Maple Leaf Foods Inc. (MFI) Earnings Call Transcript & Summary

My name is Jennifer Hawn, and I move that on an advisory basis and not to diminish the role of the responsibilities of the Board of Directors, the shareholders accept the approach to executive compensation as described in the company's Management Information Circular dated March 13, 2024.

My name is Chris Bovaird, and I second the motion.

Thank you again, Jennifer and Chris. Is there any discussion on this motion? As there is no discussion, shareholders and proxy holders may again vote on the motion, if you haven't already done so. Once again, for those attending in person, if you have a ballot that has not been turned in, please raise your hand so that the scrutineers may collect it. And as the online poll remains open, we will move on to the final item of business, which is the motion to amend our options plan to increase the number of shares reserved for issuance. The Board has recommended the approval of the increase in the number of shares reserved for issuance under the option plan by 3,250,000 to 11,750,000. This vote requires a simple majority. May I have a motion on this, please?

My name is Chris Bovaird, and I move that an amendment to increase the number of shares reserved for issuance under the option plan be approved.

My name is Jennifer Hawn, and I second the motion.

Thank you, Chris and Jennifer. Is there any discussion on this motion, please? There being no discussion, again and finally, shareholders and proxy holders are invited to vote if you haven't already done so. For those attending in person, if you have your ballot that has not been turned in, please again raise your hand so that the scrutineers may collect it. And if you are voting online, please enter your vote now. Thank you. As the last matter to be voted on at today's meeting. I now declare the online poll closed. With all voting now complete, our scrutineers will finish tabulating the votes, including those cast during the meeting today and by proxy in advance of the meeting. While we wait for the final tabulation, I would like to thank everyone for taking the time to join us today and for casting your votes. Your views are important to us and we appreciate opportunities like this to receive your feedback. I understand that we now have the voting results available. I am pleased to announce that all director nominees have been reelected and I invite my fellow directors to please stand and be recognized. Please join me in congratulating your 2024-2025 Board of Directors. I look forward to working with all of you over the course of the next year. I'm also pleased to announce that the remaining 3 resolutions. The resolution appointing KPMG as the auditors, the say-on-pay advisory resolution and the resolution approving the amendment to the option plan have also been passed. Full details of the voting results will be published following the meeting and will be filed on SEDAR. That brings us to the conclusion of our formal business. And since there is no other business, I declare the formal part of the meeting terminated. And I invite Curtis now to the podium to share a few remarks and to answer any questions that shareholders may have. Curtis?

Thank you, Michael, and good morning, everyone. It's a pleasure to see so many of you joining us today, both in person here in the forum and also online. It's certainly been a busy 12 months since our last AGM and, a year of many firsts for me after assuming the role of CEO of Maple Leaf Foods last May. First and foremost, I want to begin by extending my gratitude to our Executive Chair, Michael McCain, for his unwavering support over the course of my transition. I also want to acknowledge my fellow directors for their support and guidance and our senior leadership team, along with all of our team members at Maple Leaf Foods for their continued dedication. My journey with Maple Leaf spans virtually my entire professional career closing in on 24 years. And anyone who knows me, knows that I'm deeply passionate about what we do. We have created a culture that is unique to us, a culture that thrives on high performance and a culture that is grounded in living our Maple Leaf leadership values. It was 5 years ago that we rolled out an ambitious blueprint for Maple Leaf Foods, with a vision -- with a bold purpose story to raise the good in food and an even bolder vision to become the most sustainable protein company on Earth. Our purpose and Blueprint have not only set us apart in the marketplace, but have also served as our North Star. It has guided us through the uncertainties of recent years and charted the course to creating shared value for all of our Maple Leaf stakeholders. I'll dive a little deeper into our evolved strategic blueprint shortly. But first, I'd like to share some reflections to close out 2023. As I look back on 2023, I'm left with somewhat mixed emotions. On one hand, I'm immensely proud of the progress that we have made in stabilizing our business in this post-pandemic economy and realizing the benefits of our recent capital investments and in positioning ourselves to capitalize on the platform we have built for future success. On the other hand, I'm keenly aware that we have much yet to accomplish as we look to realize and achieve our full business potential. As a result, we can safely describe 2023 as a year of progress, but certainly not perfection. Let's begin with the progress. In the face of such difficult market conditions, we made remarkable strides in advancing the execution of our blueprint, while demonstrating exceptional resilience. And most importantly, we exited the year with momentum building in our business, positioning ourselves for success in 2024 and well beyond. Allow me to highlight what some of our team's noteworthy achievements from the past year. Throughout 2023, we achieved top line sales growth of 2.7% and an adjusted EBITDA of $428 million, marking a substantial $155 million or 55% improvement from 2022. In our Meat Protein business, we achieved sales growth of 3.6% by executing our core strategies in brand renovation, sustainable meats and expanding our presence in the United States market. We successfully met our goal of achieving adjusted EBITDA neutral or better in our Plant Protein business, accomplishing this very important milestone in the fourth quarter of 2023. We completed the start-up of over $1 billion in major capital projects at London Poultry and the Bacon Center of Excellence, legacy assets that are poised to make a significant contribution to our business for decades to come. Despite navigating through the extraordinary levels of disruption and inflation following the aftermath of a global pandemic and global conflicts, we successfully restored the health of our supply chain while aligning our pricing to these new market realities. We demonstrated resilience in our Pork Complex, outperforming our competitive peers on a relative basis, even amid dislocated pork markets that persisted deeper and longer than we could have anticipated. And finally, we exhibited disciplined capital management and initiated our path towards deleveraging our balance sheet. In this face of a year of what could only described as intense disruption and transition, our steadfast commitments to creating shared value for all of our stakeholders has remained unwavering. This serves as a source of immense pride for all of us at Maple Leaf. Celebrating 4 years as a carbon-neutral company stands us a testament to our dedication to environmental stewardship. Completing the launch of industry-leading innovations such as Maple Leaf Natural Selections, made with our simplest ingredients ever reflects our ongoing pursuit and product development excellence. Our commitment to sustainable packaging saw us convert to 100% recyclable trades at our London Poultry facility thereby eliminating 1,000 tons of waste from landfills. Our passion for reaching our goal of reducing food and security in Canada by 50% before 2030 demonstrates our deep-rooted commitment to addressing societal challenges in the communities in which we operate. Maintaining our status as global leaders in food safety and people safety underscores our unwavering commitment to the well-being of our employees and consumers alike. And finally, scaling up our regenerative agriculture initiatives, along with the completion of the next phase of work related to anaerobic digestion signifies our proactive approach to leading in sustainability. These initiatives collectively shape a more sustainable future for all Maple Leaf stakeholders, positioning Maple Leaf Foods as a leader within our industry. And while these achievements accompanied by our strengthening financial performance surely indicate momentum building in our business. I'm very much mindful not to declare victory today. Progress indeed, but certainly not perfection. It's in our very nature to continue to strive for more and it's evident to all of us here at Maple Leaf, but there's still much important work ahead enroute to realizing our full potential. This brings me to the refresh of our strategic blueprint, which was out earlier this year, an essential foundation for delivering on the next phase of profitable growth at Maple Foods. To be clear, our vision and our purpose are enduring. They will not change. However, given the rapid pace of change all around us, it's imperative that our core strategies evolve as we look towards the future. And I'm personally, incredibly excited by the 5 core strategies that we have outlined in our blueprint and that will propel us forward into the future. We will lead the way by making better food, taking better care of our people, our communities and the animals under our care and by nurturing a better planet. This sits at the very heart of our focus on shared value creation. We will build loved brands by investing in our portfolio of leading brands to build consumer demand and loyalty by accelerating the pace of bringing impactful innovation to the market and by plugging our unique capabilities into our customer strategies. We will seek to broaden our impact by extending our geographic reach with a focus into the U.S. market, developing new channels in categories such as e-commerce and continuing to diversify our protein portfolio. We will operate with excellence by harnessing advanced technologies and automations applying data and analytics and escalating our focus on driving cost out of our business. And finally, and perhaps most importantly, we will continue to develop extraordinary talent, nurturing our values-based culture, investing in our highest potential leaders and inspiring our people to climb new mountains. As we roll out its evolved blueprint, it's important to be clear that things will be different. We are pivoting from building a world-class supply chain to harvesting the benefits of our investments. Here, we are accountable to deliver on the returns we committed and we will, in fact, deliver on those commitments. We are shifting from the internal focus associated with navigating the pandemic and the post-pandemic economy, to becoming a branded consumer package fits powerhouse. We're moving from a Canadian center of gravity to accelerating growth not only domestically, but with an increasing focus on accelerating growth in the United States. We're evolving from a capital-intensive internal project phase to driving cost efficiency, leveraging technology and taking advantage of automation. We are prioritizing a strong balance sheet to create flexibility for disciplined growth, and we're sharpening our competitive edge to stay ahead in an ever-evolving marketplace. Appropriately, we will hold ourselves to a high standard of achievement, and we have established a balanced scorecard to measure progress on this very exciting journey ahead. As we look forward, we expect to deliver low to mid-single-digit revenue growth rates by executing our core strategies to drive adjusted EBITDA margin expansion toward achieving our target margin of 14% to 16% in normal markets. To achieve top quartile scores in our annual employee engagement survey, including our frontline team members, while also advancing our key metrics in diversity, equity and inclusion. To work through the Maple Leaf Center for food security to see to it that food and security in Canada is reduced by 50% by 2030. To deliver on our safety promise, as global leaders in food safety, quality, people safety and animal care. To be carbon neutral, whilst continuing on our path to achieving science-based targets and reaching 100% sustainable packaging. And finally, we expect to deliver total shareholder returns a reward to our investors. To get to where we want to go, we are implementing a new organizational design to drive focus, accountability and results as we turn to executing this refreshed strategic blueprint. First, we are bringing our prepared meats, poultry and Plant Protein businesses together under a single prepared foods umbrella reporting to our recently appointed Chief Operating Officer, Adam Grogan. Adam has been with Maple Leaf for more than 25 years, and he is an outstanding leader. He is absolutely the right person to lead our core day-to-day business through both commercial and operations. Secondly, Casey Richards is the new President of our U.S. business and will be responsible for driving growth in the U.S. market. Casey has been with Maple Leaf for 6 years, and he brings a tremendous depth of North American food industry experience, having worked for some of North America's largest food companies. And our new CFO, David Smales, is yet another key addition to our leadership team. He joined us in January. And beyond his strong financial acumen, he brings tremendous long-term strategic planning skills and a deep understanding of Canadian capital markets. He has the right background and the right experience to help us to deliver results in this next important phase. As you know, we released our quarter 1 results this morning, delivering a solid quarter in line with our expectations and a 55% improvement in adjusted EBITDA year-over-year. Our net earnings were up. Free cash flow improved. Our capital construction costs came down nearly 70% as we wrap up our capital projects, another shot sign of sure progress. Before I close today, I want to take the opportunity to acknowledge the extraordinary talented team that I'm so fortunate to work alongside at Maple Foods. The people who are affected to join us and build their careers here are inspired by our purpose and our vision. They ignite our passion for what we do, and they drive us to reach for bold goals. There really is no place like Maple Leaf and our people are the very reason that I'm filled with nothing but confidence that I look to the road ahead. I've truly never been more optimistic about the future for Maple Foods. The opportunities ahead of us are tremendous. We are clear on what needs to be done. There is positive momentum building in our business, and I'm confident that we are on the path to delivering. The time has come for us to unlock the full potential of the Maple Leaf organization. Thank you. Before we wrap things up, I'll turn to Suzanne for questions.

Sure. So if anyone has any questions in the room, please just make your way to the microphones on the side of the room. And we'll also be -- we're also monitoring online. If you have questions online, please feel free to submit them now. One question in, Curtis. You mentioned consumer packaged goods powerhouse. What does that mean to you?

Yes. One of the -- thank you, Suzanne. One of the changes that we made was really important in our business, and I'd encourage you to turn to the materials we published online this morning. We'll give you a great view for listening on the line, was to consolidate into 2 business units that are deeply important in our business. The first is our prepared food business, which houses, our prepared meats, our poultry and our Plant Protein business. And inside of that, you will find a number of leading brands in Maple Leaf Prime, Maple Leaf Prime Poultry, our Mina halal brand and our wonderful Plant Protein brands in Maple Leaf [indiscernible] and others. We have an incredible opportunity to pivot to leading in growth from a brand point of view on the strength of brands that date back nearly 100 years. And one of the consequences over the last couple of years, understandably, given the dislocation in market conditions as we've been focused on talking about our commodity businesses, perhaps more than we would have liked to within the organization. And the materials that we provided today highlights that our prepared foods business is 50% of our portfolio. We're very fortunate to have a wonderful brand, and we plan to put them to work naturally in the chapter ahead. So a very exciting time for us.

Great. I have one more question from online. What -- can you share a bit more color on your new org design and what that means for your focus on the U.S.?

Certainly. Thank you. Our new organizational design would put in place something like 8 weeks ago, and it is aligned to the 2 operating units that I talked about our Pork Complex, which is a globally admired asset that we're incredibly proud of and has had exceptional performance in the conditions that we endured over the last couple of years in our prepared foods business. We see an immense opportunity to grow into the United States market. It's been one of our strategic priorities and putting a team in place in the U.S. where we're consolidating our Meat Protein business and our Plant Protein business gives us a really amazing platform for growth. We're able to consolidate in an office and an innovation center that we have headquartered in Chicago. And combine the efforts of our selling, marketing and commercial organization along with the distribution and manufacturing assets that we have on the ground in the U.S. So it's something we're very excited about. Having a dedicated focus and a President of our U.S. business is a logical progression for us as an organization, and I think it will provide for a level of intensity and focus that will help us to unlock further growth in the United States.

There any other questions from the room? Those are all the questions that have been submitted. So on behalf of Maple Leaf Food, our Board of Directors, our management team and all of our team members here, I'd like to thank you for joining us here today. And this concludes our meeting.