Maple Leaf Foods Inc. · TSX:MFI
Maple Leaf Foods — Q4 2023 Earnings Presentation
37 slides from Maple Leaf Foods's earnings presentation, Feb 22, 2024
Slide 1: Q4 and Year End Financial Results
Q4 and Year End Financial Results February 22, 2024 All dollar amounts are presented in CAD 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 has established itself as an iconic, purpose-driven Canadian food company
Maple Leaf has established itself as an iconic, purpose-driven Canadian food company We are now focused on realizing our full potential 1995 2005 2010 2017 2017 2023 2024 FUTURE Foundation Building Transformation Investing for Future Harvesting the Benefits, Era Era Growth Realizing our Full Potenti
Slide 4: Our portfolio of leading brands includes the #1 and #2 brands in the category
Our portfolio of leading brands includes the #1 and #2 brands in the category #1 #2 #1 Schneiders is #1 brand in Maple Leaf is #2 brand in Greenfield is the #1 brand Packaged Meats Packaged Meats in Sustainable Packaged Meats (#3 in U.S.) #1 #1 #3 Maple Leaf Prime is the Mina is the #1 Halal In Refr
Slide 5: Driven by our purpose of Raising the Good in Food
Driven by our purpose of Raising the Good in Food, Maple Leaf Foods has demonstrated authentic leadership in sustainability and shared value creation Better Food Better Care Better Communities Better Planet • 100% of Maple Leaf-owned sow spaces • Advancing our goal to reduce food insecurity • World’
Slide 6: We are turning our attention to capitalizing on the platform we have built
We are turning our attention to capitalizing on the platform we have built on our journey to a purpose-driven, globally-admired and brand-led CPG company Capitalize On the platform we have built, Organic + Strategic Realize • Brand-led growth, constant Renovation Our near-term potential & Innovation
Slide 7: The next evolution of our strategic Blueprint will drive us forward
The next evolution of our strategic Blueprint will drive us forward MAPLE LEAF FOODS – Q4 2023 BUSINESS AND FINANCIAL REVIEW | FEBRUARY 22, 2024 7
Slide 8: Several important pivots in our strategic Blueprint moving forward
Several important pivots in our strategic Blueprint moving forward From To Building a world-class supply chain Harvesting the benefits of the investments we have made Navigating post-pandemic markets Becoming a Branded Consumer Packaged Goods powerhouse Canadian centre of gravity Growing at home and
Slide 9: With clear priorities for 2024
With clear priorities for 2024 • Profitable growth and market share expansion of leading brands portfolio Drive Adjusted EBITDA 1 • Pivot to growing profitably in Plant Protein category margin expansion • Growth and mix benefits of Sustainable Meats platform Harvest the benefits of • Finish the play
Slide 10: Business Results
Business Results Q4 and Full Year 2023 10
Slide 11: Today's key messages
Today’s key messages Adjusted EBITDA grew Delivered on our Capital projects to $428M in 2023, in a promise in delivered ~$25 million year of “progress, not Plant Protein in Adj. EBITDA in Q4 perfection” Adj. EBITDA grew by $155M or 57% Achieved target of Adj. EBITDA London Poultry and Bacon Centre o
Slide 12: Fourth-quarter and full year 2023 financial performance (consolidated)
Fourth-quarter and full year 2023 financial performance (consolidated) Q4 2023 vs. LY FY 2023 vs. LY Sales $1,193 +0.6% $4,868 +2.7% Adj. EBITDA $120 +117% $428 +57% Adj. EBITDA Margin 10.1% +540 bps 8.8% +300 bps MAPLE LEAF FOODS – Q4 2023 BUSINESS AND FINANCIAL REVIEW | FEBRUARY 22, 2024 12 1212
Slide 13: Adjusted EBITDA grew 57% to $428M in 2023
Adjusted EBITDA grew 57% to $428M in 2023 in a year of “progress, not perfection” Full Year 2023 Consolidated Adjusted EBITDA increased Q4 2023 Consolidated Adjusted EBITDA more than $155M, driven by both Meat Protein and Plant Protein doubled Consolidated Sales Adjusted EBITDA Consolidated Sales Ad
Slide 14: Delivered on our promise in Plant Protein
Delivered on our promise in Plant Protein Greenleaf Adjusted EBITDA (USD) achieved interim Greenleaf Sales (USD) have stabilized during 2023, target of Adjusted EBITDA neutral in Q4 2023 providing a stable growth platform $81K Sales have stabilized throughout 2023 $(7)M $(9)M $(9)M $(15)M $(19)M $(2
Slide 15: Right-sized Plant Protein business now positioned to drive profitable growth
Right-sized Plant Protein business now positioned to drive profitable growth New product innovation pipeline to stimulate consumer demand Renovating the base portfolio Fully integrating the Plant Protein business, increasing geographic focus ✓ Combining U.S. Meat and Plant Platform under a proven U.
Slide 16: Meat Protein margins fell short of expectations in Q4
Meat Protein margins fell short of expectations in Q4 Within Q4: Meat Protein Adjusted EBITDA • After positive progress in Q3, vertically integrated pork margins turned negative in Q4 $138.4 • Challenging Consumer demand environment, in Prepared Meats and Poultry with short-term impact $122.0 to vol
Slide 17: Market recovery stalled in Q4 with Pork markets and Japan lagging
Market recovery stalled in Q4 with Pork markets and Japan lagging normal conditions* by ~$28M or 250bps Vertically Integrated Margin Industry Vertically Integrated Margin USDA Pork Cutout – Industry Hog Production Cost turned negative in Q4 $140 $55 USDA Pork Cutout – Industry Hog Production Cost $1
Slide 18: Consumer demand environment impacting Prepared Meats volume and mix
Consumer demand environment impacting Prepared Meats volume and mix in the short-term, adapting brand plans in response Q4 Environment Adapting Brand Plans in Response Macro Trends Investing in Leading Brands Accelerating Pace of Innovation Consumer Relevant Promotions • Inflation • Interest rates
Slide 19: Transition to London Poultry now complete
Transition to London Poultry now complete ✓ Transitioned Schomberg, the last of four legacy plants within Q4 ✓ Processing ~1.8M birds per week ✓ Delivering 97%+ Service levels ✓ Fully staffed with ~1,600 employees on site ✓ Converted to 100% recyclable trays eliminating ~1000t of waste from landfill
Slide 20: Winnipeg Bacon Centre of Excellence operationally on track
Winnipeg Bacon Centre of Excellence operationally on track, focus on ramping up volumes ✓ Strong demand from both Retail and Food Service ✓ Plant is operationally on track, fully staffed and operating all three lines ✓ Short-term Focus: Eliminating the remaining start-up costs and onboarding new vol
Slide 21: Target of 14% - 16% Meat Protein Adjusted EBITDA margins in normal markets
Target of 14% - 16% Meat Protein Adjusted EBITDA margins in normal markets* remains unchanged 14% - 16% Adj. EBITDA Margin Profitable growth ~60 bps Driving cost driven by new ~250 bps* efficiencies, product continuous innovation, 11.4% Restoring short- term volume & mix improvement and Sustainable
Slide 22: Disciplined approach to Capital Management contributing to deleveraging
Disciplined approach to Capital Management contributing to deleveraging Improving profitability Conclusion of large-scale Higher cash flow and of the business capex programs natural deleveraging Capex now focused on Lowering net debt Improving maintenance and to Adjusted EBITDA, profitability optimi
Slide 23: Free cash flow generation to accelerate
Free cash flow generation to accelerate Near–term cash flow generation expected: Capex Free Cash Flow • Capex levels will be lower in 2024, ranging $629M from $170M to $190M $491M +110M • As London and Bacon reach optimal efficiency, expect significant reduction in start-up expenses $89M $312M • Inc
Slide 24: Streamlined team to sharpen focus and execute the plan
Streamlined team to sharpen focus and execute the plan David Smales Adam Grogan Dennis Organ Casey Richards Jumoke Fagbemi Joined as Chief Financial Officer Appointed Chief Operating Officer Joined as President, Pork Complex Appointed President, Maple Leaf Foods USA Joined as SVP, People January 202
Slide 25: Outlook: Transitory headwinds extending into Q1
Outlook: Transitory headwinds extending into Q1, expect global protein markets to progressively improve as 2024 unfolds Market Conditions Revenue Outlook Margin Outlook Balance Sheet / Capital Outlook Similar conditions into Q1 2024 Low-to mid-single digit sales growth in Adjusted EBITDA margin expa
Slide 26: Financial and Operational Results
Financial and Operational Results
Slide 27: Q4 Consolidated Results
Q4 Consolidated Results Q4 2023 Change YoY Delivered on plant results, meat Sales (millions) $1,192.7 +0.6% headwinds remain Gross profit $135.5 +34.7% • More than doubled consolidated Adjusted EBITDA margin to 10.1% from 4.7% last year Gross margin 11.4% +290 bps • Achieved Plant Protein neutral ta
Slide 28: Q4 Meat Protein Results
Q4 Meat Protein Results Q4 2023 Change YoY Continued improvement in profitability year over year Sales (millions) $1,159.0 +0.8% • Top-line growth driven by pricing, higher volume Gross profit $124.0 +50.9% and favourable mix; and recovery from prior year Gross margin 10.7% +350 bps cybersecurity in
Slide 29: Q4 Plant Protein Results
Q4 Plant Protein Results Q4 2023 Change YoY Achieved our Adjusted EBITDA neutral target Sales (millions) $36.5 -9.1%* • Progress improving profitability continued, driven Gross profit $5.1 +149.5% by operational improvement and lower SG&A Gross margin 13.9% +3,970 bps • Business concentrated on high
Slide 30: Balance Sheet
Balance Sheet Q4 2023 Change QoQ Solid balance sheet affords Total Assets $4,603.1 $(11.3) operational flexibility Long Term Debt $1,550.1 $(25.3) • Disciplined approach to capital allocation Total Debt $1,950.8 $(23.3) • London Poultry and Bacon Centre of Excellence capital expenditures are complet
Slide 31: Appendix
Appendix
Slide 32: Reconciliation of non-IFRS metrics – Adjusted EBITDA Margin
Reconciliation of non-IFRS metrics – Adjusted EBITDA Margin Three months ended December 31, 2023 Three months ended December 31, 2022 Meat Plant Meat Plant ($ millions)(1) Protein Protein Non- Protein Protein Non- (Unaudited) Group Group allocated(2) Total Group Group allocated(2) Total Earnings (lo
Slide 33: Reconciliation of non-IFRS metrics – Adjusted EBITDA Margin
Reconciliation of non-IFRS metrics – Adjusted EBITDA Margin Twelve months ended December 31, 2023 Twelve months ended December 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 (
Slide 34: Reconciliation of non-IFRS metrics – Adjusted Earnings per Share
Reconciliation of non-IFRS metrics – Adjusted Earnings per Share Three months ended December 31, ($ per share) (Unaudited) 2023 2022 Basic (loss) earnings per share ($0.08) (0.34) Restructuring and other related costs(1) — 0.04 Items included in other expense not considered 0.01 0.03 representative
Slide 35: Reconciliation of non-IFRS metrics – Adjusted Earnings per Share
Reconciliation of non-IFRS metrics – Adjusted Earnings per Share Twelve months ended December 31, ($ per share) (Unaudited) 2023 2022 Basic (loss) earnings per share ($1.03) (2.52) Impairment of Goodwill — 1.54 Restructuring and other related costs(1) 0.18 0.20 Items included in other expense not co
Slide 36: Reconciliation of non-IFRS metrics – Free Cash Flow
Reconciliation of non-IFRS metrics – Free Cash Flow Three months ended December 31, ($ thousands) (Unaudited) 2023 2022 Cash provided by operating activities $83,012 $42,320 Maintenance Capital(1) (19,235) (21,528) Interest paid and capitalized related to Maintenance Capital (377) (88) Free Cash Flo
Slide 37: Reconciliation of non-IFRS metrics – Free Cash Flow
Reconciliation of non-IFRS metrics – Free Cash Flow Twelve months ended December 31, ($ thousands) (Unaudited) 2023 2022 Cash provided by operating activities $176,883 $49,318 Maintenance Capital(1) (86,602) (69,889) Interest paid and capitalized related to Maintenance Capital (1,267) (323) Free Cas