TORONTO – Market forces in the form of people, pork and pricing pressured Maple Leaf Foods Inc.’s second-quarter results. The pressure led the company to record a loss for the quarter.

“On people, we created an absenteeism problem in Q1 for a vacancy problem in Q2,” said Michael H. McCain, president and chief executive officer, during an Aug. 4 conference call to discuss financial results. “With a severe labor shortage in Canada and the country at essentially full employment, we struggled to fill over 1,500 vacancies. That’s over 10% of our workforce.

“The labor shortages and, even worse, the continuous churn in our population limited our ability to consistently meet demand for our highly valued products. It increased our reliance on overtime and temporary labor. It added cost to our onboarding and turnover, and it weakened our productivity.”

Adding to the pressure was a volatile global pork market disrupted by the ongoing impacts of COVID-19 and the war in Ukraine that sent feed costs around the world higher. Maple Leaf Foods also felt the effects of a contracting Chinese pork market and a falling Japanese yen. Adding even more pressure were high ocean freight costs.

“The fact that any of these occurred is not significant to us,” McCain said. “The fact that they all played out at the same time, and they all persisted for considerable time is significant.”

McCain added that on pricing the company can price for inflation but has been challenged to keep pace with rapidly changing costs.

“What we do not have is the ability to increase prices speculatively for things that might happen or speculative cushion, so to speak, certainly in the short term,” he said. “Our struggle has simply been to keep up with the magnitude of price increases required. We think we’ve nailed it at one moment only to realize the next wave.

“The pricing actions that we took in the second quarter successfully covered the inflation we anticipated, but we now know it was inadequate to cover the inflation levels that actually materialized new during the quarter, mostly in freight surcharges and costs, some in packaging ingredients and various overhead components.”

Maple Leaf Foods recorded a loss of C$54.6 million ($42.4 million) for the quarter ended June 30, down from the year before when the company earned C$8.8 million, equal to C7¢ per share.

Quarterly sales rose to C$1.19 billion ($925 million) from C$1.16 billion.

“What actions are we taking?” McCain asked rhetorically. “For sure, we are not standing still hoping, just simply hoping for a sunnier day even though we feel this environment is short term and transitional. For example, we have taken steps to materially increase our hiring capacity in a challenged people market such as this; the old suite of hiring tactics simply isn’t adequate, and we are accelerating our activity. It is getting better, but we have much more work to do.

“No. 2, while we cannot influence global markets that affect the pork business, we are taking steps to optimize our position inside these markets, including pricing action where it’s possible, freight cost optimization and moving volume to more lucrative opportunities where they can be found.  And No. 3, we are taking another round of pricing in our prepared meats business in Q3.”

Noting that the company’s outlook is based on “normal market conditions,” Geer Verellen, chief financial officer, said the company expects its meat protein business to reach mid- to high- single-digit sales growth driven by continued momentum in sustainable needs, brand leadership and growth into the US market.

“In addition, we now expect to achieve adjusted EBITDA margin expansion to a 14% to 16% target range once markets normalize,” he said.