$
87.2
|
Selling, general and
administrative
expenses
|
$
91.7
|
14.4
|
—
|
$
106.2
|
$
87.3
|
26.3
|
—
|
$ 113.6
|
Adjusted Operating
Earnings(iii)
|
$
62.2
|
(16.3)
|
—
|
$
45.9
|
$
57.7
|
(34.0)
|
—
|
$
23.6
|
Adjusted
EBITDA(iii)
|
$
115.3
|
(11.6)
|
(0.6)
|
$
103.1
|
$ 104.1
|
(30.0)
|
—
|
$
74.1
|
Adjusted EBITDA
Margin(iii)
|
9.3 %
|
(31.7) %
|
n/a
|
8.1 %
|
9.0 %
|
(73.6) %
|
n/a
|
6.2 %
|
Adjusted
EBT(iii)
|
$
23.8
|
(16.5)
|
(0.6)
|
$
6.7
|
$ 47.5
|
(36.6)
|
—
|
$ 10.9
|
(i)
|
Totals may not add
due to rounding.
|
(ii)
|
Non-allocated
includes eliminations of inter-segment sales and associated cost of
goods sold, changes in the fair value of biological assets and
derivatives, and non-allocated costs which are comprised of
expenses not separately identifiable to reportable segments or are
not part of the measures used by the Company when assessing a
segment's operating results.
|
(iii)
|
Refer to the section
titled Non-IFRS Financial Measures in this news
release.
|
The following table summarizes the Company's sales, gross profit
(loss), SG&A, Adjusted Operating Earnings, Adjusted EBITDA,
Adjusted EBITDA Margin, and Adjusted EBT by operating segment for
the six months ended June 30, 2023 and June 30, 2022.
|
Six months ended
June 30, 2023
|
Six months ended June
30, 2022
|
($
millions)(i) (Unaudited)
|
Meat
Protein
Group
|
Plant
Protein
Group
|
Non-
Allocated(ii)
|
Total
|
Meat
Protein
Group
|
Plant
Protein
Group
|
Non-
Allocated(ii)
|
Total
|
Sales
|
$
2,380.5
|
74.1
|
(10.0)
|
$
2,444.6
|
$
2,249.6
|
85.7
|
(13.6)
|
$
2,321.7
|
Gross profit
(loss)
|
$
210.7
|
(5.1)
|
(35.5)
|
$
170.0
|
$ 266.9
|
(16.3)
|
(9.5)
|
$ 241.1
|
Selling, general and
administrative
expenses
|
$
181.0
|
27.9
|
—
|
$
208.9
|
$ 176.0
|
57.1
|
—
|
$ 233.1
|
Adjusted Operating
Earnings(iii)
|
$
98.2
|
(33.0)
|
—
|
$
65.2
|
$ 108.7
|
(68.9)
|
—
|
$
39.7
|
Adjusted
EBITDA(iii)
|
$
202.6
|
(23.6)
|
(0.6)
|
$
178.4
|
$ 201.6
|
(60.7)
|
—
|
$ 140.9
|
Adjusted EBITDA
Margin(iii)
|
8.5 %
|
(31.9) %
|
n/a
|
7.3 %
|
9.0 %
|
(70.8) %
|
n/a
|
6.1 %
|
Adjusted
EBT(iii)
|
$
26.8
|
(33.5)
|
(0.6)
|
$
(7.3)
|
$
91.8
|
(74.0)
|
—
|
$
17.8
|
(i)
|
Totals may not add
due to rounding.
|
(ii)
|
Non-allocated
includes eliminations of inter-segment sales and associated cost of
goods sold, changes in the fair value of biological assets and
derivatives, and non-allocated costs which are comprised of
expenses not separately identifiable to reportable segments or are
not part of the measures used by the Company when assessing a
segment's operating results.
|
(iii)
|
Refer to the section
titled Non-IFRS Financial Measures in this news
release.
|
Meat Protein Group
The Meat Protein Group is comprised of prepared meats,
ready-to-cook and ready-to-serve meals, snack kits, value-added
fresh pork and poultry products that are sold to retail,
foodservice and industrial channels, and agricultural operations in
pork and poultry. The Meat Protein Group includes leading brands
such as Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural
Selections®, Schneiders®, Schneiders® Country Naturals®, Mina®,
Greenfield Natural Meat Co.®, and other leading regional
brands.
Sales for the second quarter of 2023 increased 6.6% to
$1,236.7 million compared to
$1,160.2 million last year. Sales
growth was driven by an increase in volumes, pricing actions taken
to mitigate inflation, favourable foreign exchange rate impacts,
and a favourable mix-shift in product sales.
Year-to-date sales for 2023 increased 5.8% to $2,380.5 million compared to $2,249.6 million last year. Sales growth was
driven by factors consistent with those mentioned above.
Gross profit for the second quarter of 2023 was $120.2 million (gross margin(i)
of 9.7%) compared to $136.0 million
(gross margin(i) of 11.7%) last year. Gross
profit was negatively impacted by pork market headwinds, cost
inflation, and startup expenses, partially offset by pricing action
to address inflation and improved product mix. Gross profit for the
second quarter included start-up expenses of $33.8 million (2022: $9.0
million) associated with Construction Capital projects,
which are excluded in the calculation of Adjusted Operating
Earnings.
Year-to-date gross profit for 2023 was $210.7 million (gross margin(i)
of 8.8%) compared to $266.9 million
(gross margin(i) of 11.9%) last year. Gross
profit was negatively impacted by factors consistent with those
mentioned above. Gross profit year-to-date included start-up
expenses of $68.5 million (2022:
$17.7 million) associated with
Construction Capital projects, which are excluded in the
calculation of Adjusted Operating Earnings.
SG&A expenses for the second quarter of 2023 were
$91.7 million compared to
$87.3 million last year. The
increase in SG&A expenses was driven by higher people costs
from stabilizing staffing levels and discretionary spend, partially
offset by lower advertising and promotional expenses.
Year-to-date SG&A expenses for 2023 were $181.0 million compared to $176.0 million last year. The increase in
SG&A expenses was also driven by factors consistent with those
noted above.
Adjusted Operating Earnings for the second quarter of 2023 were
$62.2 million compared to
$57.7 million last year, driven by
factors noted above.
Year-to-date Adjusted Operating Earnings for 2023 were
$98.2 million compared to
$108.7 million last year, consistent
with factors noted above.
Adjusted EBITDA for the second quarter of 2023 were $115.3 million compared to $104.1 million last year, driven by factors
consistent with those noted above. Adjusted EBITDA Margin for the
second quarter was 9.3% compared to 9.0% last year, driven by
factors consistent with those noted above.
Year-to-date Adjusted EBITDA for 2023 were $202.6 million compared to $201.6 million last year, driven by factors
consistent with those noted above. Year-to-date Adjusted EBITDA
Margin for 2023 was 8.5% compared to 9.0% last year, also
driven by factors consistent with those noted above.
During the second quarter of 2023 the Meat Protein Group
Adjusted EBT were $23.8 million
compared to $47.5 million last year,
driven by factors consistent with those noted above, as well as a
$29.2 million increase in interest
expense as a result of increased interest rates and higher debt,
and increased depreciation expense related to continued capital
investment.
Year-to-date Adjusted EBT were $26.8 million compared to
$91.8 million last year, driven by
factors consistent with those noted above, as well as a
$55.6 million increase in interest
expense as a result of increased interest rates and higher debt,
and increased depreciation expense related to continued capital
investment.
Plant Protein Group
The Plant Protein Group is comprised of refrigerated plant
protein products, premium grain-based protein, and vegan cheese
products sold to retail, foodservice and industrial channels. The
Plant Protein Group includes the leading brands Lightlife® and
Field Roast™.
Sales for the second quarter of 2023 decreased 10.2% to
$36.7 million compared to
$40.8 million last year. Excluding
the impact of foreign exchange, sales decreased 14.5%, driven by
lower volumes across all channels, partially offset by pricing
action implemented in prior quarters to mitigate inflation.
Year-to-date sales for 2023 decreased 13.6% to $74.1 million compared to $85.7 million last year. Excluding the
impact of foreign exchange, sales decreased 18.5%, consistent with
factors noted above.
Gross profit for the second quarter of 2023 was a loss of
$1.8 million (gross margin
loss(i) of 5.0%) compared to a loss of
$10.1 million (gross margin
loss(i) of 24.7%) last year. The improvement
in gross margin was driven by operational improvements, reduction
in start-up expenses, and price increases, partially offset by
lower volumes. Gross profit for the second quarter of 2022 included
start-up expenses of $2.3 million
associated with Construction Capital projects which are excluded in
the calculation of Adjusted Operating Earnings that were not
repeated in the second quarter of 2023.
Year-to-date gross profit for 2023 was a loss of $5.1 million (gross margin
loss(i) of 6.9%) compared to a loss of
$16.3 million (gross margin
loss(i) of 19.1%) last year. The increase in
gross profit was also driven by factors consistent with those noted
above. Year-to-date gross profit for 2022 included start-up
expenses of $4.5 million associated
with Construction Capital projects which are excluded in the
calculation of Adjusted Operating Earnings, that were not repeated
in 2023.
SG&A expenses for the second quarter of 2023 were
$14.4 million (39.4% of sales)
compared to $26.3 million (64.4% of
sales) last year. The decrease in SG&A was largely driven by
lower advertising and promotional expenses, as well as decreased
consulting and headcount expenses.
Year-to-date SG&A expenses for 2023 were $27.9 million (37.7% of sales) compared to
$57.1 million (66.6% of sales)
last year. The decrease in SG&A was driven by factors
consistent with those noted above.
Adjusted Operating Earnings for the second quarter of 2023 were
a loss of $16.3 million compared to a
loss of $34.0 million last year. The
improvement in Adjusted Operating Earnings is consistent with the
factors noted above.
Year-to-date Adjusted Operating Earnings for 2023 were a loss of
$33.0 million compared to a loss of
$68.9 million last year. The
improvement in Adjusted Operating Earnings is consistent with the
factors noted above.
Adjusted EBITDA for the second quarter of 2023 were a loss of
$11.6 million compared to a loss of
$30.0 million last year, driven by
factors consistent with those noted above. Adjusted EBITDA Margin
for the second quarter was a loss of 31.7% compared to a loss of
73.6% last year, also driven by factors consistent with those noted
above.
Year-to-date Adjusted EBITDA for the second quarter of 2023 were
a loss of $23.6 million compared to a
loss of $60.7 million last year,
driven by factors consistent with those noted above. Year-to-date
Adjusted EBITDA Margin for the second quarter was a loss of 31.9%
compared to a loss of 70.8% last year, also driven by factors
consistent with those noted above.
(i)
|
Gross margin is
defined as gross profit (loss) divided by sales.
|
Other Matters
On August 2, 2023, the Board of
Directors approved a quarterly dividend of $0.21 per share, $0.84 per share on an annual basis, payable
September 28, 2023 to shareholders of
record at the close of business September 8,
2023. Unless indicated otherwise by the Company at or before
the time the dividend is paid, the dividend will be considered an
eligible dividend for the purposes of the "Enhanced Dividend Tax
Credit System". The Board of Directors has also approved the
issuance of common shares from treasury at a two percent discount
under the Company's Dividend Reinvestment Plan ("DRIP"). Under the
DRIP, investors holding the Company's common shares can receive
common shares instead of cash dividend payments. Further details,
including how to enroll in the program, are available at
https://www.mapleleaffoods.com/investors/stock-information/.
Conference Call
A conference call will be held at 8:00 a.m. ET on
August 3, 2023, to review Maple Leaf Foods' second quarter
financial results. To participate in the call, please dial
416-764-8650 or 1-888-664-6383. For those unable to participate,
playback will be made available an hour after the event at
416-764-8677 or 1-888-390-0541 (Passcode: 102212 #).
A webcast of the second quarter conference call will also be
available at: https://www.mapleleaffoods.com
The Company's full consolidated interim financial statements
("Consolidated Interim Financial Statements") and related
Management's Discussion and Analysis are available on the Company's
website.
An investor presentation related to the Company's second quarter
financial results is available at www.mapleleaffoods.com and can be
found under Presentations and Webcasts on the Investors page.
Outlook Remains Unchanged
Maple Leaf Foods is a leading consumer protein company,
supported by a portfolio of market leading brands. Over the last
several years, the Company has developed a foundation to pursue
compelling growth vectors across its business and to create value
for all stakeholders.
Meat Protein Group
In Meat Protein, the Company's strategy is to drive profitable
growth. Given the unprecedented market dynamics, marked by a
challenging post-pandemic economy, the conflict in Europe, high inflation and significant market
disruption, Maple Leaf Foods expects that its Meat Protein Group
will achieve the following:
- Mid-to-high single digit sales growth in 2023, supported by
brand leadership, and growth in the U.S. market and sustainable
meats.
- Adjusted EBITDA Margin expansion to a 14% - 16% target range
once markets normalize, including a pork complex in-line with the
five year average.
Plant Protein Group
- In late 2021, the Company announced that it was re-evaluating
its outlook for the Plant Protein Group and launching a
comprehensive review of the overall plant protein category. This
decision was driven by a pronounced slowdown in growth rates in the
category, particularly in the second half of the year, which fueled
the Company's imperative to identify and thoroughly assess the
causes, near and long-term trends, and overall implications. The
Company's analysis to date confirms that the very high category
growth rates previously predicted by many industry experts are
unlikely to be achieved given current customer feedback,
experience, buy rates and household penetration. Based on this
information, the Company believes that the category will continue
to grow at more modest, but still attractive rates. Current
estimates suggest that the category will grow at an average annual
rate of 10% to 15%, making it a $6
billion to $10 billion market
by 2030. Accordingly, the Company has pivoted its strategy and
investment thesis for the Plant Protein Group and has set a new
goal to deliver neutral or better Adjusted EBITDA in the latter
half of 2023. Work is ongoing to implement this pivot. The Company
expects steady Adjusted EBITDA improvement to continue throughout
the year.
Capital
- The Company's capital expenditures estimate for the full year
2023 remains unchanged at less than $250
million. Up to $120 million
will be Maintenance Capital with the remainder being Growth
Capital. The Growth Capital will mainly consist of an increase in
further processed poultry capacity at the Prepared Meats facility
in Brampton, Ontario, residual
expenditures for the London Poultry facility, and expanded capacity
in the snacking kits category.
- The Company expects the London,
Ontario poultry facility to start to deliver approximately
$100 million annually of additional
Adjusted EBITDA once fully ramped up which is expected to be by the
end of 2023. Additionally, the Company expects the Bacon Centre of
Excellence in Winnipeg, Manitoba
to contribute approximately $30
million annually of additional Adjusted EBITDA once fully
ramped up which is expected to be in the second half of 2023.
The ongoing effects of the post-pandemic economy induced supply
chain disruptions and the war in Ukraine are unpredictable and may impact a
number of factors that drive growth in the business, including:
- Agricultural commodity and foreign exchange markets;
- Inflationary cost pressures;
- Disruptions in the global supply chain;
- Availability of labour; and
- Demand for products and changes in product mix.
The execution of the Company's financial and operational
priorities are embedded in a commitment to deliver shared value for
the benefit of all stakeholders. The Company's guiding pillars to
be the "Most Sustainable Protein Company on Earth" include Better
Food, Better Care, Better Communities, Better Planet and are core
to how Maple Leaf Foods conducts itself. To that end, the Company's
priorities include:
- Better Food - leading the real food movement and
transitioning key brands to 100% "raised without antibiotics".
- Better Care - further advancement of animal care, after
achieving our transition of all sows under management to open
housing systems in 2021, we have an ongoing program to convert any
new sow barns that we acquire.
- Better Communities - investing a minimum of
approximately 1% of pre-tax profit to advance sustainable food
security.
- Better Planet - continuing to amplify its commitment to
carbon neutrality, while focusing on eliminating waste in any
resources it consumes, including food, energy, water, packaging,
and time.
Non-IFRS Financial Measures
The Company uses the following non-IFRS measures: Adjusted
Operating Earnings, Adjusted Earnings per Share, Adjusted EBITDA,
Adjusted EBITDA Margin, Adjusted EBT, Construction Capital, Net
Debt, Free Cash Flow and Return on Net Assets. Management believes
that these non-IFRS measures provide useful information to
investors in measuring the financial performance of the Company for
the reasons outlined below. These measures do not have a
standardized meaning prescribed by IFRS and therefore they may not
be comparable to similarly titled measures presented by other
publicly traded companies and should not be construed as an
alternative to other financial measures determined in accordance
with IFRS.
Adjusted Operating Earnings, Adjusted EBITDA, Adjusted EBITDA
Margin and Adjusted EBT
Adjusted Operating Earnings, Adjusted EBITDA, Adjusted EBITDA
Margin and Adjusted EBT are non-IFRS measures used by Management to
evaluate financial operating results. Adjusted Operating Earnings
is defined as earnings before other income, income taxes and
interest expense adjusted for items that are not considered
representative of ongoing operational activities of the business
and certain items where the economic impact of the transactions
will be reflected in earnings in future periods when the underlying
or related asset is sold or transferred. Adjusted EBITDA is defined
as Adjusted Operating Earnings plus depreciation and intangible
asset amortization, adjusted for items included in other expense
that are considered representative of ongoing operational
activities of the business. Adjusted EBITDA Margin is calculated as
Adjusted EBITDA divided by sales. Adjusted EBT is used annually by
the Company to evaluate its performance and is a component of
calculating the bonus entitlements under the Company's short term
incentive plan. It is defined as Adjusted EBITDA, less depreciation
and amortization, and interest expense. Interest expense is
allocated to the operating segments for this metric on a legal
entity basis.
The table below provides a reconciliation of earnings (loss)
before income taxes as reported under IFRS in the Consolidated
Interim Financial Statements to Adjusted Operating Earnings,
Adjusted EBITDA and Adjusted EBT for the three and six months ended
June 30, 2023 as indicated below.
Management believes that these non-IFRS measures are useful in
assessing the performance of the Company's ongoing operations and
its ability to generate cash flows to fund its cash requirements,
including the Company's capital investment program.
|
Three months ended
June 30, 2023
|
Three months ended June
30, 2022
|
($
millions)(i) (Unaudited)
|
Meat
Protein
Group
|
Plant
Protein
Group
|
Non-
Allocated(ii)
|
Total
|
Meat
Protein
Group
|
Plant
Protein
Group
|
Non-
Allocated(ii)
|
Total
|
(Loss) earnings
before income taxes
|
$
22.5
|
(23.2)
|
(63.0)
|
$
(63.7)
|
$ 46.4
|
(55.1)
|
(50.0)
|
$
(58.6)
|
Interest expense and
other financing costs
|
—
|
—
|
37.6
|
37.6
|
—
|
—
|
10.8
|
10.8
|
Other
expense
|
1.7
|
0.2
|
0.7
|
2.6
|
1.9
|
0.1
|
0.5
|
2.5
|
Restructuring and other
related costs
|
4.3
|
6.8
|
—
|
11.0
|
0.4
|
18.7
|
—
|
19.0
|
Earnings (loss) from
operations
|
$
28.4
|
(16.3)
|
(24.7)
|
$
(12.6)
|
$ 48.6
|
(36.4)
|
(38.7)
|
$
(26.4)
|
Start-up expenses from
Construction Capital(iii)
|
33.8
|
—
|
—
|
33.8
|
9.0
|
2.3
|
—
|
11.3
|
Change in fair value of
biological assets
|
—
|
—
|
27.5
|
27.5
|
—
|
—
|
50.0
|
50.0
|
Unrealized and deferred
loss (gain) on derivative
contracts
|
—
|
—
|
(2.8)
|
(2.8)
|
—
|
—
|
(11.3)
|
(11.3)
|
Adjusted Operating
Earnings
|
$
62.2
|
(16.3)
|
—
|
$
45.9
|
$ 57.7
|
(34.0)
|
—
|
$ 23.6
|
Depreciation and
amortization
|
54.8
|
4.9
|
—
|
59.7
|
48.3
|
4.1
|
—
|
52.4
|
Items included in other
income (expense)
representative of ongoing
operations(iv)
|
(1.7)
|
(0.2)
|
(0.6)
|
(2.5)
|
(1.9)
|
(0.1)
|
—
|
(1.9)
|
Adjusted
EBITDA
|
$
115.3
|
(11.6)
|
(0.6)
|
$
103.1
|
$
104.1
|
(30.0)
|
—
|
$ 74.1
|
Adjusted EBITDA
Margin
|
9.3 %
|
(31.7) %
|
n/a
|
8.1 %
|
9.0 %
|
(73.6) %
|
n/a
|
6.2 %
|
Interest expense and
other financing costs
|
(37.5)
|
(0.1)
|
—
|
(37.6)
|
(8.3)
|
(2.5)
|
—
|
(10.8)
|
Interest
income
|
0.8
|
—
|
—
|
0.8
|
—
|
—
|
—
|
—
|
Depreciation and
amortization
|
(54.8)
|
(4.9)
|
—
|
(59.7)
|
(48.3)
|
(4.1)
|
—
|
(52.4)
|
Adjusted
EBT
|
$
23.8
|
(16.5)
|
(0.6)
|
$
6.7
|
$ 47.5
|
(36.6)
|
—
|
$ 10.9
|
(i)
|
Totals may not add
due to rounding.
|
(ii)
|
Non-allocated
includes eliminations of inter-segment sales and associated cost of
goods sold, and non-allocated costs which are comprised of income
and expenses not separately identifiable to reportable segments or
are not part of the measures used by the Company when assessing a
segment's operating results.
|
(iii)
|
Start-up expenses
are temporary costs as a result of operating new facilities that
are or have been classified as Construction Capital. These costs
can include training, product testing, yield and labour efficiency
variances, duplicative overheads and other temporary expenses
required to ramp-up production.
|
(iv)
|
Primarily includes
certain costs associated with sustainability projects, gains and
losses on the sale of long-term assets, gains and losses on
investments, and other miscellaneous expenses.
|
|
Six months ended
June 30, 2023
|
Six months ended June
30, 2022
|
($
millions)(i) (Unaudited)
|
Meat
Protein
Group
|
Plant
Protein
Group
|
Non-
Allocated(ii)
|
Total
|
Meat
Protein
Group
|
Plant
Protein
Group
|
Non-
Allocated(ii)
|
Total
|
(Loss) earnings
before income taxes
|
$
18.9
|
(44.6)
|
(108.0)
|
$
(133.7)
|
$ 84.2
|
(92.2)
|
(29.6)
|
$
(37.6)
|
Interest expense and
other financing costs
|
—
|
—
|
69.2
|
69.2
|
—
|
—
|
18.5
|
18.5
|
Other
expense
|
3.2
|
0.4
|
3.3
|
6.9
|
3.4
|
0.1
|
1.6
|
5.1
|
Restructuring and other
related costs
|
7.6
|
11.2
|
—
|
18.8
|
3.4
|
18.7
|
—
|
22.1
|
Earnings (loss) from
operations
|
$
29.7
|
(33.0)
|
(35.5)
|
$
(38.9)
|
$ 91.0
|
(73.5)
|
(9.5)
|
$
8.0
|
Start-up expenses from
Construction Capital(iii)
|
68.5
|
—
|
—
|
68.5
|
17.7
|
4.5
|
—
|
22.2
|
Change in fair value of
biological assets
|
—
|
—
|
28.7
|
28.7
|
—
|
—
|
10.7
|
10.7
|
Unrealized and deferred
loss (gain) on derivative
contracts
|
—
|
—
|
6.8
|
6.8
|
—
|
—
|
(1.2)
|
(1.2)
|
Adjusted Operating
Earnings
|
$
98.2
|
(33.0)
|
—
|
$
65.2
|
$
108.7
|
(68.9)
|
—
|
$ 39.7
|
Depreciation and
amortization
|
107.6
|
9.8
|
—
|
117.4
|
96.3
|
8.3
|
—
|
104.6
|
Items included in other
income (expense)
representative of ongoing
operations(iv)
|
(3.2)
|
(0.4)
|
(0.6)
|
(4.1)
|
(3.4)
|
(0.1)
|
—
|
(3.5)
|
Adjusted
EBITDA
|
$
202.6
|
(23.6)
|
(0.6)
|
$
178.4
|
$
201.6
|
(60.7)
|
—
|
$
140.9
|
Adjusted EBITDA
Margin
|
8.5 %
|
(31.9) %
|
n/a
|
7.3 %
|
9.0 %
|
(70.8) %
|
n/a
|
6.1 %
|
Interest expense and
other financing costs
|
(69.0)
|
(0.1)
|
—
|
(69.2)
|
(13.5)
|
(5.0)
|
—
|
(18.5)
|
Interest
income
|
0.8
|
—
|
—
|
0.8
|
—
|
—
|
—
|
—
|
Depreciation and
amortization
|
(107.6)
|
(9.8)
|
—
|
(117.4)
|
(96.3)
|
(8.3)
|
—
|
(104.6)
|
Adjusted
EBT
|
$
26.8
|
(33.5)
|
(0.6)
|
$ (7.3)
|
$ 91.8
|
(74.0)
|
—
|
$ 17.8
|
(i)
|
Totals may not add
due to rounding.
|
(ii)
|
Non-allocated
includes eliminations of inter-segment sales and associated cost of
goods sold, and non-allocated costs which are comprised of income
and expenses not separately identifiable to reportable segments or
are not part of the measures used by the Company when assessing a
segment's operating results.
|
(iii)
|
Start-up expenses
are temporary costs as a result of operating new facilities that
are or have been classified as Construction Capital. These costs
can include training, product testing, yield and labour efficiency
variances, duplicative overheads and other temporary expenses
required to ramp-up production.
|
(iv)
|
Primarily includes
certain costs associated with sustainability projects, gains and
losses on the sale of long-term assets, gains and losses on
investments, and other miscellaneous expenses.
|
Adjusted Earnings per Share
Adjusted Earnings per Share, a non-IFRS measure, is used by
Management to evaluate financial operating results. It is defined
as basic earnings per share and is adjusted on the same basis as
Adjusted Operating Earnings. The table below provides a
reconciliation of basic earnings per share as reported under
IFRS in the Consolidated Interim Financial Statements to Adjusted
Earnings per Share for the three and six months ended June 30 as indicated below. Management believes
this basis is the most appropriate on which to evaluate financial
results as they are representative of the ongoing operations of the
Company.
($ per
share)
(Unaudited)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
2023
|
2022
|
2023
|
2022
|
Basic loss per
share
|
|
$
(0.44)
|
|
$
(0.44)
|
|
$
(0.92)
|
|
$
(0.33)
|
Restructuring and other
related costs(i)
|
|
0.08
|
|
0.13
|
|
0.14
|
|
0.15
|
Items included in other
expense not considered representative of ongoing
operations(ii)
|
|
0.01
|
|
—
|
|
0.02
|
|
0.01
|
Start-up expenses from
Construction Capital(iii)
|
|
0.21
|
|
0.07
|
|
0.42
|
|
0.14
|
Change in fair value of
biological assets
|
|
0.17
|
|
0.30
|
|
0.18
|
|
0.06
|
Change in unrealized
and deferred fair value on derivatives
|
|
(0.02)
|
|
(0.07)
|
|
0.04
|
|
(0.01)
|
Adjusted Earnings
per Share(iv)
|
|
$
0.00
|
|
$
0.00
|
|
$
(0.12)
|
|
$
0.03
|
(i)
|
Includes per share
impact of restructuring and other related costs, net of
tax.
|
(ii)
|
Primarily includes
legal fees, gains or losses on investment property, and transaction
related costs, net of tax.
|
(iii)
|
Start-up expenses
are temporary costs as a result of operating new facilities that
are or have been classified as Construction Capital. These costs
can include training, product testing, yield and labour efficiency
variances, duplicative overheads and other temporary expenses
required to ramp-up production, net of tax.
|
(iv)
|
Totals may not add
due to rounding.
|
Construction Capital
Construction Capital, a non-IFRS measure, is used by Management
to evaluate the amount of capital resources invested in specific
strategic development projects that are not yet operational. It is
defined as investments and related financing charges in projects
over $50.0 million that are related
to longer-term strategic initiatives, with no returns expected for
at least 12 months from commencement of construction and the asset
is re-categorized from Construction Capital once
operational. The current balance of Construction Capital
includes investment in increased further processed poultry capacity
in the Prepared Meats facility in Brampton, Ontario. Investments in capacity at
the Walker Drive facility in Brampton,
Ontario, and the plant protein facility in Indianapolis, Indiana were moved out of
construction capital upon completion during the first quarter of
2022, and the London Poultry facility was moved out of construction
capital during the fourth quarter of 2022 when commercial
production began. The following table is a summary of Construction
Capital activity and debt financing for the periods indicated
below.
($
thousands)
(Unaudited)
|
|
2023
|
|
2022
|
Property and
equipment and intangibles at January 1
|
|
$
2,663,985
|
|
$
2,554,483
|
Other capital and
intangible assets at January 1(i)
|
|
2,654,419
|
|
1,811,164
|
Construction Capital
at January 1
|
|
$
9,566
|
|
$ 743,319
|
Additions
|
|
8,822
|
|
54,776
|
Transfers from
Construction Capital
|
|
—
|
|
(182,210)
|
Construction
Capital at March 31
|
|
$
18,388
|
|
$ 615,885
|
Additions
|
|
18,896
|
|
49,903
|
Construction
Capital at June 30(ii)
|
|
$
37,284
|
|
$ 665,788
|
Other capital and
intangible assets at June 30(i)
|
|
2,598,055
|
|
1,957,586
|
Property and
equipment and Intangibles at June 30
|
|
$
2,635,339
|
|
$
2,623,374
|
|
|
|
|
|
Construction Capital
debt financing(iii)(iv)
|
|
$
36,589
|
|
$ 637,795
|
(i)
|
Other capital and
intangible assets consists of property and equipment and
intangibles that do not meet the definition of Construction
Capital.
|
(ii)
|
As at June 30, 2023,
the net book value of Construction Capital includes $0.5 million
related to intangible assets (June 30, 2022: $2.6 million; December
31, 2022: $0.0 million).
|
(iii)
|
Does not include
$1,011.3 million in capital that has been transferred out but is
still in the start-up stage (2022: $260.8 million).
|
(iv)
|
Assumed to be fully
funded by debt to the extent that the Company has Net Debt
outstanding. Construction Capital debt financing excludes interest
paid and capitalized.
|
Net Debt
The following table reconciles Net Debt to amounts reported
under IFRS in the Company's Consolidated Interim Financial
Statements as at June 30 as indicated
below. The Company calculates Net Debt as cash and cash
equivalents, less long-term debt and bank indebtedness. Management
believes this measure is useful in assessing the amount of
financial leverage employed.
($
thousands)
(Unaudited)
|
|
As at June
30,
|
|
2023
|
|
2022
|
Cash and cash
equivalents
|
|
$
156,859
|
|
$
92,971
|
Current portion of
long-term debt
|
|
$
(398,394)
|
|
$
(1,029)
|
Long-term
debt
|
|
(1,565,822)
|
|
(1,513,124)
|
Total
debt
|
|
$
(1,964,216)
|
|
$
(1,514,153)
|
Net
Debt
|
|
$
(1,807,357)
|
|
$
(1,421,182)
|
Free Cash Flow
Free Cash Flow, a non-IFRS measure, is used by Management to
evaluate cash flow after investing in the maintenance of the
Company's asset base. It is defined as cash provided by operations,
less Maintenance Capital(i) and associated
interest paid and capitalized. The following table calculates Free
Cash Flow for the periods indicated below:
($
thousands)
(Unaudited)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Cash (used in) provided
by operating activities
|
|
$
(57,004)
|
|
$
16,492
|
|
$
(21,290)
|
|
$
(68,501)
|
Maintenance
Capital(i)
|
|
(19,070)
|
|
(16,336)
|
|
(42,178)
|
|
(30,870)
|
Interest paid and
capitalized related to Maintenance Capital
|
|
(252)
|
|
(1)
|
|
(486)
|
|
(172)
|
Free Cash
Flow(ii)
|
|
$
(76,326)
|
|
$
155
|
|
$
(63,954)
|
|
$
(99,543)
|
(i)
|
Maintenance Capital
is defined as non-discretionary investment required to maintain the
Company's existing operations and competitive position. For the
three and six months ended June 30, 2023, total capital spending of
$55.9 million and $105.1 million (2022: $81.9 million and $179.2
million) shown on the Consolidated Statements of Cash Flows is made
up of Maintenance Capital of $19.1 million and $42.2 million (2022:
$16.3 million and $30.9 million), and Growth Capital of $36.8
million and $62.9 million (2022: $65.6 million and $148.4
million).Growth Capital is defined as discretionary investment
meant to create stakeholder value through initiatives that for
example, expand margins, increase capacities or create further
competitive advantage.
|
(ii)
|
Certain comparative
figures have been restated to conform with current year
presentation.
|
Return on Net Assets ("RONA")
RONA is calculated by dividing tax effected earnings from
operations (adjusted for items which are not considered
representative of the underlying operations of the business) by
average monthly net assets. Net assets are defined as total assets
(excluding cash and deferred tax assets) less non-interest bearing
liabilities (excluding deferred tax liabilities). Management
believes that RONA is an appropriate basis upon which to evaluate
long-term financial performance.
Forward-Looking Statements
This document contains, and the Company's oral and written
public communications often contain, "forward-looking information"
within the meaning of applicable securities law. These statements
are based on current expectations, estimates, projections, beliefs,
judgements and assumptions based on information available at the
time the applicable forward-looking statement was made and in light
of the Company's experience combined with its perception of
historical trends. Such statements include, but are not limited to,
statements with respect to objectives and goals, in addition to
statements with respect to beliefs, plans, targets, goals,
objectives, expectations, anticipations, estimates, and intentions.
Forward-looking statements are typically identified by words such
as "anticipate", "continue", "estimate", "expect", "may", "will",
"project", "should", "could", "would", "believe", "plan", "intend",
"design", "target", "undertake", "view", "indicate", "maintain",
"explore", "entail", "schedule", "objective", "strategy", "likely",
"potential", "outlook", "aim", "propose", "goal", and similar
expressions suggesting future events or future performance. These
statements are not guarantees of future performance and involve
assumptions, risks and uncertainties that are difficult to
predict.
By their nature, forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those
anticipated in such forward-looking statements. The Company
believes the expectations reflected in the forward-looking
statements are reasonable, but no assurance can be given that these
expectations will prove to be correct and such forward-looking
statements should not be unduly relied upon.
Specific forward-looking information in this document may
include, but is not limited to, statements with respect to:
- post-COVID-19 pandemic recovery, including implications for
supply chain, workforce availability, global pork markets and
consumption patterns;
- expected future cash flows and the sufficiency thereof, sources
of capital at attractive rates, future contractual obligations,
future financing options, renewal of credit facilities, compliance
with credit facility covenants, and availability of capital to fund
growth plans, operating obligations and dividends;
- future performance, including future financial objectives,
goals and targets, category growth analysis, expected capital spend
and expected SG&A expenditures, global pork market dynamics,
Japan export market margin
outlook, labour markets, inflationary pressures (including the
ability to price for inflation);
- ongoing impacts or potential for a recurrence of a
cybersecurity incident on the Company's systems, business and
operations, as well as the ability to mitigate the financial and
operational impacts, the success of remediation and recovery
efforts, the implications of data exfiltration, and other ongoing
risks associated with cybersecurity;
- the execution of the Company's business strategy, including the
development and expected timing of business initiatives, brand
expansion and repositioning, plant protein category investment and
performance, market access in China and Japan, capital allocation decisions (including
investment in share repurchases under the NCIB) and investment in
potential growth opportunities and the expected returns associated
therewith;
- the impact of international trade conditions and markets on the
Company's business, including access to markets, implications
associated with the spread of foreign animal disease (such as
African Swine Fever ("ASF")) and other animal diseases such as
Avian Influenza, as well as other social, economic and political
factors that affect trade, including the war in Ukraine;
- competitive conditions and the Company's ability to position
itself competitively in the markets in which it competes;
- capital projects, including planning, construction, estimated
expenditures, schedules, approvals, expected capacity, in-service
dates and anticipated benefits of construction of new facilities
and expansions of existing facilities;
- the Company's dividend policy, including future levels and
sustainability of cash dividends, the tax treatment thereof and
future dividend payment dates;
- the impact of commodity prices and foreign exchange impacts on
the Company's operations and financial performance, including the
use and effectiveness of hedging instruments;
- operating risks, including the execution, monitoring and
continuous improvement of the Company's food safety programs,
animal health initiatives, cost reduction initiatives, and service
levels (including service level penalties);
- the implementation, cost and impact of environmental
sustainability initiatives, the ability of the Company to achieve
its sustainability objectives, changing climate and sustainability
laws and regulation, changes in customer and consumer expectations
related to sustainability matters, as well as the anticipated
future cost of remediating environmental liabilities;
- the adoption of new accounting standards and the impact of such
adoption on the financial position of the Company;
- expectations regarding pension plan performance, including
future pension plan assets, liabilities and contributions; and
- developments and implications of actual or potential legal
actions.
Various factors or assumptions are typically applied by the
Company in drawing conclusions or making the forecasts,
projections, predictions or estimations set out in the
forward-looking statements. These factors and assumptions are based
on information currently available to the Company, including
information obtained by the Company from third-party sources and
include but are not limited to the following:
- expectations regarding the ongoing impact and future
implications of post-COVID-19 pandemic recovery, including
adaptations in operations, supply chain, customer and consumer
behaviour, economic patterns (including but not limited to global
pork markets), foreign exchange rates, international trade dynamics
and access to capital;
- the competitive environment, associated market conditions and
market share metrics, category growth or contraction, the expected
behaviour of competitors and customers and trends in consumer
preferences;
- the success of the Company's business strategy, including
execution of the strategy in the Meat Protein Group, the execution
of the Adjusted EBITDA neutral strategy for the Plant Protein Group
and the relationship between pricing, inflation, volume and sales
of the Company's products;
- prevailing commodity prices (especially in pork and feed
markets), interest rates, tax rates and exchange rates;
- potential ongoing impacts of the cybersecurity incident, the
potential for a future incident, the risks associated with data
exfiltration, the availability of insurance, the effectiveness of
remediation and prevention activities, third party activities,
ongoing impacts, customer, consumer and supplier responses and
regulatory considerations;
- the economic condition of and the sociopolitical dynamics
between Canada, the U.S.,
Japan and China, and the ability of the Company to
access markets and source ingredients and other inputs in light of
global sociopolitical disruption, and the ongoing impact of the war
in Ukraine on international
relations, trade and markets;
- the spread of foreign animal disease (including ASF and Avian
Influenza), preparedness strategies to manage such spread, and
implications for all protein markets;
- the availability of and access to capital to fund future
capital requirements and ongoing operations;
- expectations regarding participation in and funding of the
Company's pension plans;
- the availability of insurance coverage to manage certain
liability exposures;
- the extent of future liabilities and recoveries related to
legal claims;
- prevailing regulatory, tax and environmental laws; and
- future operating costs and performance, including the Company's
ability to achieve operating efficiencies and maintain sales
volumes, turnover of inventories and turnover of accounts
receivable.
Readers are cautioned that these assumptions may prove to be
incorrect in whole or in part. The Company's actual results may
differ materially from those anticipated in any forward-looking
statements.
Factors that could cause actual results or outcomes to differ
materially from the results expressed, implied, or projected in the
forward-looking statements contained in this document include,
among other things, risks associated with the following:
- implications of the post-COVID-19 pandemic recovery on the
operations and financial performance of the Company, as well the
ongoing implications for macro socio-economic trends;
- macro economic trends, including inflation, recessionary
indicators, labour availability and labour market dynamics and
international trade trends (including global pork markets);
- the results of the Company's execution of its business plans,
the degree to which benefits are realized or not, and the timing
associated realizing those benefits, including the implications on
cash flow;
- competition, market conditions, and the activities of
competitors and customers, including the expansion or contraction
of key categories. pork market dynamics and Japan export margins;
- cybersecurity and maintenance and operation of the Company's
information systems, processes and data, recovery, restoration and
long term impacts of the cybersecurity event, the risk of future
cybersecurity events, actions of third parties, risks of data
exfiltration, effectiveness of business continuity planning and
execution, and availability of insurance;
- the health status of livestock, including the impact of
potential pandemics;
- international trade and access to markets and supplies, as well
as social, political and economic dynamics, including the war in
Ukraine;
- operating performance, including manufacturing operating
levels, fill rates and penalties;
- availability of and access to capital, and compliance with
credit facility covenants;
- decision respecting the return of capital to shareholders;
- the execution of capital projects, including cost, schedule and
regulatory variables, all of which impact expected returns on
investment;
- food safety, consumer liability and product recalls;
- climate change, climate regulation and the Company's
sustainability performance;
- strategic risk management, including execution of the Adjusted
EBITDA neutral strategy in the plant protein segment;
- acquisitions and divestitures;
- fluctuations in the debt and equity markets;
- fluctuations in interest rates and currency exchange
rates;
- pension assets and liabilities;
- cyclical nature of the cost and supply of hogs and the
competitive nature of the pork market generally;
- the effectiveness of commodity and interest rate hedging
strategies;
- impact of changes in the market value of the biological assets
and hedging instruments;
- the supply management system for poultry in Canada;
- availability of plant protein ingredients;
- intellectual property, including product innovation, product
development, brand strategy and trademark protection;
- consolidation of operations and focus on protein;
- the use of contract manufacturers;
- reputation;
- weather;
- compliance with government regulation and adapting to changes
in laws;
- actual and threatened legal claims;
- consumer trends and changes in consumer tastes and buying
patterns;
- environmental regulation and potential environmental
liabilities;
- consolidation in the retail environment;
- employment matters, including complying with employment laws
across multiple jurisdictions, the potential for work stoppages due
to non-renewal of collective agreements, recruiting and retaining
qualified personnel, reliance on key personnel and succession
planning;
- pricing of products;
- managing the Company's supply chain;
- changes in International Financial Reporting Standards and
other accounting standards that the Company is required to adhere
to for regulatory purposes; and
- other factors as set out under the heading "Risk Factors" in
the Company's Management Discussion and Analysis for the year ended
December 31, 2022.
The Company cautions readers that the foregoing list of factors
is not exhaustive.
Readers are further cautioned that some of the forward-looking
information, such as statements concerning future capital
expenditures, Adjusted EBITDA Margin growth in the Meat Protein
Group, and Adjusted EBITDA target in the Plant Protein Group
(including the timing, pace and impact of restructuring
activities), may be considered to be financial outlooks for
purposes of applicable securities legislation. These financial
outlooks are presented to evaluate potential future earnings and
anticipated future uses of cash flows and may not be appropriate
for other purposes. Readers should not assume these financial
outlooks will be achieved.
More information about risk factors can be found under the
heading "Risk Factors" in the Company's Annual Management's
Discussion and Analysis for the year ended December 31, 2022,
that is available on SEDAR at www.sedar.com. The reader should
review such section in detail. Additional information concerning
the Company, including the Company's Annual Information Form, is
available on SEDAR at www.sedar.com.
All forward-looking statements included herein speak only as of
the date hereof. Unless required by law, the Company does not
undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. All forward-looking statements
contained herein are expressly qualified by this cautionary
statement.
About Maple Leaf Foods Inc.
Maple Leaf Foods is a carbon neutral company with a
vision to be the most sustainable protein company on earth,
responsibly producing food products under leading brands including
Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural Selections®,
Schneiders®, Schneiders® Country Naturals®, Mina®, Greenfield
Natural Meat Co.®, Lightlife® and Field Roast™. The Company
employs approximately 14,000 people and does business primarily in
Canada, the U.S. and
Asia. The Company is headquartered in Mississauga, Ontario and its shares trade on
the Toronto Stock Exchange (MFI).
Consolidated Interim Balance Sheets
(In thousands of
Canadian dollars)
(Unaudited)
|
As at June
30,
2023
|
As at June 30,
2022(i)
|
As at December 31,
2022(i)
|
As at January 1,
2022(i)
|
ASSETS
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
156,859
|
|
$
92,971
|
|
$
91,076
|
|
$
162,031
|
Accounts
receivable
|
|
205,930
|
|
191,199
|
|
167,611
|
|
167,082
|
Notes
receivable
|
|
48,159
|
|
62,609
|
|
48,556
|
|
33,294
|
Inventories
|
|
523,377
|
|
507,489
|
|
485,979
|
|
409,677
|
Biological
assets
|
|
111,796
|
|
129,181
|
|
144,169
|
|
138,209
|
Income taxes
recoverable
|
|
69,521
|
|
6,297
|
|
57,497
|
|
1,830
|
Prepaid expenses and
other assets
|
|
36,786
|
|
50,774
|
|
50,266
|
|
24,988
|
Assets held for
sale
|
|
11,204
|
|
604
|
|
604
|
|
—
|
Total current
assets
|
|
$ 1,163,632
|
|
$ 1,041,124
|
|
$ 1,045,758
|
|
$
937,111
|
Property and
equipment
|
|
2,285,314
|
|
2,262,609
|
|
2,303,424
|
|
2,189,165
|
Right-of-use
assets
|
|
150,211
|
|
158,328
|
|
159,199
|
|
161,662
|
Investments
|
|
22,869
|
|
22,667
|
|
23,712
|
|
22,326
|
Investment
property
|
|
5,289
|
|
7,244
|
|
5,289
|
|
5,289
|
Employee
benefits
|
|
49,699
|
|
15,873
|
|
12,531
|
|
—
|
Other long-term
assets
|
|
9,601
|
|
18,928
|
|
12,493
|
|
9,780
|
Deferred tax
asset
|
|
41,450
|
|
48,725
|
|
42,541
|
|
39,907
|
Goodwill
|
|
477,353
|
|
662,261
|
|
477,353
|
|
658,673
|
Intangible
assets
|
|
350,025
|
|
360,765
|
|
360,561
|
|
365,318
|
Total long-term
assets
|
|
$ 3,391,811
|
|
$ 3,557,400
|
|
$ 3,397,103
|
|
$ 3,452,120
|
Total
assets
|
|
$ 4,555,443
|
|
$ 4,598,524
|
|
$ 4,442,861
|
|
$ 4,389,231
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
|
Accounts payable and
accruals
|
|
$
528,481
|
|
$
545,432
|
|
$
485,114
|
|
$
526,189
|
Current portion of
provisions
|
|
23,837
|
|
32,680
|
|
42,589
|
|
842
|
Current portion of
long-term debt
|
|
398,394
|
|
1,029
|
|
921
|
|
5,176
|
Current portion of
lease obligations
|
|
37,749
|
|
37,522
|
|
38,321
|
|
31,375
|
Income taxes
payable
|
|
1,600
|
|
—
|
|
2,311
|
|
23,853
|
Other current
liabilities
|
|
17,998
|
|
43,106
|
|
64,684
|
|
81,265
|
Total current
liabilities
|
|
$ 1,008,059
|
|
$
659,769
|
|
$
633,940
|
|
$
668,700
|
Long-term
debt
|
|
1,565,822
|
|
1,513,124
|
|
1,709,493
|
|
1,247,073
|
Lease
obligations
|
|
137,029
|
|
142,462
|
|
144,569
|
|
144,391
|
Employee
benefits
|
|
64,251
|
|
64,964
|
|
64,280
|
|
97,629
|
Provisions
|
|
2,281
|
|
16,197
|
|
3,799
|
|
44,650
|
Other long-term
liabilities
|
|
928
|
|
2,232
|
|
1,841
|
|
1,057
|
Deferred tax
liability
|
|
223,190
|
|
177,360
|
|
221,606
|
|
147,060
|
Total long-term
liabilities
|
|
$ 1,993,501
|
|
$ 1,916,339
|
|
$ 2,145,588
|
|
$ 1,681,860
|
Total
liabilities
|
|
$ 3,001,560
|
|
$ 2,576,108
|
|
$ 2,779,528
|
|
$ 2,350,560
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
Share
capital
|
|
$
859,046
|
|
$
862,688
|
|
$
850,086
|
|
$
847,016
|
Retained
earnings
|
|
671,870
|
|
1,160,951
|
|
809,616
|
|
1,212,244
|
Contributed
surplus
|
|
—
|
|
9,969
|
|
—
|
|
5,371
|
Accumulated other
comprehensive income
|
|
30,150
|
|
14,724
|
|
29,547
|
|
286
|
Treasury
shares
|
|
(7,183)
|
|
(25,916)
|
|
(25,916)
|
|
(26,246)
|
Total shareholders'
equity
|
|
$ 1,553,883
|
|
$ 2,022,416
|
|
$ 1,663,333
|
|
$ 2,038,671
|
Total liabilities
and equity
|
|
$ 4,555,443
|
|
$ 4,598,524
|
|
$ 4,442,861
|
|
$ 4,389,231
|
(i) Restated, refer
to Note 3 of the Consolidated Interim Financial
Statements.
|
Consolidated Interim Statements of Net Loss
(In thousands of
Canadian dollars, except share amounts)
(Unaudited)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
1,269,664
|
|
$ 1,195,133
|
|
$
2,444,553
|
|
$ 2,321,686
|
Cost of goods
sold
|
|
1,176,069
|
|
1,107,894
|
|
2,274,511
|
|
2,080,584
|
Gross profit
|
|
$
93,595
|
|
$
87,239
|
|
$ 170,042
|
|
$ 241,102
|
Selling, general and
administrative expenses
|
|
106,184
|
|
113,608
|
|
208,897
|
|
233,065
|
(Loss) earnings before
the following:
|
|
$ (12,589)
|
|
$ (26,369)
|
|
$ (38,855)
|
|
$
8,037
|
Restructuring and other
related costs
|
|
11,026
|
|
19,039
|
|
18,775
|
|
22,057
|
Other
expense
|
|
2,579
|
|
2,452
|
|
6,874
|
|
5,076
|
(Loss) before interest
and income taxes
|
|
$ (26,194)
|
|
$ (47,860)
|
|
$ (64,504)
|
|
$ (19,096)
|
Interest expense and
other financing costs
|
|
37,554
|
|
10,786
|
|
69,157
|
|
18,502
|
(Loss) before income
taxes
|
|
$ (63,748)
|
|
$ (58,646)
|
|
$
(133,661)
|
|
$ (37,598)
|
Income tax (recovery)
expense
|
|
(10,070)
|
|
(4,034)
|
|
(22,279)
|
|
3,327
|
Net loss
|
|
$ (53,678)
|
|
$ (54,612)
|
|
$
(111,382)
|
|
$ (40,925)
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per
share attributable to common
shareholders:
|
|
|
|
|
|
|
|
|
Basic loss per
share
|
|
$
(0.44)
|
|
$
(0.44)
|
|
$
(0.92)
|
|
$
(0.33)
|
Diluted loss per
share
|
|
$
(0.44)
|
|
$
(0.44)
|
|
$
(0.92)
|
|
$
(0.33)
|
Weighted average number
of shares (millions):
|
|
|
|
|
|
|
|
|
Basic
|
|
121.5
|
|
124.1
|
|
121.5
|
|
124.0
|
Diluted
|
|
121.5
|
|
124.1
|
|
121.5
|
|
124.0
|
Consolidated Interim Statements of Other Comprehensive Income
(Loss)
(In thousands of
Canadian dollars)
(Unaudited)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ (53,678)
|
|
$ (54,612)
|
|
$
(111,382)
|
|
$ (40,925)
|
Other comprehensive
income
|
|
|
|
|
|
|
|
|
Actuarial (losses)
gains that will not be reclassified to profit or loss (Net of tax
of $8.9 million and $9.6 million; 2022: $0.2 million and $13.6
million)
|
|
$
25,779
|
|
$
505
|
|
$
27,903
|
|
$
39,406
|
Change in revaluation
surplus (Net of tax of $0.0 million and $1.7 million; 2022: $0.0
million and $0.0 million)
|
|
—
|
|
—
|
|
6,993
|
|
—
|
Total items that will
not be reclassified to profit or loss
|
|
$
25,779
|
|
$
505
|
|
$
34,896
|
|
$
39,406
|
Items that are or may
be reclassified subsequently to profit or loss:
|
|
|
|
|
|
|
|
|
Change in accumulated
foreign currency translation adjustment (Net of tax of $0.0 million
and $0.0 million; 2022: $0.0 million and $0.0 million)
|
|
(8,686)
|
|
15,063
|
|
(9,119)
|
|
8,092
|
Change in foreign
exchange on long-term debt designated as a net investment hedge
(Net of tax of $1.2 million and $1.2 million; 2022: $1.7 million
and $1.1 million)
|
|
6,498
|
|
(9,085)
|
|
6,618
|
|
(5,525)
|
Change in cash flow
hedges (Net of tax of $0.8 million and $1.8 million; 2022: $0.7
million and $4.1 million)
|
|
(782)
|
|
1,907
|
|
(3,889)
|
|
11,871
|
Total items that are or
may be reclassified subsequently to profit or loss
|
|
$
(2,970)
|
|
$
7,885
|
|
$
(6,390)
|
|
$
14,438
|
Total other
comprehensive income
|
|
$
22,809
|
|
$
8,390
|
|
$
28,506
|
|
$
53,844
|
Comprehensive (loss)
income
|
|
$ (30,869)
|
|
$ (46,222)
|
|
$ (82,876)
|
|
$
12,919
|
Consolidated Interim Statements of Changes in Total
Equity
|
|
|
|
Accumulated other
comprehensive income (loss)
|
|
|
(In thousands of Canadian dollars)
(Unaudited)
|
Share
capital
|
Retained
earnings
|
Contributed
surplus
|
Foreign
currency
translation
adjustment(i)
|
Unrealized
gains and
losses on
cash flow
hedges(i)
|
Unrealized
gains on fair
value of
investments(i)
|
Revaluation
Surplus(iii)
|
Treasury
shares
|
Total
equity
|
Balance at December
31, 2022(iii)
|
$
850,086
|
809,616
|
—
|
10,972
|
12,885
|
2,945
|
2,745
|
(25,916)
|
$
1,663,333
|
Net loss
|
—
|
(111,382)
|
—
|
—
|
—
|
—
|
—
|
—
|
(111,382)
|
Other
comprehensive income (loss)(ii)
|
—
|
27,903
|
—
|
(2,501)
|
(3,889)
|
—
|
6,993
|
—
|
28,506
|
Dividends declared
($0.42 per share)
|
—
|
(51,252)
|
—
|
—
|
—
|
—
|
—
|
—
|
(51,252)
|
Share-based
compensation expense
|
—
|
—
|
6,062
|
—
|
—
|
—
|
—
|
—
|
6,062
|
Deferred taxes on
share-based compensation
|
—
|
—
|
1,100
|
—
|
—
|
—
|
—
|
—
|
1,100
|
Exercise of stock
options
|
4,447
|
—
|
(1,363)
|
—
|
—
|
—
|
—
|
—
|
3,084
|
Shares
re-purchased
|
(4,498)
|
—
|
(11,595)
|
—
|
—
|
—
|
—
|
—
|
(16,093)
|
Shares sold by RSU
trust
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
9,841
|
9,841
|
Settlement of
share-based compensation
|
—
|
(3,015)
|
(15,192)
|
—
|
—
|
—
|
—
|
8,892
|
(9,315)
|
Change in obligation
for repurchase of shares
|
9,011
|
—
|
20,988
|
—
|
—
|
—
|
—
|
—
|
29,999
|
Balance at June 30,
2023
|
$
859,046
|
671,870
|
—
|
8,471
|
8,996
|
2,945
|
9,738
|
(7,183)
|
$
1,553,883
|
|
|
|
|
|
|
Accumulated other
comprehensive income (loss)(i)
|
|
|
(In thousands of Canadian dollars)
(Unaudited)
|
Share
capital
|
Retained
earnings
|
Contributed
surplus
|
Foreign
currency
translation
adjustment(i)
|
Unrealized
gains and
losses on
cash flow
hedges(i)
|
Unrealized
gains on fair
value of
investments(i)
|
Revaluation
Surplus(iii)
|
Treasury
shares
|
Total
equity
|
Balance at January 1,
2022(iii)
|
$
847,016
|
1,212,244
|
5,371
|
2,037
|
(7,441)
|
2,945
|
2,745
|
(26,246)
|
$ 2,038,671
|
Net loss
|
—
|
(40,925)
|
—
|
—
|
—
|
—
|
—
|
—
|
(40,925)
|
Other
comprehensive income (loss)(ii)
|
—
|
39,406
|
—
|
2,567
|
11,871
|
—
|
—
|
—
|
53,844
|
Dividends declared
($0.40 per share)
|
—
|
(49,774)
|
—
|
—
|
—
|
—
|
—
|
—
|
(49,774)
|
Share-based
compensation expense
|
—
|
—
|
13,758
|
—
|
—
|
—
|
—
|
—
|
13,758
|
Modification of stock
compensation plan
|
—
|
—
|
(3,594)
|
—
|
—
|
—
|
—
|
—
|
(3,594)
|
Deferred taxes on
share-based compensation
|
—
|
—
|
(800)
|
—
|
—
|
—
|
—
|
—
|
(800)
|
Exercise of stock
options
|
5,888
|
—
|
(1,289)
|
—
|
—
|
—
|
—
|
—
|
4,599
|
Shares purchased by
RSU trust
|
—
|
—
|
—
|
—
|
—
|
|
—
|
(7,500)
|
(7,500)
|
Settlement of
share-based compensation
|
—
|
—
|
(15,560)
|
—
|
—
|
—
|
—
|
7,830
|
(7,730)
|
Change in obligation
for repurchase of shares
|
9,784
|
—
|
12,083
|
—
|
—
|
—
|
—
|
—
|
21,867
|
Balance at June 30,
2022
|
$
862,688
|
1,160,951
|
9,969
|
4,604
|
4,430
|
2,945
|
2,745
|
(25,916)
|
$ 2,022,416
|
(i)
|
Items that are or
may be subsequently reclassified to profit or loss.
|
(ii)
|
Included in other
comprehensive income (loss) is the change in actuarial gains and
losses that will not be reclassified to profit or loss and has been
reclassified to retained earnings.
|
(iii)
|
Restated, refer to
Note 3 of the Consolidated Interim Financial
Statements.
|
Consolidated Interim Statements of Cash Flows
(In thousands of
Canadian dollars)
(Unaudited)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
2023
|
2022
|
2023
|
2022
|
CASH PROVIDED BY (USED
IN):
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ (53,678)
|
|
$ (54,612)
|
|
$
(111,382)
|
|
$ (40,925)
|
Add (deduct) items not
affecting cash:
|
|
|
|
|
|
|
|
|
Change in fair value
of biological assets
|
|
27,547
|
|
49,963
|
|
28,674
|
|
10,652
|
Depreciation and
amortization
|
|
66,371
|
|
57,239
|
|
133,796
|
|
114,430
|
Share-based
compensation
|
|
4,050
|
|
9,362
|
|
6,062
|
|
13,758
|
Deferred income
taxes
|
|
(5,144)
|
|
(3,160)
|
|
(8,018)
|
|
4,812
|
Income tax
current
|
|
(4,926)
|
|
(874)
|
|
(14,261)
|
|
(1,485)
|
Interest expense and
other financing costs
|
|
37,554
|
|
10,786
|
|
69,157
|
|
18,502
|
Loss on sale of
long-term assets
|
|
741
|
|
1,124
|
|
975
|
|
1,582
|
Impairment of property
and equipment and
ROU
assets
|
|
6,530
|
|
16,056
|
|
6,530
|
|
16,056
|
Change in fair value
of non-designated
derivatives
|
|
(8,635)
|
|
(14,109)
|
|
(5,526)
|
|
(12,535)
|
Change in net pension
obligation
|
|
(136)
|
|
1,944
|
|
331
|
|
4,442
|
Net income taxes
paid
|
|
3,143
|
|
(2,875)
|
|
1,366
|
|
(26,487)
|
Interest paid, net of
capitalized interest
|
|
(33,838)
|
|
(22,712)
|
|
(67,628)
|
|
(30,388)
|
Change in provision
for restructuring and other
related costs
|
|
(13,545)
|
|
1,743
|
|
(19,551)
|
|
3,456
|
Change in derivatives
margin
|
|
8,454
|
|
24,784
|
|
(5,286)
|
|
(319)
|
Cash settlement of
derivatives
|
|
(2,735)
|
|
—
|
|
8,274
|
|
—
|
Other
|
|
(3,913)
|
|
(6,559)
|
|
(3,696)
|
|
(7,810)
|
Change in non-cash
operating working capital
|
|
(84,844)
|
|
(51,608)
|
|
(41,107)
|
|
(136,242)
|
Cash (used in) provided
by operating activities
|
|
$ (57,004)
|
|
$
16,492
|
|
$ (21,290)
|
|
$ (68,501)
|
Investing
activities
|
|
|
|
|
|
|
|
|
Additions to long-term
assets
|
|
$ (55,869)
|
|
$ (81,935)
|
|
$
(105,121)
|
|
$
(179,240)
|
Interest paid and
capitalized
|
|
(757)
|
|
(5,123)
|
|
(1,238)
|
|
(9,620)
|
Proceeds from sale of
long-term assets
|
|
206
|
|
23
|
|
270
|
|
117
|
Purchase of
investments
|
|
(100)
|
|
—
|
|
(100)
|
|
—
|
Cash used in investing
activities
|
|
$ (56,520)
|
|
$ (87,035)
|
|
$
(106,189)
|
|
$
(188,743)
|
Financing
activities
|
|
|
|
|
|
|
|
|
Dividends
paid
|
|
$ (25,693)
|
|
$ (24,901)
|
|
$ (51,252)
|
|
$ (49,774)
|
Net increase in
long-term debt
|
|
219,554
|
|
141,085
|
|
268,354
|
|
255,947
|
Payment of lease
obligation
|
|
(7,462)
|
|
(8,682)
|
|
(17,380)
|
|
(18,090)
|
Receipt of lease
inducement
|
|
—
|
|
—
|
|
—
|
|
6,847
|
Exercise of stock
options
|
|
2,315
|
|
881
|
|
3,084
|
|
4,599
|
Repurchase of
shares
|
|
(5,324)
|
|
—
|
|
(16,093)
|
|
—
|
Sale (purchase) of
treasury shares
|
|
9,841
|
|
(7,500)
|
|
9,841
|
|
(7,500)
|
Payment of financing
fees
|
|
(2,281)
|
|
(3,845)
|
|
(3,292)
|
|
(3,845)
|
Cash provided by
financing activities
|
|
$ 190,950
|
|
$
97,038
|
|
$ 193,262
|
|
$ 188,184
|
Increase (decrease)
in cash and cash equivalents
|
|
$
77,426
|
|
$
26,495
|
|
$
65,783
|
|
$ (69,060)
|
Cash and cash
equivalents, beginning of period
|
|
79,433
|
|
66,476
|
|
91,076
|
|
162,031
|
Cash and cash
equivalents, end of period
|
|
$ 156,859
|
|
$
92,971
|
|
$ 156,859
|
|
$
92,971
|
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SOURCE Maple Leaf Foods Inc.