Maple Leaf Foods Reports Fourth Quarter 2023 Financial Results

TSX: MFI
www.mapleleaffoods.com

MISSISSAUGA, ON, Feb. 22, 2024 /CNW/ – Maple Leaf Foods Inc. (“Maple Leaf Foods” or “the Company”) (TSX: MFI) today reported its financial results for the fourth quarter and full year ended December 31, 2023.

“In 2023 we made great progress in advancing our strategic Blueprint, delivering top-line growth of 2.7%, recording an increase of $155 million in Adjusted EBITDA to $428 million for the year, and meeting our commitment to achieve Adjusted EBITDA neutral or better in our Plant Protein business as we exited the year,” said Curtis Frank, President and Chief Executive Officer of Maple Leaf Foods. “While these are important achievements, and we are pleased with our relative performance in challenging market conditions, we acknowledge that we still have work to do to realize our full potential.”

“In the fourth quarter, our Meat Protein results fell below our expectations, as a result of global pork market dislocations that have persisted longer and deeper than we anticipated, and a challenging consumer demand environment, plus we still have a short distance to go to bring home the full benefits from our London Poultry and Bacon Centre of Excellence projects,” continued Frank. “With our refreshed strategic Blueprint announced today, we are sharpening our execution focus, bringing together our Meat Protein and Plant Protein businesses to build a powerful platform from which to grow in the U.S. market, and aligning the talents of our team to leverage the strength of our portfolio of leading brands, leadership in sustainability and world-class assets.”

Fourth Quarter 2023 Highlights

• Total Company sales growth of 0.6% to $1,192.7 million, with an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)⁽ⁱ⁾ margin of 10.1%.
• Meat Protein Group sales grew to $1,159.0 million, an increase of 0.8% year over year. Adjusted EBITDA was $122.0 million, Adjusted EBITDA margin was 10.5%, an improvement of 390 basis points from the fourth quarter of 2022.
• London Poultry plant and Bacon Centre of Excellence delivered approximately $25 million incremental Adjusted EBITDA.
• Plant Protein Group sales were $36.5 million. Plant Protein Group Adjusted EBITDA improved by $20.5 million year over year to a gain of $0.1 million, achieving the Company’s Adjusted EBITDA target of neutral or better in the latter half of 2023.
• Capital expenditures were $40.8 million.
• Sales for the fourth quarter increased 0.6% to $1,192.7 million compared to $1,185.5 million last year. Sales growth in the Meat Protein Group was partly offset by an 8.9% sales decline in the Plant Protein Group. For more details on sales performance by operating segment, please refer to the Operating Review.
• Net loss for the fourth quarter of 2023 was $9.3 million ($0.08 loss per basic share) compared to net loss of $41.5 million ($0.34 loss per basic share) last year. The improvement in performance for the quarter was driven by pricing to mitigate inflation, stronger pork markets, benefits from strategic construction projects, and the non-repeated estimated impact of $23 million from the cybersecurity incident in 2022 combined with achieving the goal of Adjusted EBITDA neutral performance in the Plant Protein segment. This was partially offset by higher input costs and increased interest expense. Net loss for the fourth quarter of 2023 also included start-up expenses of $29.7 million (2022: $25.8 million) associated with Construction Capital projects, and lower gains on biological assets mark to market adjustments, both of which are excluded from the calculation of Adjusted Operating Earnings.  
• Adjusted Operating Earnings for the fourth quarter of 2023 were $57.5 million compared to $1.8 million last year, consistent with the factors noted above.
• Adjusted EBITDA Margin for the fourth quarter increased to 10.1% from 4.7% last year, consistent with the factors noted above.
• Adjusted Earnings Before Taxes (“Adjusted EBT”) for the fourth quarter of 2023 were $16.4 million compared to a loss of $21.7 million last year, consistent with the factors noted above.
• Basic Earnings per Share was a loss of $0.08 for the fourth quarter of 2023 compared to a loss of $0.34 last year, consistent with the factors described above. 
• Adjusted Earnings per Share in the fourth quarter of 2023 was $0.08 compared to a loss of $0.28 last year.
• Full Year 2023
• Sales for 2023 were $4,867.9 million compared to $4,739.1 million last year, an increase of 2.7%. Sales growth in the Meat Protein Group was partly offset by a decline in the Plant Protein Group. For more details on sales performance by operating segment, please refer to the Operating Review.
• Net loss for 2023 was $125.0 million ($1.03 loss per basic share) compared to a net loss of $311.9 million ($2.52 loss per basic share) last year. In the Meat Protein Group stronger commercial performance more than offset market headwinds and inflation. In the Plant Protein Group improved operational performance more than offset lower volumes. In the prior year, the Plant Protein Group also included a $190.9 million one-time impairment charge. Interest expense increased by $94.8 million, reflecting the net debt levels associated with Construction Capital projects and increases in borrowing rates. Net loss for the year also included start-up expenses of $122.3 million (2022: $59.3 million) associated with Construction Capital projects, as well as net losses from non-cash fair value changes in biological assets and derivative contracts of $24.6 million (2022: $14.0 million), all of which are excluded in the calculation of Adjusted Operating Earnings.
• Adjusted Operating Earnings for 2023 were $193.2 million compared to $65.7 million last year, and Adjusted Earnings per Share for 2023 was $0.09 compared to loss of $0.26 last year.
• Adjusted Earnings Before Taxes (“Adjusted EBT”) for 2023 were $34.2 million compared to $4.4 million last year due to similar factors as noted above.
• Meat Protein Group
• The Meat Protein Group is comprised of prepared meats, ready-to-cook and ready-to-serve meals, snack kits, value-added fresh pork and poultry products that are sold to retail, foodservice and industrial channels, and agricultural operations in pork and poultry. The Meat Protein Group includes leading brands such as Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural Selections®, Schneiders®, Schneiders® Country Naturals®, Mina®, Greenfield Natural Meat Co.®, and other leading regional brands.
• Sales for the fourth quarter increased 0.8% to $1,159.0 million compared to $1,149.6 million last year. Sales growth was driven by volume growth, pricing action implemented in prior quarters to mitigate the impact of inflation, and favourable mix shift. Prior year sales volumes were also impacted by the cybersecurity incident.
• Gross profit for the fourth quarter of 2023 was $124.0 million (gross margin of 10.7%) compared to $82.2 million (gross margin of 7.2%) last year. Gross profit was positively impacted by pricing action to catch up to inflation, improved pork market conditions, and benefits from strategic capital, partially offset by cost inflation, unfavourable product mix, and start up expenses. Prior year results were impacted by the cybersecurity incident. Gross profit for the fourth quarter of 2023 included start-up expenses of $29.7 million (2022: $25.8 million) associated with Construction Capital projects which are excluded from the calculation of Adjusted Operating Earnings.
• SG&A expenses for the fourth quarter of 2023 were $91.3 million an increase from $80.0 million last year. The increase was due to inflationary pressures on base compensation as well as higher advertising and promotional spend.
• Adjusted Operating Earnings for the fourth quarter of 2023 were $62.3 million compared to $28.0 million last year, driven by the factors noted above.
• Adjusted EBITDA Margin for the fourth quarter was 10.5% compared to 6.6% last year, consistent with the factors noted above as well as benefits from London poultry plant and Bacon Centre of Excellence.
• Adjusted EBT for the fourth quarter of 2023 were $23.2 million compared to $6.7 million last year, driven by factors consistent with those noted above, as well as a $20.3 million increase in interest expense as a result of increased interest rates and higher debt, and increased depreciation expense all related to continued capital investment.
• Plant Protein Group
• The Plant Protein Group is comprised of refrigerated plant protein products, premium grain-based protein, and vegan cheese products sold to retail, foodservice and industrial channels. The Plant Protein Group includes the leading brands Lightlife® and Field Roast™.
• Sales for the fourth quarter were $36.5 million compared to $40.0 million last year, representing a decline of 8.9%, or 9.1% excluding the impact of foreign exchange. Sales decline was driven by lower retail volumes, partially offset by pricing action implemented in prior quarters to mitigate inflation.
• Gross profit for the fourth quarter of 2023 was $5.1 million (gross margin of 13.9%) compared to a loss of $10.3 million (gross margin loss of 25.8%) last year. The improvement in gross profit was driven by operational improvements, higher pricing, partially offset by lower volumes.
• SG&A expenses for the fourth quarter of 2023 were $9.9 million (27.2% of sales), compared to $15.8 million (39.5% of sales) last year. The decrease in SG&A expenses was primarily attributable to lower advertising and promotional expenses and lower people costs as a result of restructuring in prior quarters.
• Adjusted Operating Earnings for the fourth quarter of 2023 were a loss of $4.8 million compared to a loss of $26.2 million last year. The improvement in Adjusted Operating Earnings is consistent with the factors noted above.
• Adjusted EBITDA for the fourth quarter of 2023 was $0.1 million compared to a loss of $20.4 million last year, consistent with the factors noted above.