Maple Leaf Foods Inc. reported its financial results for the third quarter ended September 30, 2023.
“For the third consecutive quarter, we delivered sequential improvement in Adjusted EBITDA margin in our Meat Protein business, while also making meaningful strides toward achieving our Adjusted EBITDA neutral goal in our Plant Protein business,” said Curtis Frank, President and CEO of Maple Leaf Foods. “Delivering 11.4% Adjusted EBITDA margin in our Meat Protein business in the face of improving, but still challenging market conditions, demonstrates clear momentum in our core business.”
“Looking ahead, we will continue to build on this momentum by remaining firmly focused on delivering the benefits from our capital investments, executing our strategic Blueprint, and deleveraging our balance sheet,” continued Mr. Frank. “We have already started to see some benefits in our results from our two largest capital projects, London Poultry and the Bacon Centre of Excellence, and we expect to exit the year with an annualized run rate of about $130 million in Adjusted EBITDA contribution from these projects. At the same time, we are forecasting lower capital spend as we wrap up these large-scale organic projects.”
“Based on the strength of our assets, the power of our leading brands and product innovation, and the passion of our people, we are confident that we are poised to achieve our goal of 14-16% Adjusted EBITDA margin in our Meat Protein business when markets normalize,” concluded Mr. Frank.
Third Quarter 2023 Highlights
- Total Company sales grew 1.1% to $1,245.0 million, with an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)(i) Margin of 10.4%.
- Meat Protein Group sales grew to $1,211.0 million, an increase of 1.4% year over year. Adjusted EBITDA was $138.4 million, and Adjusted EBITDA Margin was 11.4%, an improvement of 290 basis points compared to the same period last year, and 210 basis points from the second quarter of 2023.
- Plant Protein Group sales were $36.4 million. Plant Protein Group Adjusted EBITDA improved by 61.3% year over year to a loss of $9.4 million, en route to an Adjusted EBITDA target of neutral by the end of 2023.
- Capital expenditures were $50.5 million.
- The London Poultry facility transition is progressing on schedule. Three legacy facilities have fully transitioned their production volumes, and the transition from the fourth facility will begin shortly. The Company expects London Poultry to be fully ramped up by the end of 2023.
Outlook
- Meat Protein: Expect mid-single digit sales growth in 2023, and Adjusted EBITDA Margin expansion to achieve a target range of 14% – 16% when markets normalize.
- Plant Protein: On track to deliver Adjusted EBITDA neutral by the end of 2023.
- Capital expenditure: For 2023 is expected to be roughly $200 million, down from prior guidance of less than $250 million. Approximately half of the spend will be attributable to Maintenance Capital(i) and the balance attributable to Growth Capital(i).
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(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 |
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|
Measure(i) (Unaudited) |
Three months ended September 30, |
Nine months ended September 30, |
||||||||||
|
2023 |
2022 |
Change |
2023 |
2022 |
Change |
|||||||
|
Sales |
$ |
1,245.0 |
$ |
1,231.9 |
1.1 % |
$ |
3,689.6 |
$ |
3,553.5 |
3.8 % |
||
|
Net (Loss) |
$ |
(4.3) |
$ |
(229.5) |
98.1 % |
$ |
(115.7) |
$ |
(270.4) |
57.2 % |
||
|
Basic Loss per Share |
$ |
(0.04) |
$ |
(1.86) |
97.8 % |
$ |
(0.95) |
$ |
(2.18) |
56.4 % |
||
|
Adjusted Operating Earnings(ii) |
$ |
70.5 |
$ |
24.1 |
192.2 % |
$ |
135.7 |
$ |
63.9 |
112.5 % |
||
|
Adjusted (Loss) Earnings per Share(ii) |
$ |
0.13 |
$ |
(0.01) |
nm(iv) |
$ |
0.01 |
$ |
0.02 |
nm(iv) |
||
|
Adjusted EBITDA – Meat Protein Group(ii) |
$ |
138.4 |
$ |
100.9 |
37.2 % |
$ |
341.0 |
$ |
302.6 |
12.7 % |
||
|
Adjusted EBITDA – Plant Protein Group(ii) |
$ |
(9.4) |
$ |
(24.3) |
61.3 % |
$ |
(33.0) |
$ |
(85.0) |
61.2 % |
||
|
Free Cash Flow(ii)(iii) |
$ |
139.9 |
$ |
92.9 |
50.6 % |
$ |
160.3 |
$ |
55.1 |
190.9 % |
||
|
Construction Capital(ii) |
$ |
51.5 |
$ |
713.6 |
(92.8) % |
|||||||
|
Net Debt(ii) |
$ |
(1,769.5) |
$ |
(1,522.2) |
(16.2) % |
|||||||
|
Adjusted EBT(ii) |
$ |
25.1 |
$ |
8.4 |
198.8 % |
$ |
17.8 |
$ |
26.2 |
(32.1) % |
||
|
(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 third quarter of 2023 were $1,245.0 million compared to $1,231.9 million last year, an increase of 1.1%. Sales growth in the Meat Protein Group was mostly offset by a 16.4% sales decline 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 $3,689.6 million compared to $3,553.5 million last year, an increase of 3.8%. Meat Protein Group sales grew 4.3% which more than offset the 14.5% decline in the Plant Protein Group during the same period.
Net loss for the third quarter of 2023 was $4.3 million ($0.04 loss per basic share) compared to a loss of $229.5 million ($1.86 loss per basic share) last year. The prior year net loss included a $190.9 million one-time non-cash impairment charge related to the Plant Protein Group, as well as a $31.5 million decrease in the fair value of biological assets compared to a $0.3 million increase in 2023.The Meat Protein Group showed improved commercial results and pork market conditions, partly offset by 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, current year results were negatively impacted by higher interest expense with increased rates and higher debt largely to fund strategic capital expenditures, and by income tax expenses, which were a recovery in the prior year.
Year-to-date net loss for 2023 was $115.7 million ($0.95 loss per basic share) compared to loss of $270.4 million ($2.18 loss per basic share) last year due to similar factors as noted above, with the exception of increased pork market headwinds for the year to date.
Adjusted Operating Earnings for the third quarter of 2023 were $70.5 million compared to $24.1 million last year, and Adjusted Earnings per Share for the third quarter of 2023 was $0.13 compared to loss of $0.01 last year. The increase was a result of improved commercial results and pork market conditions, partly offset by cost inflation.
Year-to-date Adjusted Operating Earnings for 2023 were $135.7 million compared to $63.9 million last year, and Adjusted Earnings per Share for 2023 were a loss of $0.01 compared to earnings of $0.02 last year due to similar factors as noted above, with the exception of increased pork market headwinds for the year to date.
Adjusted Earnings Before Taxes (“Adjusted EBT”) for the third quarter of 2023 were $25.1 million compared to $8.4 million last year. Adjusted EBT was driven by improved commercial performance and pork market conditions, partly offset by cost inflation in the Meat Protein Group, as well as improved margins in the Plant Protein group. This was partly offset by higher interest expense with increased rates and higher debt largely to fund strategic capital expenditures.
Year-to-date Adjusted EBT for 2023 were a loss of $17.8 million compared to earnings of $26.2 million last year due to similar factors as noted above with the exception of increased pork market headwinds for the year to date.
For further discussion on key metrics and a discussion of results by operating segment, refer to the section titled Operating Review.
|
Note: Several items are excluded from the discussions of underlying earnings performance as they are not representative of ongoing operational activities. Refer to the section entitled Non-IFRS Financial Measures at the end of this news release for a description and reconciliation of all non-IFRS financial measures. |
Operating Review
The Company has two reportable segments. These segments offer different products, with separate organizational structures, brands, and financial and marketing strategies. The Company’s chief operating decision makers regularly review internal reports for these businesses. Performance of the Meat Protein Group is based on profitable revenue growth, Adjusted Operating Earnings, Adjusted EBITDA, and Adjusted EBT while the performance of the Plant Protein Group in the short term is focused on obtaining Adjusted EBITDA neutral results.
The following table summarizes the Company’s sales, gross profit (loss), SG&A, Adjusted Operating Earnings, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EBT by operating segment for the three months ended September 30, 2023 and September 30, 2022.
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Three months ended September 30, 2023 |
Three months ended September 30, 2022 |
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|
($ millions)(i) |
Meat |
Plant |
Non- |
Total |
Meat |
Plant |
Non- |
Total |
||||
|
Sales |
$ |
1,211.0 |
36.4 |
(2.5) |
$ |
1,245.0 |
$ |
1,194.5 |
43.6 |
(6.2) |
$ |
1,231.9 |
|
Gross profit (loss) |
$ |
143.5 |
(2.2) |
4.5 |
$ |
145.9 |
$ |
125.6 |
(9.8) |
(33.3) |
$ |
82.5 |
|
Selling, general and administrative expenses |
$ |
83.0 |
11.9 |
— |
$ |
94.9 |
$ |
82.9 |
19.9 |
— |
$ |
102.8 |
|
Adjusted Operating Earnings(iii) |
$ |
84.6 |
(14.1) |
— |
$ |
70.5 |
$ |
53.6 |
(29.5) |
— |
$ |
24.1 |
|
Adjusted EBITDA(iii) |
$ |
138.4 |
(9.4) |
— |
$ |
129.0 |
$ |
100.9 |
(24.3) |
— |
$ |
76.7 |
|
Adjusted EBITDA Margin(iii) |
11.4 % |
(25.7) % |
n/a |
10.4 % |
8.5 % |
(55.6) % |
n/a |
6.2 % |
||||
|
Adjusted EBT(iii) |
$ |
39.4 |
(14.3) |
— |
$ |
25.1 |
$ |
40.5 |
(32.1) |
— |
$ |
8.4 |
|
(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 nine months ended September 30, 2023 and September 30, 2022.
|
Nine months ended September 30, 2023 |
Nine months ended September 30, 2022 |
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|
($ millions)(i) |
Meat |
Plant |
Non- |
Total |
Meat |
Plant |
Non- |
Total |
|
Sales |
$ 3,591.6 |
110.5 |
(12.5) |
$ 3,689.6 |
$ 3,444.1 |
129.3 |
(19.8) |
$ 3,553.5 |
|
Gross profit (loss) |
$ 354.2 |
(7.3) |
(31.0) |
$ 315.9 |
$ 392.5 |
(26.2) |
(42.8) |
$ 323.6 |
|
Selling, general and administrative expenses |
$ 264.0 |
39.8 |
— |
$ 303.8 |
$ 258.9 |
77.0 |
— |
$ 335.9 |
|
Adjusted Operating Earnings(iii) |
$ 182.8 |
(47.1) |
— |
$ 135.7 |
$ 162.3 |
(98.4) |
— |
$ 63.9 |
|
Adjusted EBITDA(iii) |
$ 341.0 |
(33.0) |
(0.6) |
$ 307.4 |
$ 302.6 |
(85.0) |
— |
$ 217.6 |
|
Adjusted EBITDA Margin(iii) |
9.5 % |
(29.8) % |
n/a |
8.3 % |
8.8 % |
(65.7) % |
n/a |
6.1 % |
|
Adjusted EBT(iii) |
$ 66.3 |
(47.8) |
(0.6) |
$ 17.8 |
$ 132.3 |
(106.1) |
— |
$ 26.2 |
|
(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
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