TSX: MFIwww.mapleleaffoods.com Maple Leaf records year-over-year Adjusted EBITDA growth of 55% to $116 million 2024 Outlook remains unchanged, with the Company on track to meet its 2024 priorities MISSISSAUGA, ON, May 2, 2024 /CNW/ - Maple Leaf Foods Inc. ("Maple Leaf Foods" or "the Company") (TSX: MFI) today reported its financial results for the first quarter ended March 31, 2024. "In the first quarter of 2024, we delivered Adjusted EBITDA of $116 million, 55% higher than the same period last year," said Curtis Frank, President and Chief Executive Officer of Maple Leaf Foods. "With sales growth within our prepared meats portfolio, and a sequential improvement in our meat protein Adjusted EBITDA margin to 10.8%, and a 310 basis point improvement over last year, we took a meaningful step forward toward delivering our full business potential.  "The modest decline we saw in overall sales compared to Q1 2023 was primarily a function of sourcing decisions to reduce outside purchases in poultry and pork, impacting sales in the short term while setting us up to deliver on our plans moving forward.   "Looking ahead, we expect the momentum in our business to continue to accelerate. Pork headwinds, while still a challenge, are easing, and our attention is squarely on executing our refreshed Strategic Blueprint," continued Frank.  "With a powerful platform of brands, a network of world-class assets and our leadership in sustainability, we have the right strategy and team in place to drive growth in Canada, accelerate our reach in the U.S. and fully realize the benefits of our recent capital investments." First Quarter 2024 Highlights Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")(i) grew to $116.4 million, a 55% increase from the first quarter of last year, with Adjusted EBITDA margin increasing from 6.4% to 10.1% for the same period. Net earnings for the first quarter of 2024 were $51.6 million ($0.42 per basic share) compared to a loss of $57.7 million ($0.48 loss per basic share) last year. Start up expenses(i) related to Capital Construction(i) projects, decreased by approximately 67% to $11.4 million in the current quarter compared to last year. Sales in the Prepared Foods operating unit decreased approximately 0.4%, with prepared meats increasing 2.9% offset by declines in plant protein and poultry of 5.7% and 7.1% respectively, compared to last year. Sales in the Pork operating unit decreased by 4.5% compared to last year. Free cash flow(i) improved to $73.6 million from $12.4 million in the same quarter last year. Outlook For the full year 2024, the Company expects: Low-to-mid single-digit revenue growth Adjusted EBITDA margin expansion over 2023 To generate strong free cash flow and delever the balance sheet To reflect the refreshed Blueprint and realignment of its organizational structure, as of the first quarter of 2024, the Company is reporting its business and operational results as a consolidated protein company, to align with how management monitors and measures business performance. With these changes, the Company believes it is positioned to achieve a consolidated Adjusted EBITDA margin target of 14-16%, in normal market conditions. (i)  Refer to the section titled Non-IFRS Financial Measures in this news release. Financial Highlights Measure(i) Three months ended March 31, (Unaudited) 2024 2023 Change Sales(ii) $    1,153.2 $    1,171.1 (1.5) % Net Earnings (Loss) $         51.6 $        (57.7) 189.3 % Basic Earnings (Loss) per Share $         0.42 $        (0.48) 187.5 % Adjusted Operating Earnings(iii) $         53.0 $         19.3 174.4 % Adjusted Earnings (Loss) per Share(iii)     $         0.04 $        (0.12) 133.3 % Adjusted EBITDA(iii) $       116.4 $         75.3 54.6 % Free Cash Flow(iii) $         73.6 $         12.4 493.5 % Net Debt(iii) $   (1,722.8) $   (1,677.3) 2.7 % Adjusted EBT(iii) $         10.4 $        (14.0) 174.3 % (i)  All financial measures in millions of dollars except Basic and Adjusted Earnings per Share. (ii) Quarterly amounts for 2023 have been adjusted to eliminate new sales agreements entered into during the year that contained an expectation of repurchase, which had previously been reported as external sales. (iii)  Refer to the section titled Non-IFRS Financial Measures in this news release. Sales for the first quarter of 2024 were $1,153.2 million compared to $1,171.1 million last year, a decrease of 1.5%, Sales in the Prepared Foods operating unit decreased approximately 0.4%, with prepared meats increasing 2.9% offset by declines in plant protein and poultry of 5.7% and 7.1% respectively, compared to last year. Sales in the Pork operating unit decreased by 4.5% compared to last year.  Net earnings for the first quarter of 2024 were $51.6 million ($0.42 per basic share) compared to a loss of $57.7 million ($0.48 loss per basic share) last year. Net earnings were positively impacted by reduced feed costs, operating efficiencies, lower start-up expenses, reduced restructuring costs, and a positive impact of unrealized mark to market valuation on biological assets. Results were negatively impacted by higher interest expense due to increased interest rates and higher debt, as well as increased tax expenses. Adjusted Operating Earnings for the first quarter of 2024 were $53.0 million compared to $19.3 million last year, and Adjusted Earnings per Share for the first quarter of 2024 was $0.04 compared to loss of $0.12 last year. Adjusted Earnings Before Taxes ("Adjusted EBT") for the first quarter of 2024 were $10.4 million compared to loss of $14.0 million last year. For further discussion on key operational metrics and results 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 Earlier this year, the Company announced an update to its strategic blueprint ("Blueprint") that reflects the progress it has made toward achieving its Purpose and Vision and establishes the roadmap for the next chapter for how Maple Leaf Foods intends to deliver on these objectives. To execute on this Blueprint, the Company has combined its Meat and Plant Protein businesses and aligned its organizational structure to focus on its growth potential in key markets, drive operational efficiencies, and provide clear accountability for strategic execution. Based on this realignment and focus as a protein company, as of the first quarter of 2024, Maple Leaf Foods is reporting its business and operational results as a consolidated protein company, to align with how management monitors and measures business performance. With these changes, the Company believes it is positioned to achieve a consolidated Adjusted EBITDA margin target of 14% to 16% in normal market conditions.  Previously, the Company's Adjusted EBITDA margin target of 14% to 16% in normal market conditions was solely for meat protein. The Company achieved an Adjusted EBITDA margin for meat protein of 10.8% in the first quarter of 2024. As a consolidated protein company, Maple Leaf Foods has two operating units: Prepared Foods and Pork, which represent on average approximately 75% and 25% of total Company revenue respectively. Prepared Foods combines the operations of prepared meats, plant protein, and poultry, which represent on average approximately 50%, 5% and 20% of total Company revenue respectively. The following table summarizes the Company's sales, gross profit, SG&A, Adjusted Operating Earnings, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EBT for the three months ended March 31, 2024 and March 31, 2023. Three months ended March 31, ($ millions) (Unaudited) 2024 2023 Sales(i) $         1,153.2 $         1,171.1 Gross profit (loss) $            226.3 $              76.4 Selling, general and administrative expenses     $            110.0 $            102.7 Adjusted Operating Earnings(ii) $              53.0 $              19.3 Adjusted EBITDA(ii) $            116.4 $              75.3 Adjusted EBITDA Margin(ii) 10.1 % 6.4 % Adjusted EBT(i) $              10.4 $             (14.0) (i) Quarterly amounts for 2023 have been adjusted to eliminate new sales agreements entered into during the year that contained an expectation of repurchase, which had previously been reported as external sales. (ii)  Refer to the section titled Non-IFRS Financial Measures in this news release. Sales for the first quarter decreased 1.5% to $1,153.2 million compared to $1,171.1 million last year. Sales in the Prepared Foods operating unit decreased approximately 0.4%, with prepared meats increasing 2.9% offset by declines in plant protein and poultry of 5.7% and 7.1% respectively, compared to last year. Sales in the Pork operating unit decreased by 4.5% compared to last year. Volume and mix drove the increase in sales in prepared meats, while decreases in volume in fresh poultry were driven by reduced sales to industrial channels; and in Pork by a reduction in hog purchases for processing and a negative foreign exchange impact.  Gross profit for the first quarter increased to $226.3 million (gross margin of 19.6%) compared to $76.4 million (gross margin of 6.5%) last year. The improvement in gross profit was driven by improving pork market conditions, operating efficiencies at the London Poultry plant, and a higher unrealized mark to market valuation adjustment on biological assets, due to changes in hog and feed markets. In addition, gross profit benefited from reduced start-up expenses related to Capital Construction projects, which decreased by approximately 67% in the current quarter compared to last year. SG&A expenses for the first quarter were $110.0 million compared to $102.7 million last year. The increase in SG&A expenses was primarily driven by higher variable compensation. Adjusted Operating Earnings for the first quarter were $53.0 million compared to $19.3 million last year, driven primarily by the drivers noted above for gross profit and SG&A, and excluding the impacts of unrealized mark to market valuation adjustments and start-up expenses, which are excluded in the calculation of Adjusted Operating Earnings. Adjusted EBITDA for the first quarter were $116.4 million compared to $75.3 million last year, driven by factors consistent with those noted above and also excluding the impact of unrealized mark to market valuation adjustments and start-up expenses. Adjusted EBITDA Margin for 2024 was 10.1% compared to 6.4% last year, also driven by factors consistent with those noted above. Adjusted EBT for the first quarter were $10.4 million compared to a loss of $14.0 million last year, driven by factors consistent with those noted above, as well as a $10.5 million increase in interest expense as a result of increased interest rates and higher debt related to capital investments in recent years and also excluding the impacts of unrealized mark to market valuation adjustments and start-up expenses. Other Matters On May 1, 2024, the Board of Directors approved a quarterly dividend of $0.22 per share (an increase of $0.01 per share from the 2023 first quarter dividends), $0.88 per share on an annual basis, payable June 28, 2024 to shareholders of record at the close of business June 6, 2024. 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.com. Conference Call A conference call will be held at 8:00 a.m. ET on May 2, 2024, to review Maple Leaf Foods' first 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: 900050#). A webcast of the first 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 and on SEDAR+ at www.sedarplus.ca. An investor presentation related to the Company's first quarter financial results is available at www.mapleleaffoods.com and can be found under Presentations and Webcasts on the Investors page. Outlook Maple Leaf Foods is a leading consumer protein company built on a powerful portfolio of brands, with a leading voice in sustainability and food security. The Company's strategic Blueprint defines how it will advance its vision to be the most sustainable protein company on earth while delivering on its commercial and financial objectives. The Company recognizes that macro-economic factors and global conflict continue to define the current operating environment, contributing to higher interest rates, inflation, supply chain tensions, and pressures on agricultural, commodity and foreign exchange markets. As a result, consumers and businesses alike are adapting their behaviour which impacts demand and product mix. The Company leverages its data-driven insights to stay close to these dynamics, and it is confident in the resilience of its brands, business model and strategy to manage through prevailing economic conditions. Earlier this year, Maple Leaf Foods refreshed its Blueprint and announced it was realigning its organizational structure to support its new strategic orientation as it brings together its Meat and Plant Protein businesses under a single umbrella with a clear and consistent focus on driving profitable growth in Canada, the U.S., and internationally across its entire protein portfolio. With this focus, the Company expects to achieve an overall consolidated Adjusted EBITDA margin target of 14% to 16% in normal market conditions. Prior to this quarter, this Adjusted EBITDA margin target applied to the previous Meat Protein segment but now applies on a consolidated protein basis. For the full year 2024, the Company expects: Low-to-mid single-digit revenue growth Adjusted EBITDA margin expansion from 2023, supported by the benefits of: Profitable growth of its leading portfolio of protein brands Returns from investments in the London Poultry Plant and the Bacon Centre of Excellence Leadership in sustainable meats Driving operational and cost efficiencies To generate strong free cash flow and delever its balance sheet by: Improving margins and overall profitability as outlined above Generating the targeted returns on its capital investments at the London Poultry Plant and the Bacon Centre of Excellence, including reducing start-up expenses, maximizing efficiencies and onboarding new customers Exercising disciplined capital management, with total capital expenditures this year expected to be in the range of $170 - $190 million, largely focused on maintenance capital and optimization of its existing network Maple Leaf Foods will also continue to advance its ambitious sustainability agenda, including leading the real food movement, advancing its animal care initiatives, seeking solutions to address food insecurity, accelerating its efforts to reduce its environmental footprint and continuing to deliver safe food made in a safe work environment. 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, Net Debt to trailing four quarters Adjusted EBITDA, 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 bonus entitlements under the Company's short term incentive plan. It is defined as Adjusted EBITDA plus interest income, less depreciation and amortization, and interest expense. 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 months ended March 31, 2024 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 requirements, including the Company's capital investment program. Three months ended March 31, ($ millions)(i)(Unaudited) 2024 2023 Earnings (loss) before income taxes $      73.8 $       (69.9) Interest expense and other financing costs 42.1 31.6 Other expense 1.2 4.3 Restructuring and other related (reversals) costs (0.7) 7.7 Earnings (loss) from operations $    116.3 $       (26.3) Start-up expenses from Construction Capital(ii) 11.4 34.8 Change in fair value of biological assets (69.1) 1.1 Unrealized and deferred (gain) loss on derivative contracts (5.6) 9.7 Adjusted Operating Earnings $      53.0 $        19.3 Depreciation and amortization 65.0 57.7 Items included in other income (expense) representative of ongoing operations(iii) (1.5) (1.7) Adjusted EBITDA $    116.4 $        75.3 Adjusted EBITDA Margin(iv) 10.1 % 6.4 % Interest expense and other financing costs (42.1) (31.6) Interest income 1.0 — Depreciation and amortization (65.0) (57.7) Adjusted EBT $      10.4 $       (14.0) (i) Totals may not add due to rounding. (ii)  Start-up expenses are temporary costs as a result of operating new facilities that are or were previously 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. (iii) Primarily includes certain costs associated with sustainability projects, gains and losses on the impairment and sale of long-term assets, legal settlements, gains and losses on investments, and other miscellaneous expenses.  (iv)