TORONTO — A confluence of events challenged Maple Leaf Foods Inc. during the third quarter of fiscal 2022, ended Sept. 30. Management sought to reassure investors that the issues are transitory and short-term during a Nov. 8 conference call to discuss the results.
“We hope that you take away a very clear and identifiable understanding of the external forces that are driving this short-term, highly abnormal outcome with the confidence that these forces won't be with us for long,” said Michael H. McCain, president and chief executive officer, during the call.
The “outcome” McCain cited was a loss of C$229.5 million ($170.2 million), which compared unfavorably to the third quarter of fiscal 2021 when the company earned C$44.5 million ($33 million), equal to C36¢ (26¢) per share on the common stock.
Quarterly sales rose 3.6% to C$1.23 billion ($912 million).
Items affecting the results included a one-time non-cash impairment charge of C$190.9 million ($141.6 million) related to the company’s Plant Protein business and in its Meat Protein business unit, a lag between raising meat prices and when the increases took effect, labor shortages, margin compression in the Japanese pork market, and China materially reducing pork imports.
Regarding the last four Meat Protein-related items, Curtis Frank, president and chief operating officer, said, “All four are quantifiable, all four are directly connected to our post-pandemic and war-torn economy, which can only be described as abnormal.”
Meat Protein unit sales rose 3.8% to C$1.2 billion ($890 million) during the quarter. Business unit adjusted EBITDA was C$100.9 million ($74.85 million), down from C$151.3 million compared to the year prior.
Frank said quarterly prepared meat sales were up 10% year-over-year.
“Our branded sales are growing, consumer demand for our categories remains strong, and we are not seeing consumers materially shifting away from our branded product portfolio,” he said. “The volume response we have experienced following inflationary-based price increases is positively exceeding our expectations, and we are very satisfied with the stability of our market share performance.”
Maple Leaf’s Plant Protein business unit saw quarterly sales fall 12% to C$43.6 million ($32 million). The decrease was driven by lower retail volume as consumers adjusted to higher prices, according to the company.
“During the quarter and as part of our annual impairment testing work, we recognized a non-cash goodwill impairment charge of approximately C$191 million associated with our plant business, which was largely due to the increase in the discount rate as a result of current economic conditions, including a significant interest rate increase,” said Geert Verellen, chief financial officer.
For the rest of the fiscal year, Maple Leaf Foods is guiding that its Meat Protein unit will experience mid- to high-single-digit sales growth. In Plant Protein, the company expects to reduce adjusted EBITDA losses in the fourth quarter by half compared to the same quarter in 2021.