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

Good morning, everyone. My name is Michael McCain, Executive Chair of Maple Leaf Foods. It is my pleasure to welcome you to the 2025 Annual and Special Meeting of Shareholders. Today is a historic day. Not only are we celebrating the 30th anniversary of my family's impactful journey with Maple Leaf Foods, we are also on the cusp of approving one of the most significant transactions in the company's history, the spin-off of our pork operation as an independent publicly-traded company and a global leader in sustainably produced premium value-added pork with a diversified sales mix and a global reach. With your approval today, Maple Leaf Foods will be poised to enter a new era as a brand-led protein-focused consumer packaged goods company, taking the next step in our purposeful journey to raise the good in food. There's no doubt in my mind that both Maple Leaf Foods and Canada Packers will each be uniquely positioned to meet the world's growing demand for sustainable protein as we unlock significant value for all our stakeholders through this transaction. It takes a long time to build a great business and 30 years, I can assure you, is a long time. In 1995, we encountered a very troubled business when we walked through the door. Seemingly, nothing was going well and the company was bleeding cash. Today, we are a global leader on almost every front. We have an inspiring journey pursuing our purpose to raise the good in food and our vision to be the most sustainable protein company on earth, which is impactful on every level. We now have a company with a world-class supply chain operated with a world-class safety promise. We are brand leaders, even more important, brand creators. We are driving growth levels, which are pace setting for all CPG companies. We have disciplined execution across the board in every function. Our customer relationships are highly strategic and valued on both sides of the desk. And above all, we have a truly exceptional and distinctive culture, our most important asset with a collection of the most talented people in the food industry worldwide. What do shareholders have to show for this very long journey? In and around the year 2000, the then meat business inside Maple Leaf Foods was generating cash flows annually of less than $20 million per year. Today, we are, to our knowledge, the #1 performing protein company in North America on both top and bottom line. Indeed, great companies take a long time to build and persistence matters. A few formalities before we jump into the business of the meeting, I am acting as the Chair of the meeting and my colleague to my left, Suzanne Hathaway, our Senior Vice President and General Counsel, will act as Secretary. Also joining me on stage today is Curtis Frank, Maple Leaf Foods' President and Chief Executive Officer and 1 of my fellow directors, whom you'll be hearing from very shortly. I would also like to acknowledge my other fellow directors who are joining us today either here in person or online: Bill Aziz, Ron Close, Tom Hayes, Fareed Khan, Kate Lemon, Andrew MacDonald, Linda Mantia, Jonathan McCain; and Beth Newlands Campbell. Your commitment, your insights and your leadership are absolutely second to none. And thank you on behalf of all the stakeholders in this business, for your commitment to creating a world-class board experience. Of course, we owe a big enormous thank you to the Maple Leaf Foods team members, many of whom are joining us here in person today are online. Looking back over the year 2024 for you, was a foundational year for Maple Leaf Foods as we realize the full financial benefits from our strategic capital investments. And as we mapped out an exciting future with a refreshed strategic blueprint to propel our distinctive value proposition. This has set the stage for 2025 to be a transformational year as we continue to build on the positive momentum in our business. While we're pursuing our purpose to raise the good in food and our vision to be the most sustainable protein company on earth. I simply could not be more proud of the work that Curtis and his entire team have done. Looking ahead, the macro geopolitical and economic uncertainties in the current environment present us with both challenges and opportunities. And while there is a temptation in times like these uncertain times like this, to retrench and maybe focus solely on our short-term financial interest, that's not for us. At Maple Leaf Foods, our commitment to creating shared value for all our stakeholders and growing sustainably is unwavering and clear. Our imperative is to deliver attractive shareholder returns and superior growth while also addressing societal needs. Striking this balance is hard work, but it makes us a stronger company, a better company and long term, a more profitable company, it's our competitive advantage. The pursuit of shared value demands vision and demands resilience and a clear-eyed view of how to balance the competing stakeholder interest across the business and deliver both business and societal returns. Too many people in our experience get mired in the notion of maximizing their isolated interest where our vision is to clearly identify reasonable expectations for all stakeholders and then work tirelessly to meet each of them. Our financial results in 2024, together with our achievements in our sustainability performance demonstrate our progress and our ability to accomplish this goal. We are a carbon-neutral company. We are a leading supplier of animal products from -- meat products from animals raised without antibiotics. We are world leader in food safety, in people safety and in animal care. And through the unbelievable work of the Maple Leaf Center for food security, we are collaborating with civil society, with governments and industry to advance big solutions to address the crisis of food insecurity in Canada, that now impacts 1 in 4 children and almost 23% of households across Canada. As we look ahead, we will continue to deliver profitable growth as a purpose-driven company. Curtis and his team have a keen executional focus to drive growth, to capitalize on the rising global demand for protein, to leverage our leadership in sustainable meat, to build on our brands and our expanding reach and all of this underpinned by a resilient balance sheet delivering a strong free cash flow and very disciplined capital management. You're going to hear more on all of this when Curtis takes the microphone. Turning now to the formal business of the meeting. Our agenda today will consist of 3 parts. We will start with the formal business, which will cover receiving the 2024 annual financial statements, the election of directors, reappointing KPMG as the external auditors of Maple Leaf Foods, approving the arrangement resolution to spin off Canada Packers as an independent public company, approving the Canada Packers option plan resolution and approving the advisory resolution on executive compensation. All of these matters are described in detail in the notice of meeting and accompanying management information circular dated May 1, 2025. Once we have completed the voting formalities, we will adjourn the meeting temporarily to allow time for the scrutineers to complete the tabulation of voting results. During this break, Curtis will provide an update on the incredible forward momentum in the business and the strategic blueprint that we will be following to deliver on our full potential as we embark on the next chapter. Following Curtis' remarks, we will open up a general question-and-answer session, following which we will reconvene the formal meeting to announce the voting results. A few additional process points for today's hybrid meeting. If you are attending in person and have a specific question about a specific item of business, you're welcome to ask it when that matter is being considered. If you have a general question or comment, we ask that you please hold it until the general question-and-answer session following Curtis' management presentation. In either case, please use 1 of the microphones that are stationed at the corners of the room here so that those joining online can hear your question. We will also ask that you identify yourself by name and whether you are a shareholder or a proxy holder. If you're joining us online, you're welcome to also submit your questions at any time during the meeting by selecting the message icon at the top of your screen, typing in your message in the text box and clicking send. Questions submitted online that relate to the formal business of the meeting will be read allowed by Suzanne when that matter is being considered. General questions will be read aloud during the general question-and-answer session. When we get to the general questions, depending on the volume of questions, we make group online questions and comments of a similar nature. We'll do our best to respond to all questions. But in the event that we are not able to get to your specific question, we will follow up with you after the meeting. Now with the consent of the meeting, I appoint Timothy Lee and Melody Tong as scrutineers. Suzanne, can you please confirm that a quorum is present and the meeting is properly constituted.

Thank you, Michael. Yes, I can confirm that the meeting is duly constituted and that a quorum is present. Both the confirmation of mailing of the meeting materials and the scrutineer's report and attendance will be capped with the records of the meeting. Copies of the notice of the meeting and the management information circular are available on our Maple Foods website and on SEDAR+. For those of you joining online, you can also access the materials during the meeting by clicking on the documents icon on the Lumi platform. All votes today will be conducted by ballot. If you're a registered shareholder or proxy holder attending in person, you will have received ballots when you arrived at the meeting and registered with Computershare. Most of you will have turned in your ballots at that time. If you are a proxy holder and did not receive ballots or if you received ballots and have not turned them in, please raise your hand and the scrutineers will assist you. Shareholders and proxy holders attending virtually and who have logged into the meeting using your control number are able to vote on each matter until the voting is closed. You can vote online by clicking the polling icon at the top of the screen and completing the ballot. You may change your vote by selecting an alternative option on the ballot, or you may cancel your vote by selecting cancel. Please note that if you have already voted by proxy before the meeting, you do not need to vote again during the online voting unless you wish to change your vote. Voting online will revoke your previously submitted proxy. And once voting online is completed, your online ballot will be automatically submitted. Detailed voting instructions are available on your screen once the voting is open. We'll announce the results of all voting, including the votes cast at the meeting and proxies deposited before the meeting following the management presentation. To expedite the meeting, we have asked certain shareholders and proxy holders who are employees of the company to move and second the various motions. And as a final note, I would like to remind you that today's management presentation contains forward-looking information. We encourage you to review the cautionary statements in our regulatory filings available on our website and SEDAR for more information on the factors that could cause our actual results or outcomes to differ.

Thank you, Suzanne. With that, we will now move to the first item of business and open the online poll for all matters. The first matter of business is the presentation of the financial statements for the year ended December 31, 2024, together with the auditor's report on those statements. The financial statements and associated auditor's report are tabled before the meeting and have been mailed to those shareholders who requested them and are also available on our website and on SEDAR. No motion is required. Are there any questions? There being no questions, we will move to the next item of business, which is the election of directors. The number of directors to be elected has been set at 11. All nominees have confirmed their eligibility and their willingness to serve as director. As outlined in the information circular, the nominees are as follows: William Aziz, Ron Close, Curtis Frank, Tom Hayes, Fareed Khan, Catherine Lemon, Andrew MacDonald, Linda Mantia, Jonathan McCain, Michael McCain, and Beth Newlands Campbell. May I please have a motion?

My name is Cameron Chapman. I nominate each of the 11 nominees listed in the form of proxy and Management Information Circular for election as a director.

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

Thank you, Cameron and Jennifer. Are there any further nominations or questions. As there are no further nominations, I declare the nominations closed. Shareholders are entitled to vote individually for each director. Each director requires a simple majority of votes cast to be elected. May I have a motion?

My name is Cameron Chapman and I move the election of each individual director nominee to the Board of Directors of Maple Leaf Foods to hold office for a term to expire immediately following the next annual meeting of shareholders or until their respective successors are elected or appointed or they otherwise cease to hold office.

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

Thank you again, Cameron and Jennifer. If a shareholder or proxy holder attending in person has a ballot on this matter 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 next item of business, which is the appointment of auditors and the authorization for the directors to fix the auditor's remuneration. The Board has recommended the reappointment of KPMG LLP as auditors. This vote requires a simple majority. May I have a motion, please?

My name is Jason Meyer, and I move that KPMG LLP be appointed auditors of the company to hold office until the next Annual Meeting of Shareholders or until their successors are appointed and that the directors of the company be authorized to fix their remuneration.

My name is Leslie Bell, and I second the motion.

Thank you, Jason and Leslie. Is there any discussion on this motion? Shareholders and proxy holders are invited to vote if you haven't already done so. If you are attending in person and 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 continues to remain open, we will move on to the next item of business, which is the approval of the arrangement resolution. The Board having considered the unanimous recommendation of the special committee, has recommended approval of the arrangement resolution as fully described in the Management Information Circular. This vote requires not less than 66 2/3 of the votes cast by all shareholders and not less than a simple majority of the votes cast by the public shareholders. May I have a motion?

My name is Jennifer Hawn, and I move that the arrangement resolution be approved.

My name is Cameron Chapman and I second the motion.

Thank you, Jennifer and Cameron. Is there any discussion on this motion? And as the online poll continues to remain open, we will move on to the next item of business, which is the approval of the Canada Packers option plan subject to the approval of the arrangement resolution. This vote requires a simple majority of the votes cast by all shareholders. May I have a motion, please?

My name is Jennifer Hawn. And I move that the Canada Packers option plan be approved.

My name is Jason Meyer, and I second the motion.

Thank you, Jennifer and Jason. Is there any discussion on this motion? As there is no discussion, shareholders and proxy holders may 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 nonbinding advisory vote on the company's approach to executive compensation. May I have a motion on this, please?

My name is Leslie Bell, 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 May 1, 2025.

My name is Jason Meyer, and I second the motion.

Thank you. Leslie and Jason, is there any discussion on this motion? As there is no discussion, shareholders and proxy holders may vote on the motion if you haven't already done so. And 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 at this time. Thank you. And as the last matter to be voted on at today's meeting, I would now declare the online poll closed. With all of the voting now complete, all scrutineers will -- 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 invite Curtis to come to the podium and share his very exciting and inspiring remarks.

Thank you, Michael. And good morning, everyone. It's a pleasure to welcome so many of you today, whether you're here in person at our Think Food Innovation Center, or joining us online. Thank you for taking the time to be part of this important moment in our company's journey. Before I begin today, I want to extend my heart gratitude to Michael McCain, your unwavering passion for Maple Foods, your steadfast mentorship and your deep commitment to this company have been instrumental to not only my own personal development, but to the immense progress we've made in the company over the past 30 years, as you described. I also want to thank our Board of Directors for your thoughtful guidance and for your ongoing support. And to the entire Maple Leaf Foods team, whether you're on the front lines of our operations or part of our senior leadership team, thank you. Your dedication, resilience and contributions over the past year have been nothing short of extraordinary. It's been a busy and productive 12-plus months since our last AGM. And while 2024 was not without its challenges, it was above all, a deeply gratifying year. The long-term strategies we've been building over the past several years, have clearly begun to take hold. We saw our growth strategies prove their resilience. Our major capital projects came online and started to deliver real financial benefits. Our Fuel for Growth initiative began to hit its stride and pork market conditions began to normalize as we had always anticipated. And then came 1 of the most defining decisions in our company's history. The announcement of our plans to spin off our pork operations into a separate independent public company. A move that reshapes our focus, that crystallizes our identity, that sets a bold new course for Maple Foods as a purpose-driven, protein-focused branded consumer packaged goods company. We entered 2025 with the tailwinds of momentum with clarity and with a renewed commitment creating long-term sustainable value. After an excellent start to the quarter in Q1, that's exactly what we're on course to deliver. With our capital investment phase now fully complete, we are focused, intensely focused on executing the 5 core strategies that are reflected in our refreshed strategic blueprint. These are not just words on a wall. They are embedded in how we operate, how we make decisions, how we lead. Since we rolled out the refreshed blueprint early last year, I've talked about these strategies often, but they bear repeating here today. First, we lead the way by making better food, caring for our people, serving our communities, treating the animals under our care with compassion and nurturing a healthier planet. Second, we build loved brands by connecting deeply with consumers driving meaningful innovation and leveraging what makes us uniquely Maple Leaf. Third, we broadened our impact by expanding into new geographies, new categories, new channels and by diversifying our protein portfolio. Fourth, we operate with excellence by applying advanced technologies using data to drive smarter decisions and relentlessly improving efficiency. And finally, and perhaps most importantly, we develop extraordinary talent by living our values, investing in our leaders and creating a culture of high engagement and accountability. Over the course of 2024, we successfully advanced the execution of these 5 core strategies, achieving what I would describe as notable progress. Allow me to highlight what some of our team's noteworthy achievements from the past year. We grew revenue 1.1% across our total business and 3.9% in our CPG centric prepared meats portfolio, clearly demonstrating our ability to a shifting -- to adapt to a shifting economic environment, and changing consumer expectations. We improved the profitability of the business in a material way, delivering $553 million in adjusted EBITDA, nearly a 30% improvement from the prior year. We harvested the full benefits of our capital investment program as we exited the year, delivering an adjusted EBITDA margin of 12.5% in the fourth quarter, a 250 basis point improvement from the year prior. We announced our Fuel for Growth initiative and completed the integration of the plant protein business as part of the restructuring of our commercial and operations teams, setting the stage not only for improved profitability in the plant protein business, but also scaling up our platform in the U.S. market. And we strengthened our balance sheet, generating $385 million in free cash flow, reducing our net debt by $231 million and ending the year with a net debt to adjusted EBITDA ratio of 2.7, well within our investment-grade target. But beyond the numbers, we stayed true to our values, and we advanced our vision to be the most sustainable protein company on earth in very meaningful ways. This included marking our fifth year as a carbon-neutral company, something that continues to set us apart in the market. reducing our environmental emissions and our environmental impact, including a Scope 1 and 2 emissions reduction of over 5% in absolute and reducing our Scope 3 emissions intensity by almost 17% versus our 2018 baseline, achieving a 98.9% reduction in antibiotic use in our hog operations since 2014, delivering on our safety promise, in food safety, people safety and animal care, accelerating the pace of impactful innovation with the launch of over 50 new products, including exciting innovations like our Schneider's breakfast sandwiches and breakfast bites, and continuing our work through the Maple Leaf Center for Food Security to see to it that food insecurity in Canada is reduced by 50% by 2030. All of this progress has created what I like to call Clean Air, a rare and powerful moment to focus on execution, on growth and unlocking the full potential of the Maple Leaf business. With this Clean Air, we entered 2025 with 3 clear priorities. First, to continue building our financial performance through strong execution and enhanced cost competitiveness, Second, to successfully spin off and complete the transaction of Canada Packers, a bold transformation that sharpens our identity as a CPG company. And third, to continue advancing our vision to be the most sustainable protein company on Earth, while delivering value for all of our stakeholders. Our strategy is not just working, it's building momentum. And while there continues to be geopolitical uncertainty all around us, we are proactively managing these risks, leaning into the resiliency of our business and the agility of the Maple Leaf team. In moments like this, some companies retreat, they turn their focus narrowly to the short term. That is not our way. At Maple Leaf, we're doubling down on our values and our commitment to shared value creation because that is at the heart of what we believe builds enduring success. We are leading boldly in our marketing efforts in Canada. Our Look for the Leaf campaign is but 1 example of a sweeping values-driven media moment that's shown a national spotlight, not just on Maple Leaf, but on 16 fellow Canadian food brands. In a time of potential trade tension, we encourage Canadians to support homegrown products, not just ours, but any marked with a maple leaf because when you lead with purpose, you lift others up. All of this positive momentum is reflected in our 2025 outlook, where we continue to expect to deliver mid-single-digit sales growth driven by the continued execution of our proven growth strategies to deliver a significant year-over-year adjusted EBITDA improvement to meet or exceed $634 million, to maintain an investor-friendly approach to capital allocation, and to continue deleveraging the balance sheet, operating well within our investment-grade target range. Now this brings me to perhaps the most exciting milestone on our near-term horizon, the creation of Canada Packers as we split Maple Leaf Foods into 2 independent public companies, each with a clear identity, a defined investment thesis, a robust plan and sharper executional focus. As we announced last summer, this transaction marked the beginning of a bold new chapter on a very purposeful journey. Maple Leaf Foods will march forward as a purpose-driven, protein-focused, branded consumer packaged goods company and Canada Packers will emerge as a new independent company, unleashed to pursue its full potential as a global leader in premium value-added, sustainably produced pork. With your approval today, we expect the transaction to close in the second half of 2025, providing an exciting opportunity for all shareholders to participate in not 1 but 2 strong sustainable businesses with compelling growth potential. With global demand for protein expected to nearly double in the coming decades and consumers increasingly demanding protein with a purpose, that is exactly what Maple Leaf Foods and Canada packers intend to deliver each in their unique way. Within Maple Leaf Foods, we are armed with strong market shares, trusted brands, a world-class supply chain, proven innovation capabilities and an exceptional management team with deep consumer packaged goods experience. Our strategic blueprint is future ready now, and we are perfectly positioned to unlock the full potential of what we've worked so hard to build. And Canada Packers will be a world-class business from day 1 with a clear vision to produce meat the right way, and deliver industry-leading financial performance. As I look at where we are today and what lies ahead, I've personally never been more energized or more confident. So let me end where I began. and that's with gratitude, to our people, to our partners, to our shareholders. Thank you. It's a profound privilege to lead this company to work alongside people who care so deeply, who believe in our purpose and who are building something special that truly matters. Because of your efforts, Maple Leaf Foods is exactly where it needs to be, bold in vision, strong in execution and ready for what comes next. Thank you.

Thank you, Curtis. A super inspiring outcome for Maple Foods, led by an incredible Chief Executive Officer in Curtis Frank. Before we reconvene, I'll turn it over to Suzanne for questions, please.

So we have 1 question coming in online. Curtis, can you talk a little bit more about the protein opportunity and how you're positioning Maple Leaf Foods to capitalize on it?

Yes.. Thanks, Suzanne. The -- you heard in my comments, I noted that the protein consumption is predicted on many levels to more than double by -- as soon as 2050. And protein consumption continues to grow at a rapid pace. We're incredibly pleased and proud of how Maple Leaf is prepared to capitalize on that particular opportunity. Between a very diversified protein portfolio, the leadership we have in our #1 and #2 brands in the marketplace. Our leadership in sustainable meats, our beachhead into the United States market, I think we're perfectly positioned, particularly given our innovation capabilities to meet the growing demand for consumer needs for protein, whether that be in all life stages, Gen Z, millennials, aging population and those even on GLP-1 support in the marketplace. So we feel incredibly proud of where we line up from a protein consumption point of view.

And if there's questions in the room, please feel free to make your way to the microphones. I have no more questions online.

Okay. I understand now that we have the voting results that are available and we'll reconvene the formal part of the meeting. I'd 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'm pleased to announce that all director nominees have been reelected. Please join me in congratulating your 2025, 2026 Board of Directors. I would tell you, I look forward to working with each 1 of you over the next 12 months and the course of the next year as we enter into this next exciting period for Maple Leaf Foods. I'm also pleased to announce that each of the 4 remaining resolutions, the resolution reappointing KPMG as auditors, the resolution approving the arrangement and spin-off of Canada Packers, the resolution approving the Canada Packers option plan and the say-on-pay advisory resolution have all been passed. As I said at the beginning of the meeting, this is a truly historic day. It's also my 30th Annual General Meeting. With your strong endorsement of the Canada Packers spin-off, our team is going to be full steam ahead over the course of the next many months in the execution of that transaction that we're on track to complete in the back half of 2025. Full details of all the voting results are going to be published following the meeting and they'll be filed on SEDAR. This brings us to the conclusion of our formal business, and now concludes our meeting of shareholders. So thank you for attending today, and we will look forward to reconvening again in 1 year's time as 2 enterprises, not one. Have a wonderful day. Thank you.