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

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Maple Leaf's Investor Update Conference Call. As a reminder, this conference call is being broadcast live on the Internet. [Operator Instructions] I would now like to turn the conference call over to Janet Craig, Investor Relations at Maple Leaf Foods. Please go ahead, Ms. Craig.

Thank you, Julie. Good morning, everyone. Speaking on the call this morning will be Michael McCain, Executive Chair; Curtis Frank, President and -- Chief Executive Officer, Dennis Organ President, Pork Complex and incoming CEO of the new Pork Company; and David Smales, CFO of Maple Leaf. Before we begin, I would like to remind you that some statements made on today's call may constitute forward-looking information. These statements are based on current assumptions, expectations and estimates of management, relating to matters such as market conditions, our business the proposed transaction and future outcomes as well as non-IFRS measure -- as well as non-IFRS financial metrics that are intended to be preliminary illustrative financial data. Forward-looking information necessarily involves known and unknown risks, uncertainties and other factors that may cause actual results or events that may be materially different from what we discuss. Please refer to the forward-looking information slide and the non-IFRS measures and management preliminary estimate slide that are included as part of the investor presentation for this call available on our website and for a more detailed summary of forward-looking information and the basis of preliminary financial information, including associated risks and assumptions. We also invite you to refer to the Risk Factors section of our annual management discussion and analysis for the year ended December 31, 2023, for a broader description of operations and risk factors that could affect the company's performance. We also upload the deck related to this announcement to the Investor Relations section of our website, which includes support material. As you can appreciate, we've entered our quiet period and are set to announce our second quarter results on August 8. Our remarks today will be understandably be focused on this announcement, and we will not be speaking to any near-term financial operational results. As always, the Investor Relations team will be available after the call for any follow-up questions. And with that, I will turn the call over to Curtis Frank. Curtis?

Thank you, Janet. Good morning, everyone, and thank you for joining our conference call here this morning. As you have seen earlier today, we announced that Maple Leaf will be splitting into 2 independent public companies with the aim of unlocking value and unleashing potential. Maple Leaf Foods is set to continue to pursue its inspiring vision to be the most sustainable protein company on earth, now as a more focused consumer packaged goods company and we intend to spin-off our pork business to become its own separate world-leading pork company that will be unleashed to pursue its own distinct value-creating plan. This is an exciting next step in our company's history that dates back more than 100 years, and a moment that we have been building toward from the day the McCain family began to play a pivotal role in shaping Maple Leaf Foods starting in 1995. Since that time, we have built an iconic purpose-driven Canadian food company that houses leading brands with leading market shares offers a diverse portfolio of protein offerings to consumers around the world, has established authentic leadership in sustainability, has invested to create a modern North American scaled supply chain is led by an incredibly talented team and has exciting growth opportunities that will propel us well into the future. Today, we look to start a new chapter for Maple Leaf, seeking to unlock the full potential of 2 distinct businesses. In February, we launched an evolved strategic blueprint, one that refined and updated the strategies that underpin our purpose to raise the good in food and our vision to be the most sustainable protein company on earth. This evolution reflected the transition from an intensive phase of investing and building new plants to realizing the benefits of our world-class network and compelling growth platforms. Now with the creation of 2 independent public companies, each with their distinctive value creation opportunities, we continue to evolve, enabling each business to continue down the path of generating shared value for all of our stakeholders. Both companies will have a sharper focus on the execution of their respective growth strategies and we'll enjoy the opportunity to be recognized as leaders in their respective industries. At Maple Leaf Foods, we will realize our vision to be the most sustainable protein company on earth now as a more focused, purpose-driven consumer packaged goods company. The new Pork Company will be unleased as a world-leading pork business, taking advantage of its unique business model and unlocking its own significant growth potential. The 2 companies will continue to have an enduring strategic relationship. Maple Leaf Foods will continue as a key shareholder in the Pork Company and will also serve as an anchor customer. An evergreen supply agreement between the 2 organizations will play an essential role in delivering value for both companies, while at the same time, allowing each to pursue their individual value creation opportunities. It's also important to emphasize that our commitments to sustainability and shared value creation will not change. This transaction will support the continuation of our leading sustainability practices across both companies, which remain foundational to who we are and what we do. We are confident that the separation of Maple Leaf Foods into 2 stand-alone businesses will offer a clear path to unlocking value at both companies. Maple Leaf will continue to be led by me as Chief Executive Officer; David Smales, as Chief Financial Officer; and Adam Grogan, its Chief Operating Officer. The new Pork Company will enter the market as an independent producer of high-quality Canadian pork products with a diversified customer base, led by Dennis Organ who is currently the President of our pork business. Dennis is a distinguished industry executive who joined us in 2023 after more than 27 years of experience in the North American food industry, including 11 years with Smithfield Foods, where he held a variety of roles, including CEO. Investors will have increased visibility into 2 separate investment opportunities, each benefiting from a sharpened focus on execution from a dedicated management team with deep industry experience and an unwavering commitment to long-term success of their organizations. We believe this will ultimately lead to proper recognition of their values by the market. Maple Leaf Foods will be composed of our prepared meats, our poultry and our plant protein businesses where our engagement with customers and consumers is strong and enduring. We have the #1 and #2 packaged meats brands in Canada, Schneider's and Maple Leaf and the #1 sustainable meats brand in Canada and #3 in the U.S. in Greenfield Natural Meats. We also have the #1 brand in fresh poultry and Maple Leaf Prime, the #1 halal fresh poultry brand in Mina halal and a portfolio of leading brands in the U.S. plant protein category through the combination of Lightlife, Field Roast and Chao cheese. These leading brands, supported by a broad portfolio of regional and specialty brands are engaged in more than 20 product categories distributed throughout thousands of North American grocery stores and available to consumers across the vast offering of North American food service operations. For Maple Leaf Foods, this transaction is the next pivotal step in our journey to bringing our blueprint to life. With global protein consumption projected to nearly double by 2050 due to a growing population, rising affluence, urbanization, aging demographics and dietary shifts towards protein-rich foods, our diverse protein portfolio positions us incredibly well to capitalize on the growing demand for protein. Maple Leaf will be able to put an even sharper focus on executing our compelling revenue growth platforms and the margin expansion program that we already have underway. Our focus will be set squarely on driving the growth of our leading brands, accelerating the pace of impactful innovation, expanding in new geographies, particularly the U.S. and leveraging our leadership in Sustainable Meats. And we won't be stopping there. We are relentlessly focused on harvesting the benefits of our recent capital investments while driving out waste through a pipeline of cost reduction initiatives. Of course, growth would not be possible without the footprint and scale of our manufacturing facilities and our network is primed with sufficient capacity to support growth for the foreseeable future. This, in turn, will drive both top line growth and margin expansion that when coupled with disciplined capital expenditures, will enable our free cash flow to increase materially, enable deleveraging and provide us with the capacity to make strategic investments that will continue to shape our portfolio of protein offerings. I say with confidence that I have never been more excited about the future that lies ahead for Maple Leaf Foods. Together, we have done the hard work over many years to ensure that we have the right platform to meet the growing demand for sustainably produced protein, armed with leading brands and market shares, compelling growth platforms, a modern supply chain and an exceptional management team with deep CPG industry experience, now is absolutely the right time to capitalize on what we have built and to bring our bold vision to life. Maple Leaf will remain deeply grounded in our blueprint, and it will continue to serve as the strategic compass for our business. So despite what's changing with this announcement, it's important to be clear on what will not change, our purpose to raise the good in food and our vision to be the most sustainable protein company on earth. And that brings us to our pork business, the new pork company, which is beginning a transformational journey of its own as an independent company. I'd like to now turn it over to Dennis Organ, the current President of our Pork Complex and incoming CEO of the new Pork Company to tell you about its own set of value-creation opportunities that lie ahead. Dennis?

Hello, everybody, on the call. I'm thrilled to be speaking with you today and eager to engage with you in the weeks to come. I am enthusiastic about the opportunity to unlock our potential as a newly independent organization. But first, let me delve into the current state of the pork business. We have a strong history of profitability in our pork business, and we are excited by the fact that market conditions have shown improvement in recent quarters. Operating from our world-class processing facilities in Alberta and Manitoba, we process around 4 million hogs annually. About 1.7 million of those are raised in-house and the other 2.3 million are sourced from our contract growers. We sell our pork products to a unique and attractive mix of customers in high-growth markets in North America and internationally. This diversified sales mix is a strategic advantage to the new Pork Company and gives us options for maximizing the revenue we receive for our products. Our long-standing customers trust us for the quality of our products and the value-added production capabilities that they have come to rely on. At the core of our operations, our industry-leading best practices in sustainability, worker safety and animal care. As one of North America's largest producers of pork that is raised without antibiotics, we are committing to setting the standard for responsible production practices. This commitment, combined with our resilient business model ensures our strength in all market conditions. Now for a look at what lies ahead for the new Pork Company. As we forge our own path forward, there are a wealth of known opportunities for us to build value in our business, ensuring both near-term and long-term success. For instance, our Manitoba processing facility currently operates below capacity. Optimizing its utilization is a key strategic initiative that promises substantial returns without significant capital investments. Other opportunities such as equipment modernization and capability expansion also offer meaningful financial returns. We also have a significant amount of continuous improvement initiatives that will deliver material value to the shareholders. There is consequential value for our entire entity to focus the light of the organization on the metrics that matter to the pork business. We will be operationally excellent. Increases in feed costs have also begun to normalize. Feed cost increases were the primary reason that the cost to raise a pig exceeded the value of the meat over the last few years. As earnings migrate towards full recovery, our controllable improvement initiatives, coupled with a favorable commodity outlook will allow us to invest back in the company to fuel future growth. So in conclusion, this transaction marks an exciting milestone for us. We are unleashing the potential of a world-class organization. We are building on our strengths, and we are providing investors a unique chance to participate in what I believe is a rare opportunity. So now, I will turn the call over to our Chief Financial Officer, David Smales, to present some financial highlights.

Thank you Dennis. I'm going to speak briefly to the pro forma financials and next steps in the transaction. As you know, Maple Leaf Foods has not previously reported our financial results along these 2 business lines. In our press release, we provided some baseline data to give you a sense of the relative scale of revenue and profitability of the separate businesses. On a trailing 12-month basis, ending March 31, 2024, a Maple Leaf Foods recorded revenue of close to $4.9 billion. If we've been reporting the business performance of the 2 businesses and adjusted pro forma for the impacts of the separation, Maple Leaf Foods revenue, excluding the Pork business would have been about $3.6 billion and adjusted EBITDA would have been approximately $395 million at an 11% margin. In the same way, trailing 12-month revenues at the new Pork Company would have been around $1.7 billion, including sales to Maple Leaf Foods treated as external sales as they will be post separation rather than being eliminated into company sales as they have been historically. We estimate the trailing 12-month adjusted EBITDA at the new Pork Company on the same basis would have been approximately $70 million producing a margin in the 4% range. These results reflect market conditions that were affected by impacts caused by the post-COVID economy. And as such, we have also provided our estimate of what these results would have been for the last 12 months under normal market conditions. Turning to the major terms of the transaction. Maple Leaf Foods will distribute 80.1% of the shares of the new Pork Company and will retain ownership of the remaining 19.9%. Existing shareholders of Maple Leaf Foods will receive a pro rata allocation of shares in the new Pork Company. These new Pork Company shares will be listed on the TSX, and investors will receive a prospectus with detailed information on the business of the new Pork Company. The spin-off will be completed as a return of capital transaction with an expected closing date early in 2025. This transaction is subject to shareholder approval along with certain lender consents and other customary approvals to be secured prior to closing. Shareholders will be asked to approve transactions in an upcoming special meeting of shareholders. Details of the meeting, along with a comprehensive discussion of the transaction background and rationale will be published in an information circular prior to the meeting. I'll now pass it back to Curtis briefly prior to Michael closing the prepared remarks.

Thank you, David. I hope and trust that you can hear from our enthusiasm for what we have presented here today that Dennis and I couldn't be more excited about the prospect of unlocking the full potential of these 2 great businesses as we look to lead them into the next chapter of pursuing their own growth strategies. Before we turn it over to Q&A, I'll now ask that Michael McCain, Executive Chair of Maple Leaf Foods to provide some concluding remarks.

Thank you, Curtis and team. It's wonderful to be here with you again today. It's been some time, and it's a real pleasure to be here again with you today. As you know, over nearly 30 years of history of Maple Leaf Foods, we've never shied away from bold moves to create a better future, never. Our company has never been stronger than it is today, more inspiring, more vibrant and more differentiated in its position in the marketplace than it is right now. Now here we are at another pivotal moment in that journey. I have to say I love the word unlocking and unleashing because that's exactly what this team is doing. We're unlocking value in a world-class CPG company with an inspiring vision under Curtis' leadership. And we're unleashing the uniqueness of our best-in-class pork company to grow and prosper without limitation, led by Dennis. Curtis and Dennis have given you an excellent picture of the strengths and potential of their respective organizations. And they've given you a clear explanation as to why this is the right transaction at the right time as we move forward, aspiring to create value for all stakeholders. Each of these companies will have a distinct value proposition. They will have unique growth trajectories and investment opportunities to build on their industry-leading performance. It will benefit from the focus of a dedicated management team, each aligned to our sustainability vision, as 2 distinct public companies, investors will have the opportunity -- and visibility of individual business models and investment opportunities, allowing them to properly understand and properly value each in the capital markets. My family and I are proud to be long-term owner operators with significant shareholdings in each one of these businesses, and we intend to play the same role in both. Each business will share a commitment to leadership and sustainability as a central strategy and we'll find pathways for all stakeholders to create value. I can't tell you how excited we are about the future this transaction creates. I hope you all share in that enthusiasm as we embark on this transformational opportunity ahead and enter a new era of value creation at Maple Leaf Foods. And now I'll turn it back over to Curtis and ask the operator to poll for questions. Curtis?

Thank you very much, Michael. And operator, if we could turn now to open the lines to Q&A, that would be wonderful.

[Operator Instructions] Your first question comes from Luke Hannan.

Congratulations on the announcement. Michael, if I can, I'd like to get your perspective on what ultimately led to this transaction in your view? Being the best way to create value for shareholders as opposed to perhaps any other alternative structures or corporate actions. And then also, I know, we'll be getting a little bit more detail in the circular, but can you just give us the broad strokes of maybe how long this process has been running in the background as well?

Luke, is that directed at me? It's Michael?

Yes. Correct.

Michael, perhaps you could cover your perspective on the transaction, and I can cover the timing elements.

Since the beginning of time, Luke, the capital markets for reasons we all understand has differentiated between the upstream businesses and the downstream businesses. We have both in our portfolio. The challenge in keeping them together is way, the way that they've been to date is it becomes restrictive for each one of them. The CPG company inside that mixture, doesn't have its -- virtue is properly unlocked in the capital markets and recognized. The upstream business becomes restricted in its opportunities and capital availability to grow because the amalgamation doesn't want to increase the exposure -- the capital exposure to that upstream business when it's combined. So you will note that in most other examples a separation like this makes really good sense to both unlock the value of the CPG company and unleash the potential for growth, its own independent growth in the upstream business. Just because they're different doesn't mean one is better than the other, they're just different. And there's many examples when -- in the food industry when the upstream and the downstream businesses should be separated like this. So that's the overarching why here. It creates opportunities and potential, I think, look, for both businesses. I can tell you as a share owner. We are really, really proud to have a long-term ownership position in each one of them. And I think it just makes a ton of sense. In terms of the timing now, it would have been incredibly challenging to complete transaction during the pandemic or in the post-pandemic economy. When the pork industry was facing not cycle but dysfunction and I draw a distinction there between cycle and dysfunction. We're coming out of that now. We're actually recovering from that dysfunction, and you're seeing that in the quarterly results. So the timing is basically perfect right now. Curtis?

Luke, did you get your question answered there? Is there any additional color that we can provide?

No. That's excellent, unless you had something else specifically that you wanted to get across, Curtis.

No. I think Michael characterized it appropriately. I mean this is something that's been contemplated over a period of time and carefully contemplated a period of time. The post-pandemic economy, certainly played a role in the timing. And I think the only thing that I would add with respect to it being the right time to complete the transaction beyond the normalization that's naturally happening in the pork business today is the fact that we've just completed a very significant capital investment program in the prepared meats and prepared foods business, at Maple Leaf Foods and the timing of putting that behind us, combined with the normalization of the pork markets makes a completely appropriate time to engage in this transaction. So it's been contemplated for some period of time, and we obviously have some period of time ahead of us until we get to an ultimate close.

That makes a lot of sense. And then my follow-up here, and then I'll pass the line. But the commentary on there being a taxable capital gain to Maple Leaf as a result of this transaction. Can you give us a little bit more detail on that, maybe why that is and to the extent that you can't share this maybe any visibility roughly speaking, into what that amount could be?

Sure, we'll give you some important context, David, perhaps you could maybe comment on that question, please.

Yes. So obviously, as we went through the process in conjunction with our advisers, we look to a range of options for the spin-off structure. We ultimately concluded there wasn't a clear path to securing the approvals we need to execute a more tax effective option, but at the same time, when you look at the overall value creation and our view of the significance of that by separating the 2 companies, the Board determined that the transaction was still beneficial overall to shareholders regardless of the tax implications. In terms of additional details, obviously, that will all be laid out in the prospectus and management information circular at that time.

Maybe one final, final question before I pass it along. When roughly speaking, should we expect the prospectus and the circular part need to be filed?

We're -- impossible today, Luke, we prefer not to give a precise date only because we don't have a precise date at this stage. However, we are expecting the transaction to close within the early parts of 2025. And obviously, a prospectus and management circular in advance of that will be appropriate. So we'll give you some more context for that. We have an important milestone coming up at our Q2 earnings and another opportunity to check in. And if there are any new developments in terms of specific timelines, we'll share them at that time.

Your next question comes from Michael Van Aelst.

Congratulations on the news. Just clarifying, so you don't have a date yet for the extraordinary general meeting or any -- just roughly a month, like a rough time frame?

We don't like, It's -- they priority today is to assure the news of the announcement and our intention to compete the transaction, and we'll have to follow up with you in due course with the precision around those dates.

You provided margin potential for the pork business. What do you see as the margin potential of the CPG company that -- in light of the past comments that the combined company would be in that 14% to 16% range.

Yes. Mike, I think a couple of important comments I'd offer in that regard. Number one, I just commented that we expect the transaction to close in, which means we'll be continuing to operate the business on a consolidated basis between now and that ultimate closing date. And in that period of time, the forward-looking guidance that we've provided for the combined organization, low to mid-single-digit revenue growth progression in our margins toward our 14% to 16% target and discipline in capital allocation, that forward-looking view will remain unchanged, we did in an attempt to try to provide some early color. Unfortunately, you're going to have to wait for the detail of the prospectus and management circular to be ultimately distributed, but we did try to at least at a high level, provide some pro forma estimates with the appropriate disclaimers on them, but things will naturally change as we finalize the separation of the 2 companies and our materials. It's premature at this stage to set margin targets for the individual companies, premature. Ultimately, we will provide some direction on that in the months ahead, but I think I'm going to have to leave you with the response that it's premature at this stage. What I know for certain is that the margin we show from an LTM perspective in the pork business is not reflective of its earnings potential. I mean what we've endured over the last, call it, 12 to 24 months or longer in a pandemic and post-pandemic economy is not normal market conditions and that we've tried to demonstrate what more normal market conditions would look like in terms of the impact of the pork business. And important to keep in mind in what's demonstrated in Maple Leaf Foods, that's trailing 12 months and doesn't include the full benefits of our capital programs and other items that we expect to contribute to margin expansion over the course of time and Maple Leaf Foods as well. So premature to give individual targets today, but ultimately, we will head in that direction as time [indiscernible].

So let me ask it in a little different way then. Is there any reason to believe that once you do provide those forecasts that when we adjust for the intercompany revenues, that those margins would lead us to the combined 14% to 16% for the 2 operations at some point in the foreseeable near future.

There is, I would say, 2 things. Number one, I want to be clear, we have not changed our targets for Maple Leaf as a combined entity, which should answer the question of -- is there any reason that we would expect that 14% to 16% is no longer achievable. That is not what we're communicating today. That continues to be well within our expected range of the combined entity. And again, when it comes to setting individual targets for the 2 individual companies that will have to unfold over time.

And then, are you not able to give any kind of range of capital gain exposure, from a tax perspective?

Not at this stage, Mike, there's a lot that goes into that in terms of valuation, et cetera, et cetera, that will play out as we get closer to the closing of the transaction.

Your next question comes from Mark Petrie.

I wanted to ask the 4% margin on the new Pork Company and then the 11% that you sort of provided as a marker. Is the delta there simply the -- what you've previously articulated as the as the impact of the Pork Complex versus the 5-year average, the negative impact on MFI. Is that the delta?

Yes, the short answer is yes. We've been demonstrating on a quarterly basis, the delta in our earnings to the 5-year average or what we would call normal market conditions, pre pandemic, and including the implications of our Japan business. So commodity markets and Japan, and this is simply reflective of that same methodology.

And then maybe I don't know if you can follow up offline or whatever, but I know you've changed the methodology a little bit in terms of how you've quantified that number over the last little bit. Can you quantify what that number is for the LTM period, like versus the 9.7% that you've delivered over LTM, what would be the impact of the Pork Complex versus the 5-year average on that number?

We can follow up with you off-line, Mark, but it would be roughly 200 to 220 basis points in that kind of range. But we can follow up with you offline with more detail.

Yes. I think with more precision on this, we would have to follow up, Mark. The other thing I would point out is in the question here, and maybe Michael, this might be an opportunity for you to add some color as well. If you have any comments, I'll just say this first, and then I'll pass it your way. When you look at that 4%, I mean, it's on the surface materially lower than we would have expected to deliver in the last couple of years. But I would point you to other public company benchmarks in the pork industry, in the last couple of quarters, we frequently talked about the fact that we're very pleased with our performance on a relative basis as compared to our peers. And I know sometimes frustratingly so we haven't been able to break out what that performance is as compared to others. This would give you an indication of how that performance looks relative to others. So Michael, I'll pass it your way, and you can add a little color for Mark, if you'd like.

Sure. I hope this is helpful, Mark. But over close to 30 years in the industry here, the one thing about the pork industry is there are statistical cycles that are attached to the industry itself, that presents some volatility, which is why these businesses trade maybe at a slightly lower level than others. But there is some kind of normal business cycle that's attached to it. What this business has experienced in the last 2 years, not 30, but the last 2 years or 2 to 3 years has nothing to do with cycle. It's been -- I think the only way you could accurately describe it is gross dysfunction as a result of some macro geopolitical global issues that created that dysfunction that is never -- it's unprecedented, in my 30 years with this industry, and I think anybody else in the industry. The best way to look at the comparisons is, okay, -- Maple Leaf has got a business that during that dysfunction, a big chunk of that LTM is inclusive of the dysfunction. Maple Leaf delivered 4% EBITDA margins. I can tell you, if you just have to pull out the -- as Curtis just identified, pull on some of the industry pure-play industry pork numbers, and you'll see numbers that are deeply red, not a little red, deeply red during this dysfunctional period deeply. And in a business like this, while that 4% looks like a low number, I look at it and say that is a colossal victory, actually, of victory. And demonstrating the resilience and the strength of the business that we have, that the dysfunction of the last few years that contributed to that deep red in the industry, it's just, by definition, is not going to continue. And so what David and his team and Curtis and others tried to give you is what does that LTM look like? And what's the potential of this business? If we do our level best to estimate the value of that dysfunction, and that's what I think they've tried to do. But I encourage you to pay attention to that 4% relative to some of those other benchmarks because it's a very material fact.

Yes. No, I understand that, and I appreciate the fact that Obviously, the last few years have been unprecedented in terms of the impact. For me, it's really more about trying to get at what the right level is for the for the CPG business, but obviously, we'll have to continue to work through that. One question I have is just about the relationship between the 2 segments and how the contracts -- not obviously in details, but how the contracts would roughly be structured? And I guess maybe simply put, how will the ups and downs of the pork commodity complex affect the profitability of the CPG business because that's obviously something that the market has grappled with over time. And I presume that the intention here is to be able to deliver much more stable margins in the CPG business and then have a lot of the volatility contained in the new pork co. But I just want to understand that a little bit better. So any insights you could provide would be great.

Yes, sure. No problem, Mark -- be happy to, I think the key points are firstly Maple Leaf Foods will have a significantly reduced commodity exposure as a result of the transaction that we're putting forward, significantly reduced commodity exposure will obviously be a 19.9% shareholder in the pork company, view that as a very positive and constructive thing and transparently reflective of our confidence in the future of the pork business and one, we're excited to be, obviously, investors in. There will be a supplier -- an evergreen supply agreement in place that we've commented on in materials. And that's, frankly, to the benefit of both companies. For Maple Leaf Foods that provides us with security of incoming high-quality Canadian sustainable meat raw material supply. And for the pork company, it provides them with an anchor customer and no different than they have today. So the intention of the evergreen supply agreement is simply to solidify the behavior between the 2 companies that essentially exist on an intercompany basis today. So that's important. The other thing that's important is the basis for the supply agreement in terms of pricing is tied to USDA markets that are fully transparent and are traded daily. So you get daily price disclosure on USDA markets for transfer pricing between the 2 companies. So there's a complete and full transparency. And that's essentially the same methodology that takes today. So on the commodity buying side, it does not change the exposure to commodities, which we price for very effectively through our revenue management process in the Maple Leaf business. And the Maple Leaf company will own 20% to 19.9% in the Pork Company. And of course, there are benefits to both organizations at the Pork Company and Maple Leaf Foods to an evergreen supply agreement. So hopefully, that provides you with some color, Mark and answers your question.

Yes. Yes, that's helpful. And I guess maybe just the last sort of topic, there might be a couple of questions here. But the last topic is just with regards to the actual sort of production plans. And so maybe first on the -- for the CPG business for MFI, would 100% of MFIs needs be supplied by the new Pork Company? Or would MFI be procuring from other entities as well?

The vast majority of our pork needs would be procured from the pork business. A big portion of our portfolio, Mark, as an example, comes in the poultry business where we'll continue to supply ourselves internally through our poultry business and in the plant protein space. But when it comes to the pork business, we would have some outside purchases, but the vast majority would take place through the Pork Company today.