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.
SOURCE Maple Leaf Foods Inc.
