Sales in the pork operating unit increased by 1.1% compared to last year.
November 13, 2024
Maple Leaf Foods Inc. has reported its financial results for the third quarter ending Sept. 30, and provided an update on its new tax-free structure for the spin-off of its pork business, to be known as Canada Packers.
"In the third quarter of 2024, we made significant strides in executing our strategic playbook, achieving strong results in a challenging consumer landscape," said Curtis Frank, president and CEO of Maple Leaf Foods. "Our sales increased by 1.8%, driven by over 3% growth in our prepared meats business, while Adjusted EBITDA rose to $141 million.
"These results reflect our continued investment in our market-leading brands, our leadership in sustainable meats, and alignment with our customers' strategies, as we expanded retail market share and demonstrated growth in our food service portfolio. These factors, together with improving pork market conditions and the benefits from our capital projects, fueled a 9.1% year-over-year increase in adjusted EBITDA.
"With our business performance strengthening, our large-scale capital programs complete, and our disciplined approach to capital management, we generated an increase of $65 million in free cash flow during the quarter. This has accelerated the rapid deleveraging of our balance sheet, achieving a 3.1x adjusted EBITDA to net debt ratio at the end of Q3. Looking forward, we anticipate continued progress in the fourth quarter and remain confident in our 2024 outlook," continued Frank.
"We continue to be very excited about the benefits of the spin-off of our pork business, and the future of Maple Leaf Foods and Canada Packers as independent, public companies. The prospect of executing the transaction as a tax-free spin-off is a positive development as we continue to advance our strategy to unlock value and unleash the potential of these two unique and distinct businesses."
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization grew to $141 million, a 9.1% increase from the third quarter of last year, with adjusted EBITDA margin increasing from 10.4% to 11.2% for the same period.
Sales were $1,260 million for the third quarter, compared to $1,238 million for the same period last year, an increase of 1.8%. Sales in prepared foods increased 2.0%. Within prepared foods, prepared meats and plant protein increased by 3.1% and 1.1% respectively, which were partially offset by a decline in poultry of 0.9%, compared to the same period in the prior year. Sales in the pork operating unit increased by 1.1% compared to last year.
Earnings for the third quarter of 2024 were $18 million ($0.14 per basic share) compared to a loss of $4 million ($0.04 loss per basic share) last year.
Capital expenditures in the third quarter of 2024 were $26 million compared to $50 million in the third quarter last year, consistent with the company's focus of disciplined capital management, and reflecting the completion of its large capital projects.
Net debt was $1,597 million, with net debt to trailing four quarters adjusted EBITDA of 3.1x, decreasing from 3.4x at the end of the second quarter and 4.9x at the same time a year ago, consistent with the company's focus on deleveraging the balance sheet.
Free cash flow improved to $155 million, an increase of $65 million from the same quarter last year.
On July 9, Maple Leaf Foods announced plans to separate into two independent public companies through the spin-off of its pork business. Since the announcement of the spin-off, the company has made significant strides in executing the work necessary for a successful separation of the two businesses, including continuing to assess its ability to achieve a more tax efficient outcome. The company has identified a structure that would allow it to implement the spin-off through a tax-free "butterfly reorganization."
The company continues to expect that the transaction will be completed during 2025, however, the completion of the spin-off under the new structure is subject to the receipt of an advance tax ruling from the Canada Revenue Agency. As a result, Maple Leaf expects that the closing of the transaction will be delayed beyond the company's original expectations.
On Oct. 10, Maple Leaf Foods unveiled that Canada Packers Inc. will be the name of the separated pork business, honoring the history and legacy of this iconic brand, as well as reflecting the vision for the future of Canada Packers once it is established as a new independent, public company.
For the full year 2024, the company expects low single-digit revenue growth, adjusted EBITDA margin expansion over 2023 and to generate increased free cash flow and deliver the balance sheet. Total capital expenditures this year are expected to be approximately $100 million, largely focused on maintenance capital and optimization of its existing network.
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