Maple Leaf Foods Inc. · TSX:MFI
Maple Leaf Foods — Q1 2023 Earnings Presentation
27 slides from Maple Leaf Foods's earnings presentation, May 11, 2023
Slide 1: Nearing the Turning Point
Nearing the Turning Point Q1 2023 Business & Financial Review All dollar amounts are presented in CAD dollars unless otherwise noted.
Slide 2: Forward-looking Statements and Non-IFRS Measures
Forward-looking Statements and Non-IFRS Measures This presentation contains “forward-looking information” within the meaning of applicable securities law. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which the Company operates, as
Slide 3: Maple Leaf Foods is an iconic, purpose-driven Canadian food company
Maple Leaf Foods is an iconic, purpose-driven Canadian food company
Slide 4: Our ambitious Blueprint guides us on our journey
Our ambitious Blueprint guides us on our journey MAPLE LEAF FOODS – Q1 2023 BUSINESS AND FINANCIAL REVIEW | MAY 11, 2023 4
Slide 5: Our journey is creating long-term value
Our journey is creating long-term value ✓ Iconic portfolio of Brands, with growing value-added sales and US exposure ✓ Industry-leading sustainability practices, with long-term commitment to sustainable food production ✓ Growing sustainable meat production, drawing on powerful consumer trends reshap
Slide 6: The execution of our strategic priorities is on track
The execution of our strategic priorities is on track, moving us one step closer toward the inflection point Topline sales growth of our portfolio of market leading consumer packaged goods brands, leading in Sustainable Meats and broadening our reach into the US market Stabilizing the supply chain t
Slide 7: Q1 2023 Highlights
Q1 2023 Highlights Topline growth delivering as expected 10-year lows in pork market conditions persist Significant progress in stabilizing our supply chain Implemented pricing action effective Q2 $1B in strategic investments successfully coming on-line Plant Protein transition to profitability on t
Slide 8: Q1 2023 - Meat Protein
Q1 2023 - Meat Protein Operating within Adjusted EBITDA target margins, excluding short-term factors Underlying business remains healthy • Brands demonstrate strong resilience • Progress in addressing supply-chain inefficiencies • Successfully restarted Brandon exports to China, expected to be Adjus
Slide 9: Q1 2023 Meat Protein Financial Results
Q1 2023 Meat Protein Financial Results Q1 2023 vs. LY Drivers • Pricing action implemented in prior quarters to Sales $1,143.9 +5.0% mitigate inflation, a favourable mix shift and Sales growth favourable FX • Partially offset by lower volumes met Gross Profit $90.5 (30.9%) expectations • Pork market
Slide 10: Meat Protein business has proven extremely resilient
Meat Protein business has proven extremely resilient; topline growth led by the strength of our Consumer Packaged Goods brands Driving Branded Leading in Broadening Delivering Growth Sustainable Meats our Reach Operational Excellence ✓ Continued growth in ✓ Continued Sustainable Meats ✓ 7 consecutiv
Slide 11: One Profit in a Pig dislocation continued into Q1
“One Profit in a Pig” dislocation continued into Q1. While the precise timing of recovery is difficult to predict, “green shoots” for a recovery continue to emerge USDA Pork Cutout – Hog Production Cost $140 $50 Spread US$ (CWT) $45 $130 $40 $35 $120 $30 $25 $110 $20 Cost of Hog Production: US$99/CW
Slide 12: Excluding short-term factors, Adjusted EBITDA margins delivering on track
Excluding short-term factors, Adjusted EBITDA margins delivering on track 16%+ Q1 is a Adj. EBITDA seasonally Margin low quarter MAPLE LEAF FOODS – Q1 2023 BUSINESS AND FINANCIAL REVIEW | MAY 11, 2023 12
Slide 13: Examining the Adjusted EBITDA margin bridge relative to our expectations
Examining the Adjusted EBITDA margin bridge relative to our expectations Q1 Impact What Happened in Q1 Outlook ∆ Q4 Pork Markets • Supply/demand imbalance and increased feed costs • We believe market forces will return to equilibrium ~100 bps ~270 bps, drove “one profit in a pig” margins to 10-year
Slide 14: $1.2B investment in organic projects set to add $130M to annual Adjusted EBITDA
$1.2B investment in organic projects are now coming online and are set to add $130M to annual Adjusted EBITDA Incremental Capital Project Benefits Adjusted EBITDA London Poultry facility ➢ More profitable product mix: through improved processing ➢ Annual Incremental The new 660,000 sq. ft. facility
Slide 15: London Poultry: commercial production has started
London Poultry: commercial production has started and the transition from St. Marys’ and Toronto facilities has been primarily completed Completed Current Remaining • Construction completed in Sept 2022 • Grounds transition in June (Toronto • Execute against the transition plan • Wet testing through
Slide 16: Bacon Centre of Excellence ramping up commercial production
Bacon Centre of Excellence ramping up commercial production Completed Current Remaining • Construction completed in Oct 2021 • Producing saleable product since • Transition from co-manufacturers and • Dry testing completed early 2022 ramp-up to be complete in H2 2023 • Commissioning remaining lines
Slide 17: Q1 2023 – Plant Protein
Q1 2023 – Plant Protein On track for Adjusted EBITDA neutral in H2 2023 We have rapidly shifted our playbook to pursue profitable growth • Market share grew 2.8% in Retail Refrigerated Plant- based Meat versus prior year • Q1 Adjusted EBITDA improved 63%* over prior year • Anticipate continued impro
Slide 18: Q1 2023 Plant Protein Financial Results
Q1 2023 Plant Protein Financial Results Q1 2023 vs. LY Drivers Lower retail and foodservice volumes, (22.0%) Sales $37.4 partially offset by an increase in pricing (ex-FX, in USD) and favourable FX Price increases, operational Strong Gross Profit ($3.3) +$3.0 improvements and reduction in start-up p
Slide 19: On track to achieve Plant Protein Adjusted EBITDA neutral in H2 2023
On track to achieve Plant Protein Adjusted EBITDA neutral in H2 2023 Completed Rest of 2023 Target ✓ SG&A reduced by 56% in Q1 2023 • Repurpose excess plant-based footprint to ✓ Achieve Adjusted EBITDA neutral or further processed poultry production better in H2 2023 ✓ Headcount lowered by 25%* • Pr
Slide 20: Production ramp-up at Indiana Tempeh plant exceeding expectations
Production ramp-up at Indiana Tempeh plant exceeding expectations Strategic Rationale Completed Current Status • Cost effective, scalable approach to meet • Existing 118,000 sq. ft. food facility • Product is available on shelves consumer demand • US$97 million for acquisition & build-out • Plant is
Slide 21: Total Company – Q1 2023 financial results
Total Company – Q1 2023 financial results Q1 2023 vs. LY Drivers Sales $1,174.9 +4.3% • Growth in Meat, partially offset by Sales growth lower sales in Plant met Adj. Operating Earnings $19.3 +19.8% expectations Adj. EBITDA $75.3 +12.7% • Challenging operating environment due to pork market headwind
Slide 22: Long-term outlook focused on delivering profitable growth
Long-term outlook focused on delivering profitable growth Meat Protein Plant Protein Capital Mid-to-high single digit sales Adjusted EBITDA improvement in Capital expenditures for 2023 to growth in 2023, driven by Q2 2023 of at least 50% compared be less than $250 million, with up continued momentum
Slide 23: Capital allocation focused on long-term growth and shareholder return
Capital allocation focused on long-term growth and shareholder return Capital Allocation Priorities Up to $120M for Maintenance Capital: Non-discretionary – maintains existing Maintenance… operations and competitiveness Balance Sheet Optimization: Investment grade balance sheet Less than $250M throu
Slide 24: Balance sheet reflects projects in start-up phase
Balance sheet reflects projects in start-up phase, at an inflection point of transitioning from “Cash OUT” to “Cash IN” ~ $1.7B • Nearly two-thirds of debt attributable to our three new manufacturing facilities ~ $0.7B • Construction is completed at these facilities, and they are at various stages o
Slide 25: Appendix
Appendix MAPLE LEAF FOODS – Q1 2023 BUSINESS AND FINANCIAL REVIEW | May 11, 2023 25
Slide 26: Reconciliation of non-IFRS metrics – Adjusted EBITDA Margin
Reconciliation of non-IFRS metrics – Adjusted EBITDA Margin Three months ended March 31, 2023 Three months ended March 31, 2022 Meat Plant Meat Plant ($ millions)(1) Protein Protein Non- Protein Protein Non- (Unaudited) Group Group allocated(2) Total Group Group allocated(2) Total Earnings (loss) be
Slide 27: Reconciliation of non-IFRS metrics – Adjusted Earnings per Share
Reconciliation of non-IFRS metrics – Adjusted Earnings per Share Three months ended March 31, ($ per share) (Unaudited) 2023 2022 Basic (loss) earnings per share ($0.48) 0.11 Restructuring and other related costs(1) 0.06 0.02 Items included in other expense not considered 0.02 0.01 representative of