MISSISSAUGA, ONTARIO – Maple Leaf Foods executives said financial challenges were expected in the first half of the year and those expectations were realized in the second fiscal quarter ended June 30, 2021, as the company reported adjusted operating earnings of $56.4 million (28¢ earnings per share) compared to $66.7 million (35¢ earnings per share) during the same period last year. At $1.16 billion, sales for the quarter were 5.9% higher than last year’s $1.10 billion. Despite challenges in the second quarter, Maple Leaf reported positive progress for the first half of 2021 compared to last year with net earnings totaling $56.5 million, an increase of 157% over last year’s $21.9 million and sales 4.5% higher at $2.21 billion compared to $2.12 billion in 2020.
The company said the more modest Q2 results reflected limited exports to China in addition to lower margins in its Meat Protein business. The Meat Protein Group reported sales of $1.12 billion for the quarter compared to $1.04 billion during the same period of 2020, a 7.4% increase. However, quarterly gross profit was lower at $167 million in 2021 compared to $176.6 in 2020 due in large part to costs related to operational and costs related to the company’s COVID-19 response. Higher market values for fresh pork and poultry contributed to the higher sales as did higher demand in the foodservice sector since the beginning of the pandemic in addition to higher volumes of products sent to the United States.
“In Meat Protein, performance was impressive with sales growth of 7.4% and adjusted EBITDA margins of 11.6%,” said Michael McCain, president and chief executive officer. “We expect our margins to fully recover beginning in the third quarter.”
The Plant Protein Group also reported a 20.7% sales decline for the quarter at $48.1 million compared to $60.6 million during the same period last year, with gross profit declining to $300,000 compared to $7.9 million in the second quarter of 2020.
According to Maple Leaf, “The decrease in gross profit was attributed to strategic investments in capacity to build for anticipated demand, which has resulted in increased overhead and transitory costs. Other factors include lower sales volumes and higher trade expenditures.”
Six months into 2021, sales declined 15.2% in the segment to $90.7 million, from last year’s $107 million.
For the quarter, Maple Leaf reported capital expenditures of $167 million, most of which went toward the construction of the company’s poultry processing plant being built in London, Ontario.
“In Plant Protein, where we continue to invest for long-term growth, we expected our sales in the first and second quarters to come in soft,” McCain said. “At the same time, we expect to return to our strategic growth targets or above in the second half of this year. Our brand momentum, innovation pipeline and customer activity all support this.”
Looking ahead, Maple Leaf said it has incorporated what are expected to be continued structural costs associated with COVID-19 into its operating plan for 2021. In the Meat Protein Group, the company expects sales growth just under 10% sales growth based on a full-year comparable basis, due largely to growing demand for sustainable meats, growth in the US market and capitalizing on its renovated brand.
As for the Plant Protein Group, while margin volatility is expected in the short term, sales growth in the second half of 2021 is expected to top 30%. Drivers include product innovation, improved distribution of its fresh products and continued recovery of the foodservice segment as COVID-19 restrictions on restaurants continue to loosen.
“During these challenging times, I continue to be inspired by our people, confident in the resiliency and effectiveness of our strategic blueprint, and more optimistic than ever in achieving our long-term goals,” McCain said.