Maple Leaf Foods Inc. · TSX:MFI
Maple Leaf Foods — Q2 2020 Earnings Presentation
27 slides from Maple Leaf Foods's earnings presentation, Jul 1, 2020
Slide 1: Maple Leaf Foods Q2 2020 Business & Financial Review
Maple Leaf Foods Q2 2020 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: Our Blueprint
UPDAE PICTURE Our Blueprint 3
Slide 4: We Built a Profitable Base; Now We're Focused on Profitable Growth
We Built a Profitable Base; Now We’re Focused on Profitable Growth 2010 Transformation 2014 2015 Brand-led Growth Today Exited non-core businesses Expanding sustainable meats platform Rothsay (2013) Olivieri (2013) Canada Bread (2014) Renovated core brands Transformed our supply chain
Slide 5: Continuing to Execute our Blueprint
Continuing to Execute our Blueprint 55 MAPLE LEAF FOODS – Q2 2020 BUSINESS AND FINANCIAL REVIEW | JULY 30, 2020
Slide 6: Maple Leaf's Growth Vectors Have Delivered Compelling Results
Maple Leaf’s Growth Vectors Have Delivered Compelling Results 1 Meat Protein Growth Vectors: Average Sales Growth, Last 12 Months excluding acquisitions/divestments Building leadership in sustainable meats Rapidly growing U.S. market reach Fueling growth through brand renovation >2x Construc
Slide 7: Well-defined Strategies and the Leading Brands to Support Them
Well-defined Strategies and the Leading Brands to Support Them Two businesses, with two distinct strategies Meat Protein Group Plant Protein Group Strategy: Drive profitable growth Strategy: Invest for growth Our Brands Adjusted EBITDA Dollars & Margin Sales (in millions; margin as % of sales) (in m
Slide 8: Q2 2020 Results
MAPLE LEAF Q2 2020 Results
Slide 9: Meat Protein Group – Excellent progress activating our Blueprint
Meat Protein Group – Excellent progress activating our Blueprint Drive Profitable Growth by… Q2 Highlights • Strong growth in Maple Leaf brand Investing in our brands Strong POS growth & market share1 expansion • to build demand & loyalty in wieners & sausage categories • Double-digit growth in su
Slide 10: Meat Protein Group – Q2 2020 Key Financial Metrics
Meat Protein Group – Q2 2020 Key Financial Metrics Q2 2020 vs. LY Drivers • Increased hogs processed, favourable mix to sustainable Sales $1,040.4 5.8% meats and brands, and higher sales to Asian markets • Q3/19 pricing action and FX also contributed Gross Profit $176.6 +8.8% • Favourable product an
Slide 11: Meat Protein Group – Putting the Q2 Pork Complex in Context
Meat Protein Group – Putting the Q2 Pork Complex in Context Hog Production Margins Pork Processor Margins Pork By-Product Market $20 $55 $6.0 $10 $40 $5.5 US/CWT US/CWT US/CWT $0 $25 5-yr avg. $5.0 -$10 $10 $4.5 -$20 Q1 Q2 Q3 Q4 -$5 Q1 Q2 Q3 Q4 $4.0 Q1 Q2 Q3 Q4 Hog production margins = live hog cost
Slide 12: Plant Protein Group – Exciting Brand Renovation Underway
Plant Protein Group – Exciting Brand Renovation Underway Invest for Growth by… Q2 Highlights • Category growth remained robust (U.S. refrigerated market +103%, Canada +25%)1 Entrenching prominent market share position • Greenleaf maintaining solid #2 market share position with market-leading distr
Slide 13: Plant Protein Group – Q2 2020 Key Financial Metrics
Plant Protein Group – Q2 2020 Key Financial Metrics Q2 2020 vs. LY Drivers • Expanded distribution of recent innovation products Sales $60.6 41.4% • Continued volume increases in existing portfolio • Sales +36.5% excluding impacts of foreign exchange Gross Profit $7.9 (15.3%) • Higher supply chain c
Slide 14: Plant Protein Group – Gross Margin and SG&A Expense Evolution
Plant Protein Group – Gross Margin and SG&A Expense Evolution Gross Margin SG&A Expenses Gradual improvement over time 2020 SG&A investment outlook unchanged $45.3M (91% of sales) $34.1M $30.9M (56% of sales) 2.5% (67% of sales) COVID Costs 14.6% Ad & 14.4% promo: Ad & Ad & 13.0% ~60% promo: promo:
Slide 15: Total Company – Q2 2020 Key Financial Metrics
Total Company – Q2 2020 Key Financial Metrics Q2 2020 vs. LY Drivers Sales $1,094.6 +7.0% • Meat and Plant Protein strategies continue to reap benefits Adj. Operating Earnings $66.7 +2.2% Adj. EBITDA $115.7 +7.1% • Robust margin expansion in Meat Protein • Offset by continued strategic investment in
Slide 16: COVID-19 Cost Headwinds to Continue Through Balance of 2020
COVID-19 Cost Headwinds to Continue Through Balance of 2020 Gross Costs Related Savings Net Cost Impact $19 million $8 million Q2 2020 Impact • Tied to labour, PPE, sanitation • Reduced spending in travel, $11 million training, advertising/promos • Largely reflected in COGS • Largely reflected in SG
Slide 17: 2020 & Long-term Outlook
2020 & Long-term Outlook 17
Slide 18: Continued Uncertainty and Incremental Costs Related to COVID-19
Continued Uncertainty and Incremental Costs Related to COVID-19 Known Factors for H2 2020: Unknown Factors for H2 2020: o Strong demand in retail channel and lower o Volatility in pork & poultry commodity and sales in foodservice foreign exchange markets (+/-) o Strong pork demand from Asian markets
Slide 19: 2020 Financial Priorities Remain Largely Unchanged
2020 Financial Priorities Remain Largely Unchanged Based on performance YTD and estimated COVID-19 costs, we expect to achieve: Meat Protein Group Plant Protein Group Total Company 1. Mid-to-high single digit sales 1. Sales growth of approximately 1. Capital expenditure of growth, driven by continue
Slide 20: 2020 Strategic & Operational Priorities
2020 Strategic & Operational Priorities Company Wide Leverage our carbon neutral commitment with our brands Maintain a strong balance sheet with ample liquidity Protect people’s safety and operational stability through pandemic Meat Protein Group Grow sustainable meats, including continued m
Slide 21: Long Term Outlook – Focused on Material Value Creation
Long Term Outlook – Focused on Material Value Creation 2022 Adjusted EBITDA margin target of 14-16%, driven by: Meat Protein • Growth in sustainable meats • Mix-shift benefits from our brand and food renovation work Group • Cost and operational efficiencies 2029 ambitious goals for high-growth busin
Slide 22: COVID-19 Update
Protect the Health & Safety of our People COVID-19 Ensure Business Update Continuity Support our Communities 22
Slide 23: We are Singularly Focused on These Priorities During COVID-19
We are Singularly Focused on These Priorities During COVID-19 YTD Activities Outlook for H2 2020 • Strict screening and preventative measures Protect the applied in our facilities • Continued focus on sanitation, work flow, • Policies in place to encourage employee and social distancing measures Hea
Slide 24: Appendix
Appendix iA —TTSTIME FOR BETTER iil FOR MEAT THAT TASTES THE WAY IT SHOULD LIKE MEAT, | _ MADE FROM ANIMALS THATHRE RAISED, NOT PRODUCED, IT'S TIME FOR MORE FARIM AND LESS PHARM, _ BECAUSE ANTIBIOTICS ARE FOR THE SICK, NOT THE HUNGRY. IT'S TIMETO LETNATURE DOTS THING) IT’S TIME FOR BETTER MEAT FOR B
Slide 25: Reconciliation of Non-IFRS Metrics – Adjusted EBITDA Margin
Reconciliation of Non-IFRS Metrics – Adjusted EBITDA Margin Three months ended June 30, 2020 Three months ended June 30, 2019(1) Meat Plant Meat Plant ($ millions)(2) Protein Protein Non- Protein Protein Non- (Unaudited) Group Group allocated(3) Total Group Group allocated(3) Total Earnings (loss) b
Slide 26: Reconciliation of Non-IFRS Metrics – Adjusted Earnings per Share
Reconciliation of Non-IFRS Metrics – Adjusted Earnings per Share Three months ended June 30, ($ per share) (Unaudited) 2020 2019 Basic earnings (loss) per share $0.21 ($0.05) Restructuring and other related costs(1) 0.01 (0.01) Items included in other expense not considered 0.03 0.03 representative
Slide 27: Capital Allocation Priorities
Capital Allocation Priorities Growth capacity and efficiency initiatives 1 Reinvest in the Business with a focus on returns metrics & timing Capitalize on inorganic opportunities 2 Accretive Acquisitions with financial and strategic appeal 3 Dividend Appreciation Deliver consistent predictable growt