MISSISSAUGA, Ont. – Despite some turbulence in the pork market, Maple Leaf Foods Inc. reported a solid first quarter ended March 31, 2017. First quarter sales increased 1.8 percent and adjusted earnings per share increased 17.9 percent compared to the same quarter of last year. Adjusted EBITDA margin was 10.8 percent in the quarter, which was the fifth consecutive quarter of above the company’s 10 percent strategic target.
However, net earnings for the first quarter decreased 28.8 percent to C$30.1 million ($0.23 per basic share) compared to C$42.3 million ($0.31 per basic share) last year. According to the company, “The underlying progress in the business reflected in positive revenue and margin growth was more than offset by factors excluded in calculating Adjusted Operating Earnings, such as the change in fair value of biological assets and higher restructuring costs.”
Michael McCain, Maple Leaf Foods CEO, president and director, told analysts on an earnings call April 27, “This positive outcome was achieved despite some market challenges during the quarter, notably some significant turbulence in the pork markets.”
Sales in the first quarter increased to C$811.2 million ($594.3 million), or 2.1 percent after adjusting for the impact of foreign exchange and acquisitions. Stronger volume and higher value-added fresh pork export sales to Japan contributed to the increase, according to CFO Deborah Simpson.
“Overall, we had a solid quarter from a commercial and operating perspective,” Simpson said during the earnings call. “Our prepared meats volume continued to improve and was higher than last year, even though the prior year had the added benefit of Easter, landing in the first quarter. We also had lower operating costs across the supply chain, which contributed to our results.”
The company also reported strong commercial performance in fresh value-added pork which was partially offset by margin compression in prepared meats, particularly in packaged bacon. “Protein volumes were also up, but markets impacted margins and overall poultry performance was below year-ago levels,” Simpson explained. “We continue to grow volume in meat raised without antibiotics, with a much greater commercial thrust in 2017 in both the US and Canada.”
The company closed its acquisition of Lightlife Foods Inc. in March. With approximately $40 million in sales in 2016, Lightlife has 38 percent market share in the US refrigerated plant-based protein foods category and manufactures more than 30 products, including plant-based tempeh, hot dogs, breakfast foods and burgers, at its facility in Turner Falls, Massachusetts. The deal strengthens Maple Leaf Foods’ position in the $600 million US plant-based protein market.
“It's an important milestone for us as we expand into the alternative protein segment,” McCain told analysts. “Lightlife commands a 38 percent market share in the refrigerated plant protein category with the No. 1 brand. And the overall plant protein category is growing at a double-digit pace, well above conventional grocery. We're delighted with the transaction.”
Looking ahead, McCain outlined the company’s road map toward more profitable growth, which is made up of six corporate strategies.
- Lead in sustainability
- Invest in people
- Making great food
- Broadening reach
- Building on a digital future
- Elimination of waste
“We’re at a juncture in which we are finally able to leverage all of the strategic capabilities that we’ve created and all of our passions and interests, and they all line up to where society is going today, where the market’s headed, where our passions lie and where we also have a clear strategic advantage,” McCain said.
Regarding sustainability, Maple Leaf has outlined four sustainability pillars that will be outlined in its soon-to-be-released 2016 Sustainability Report.
First, the company has shown industry leadership in offering protein raised without antibiotics. It’s also moving toward removing artificial color and flavors and shifting its entire portfolio toward simpler, natural ingredients.
In addition, Maple Leaf has launched the Maple Leaf Centre for Action on Food Security. The program is backed by a $10 million, 5-year commitment to advance sustainable food security through funding and innovation, as well as a learning hub in collaboration with communities across the country. Its goal is to work collaboratively to reduce food insecurity by 50 percent by 2030.
Animal welfare continues to be a critical part of the company’s sustainability pillar. “We’re driving very comprehensive advancements in new technologies, in training and in more humane production practices,” McCain said.
Finally, the company continues to work on reducing its environmental footprint. Maple Leaf has set a goal to reduce its environmental impact by 50 percent by 2025. “Last year, I’m very proud to say that we cut our energy and water usage by a phenomenal 15 percent and emissions by over 30 percent,” McCain said. “We have every reason to believe we can accomplish our goal ahead of schedule.”
(1 Canadian Dollar = 0.73 US Dollars)
