TSX: MFI
www.mapleleaffoods.com
MISSISSAUGA, ON, Jan. 10,
2025 /PRNewswire/ - Maple Leaf Foods Inc. ("Maple
Leaf Foods" or the "Company") (TSX: MFI), an iconic Canadian
protein company, announced today updates on its outlook for
2025, completion of the initial phase of restructuring initiatives
to reduce costs and maximize the Company's potential, and
advancement of the planned spin-out of Canada Packers, all
contributing to momentum for a transformative year ahead.
"This year will be a significant year of strategic
transformation and financial progress for Maple Leaf Foods," said
Curtis Frank, President and Chief
Executive Officer of Maple Leaf Foods. "Our growth strategies have
proven to be resilient and successful even in the most challenging
conditions, our capital projects are exiting 2024 contributing
expected benefits, market conditions and consumer behaviour are
recovering as anticipated, and we recently completed the first
phase of our Fuel for Growth cost competitiveness initiatives, all
of which we expect will underpin a meaningful improvement in
profitable growth and the ongoing de-leveraging of our balance
sheet."
The Company's recently approved 2025 operating plan highlighted
core elements of this transformational year, including:
- Revenue growth of mid-single digits driven by execution of the
Company's proven growth strategies.
- Significant year-over-year Adjusted EBITDA improvements driven
by the full benefits of capital investments, excellence in brand
and revenue management, recent restructuring and supply chain cost
saving initiatives and the return of normalized market
conditions.
- Continued deleveraging of the balance sheet driven by
strong free cash flow from operations.
- Completion of the spin-out of Canada Packers.
- Further optimizing performance through a refocused
organizational structure.
"Maple Leaf Foods has demonstrated its ability to outperform our
peers in both top and bottom-line performance," continued Mr.
Frank. "We expect this trend to accelerate in 2025 as our long-term
strategies and focus yield clear and measurable results."
Consistently Driving Organic Growth
Growth strategies of Maple Leaf Foods have delivered consistent
performance over time which is expected to continue in 2025 and
beyond. Central elements of these long-term strategies include:
- Capitalizing on the growing consumer demand for protein, our
singular portfolio focus.
- Strategically increasing marketing and advertising investments
behind our portfolio of leading protein brands with clear brand
strategies, each designed to address a specific consumer demand
space.
- Leveraging company leadership in sustainable meats.
- Accelerating the pace of consumer-focused innovation with a
view to outpacing the over 50 new SKU's that were introduced
in 2024.
- Expanding geographic reach in the US market by building on our
existing protein platform and new organizational structure.
- Building on strategic relationships with customers through
joint business planning.
Expecting Significant Year-Over-Year Adjusted EBITDA
Improvements
The Company expects another year of continued improvement in
Adjusted EBITDA performance. Its 2025 operating plan is expected to
deliver Adjusted EBITDA that will meet or exceed current analyst
consensus estimates of $634 million.
Key drivers of the Company's Adjusted EBITDA growth include:
- The full year of benefits attached to three key large capital
projects - London Poultry, the Winnipeg Bacon Centre of Excellence
and the Walker Road Further Processed Poultry expansion – all of
which exited 2024 at a run-rate delivering their business
case.
- Being responsive to the improving consumer environment,
supported by brand and revenue management plans to optimize volume
and mix.
- A full year of benefits from a return to more normal levels of
profitability in the pork complex, which are now
materializing.
- The announcement of Maple Leaf's new Fuel for
Growth initiative, which accelerates the company's cost
reduction focus and competitive edge by optimizing resources and
processes in a world class collection of assets, investing in
automation technology where appropriate, and leaning out the
organizational structure to improve execution.
- Supply Chain Optimization: By the end of 2024, the
Company completed a sourcing optimization initiative that will
deliver enhanced savings, scalability, and supply chain agility in
2025.
- SG&A Improvements: The Company also successfully
implemented the initial phase of SG&A reductions through the
restructuring of commercial and operations teams at the end of
2024, resulting in a leaner organizational structure and reduced
headcount. Combined with right-sizing SG&A investments in the
plant protein category, these measures are expected to deliver
significant SG&A savings in 2025.
- Strategic Manufacturing Review: The Company has launched
a strategic review of its manufacturing and operating network to
boost capacity utilization, rationalize its footprint where
necessary, adopt advanced technologies, and embed operational
excellence across processes. This includes benefits from the
planned closure of the Brantford Plant in the first half of
2025.
Continuing to Deleverage the Balance Sheet for Effective
Capital Allocation
Following several years of aggressive investments, the current
focus of using Free Cash Flow to deleverage and maintain an
investment grade balance sheet is expected to continue in 2025,
facilitating more choice for capital allocation in the future,
benefiting our shareholders short and long-term. Key initiatives
this year include:
- Disciplined capital expenditures at more typical levels in the
range of $175M to $200M
- Increasing the quarterly dividend for the tenth consecutive
year with the declaration of a quarterly dividend of $0.24 per share commencing with the 2025 first
quarter dividend payable on March 31,
2025. This reflects an increase of $0.02 per share from the 2024 fourth quarter
dividend and an annualized dividend rate of $0.96 per share.
- Eliminating the Dividend Reinvestment Plan (DRIP) discount
effective with the 2025 first quarter dividend.
- Evaluating capital allocation alternatives to build investor
confidence and take advantage of market conditions where the
trading level of the Company equity is viewed to be below intrinsic
value.
"At Maple Leaf Foods, we have always been dedicated to building
long-term value for our stakeholders," said Michael H. McCain, Executive Chair of Maple Leaf
Foods. "Long-term value creation is generated by running day-to-day
operations well, making smart investment and capital allocation
choices, and building the foundations of our business over time.
This is exactly what we are doing, and we believe 2025 will be a
pivotal year for Maple Leaf Foods in building value. We understand
that the value of long-term investing is often under-appreciated by
investors, and we have seen the impact of that on our trading
multiple recently. Based on current analyst consensus for 2025,
Maple Leaf is trading at approximately 6.5x Adjusted EBITDA which
is a significant discount to the intrinsic value of the business
which is currently outperforming most peers. Based on this insight,
the Board will continue to evaluate dividend policy, capital
allocation choices and investor initiatives which will build
investor confidence."
Update on the Canada Packers Spin Out
In 2024, Maple Leaf Foods announced the planned separation of
its pork business as a standalone public company to be called
Canada Packers Inc. Following the separation, Canada Packers will
be a focused, integrated pork company, a leader in sustainably
produced, premium quality, value-added pork products, and a key
supplier of RWA and conventional pork products to customers in
Canada, the U.S. and
internationally.
Recently, the Company shared that it was advancing the
transaction as a tax-free butterfly reorganization that would
require an advance tax ruling from the Canada Revenue Agency. The
ruling request has been submitted, and a decision is anticipated in
approximately nine months. The Company is scheduling a meeting of
shareholders in June 2025 to approve
the transaction, which would allow closing to occur as soon as a
positive CRA ruling has been received, assuming that the other
customary closing conditions are also satisfied. Assuming these
approvals are received, the transaction is on pace to close in the
second half of 2025 as expected.
Work on the separation of the two companies is continuing,
including planning of capital structure and dividend policies. The
current plan is for the initial combined dividends of Maple Leaf
Foods and Canada Packers to not be less than Maple Leaf Foods'
annual dividend immediately prior to the completion of the
spinoff. Future dividends will be at the discretion of each
company's board of directors. The capital structure for the two
companies is also being evaluated, with current planning being
based on a Canada Packers initial leverage ratio in the range of
2.5x to 3.0x Net Debt to Adjusted EBITDA. Full details will be
included in the Management Information Circular that is expected to
be filed in May of this year in advance of the shareholder meeting
to approve the transaction.
"With pork markets more or less normalized, the timing to
complete the transaction this year is very positive," commented Mr.
Frank. "We are pleased with the progress we have made on the
business and operational plans to maximize readiness once we have
secured all the necessary approvals, and we are excited for the
value creation potential that this transaction holds for both
companies and their stakeholders going forward."
Next Stakeholder Update
The Company will provide a further update on its 2025 outlook in
connection with the release of its fourth quarter and full year
2024 results on February 25,
2025.
About Maple Leaf Foods Inc.
Maple Leaf Foods is a leading protein company responsibly producing
food products under leading brands including Maple
Leaf®, Maple Leaf Prime®, Maple Leaf Natural
Selections®, Schneiders®,
Schneiders® Country Naturals®,
Mina®, Greenfield Natural Meat Co.®,
LightLife® and Field Roast™. The Company employs
approximately 13,500 people and does business primarily
in Canada, the U.S. and Asia. The Company is
headquartered in Mississauga, Ontario and its shares
trade on the Toronto Stock Exchange (MFI).
Non-IFRS Metrics
Adjusted Operating Earnings and
Adjusted EBITDA are non-IFRS measure used by the Company 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. Free Cash Flow is used by the Company
to evaluate cash flow after investing in the maintenance of the
Company's asset base. It is defined as cash provided by operations,
less maintenance capital and associated interest paid and
capitalized.
Net Debt is a non-IFRS measure used by the Company in assessing
the amount of financial leverage employed. The Company calculates
Net Debt as cash and cash equivalents, less current and long-term
debt and bank indebtedness.
Forward Looking Statements
This document contains, and the Company's oral and written
public communications often contain, "forward-looking information"
within the meaning of applicable securities law. These statements
are based on current expectations, estimates, projections,
beliefs, judgements and assumptions based on information
available at the time the applicable forward-looking statement was
made and in light of the Company's experience combined with its
perception of historical trends. Such statements include, but are
not limited to, statements with respect to objectives and goals, in
addition to statements with respect to beliefs, plans, targets,
goals, objectives, expectations, anticipations, estimates, and
intentions. Forward-looking statements are typically identified by
words such as "anticipate", "continue", "estimate", "expect",
"may", "will", "project", "should", "could", "would", "believe",
"plan", "intend", "design", "target", "undertake", "view",
"indicate", "maintain", "explore", "entail", "schedule",
"objective", "strategy", "likely", "potential", "outlook", "aim",
"propose", "goal", and similar expressions suggesting future events
or future performance. These statements are not guarantees of
future performance and involve assumptions, risks and uncertainties
that are difficult to predict.
By their nature, forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those
anticipated in such forward-looking statements. The Company
believes the expectations reflected in the forward-looking
statements are reasonable, but no assurance can be given that these
expectations will prove to be correct and such forward-looking
statements should not be unduly relied upon.
Specific forward-looking information in this document may include, but is not limited to
statements with respect to: financial outlook for
2025; operational and financial performance of the Company in 2025,
including revenue growth, Adjusted EBITDA growth, benefits from
capital investments, and deleveraging; the consumer demand
environment, including the demand for protein and the Company's
products; the capital structure and dividend policy decisions of
Maple Leaf Foods and Canada Packers; the anticipated benefits of
Maple Leaf Foods separating into two independent public companies,
including each company's growth potential, business model, value
proposition and ability to be a leader in its field; the timing of
the separation of Canada Packers and ability to secure necessary
approvals, rulings and consents; the anticipated benefits of the
Fuel for Growth Initiatives and the associated financial returns;
the expected timing of the completion of the separation; the timing
and receipt of shareholder approval in respect of the transaction
and receipt of other customary approvals, including third-party
consents; the post-separation business structure of Maple Leaf
Foods and Canada Packers; the competitive conditions and the
ability of Maple Leaf Foods (and Canada Packers post spin-out) to
position themselves competitively in the markets in which they
operate; the execution of the business strategy of Maple Leaf
Foods, including the development and expected timing of business
initiatives; brand expansion and innovation and the expected
returns associated therewith; the transactional structure and
execution of the business strategy of Canada Packers to achieve
target Net Debt to Adjusted EBITDA ratios; changes in customer and
consumer expectations; and future performance, including with
respect to financial objectives, goals and targets, consumer demand
environment and global pork market dynamics.
The forward-looking statements are based on certain key
expectations and assumptions made in respect of Maple Leaf Foods or
Canada Packers, as the case may be.
These factors and assumptions are based on
information currently available to the Company, including
information obtained by the Company from third-party sources and
include but are not limited to the following: expectations and
assumptions concerning the timing and completion of the separation
of Maple Leaf Foods into two independent public companies and the
success of such separation, including securing required approvals,
consents and rulings; expectations regarding the adaptations in
operations, supply chain, customer and consumer behaviour, economic
patterns (including but not limited to global pork markets),
foreign exchange rates, international trade dynamics and access to
capital, including possible presence or absence of structural
changes macro-economic dynamics; the competitive environment,
associated market conditions and market share metrics, category
growth or contraction, the expected behaviour of competitors and
customers and trends in consumer preferences; the success of the
business strategy of Maple Leaf Foods and Canada Packers and the
relationship between pricing, inflation, volume and sales of each
company's products; prevailing commodity prices (especially in pork
and feed markets), interest rates, tax rates and exchange rates;
the economic condition of and the sociopolitical dynamics between
Canada, the U.S., Japan and China, including potential impact tariffs and
international trade dynamics on the ability of Maple Leaf Foods and
Canada Packers to access markets and source ingredients; the
ongoing impact of global conflicts on inflation, trade and markets;
the spread of foreign animal disease (including ASF and Avian
Influenza), preparedness strategies to manage such spread, and
implications for all protein markets; the availability of and
access to capital to fund future capital requirements and ongoing
operations; the availability of insurance coverage to manage
certain liability exposures; prevailing regulatory, tax and
environmental laws; and future operating costs and performance,
including the ability of Maple Leaf Foods and Canada Packers to
achieve operating efficiencies and maintain sales volumes, turnover
of inventories and turnover of accounts receivable.
Readers are cautioned that these assumptions may prove to be incorrect in whole or in part
and actual results may differ materially from those
anticipated in any forward-looking statements.
Factors that could cause
actual results or outcomes to differ materially from the results
expressed, implied, or projected in the
forward-looking statements contained in this document include,
among other things, risks associated with the following: the
separation of Maple Leaf Foods into two independent public
companies not proceeding as expected, including as a result of the
conditions of the transaction not being satisfied, approvals or
rulings not being secured on acceptable terms or at all; the
possibility that the separation will not be completed within the
anticipated time period or at all; future dividend policies of each
company; the ability of the separated companies to each succeed as
a standalone publicly traded company; the possibility that the
separation will not achieve its intended benefits; pork market
conditions failing to normalize as expected or the unanticipated
effects of the announcement or pendency of the separation on the
market price of the Company's securities and/or on the financial
performance of the Company; macro economic trends, including
inflation, consumer behaviour, recessionary indicators, labour
availability and labour market dynamics, trade or tariff
restrictions and international trade trends (including global pork
markets); the results of each of Maple Leaf Food's and Canada
Packers execution of their business plans, the degree to which
benefits are realized or not, and the timing associated with
realizing those benefits, including the implications on cash flow;
competition, market conditions, and the activities of competitors
and customers, including the expansion or contraction of key
categories, inflationary pressures, pork market dynamics and
Japan export margins; the health
status of livestock, including the impact of potential pandemics;
international trade and access to markets and supplies, as well as
social, political and economic dynamics, including global
conflicts; operating performance, including manufacturing operating
levels, fill rates and penalties; availability of and access to
capital, and compliance with credit facility covenants; the
execution of capital projects and investment maintenance capital;
food safety, consumer liability and product recalls; climate
change, climate regulation and each company's sustainability
performance; strategic risk management; acquisitions and
divestitures; fluctuations in the debt and equity markets;
fluctuations in interest rates and currency exchange rates; pension
assets and liabilities; cyclical nature of the cost and supply of
hogs and the competitive nature of the pork market generally; the
effectiveness of commodity and interest rate hedging strategies;
impact of changes in the market value of the biological assets and
hedging instruments; the supply management system for poultry in
Canada; availability of plant
protein ingredients; intellectual property, including product
innovation, product development, brand strategy and trademark
protection; consolidation of operations and focus on protein; the
use of contract manufacturers; reputation; weather; compliance with
government regulation and adapting to changes in laws; actual and
threatened legal claims; consumer trends and changes in consumer
tastes and buying patterns; environmental regulation and potential
environmental liabilities; consolidation in the retail environment;
employment matters, including complying with employment laws across
multiple jurisdictions, the potential for work stoppages due to
non-renewal of collective agreements, recruiting and retaining
qualified personnel, reliance on key personnel and succession
planning; pricing of products; managing each company's supply
chain; and other factors as set out under the heading "Risk
Factors" in the Company's Management Discussion and Analysis for
the year ended December 31, 2023.
The Company
cautions readers that the foregoing
list of factors is not exhaustive.
More information about risk factors can be found under the
heading "Risk Factors" in the Company's Annual Management's
Discussion and Analysis for the year ended December 31, 2023 and the quarter ended
September 30, 2024 that are available
on SEDAR+ at www.sedarplus.ca.
All forward-looking statements included herein
speak only as of the date hereof.
Unless required by law, the Company does
not undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. All forward-looking statements
contained herein are expressly qualified by this cautionary
statement.
View original content to download
multimedia:https://www.prnewswire.com/news-releases/maple-leaf-foods-lays-groundwork-for-transformational-year-ahead-302347618.html
SOURCE Maple Leaf Foods Inc.