Maple Leaf Foods Reports Second Quarter 2017 Financial Results

TSX: MFI
www.mapleleaffoods.com

MISSISSAUGA, ON, July 27, 2017 /PRNewswire/ - Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the second quarter, June 30, 2017.

• Significant sales and volume growth across our portfolio
• Strong earnings growth and Adjusted EBITDA Margin⁽¹⁾
• Favourable markets offset by margin compression from rising meat costs

Financial Highlights

Second quarter sales increased 8.3% to $925.9 million and Adjusted Earnings per Share⁽²⁾ increased 28.1% to $0.41 compared to the same quarter last year. Adjusted EBITDA Margin for the quarter was 11.2%, while Free Cash Flow⁽³⁾ declined to $15.2 million.

For the six months ended June 30, 2017, sales increased 5.2% and Adjusted Earnings per Share increased 23.3%. Adjusted EBITDA Margin was 11.0% while Free Cash Flow was approximately $49.9 million.

"We delivered excellent second quarter results with continued earnings growth," said Michael H. McCain, President and CEO. "Strong performance in the fresh value-added pork portfolio contributed to earnings. Favourable market conditions were offset by margin compression in prepared meats due to rising raw material costs. Moving forward, we are focused on accelerating profitable growth, investing in our brands and building our leadership in sustainability. We see a path to creating significant value for shareholders and to society by advancing our vision to be the most sustainable protein company on earth."

Sales and Earnings

The Company's products include value-added prepared meats, lunch kits and snacks, value-added fresh pork and poultry products and refrigerated plant protein products sold under flagship national brands such as Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural Selections®, Schneiders®, Schneiders® Country Naturals®, Mina® and Lightlife®.

Sales for the second quarter increased 8.3% to $925.9 million or 5.7% after adjusting for the impact of foreign exchange and acquisitions. Increased volumes in prepared meats, value-added fresh pork, and poultry coupled with a full quarter of Lightlife sales contributed to the increase. 

Sales for the first six months increased 5.2% to $1,737.1 million or 4.0% after adjusting for the impact of foreign exchange and acquisitions.

Net earnings for the second quarter increased to $37.3 million ($0.29 per basic share) compared to $31.4 million ($0.23 per basic share) last year. Performance was strong in fresh value-added pork due to improved commercial mix and favourable market conditions, partially offset by margin compression in prepared meats due to rising raw material costs. We will be implementing targeted pricing actions in the third quarter to offset these rising raw material costs. The Company also experienced some non-routine operational costs in the period. For the first six months, net earnings were $67.4 million ($0.52 per basic share) compared to $73.7 million ($0.55 per basic share) last year. Year to date results were impacted by the change in fair value of biological assets and higher restructuring costs, which are excluded in calculating Adjusted Operating Earnings below.

Adjusted Operating Earnings increased to $75.0 million compared to $60.5 million last year. Commercial performance in value-added fresh pork, strong volume growth across the portfolio and favourable market conditions contributed to earnings growth in the quarter. Results were partially offset by higher raw material costs that led to margin compression in the prepared meats portfolio and some non-routine operational costs in the quarter.

Adjusted Operating Earnings in the first six months was $134.0 million compared to $114.0 million last year.

Other Matters

On July 26, 2017, the Board of Directors approved a dividend of $0.11 per share payable September 29, 2017 to shareholders of record at the close of business September 8, 2017.  Based on the current number of shares outstanding, it is estimated that $0.1022 per share of the total dividend to be paid will be considered an Eligible Dividend for the "Enhanced Dividend Tax Credit System". The final amount of the dividend that is considered an Eligible Dividend will be confirmed on the Company's website on or before September 29, 2017.

Conference Call

An investor presentation related to the Company's second quarter financial results is available at www.mapleleaffoods.com and can be found under Investor Information on the Investors page. A conference call will be held at 2:30 p.m. EDT on July 27, 2017, to review Maple Leaf Foods' second quarter financial results. To participate in the call, please dial 416-340-2218 or 1-800-273-9672. For those unable to participate, playback will be made available an hour after the event at 905-694-9451 or 1-800-408-3053 (Passcode:1365285#).

A webcast presentation of the second quarter financial results will also be available at:

http://edge.media-server.com/m/p/eapsmzw9

The Company's full unaudited condensed consolidated interim financial statements and related Management's Discussion and Analysis are available on the Company's website.

Reconciliation of Non-IFRS Financial Measures

The Company uses the following non-IFRS measures: Adjusted Operating Earnings, Adjusted Earnings per Share, Adjusted EBITDA, and Free Cash Flow. Management believes that these non-IFRS measures provide useful information to investors in measuring the financial performance of the Company. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS.

Forward Looking Statements

This document contains, and the Company's oral and written public communications often contain, "forward-looking information" within the meaning of applicable securities law. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which the Company operates, as well as beliefs and assumptions made by Management of the Company. Such statements include, but are not limited to, statements with respect to objectives and goals, in addition to statements with respect to beliefs, plans, objectives, expectations, anticipations, estimates, and intentions. Specific forward-looking information in this document includes, but is not limited to, statements with respect to: the increases in operating efficiencies and cost reductions; expectations regarding the use of derivatives, futures and options; expectations regarding improving efficiencies; the expected use of cash balances; source of funds for ongoing business requirements; capital investments and expectations regarding capital expenditures; expectations regarding the implementation of environmental sustainability initiatives; expectations regarding the adoption of new accounting standards and the impact of such adoption on financial position; expectations regarding pension plan performance and future pension plan liabilities and contributions; expectations regarding levels of credit risk; and expectations regarding outcomes of legal actions. Words such as "expect", "anticipate", "intend", "may", "will", "plan", "believe", "seek", "estimate", and variations of such words and similar expressions are intended to identify such forward-looking information. These statements are not guarantees of future performance and involve assumptions, risks, and uncertainties that are difficult to predict.   

In addition, these statements and expectations concerning the performance of the Company's business in general are based on a number of factors and assumptions including, but not limited to: the condition of the Canadian, U.S., and Japanese economies; the rate of exchange of the Canadian dollar to the U.S. dollar, and the Japanese yen; the availability and prices of raw materials, energy and supplies; product pricing; the availability of insurance; the competitive environment and related market conditions; improvement of operating efficiencies; continued access to capital; the cost of compliance with environmental and health standards; no adverse results from ongoing litigation; no unexpected actions of domestic and foreign governments; and the general assumption that none of the risks identified below or elsewhere in this document will materialize. All of these assumptions have been derived from information currently available to the Company, including information obtained by the Company from third-party sources. These assumptions may prove to be incorrect in whole or in part. In addition, actual results may differ materially from those expressed, implied, or forecasted in such forward-looking information, which reflect the Company's expectations only as of the date hereof.  

Factors that could cause actual results or outcomes to differ materially from the results expressed, implied, or forecasted by forward-looking information include, among other things: 

• risks associated with the Company focusing solely on the protein business;
• risks related to the Company's decisions regarding any potential return of capital to shareholders;
• risks associated with the concentration of production in fewer facilities;
• risks associated with the availability of capital;
• risks associated with changes in the Company's information systems and processes;
• risks associated with cyber threats;
• risks posed by food contamination, consumer liability, and product recalls;
• risks associated with acquisitions, divestitures, and capital expansion projects;
• impact on pension expense and funding requirements of fluctuations in the market prices of fixed income and equity securities and changes in interest rates;
• cyclical nature of the cost and supply of hogs and the competitive nature of the pork market generally;
• risks related to the health status of livestock;
• impact of a pandemic on the Company's operations;
• the Company's exposure to currency exchange risks;
• ability of the Company to hedge against the effect of commodity price changes through the use of commodity futures and options;
• impact of changes in the market value of the biological assets and hedging instruments;
• risks associated with the supply management system for poultry in Canada;
• risks associated with the use of contract manufacturers;
• impact of international events on commodity prices and the free flow of goods;
• risks posed by compliance with extensive government regulation;
• risks posed by litigation;
• impact of changes in consumer tastes and buying patterns;
• impact of extensive environmental regulation and potential environmental liabilities;
• risks associated with a consolidating retail environment;
• risks posed by competition;
• risks associated with complying with differing employment laws and practices, the potential for work stoppages due to non-renewal of collective agreements, and recruiting and retaining qualified personnel;
• risks associated with pricing the Company's products;
• risks associated with managing the Company's supply chain; and
• risks associated with failing to identify and manage the strategic risks facing the Company.

The Company cautions the reader that the foregoing list of factors is not exhaustive. These factors are discussed in more detail under the heading "Risk Factors" in the Company's Management's Discussion and Analysis for the fiscal year ended December 31, 2016 that is available on SEDAR at www.sedar.com. The reader should review such section in detail. Some of the forward-looking information may be considered to be financial outlooks for purposes of applicable securities legislation including, but not limited to, statements concerning future capital expenditures. These financial outlooks are presented to evaluate anticipated future uses of cash flows, and may not be appropriate for other purposes and readers should not assume they will be achieved. The Company does not intend to, and the Company disclaims any obligation to, update any forward-looking information, whether written or oral, or whether as a result of new information, future events or otherwise, except as required by law. Additional information concerning the Company, including the Company's Annual Information Form is available on SEDAR at www.sedar.com.

About Maple Leaf Foods Inc.

Maple Leaf Foods Inc. is a leading consumer protein company, making high quality, innovative products under national brands including Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural Selections®, Schneiders®, Schneiders® Country Naturals®, Mina® and Lightlife®. Maple Leaf employs approximately 11,500 people and does business in Canada, the U.S. and Asia. The Company is headquartered in Mississauga, Ontario and its shares trade on the Toronto Stock Exchange (MFI).

 Footnote Legend

Consolidated Interim Balance Sheets

Consolidated Interim Statements of Net Earnings

Consolidated Interim Statements of Other Comprehensive Income (Loss)

Consolidated Interim Statements of Changes in Total Equity

Consolidated Interim Statements of Cash Flows

SOURCE Maple Leaf Foods Inc.