Earnings call transcript: Maple Leaf Foods beats Q1 2025 expectations

Maple Leaf Foods Inc. (MFI) reported strong first-quarter 2025 earnings, surpassing both revenue and earnings per share (EPS) forecasts. The company posted an EPS of $0.43, significantly above the forecasted $0.2743, and achieved total sales of $1.24 billion, exceeding the anticipated $1.19 billion. Following the report, the stock experienced a modest increase of 0.76%, closing at $25.13. According to InvestingPro analysis, the company currently shows strong financial health indicators, with a notable Financial Health Overall Score of 1.28.

Key Takeaways

• Maple Leaf Foods beat EPS expectations by $0.1557.
• Revenue growth was strong across prepared foods, poultry, and pork.
• The stock price increased by 0.76% post-earnings.
• The company launched 28 new products, enhancing its market position.
• Strategic initiatives like the "Fuel for Growth" are on track.

Company Performance

Maple Leaf Foods demonstrated robust performance in Q1 2025, with total sales increasing by 8.2% year-over-year. The company’s growth was driven by strong demand across its product lines, particularly in prepared foods and pork. Maple Leaf Foods continues to position itself as a leader in the North American protein market, with a strong focus on sustainable production. InvestingPro data reveals the company maintains a healthy current ratio of 2.0, indicating strong liquidity, with liquid assets exceeding short-term obligations.

Financial Highlights

• Revenue: $1.24 billion (+8.2% YoY)
• Earnings per share: $0.43 (adjusted), beating forecasts
• Adjusted EBITDA: $166 million (+43% YoY)
• Adjusted EBITDA margin: 13.4% (+330 basis points)

Earnings vs. Forecast

Maple Leaf Foods reported an EPS of $0.43, surpassing the forecast of $0.2743 by 56.8%. The significant earnings beat reflects the company’s effective cost management and successful product innovation strategy, marking a continuation of its positive performance trend.

Market Reaction

The stock price increased by 0.76% following the earnings announcement, closing at $25.13. This movement suggests investor confidence in the company’s strategic direction and financial health. The stock remains close to its 52-week high, indicating sustained positive sentiment.

Outlook & Guidance

Maple Leaf Foods maintains a positive outlook, targeting mid-single-digit revenue growth and an adjusted EBITDA of $634 million or better for 2025. The company expects continued margin improvement driven by a normalized consumer environment, strategic initiatives, and market recovery. InvestingPro analysis indicates the company is currently trading at a low P/E ratio relative to its near-term earnings growth potential, suggesting possible upside opportunity for investors.

Executive Commentary

CEO Curtis Frank expressed optimism, stating, "We are exiting Q1 with continued momentum on our side." He emphasized the company’s strategic positioning and growth potential, adding, "We continue to be of the view that we have the right strategy, blueprint, and people to make it happen."

Risks and Challenges

• Potential impacts from China’s 25% pork tariff.
• Execution risks related to the Canada Packers spin-off.
• Ongoing strategic manufacturing review could present operational challenges.

Q&A

During the earnings call, analysts inquired about the potential impacts of China’s pork tariff and the company’s margin improvement strategies. Executives addressed these concerns, highlighting their focus on innovation and cost optimization to sustain growth.

Full transcript - Maple Leaf Foods Inc. (MFI) Q1 2025:

John, Conference Call Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Maple Leaf’s First Quarter twenty twenty five Financial Results Conference Call. As a reminder, this conference call is being webcast and recorded. All lines have been placed on mute to prevent any background noise.

Please note that there will be a question and answer session following the formal remarks. We will go over the instructions for the question and answer session following the conclusion of the formal presentation. I would now like to turn the conference call over to Omar Javed, Investor Relations at Maple Leaf Foods. Please go ahead, Mr. Javed.

Thank you, John, and good morning, everyone. Speaking on the call this morning will be Curtis Frank, President and Chief Executive Officer Dave Smales, Chief Financial Officer and Dennis Organ, President, Pork Complex and incoming CEO of Canada Packers. Before we begin, I would like to remind you that some statements made on today’s call may constitute forward looking information and our future results may differ materially from what we discuss. Please refer to our first quarter twenty twenty five MD and A and financial statements and other information on our website for a broader description of operations and risk factors that could affect the company’s performance. We’ve also uploaded our first quarter investor presentation to our website.

As always, the Investor Relations team will be available after the call for any follow-up questions you may have. With that, I’ll turn the call over to our President and CEO, Curtis Frank. Okay. Thank you, Omar, and good morning, everyone. It’s great to be with you today to share our first quarter twenty twenty five results.

Joining me on the call today are David Snels, CFO of Maple Leaf Foods and Dennis Orgen, the president of our pork complex and incoming CEO of Canada Packers. I’ll begin with a strategic and operational update, and then Dennis will speak to the pork complex, and David will take us through a financial update. I will then step back in with a few closing remarks before we open the line for questions. The headline for today is that we are exiting Q1 with continued momentum on our side. In the first quarter, we made considerable progress towards achieving our goals for the year, reflected in accelerated sales growth, a significant increase in adjusted EBITDA, which grew by $50,000,000 to $166,000,000 and an expanded EBITDA margin, which increased by three thirty basis points to 13.4%.

Alongside this strong financial performance, we have also made substantial strides in advancing our strategic transformation guided by our refreshed Maple Leaf blueprint and inspired by our vision to be the most sustainable protein company on earth. In the first quarter, we delivered sales growth of 8.2% year over year, demonstrating robust performance across all of our operating units, including prepared foods, poultry and pork. Within our CPG focused prepared foods and poultry business, strong top line growth of 6.8% was driven by the solid execution of our proven growth strategies. We continue to be pleased with the resilience of our brands and with the incredible work our commercial teams are doing in the context of the current consumer demand environment. As an example, to support our prepared foods business, we proudly launched our look for the leaf advertising campaign, spotlighting over 15 Canadian food brands in response to the growing by Canadian sentiment.

This innovative campaign resonated with Canadians, achieving over 35,000,000 impressions and reaching 66 of Canadian grocery shoppers in its first forty eight hours in market. In addition, our support behind the Mina Halal brand during Ramadan served to strengthen our cultural relevance and garnered brand affinity that contributed to the growth within our poultry business. We also continue to leverage our leadership in sustainable meats within the prepared foods business, where our sustainable meats portfolio achieved yet another quarter of double digit growth. The demand for our greenfield brand, our sustainable meats premier offering, remains healthy in The U. S.

Market, driving volume growth and further enhancing our presence in The U. S. Market as we continue to develop this established platform. As a leading protein centric consumer packaged goods company, we remain focused on accelerating the pace and impact of our new product innovation. In response, we recently released our exciting spring innovation platform with 28 new items now in market and reaching retail grocery shelves.

This follows the launch of more than 50 new items last year, including a new category adjacency with our Schneider’s frozen breakfast portfolio, which continues to resonate well with consumers. While these efforts are contributing to our rise in sales, we also remain focused on expanding our adjusted EBITDA margins by executing on our operating plans. Our fuel for growth initiative, for example, which includes three elements, supply chain sourcing, SG and A optimization and a strategic manufacturing review is well advanced. First, as we discussed last quarter, we completed a procurement and sourcing project aimed at supply chain optimization towards the end of twenty twenty four. This is supporting enhanced savings, scalability and agility in 2025.

These benefits are already showing up in Q4 last year and here in the first quarter of this year. Second, we have successfully implemented the first phase of our SG and A optimization work, which included a restructuring of the commercial and operations parts of our organization and the full integration of the plant protein business into the prepared foods operating unit. The benefits of improved execution and a leaner organizational structure are benefiting the first quarter and will be supportive to delivering our outlook for the year. And third, I’m happy to report that we are making good progress on our strategic manufacturing review, which is advancing through its analytical and development phase. We expect this initiative will be an enabler of our performance in the years to come, so we are being methodical in our approach to ensure we prioritize the highest impact opportunities.

The first step, the retirement of our aging Brantford facility and the transition of production to other manufacturing sites remains on track to be completed in Q2. Consistent with our strategic playbook and our work to reshape the portfolio to CPG, we continue to make great progress on the Canada Packers spin off. As you would have seen from our press release on May 1, the management information circular will be filed on May 12 with the shareholder vote to be held on June 11 at our annual general meeting and special meeting. This spin off is one of the most important and transformational strategic initiatives in Maple Leaf Foods’ history as we will create two strong independent companies, each with enhanced strategic focus, distinct value propositions to unlock shareholder value, and more focused investments for shareholders. We strongly encourage all shareholders to vote in favor of the transaction and in support of the meaningful value it will create for all Maple Leaf stakeholders.

You’ll note from the pro form a LTM view provided today that we continue to deliver margin progression in both the Maple Leaf Foods CPG company and the future Canada Packers company. Next week, you will get even more visibility into the full details when we file our circular, something I know you are all keenly interested to dig into. Before I conclude my opening comments, I’d like to also turn your attention to a couple of important capital allocation updates. In January, we announced an increase to our quarterly dividend to $0.24 per share or $0.96 per share annually, starting with the first declared quarterly dividend that was paid in March. This is the tenth consecutive year that we’ve increased our dividend, representing a compounded annual growth rate of 11.6% and a robust return for our shareholders.

You would have also seen from our press release on March 11 that the Toronto Stock Exchange accepted the notice to establish a normal course issuer bid or NCIB program. Under this program, Maple Leaf is authorized to purchase up to 7,300,000.0 of its common shares over a twelve month period, representing just under 10% of the public float. The tool is intended to be used opportunistically to purchase shares when it is in the best interest of the company and represents an attractive use of available funds. So with this context, I’m hopeful that you share the same growing confidence that we have in the improving quality of our execution and the growing momentum that we are building in our business. The team’s collective hard work is being recognized by our shareholders and was reflected in a total shareholder return of over 24% in the first quarter.

While this performance was ahead of our Canadian and U. S. Peers, we firmly believe that there is tremendous value that remains yet to be recognized for Maple Leaf Foods. Underpinned by the drivers I just discussed, we are fully on track to deliver against our 2025 outlook, which includes mid single digit revenue growth and adjusted EBITDA of $634,000,000,000 or better in 2025, investment grade leverage to enable capital allocation choice and a successful spin off of Canada Packers. So with that, I’ll now pass things over to Dennis to discuss the pork results and then to Dave to review our financial results.

Dennis? Thank you, Curtis, and good morning, everybody. In our Port Complex, Q1 marked another quarter of improved financial performance. Our plan to increase hog processing while maintaining our premium value added sales mix is driving meaningful revenue growth, input costs have stabilized, and we remain focused on operational excellence to enhance both top and bottom line results. While revenue isn’t the primary metric for the Port Complex, we delivered a 12% increase in sales compared to Q1 last year.

This growth was fueled by higher processing volumes, higher average hog weights and favorable exchange impacts from stronger U. S. Dollar and favorable market pricing. Adjusted EBITDA margin improved in Q1, benefiting from lower fee costs, and we expect input costs to remain within a stable range supporting continued margin consistency. Our four Complex and soon to be Canada Packers operates with a well defined intangible business model underpinned by a vertically integrated pork production value chain.

We have a diversified and resilient business mix, and we continue to leverage our competitive edge in sustainable premium pork products. This strategic foundation positions us for long term growth and leadership in high quality protein production. As we move towards the closure of this transformational transaction, our team remains laser focused on maximizing the value of our premium sales mix, driving efficiency through cost discipline, and growing through increased capacity utilization. We have been disciplined and methodical in building this pure play pork business, building the best pure play pork business in North America, and we will carry the same rigor into the next chapter of Canada Packers’ historic legacy. I will now pass things over to Dave to discuss our financial results.

Thank you, Dennis, and good morning, everyone. Turning to our results. I’ll comment on the company’s consolidated results for the quarter before addressing the balance sheet and discussing the overall outlook for 2025. Total sales in the first quarter were 1,240,000,000.00, an increase of 8.2% compared to last year, driven by solid growth across across prepared foods, poultry, and pork, where sales were up 7.1%, six %, and 12% respectively. Prepared foods, which now includes meat and plant protein, saw higher volumes along with improved product mix and favorable pricing in the quarter.

In poultry, sales were up due to improved channel mix with growth in retail volume and reduced industrial sales. And pork sales increased due to volume growth from an additional 62,000 hogs that were processed in the quarter, as well as higher average hog weights, favorable movements in foreign exchange, and favorable market pricing. Earnings for the quarter were 49,600,000.0 or 40¢ per basic share compared to earnings of 51,600,000.0 or 42¢ per share last year. After removing the impact of the noncash fair value changes in biological assets and derivative contracts, start up and restructuring costs, and items included in the expenses that were not representative of ongoing operations, adjusted earnings were 43¢ per share for the quarter compared to 4¢ per share for the first quarter of twenty twenty four. Adjusted EBITDA increased by 43% to a 66,000,000 in the quarter with adjusted EBITDA margin improving by 330 basis points to 13.4% compared to 10.1% in the first quarter of last year.

Within prepared foods and poultry, increased profitability was primarily driven by favorable volume and mix impacts and benefits from our London poultry and bacon center of excellence facilities. Increased trade promotions to support our brands were a partial offset in the quarter. Our pork operating unit achieved what we considered to be approaching a more normal level of profitability in the quarter, reflecting a significant improvement in the vertically integrated spread due to lower feed costs compared to the first quarter of twenty twenty four. The decline in the packer spread partly offset this positive impact of lower feed costs. SG and A increased by $4,800,000 in the first quarter compared to last year.

The increase was mostly due to a planned increase in advertising and promotion expenses to support our brands and higher variable compensation costs. Our first quarter results also benefited from approximately 5,000,000 of favorable timing and non recurring impacts. During the quarter, we invested 25,100,000.0 in capital compared to 24,100,000.0 in q one last year. Capital expenditures are generally on the lower side in the first quarter, but we still expect spending for 2025 to be in the range of a hundred and 75 to $200,000,000, in line with our previous guidance and primarily focused on maintenance capital with growth capital related to cost efficiency and support for possible growth initiatives. In the first quarter, free cash flow was negative 14,000,000 due to the impact of timing of seasonal working capital, which is likely expected to reverse over the course of 2025.

LTM free cash flow remained strong at 298,000,000. On the balance sheet, net debt ended the quarter down a hundred and 60 9 million to approximately 1,550,000,000.00 and down from a peak level of 1,800,000,000.0 during our large capital project investment phase. In line with our stated priorities, our leverage ratio is within an investment grade range with a net debt to trailing twelve months adjusted EBITDA ratio of 2.6 times at the end of the quarter compared to 2.7 times at the end of the fourth quarter of twenty twenty four and three point seven times a year ago. As we progress through 2025, free cash flow generation, strengthening the balance sheet, and maintaining leverage in an investment grade range remain key priorities. We are on track to deliver the 2025 outlook we shared in early January and when we reported q four.

We continue to expect mid single digit sales growth and significant improvements in adjusted EBITDA, which we forecast will meet or exceed $634,000,000 for the year. I will now turn the call back to Curtis. Okay. Thank you, David. As I shared in my opening remarks, following up on what was a very solid q four, we are exiting q one with continued momentum on our side, and we are on track with our operating plan and also the transformational spin off of Canada Packers.

As a purpose driven protein focused consumer packaged goods company with a bold vision to be the most sustainable protein company on earth, Maple Leaf stands today uniquely positioned to meet the growing global demand for sustainably produced protein. And we continue to be of the view that we have the right strategy, blueprint, and people to make it happen. And before we move to questions, I want to extend my sincere thanks to the entire Maple Leaf team. It’s a privilege to work alongside such passionate and talented individuals. Our progress would not be possible without your commitments and your drive.

With that, operator, we can now open the call for questions, please. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touch tone phone. You will hear a prompt that your hand has been raised.

Should you wish to decline from the holding process, please press star followed by the number 2. If you are using a speaker phone, please lift the handset before pressing any keys. Your first question comes from the line of Michael Van Aelst from TD Securities. Congratulations on a really strong quarter. It’s nice to see a lot of these market challenges behind you.

I’d like to start with your comment around exiting Q1 with continuing momentum. And can you maybe highlight a few of the key, I guess, key drivers that are of your business that you saw continuing into Q2? And is the Buy Canada movement, is that is that did that show up as a benefit in q one? And has that changed at all in q two? Well, I’ll I’ll I’ll probably keep my comments.

Mike, first, good morning. And and thanks

Speaker 1: to speak with us today.

John, Conference Call Operator: I’ll I’ll keep my comments mostly around q one. You know, what I would say on the top line in particular, we had, as I mentioned, very robust sales growth of just over 8%. And I think what we were most pleased with is the diversity and breadth of the growth strategies that we have in the company and how resilience are proving to play out in not just the Canadian market, but The US as well. You know, that combined with some solid execution in the first quarter was was certainly supportive of the growth that we saw. Let me start with on the 8% revenue growth, it was mostly contribution of positive volume and mix benefits in the in the top line, which was which helpful.

There were some pricing. We had taken a little bit of beef pricing in February and a little bit of impact that was positive from an FX point of view. But probably what’s most, you know, positive or constructive in the business is the source of the growth came from, you know, what I would describe as all markets of Canada, The US, Japan, and China, all channels, retail and food service. And and our sustainable meats platform continued to deliver a double digit growth and also drove double digit growth levels of of revenue in The United States. So the diversity of the growth strategy has really played out, I think, really, really well.

That happened in q four. That happened again in q one. So that was certainly beneficial. On the consumer side, you got your question on the bike Canadian movements. We were very pleased, again, as I mentioned in my comments, with respect to the quality of the work that was done from the consumer marketing team here.

I would describe the consumer environment as pretty stable pretty stable quarter over quarter. You’re in you know, we’re certainly in a situation where the consumer on one hand remains under stress, and there is a flight to value which requires a little bit more promotional investments to sustain volume and market share that, you know, mostly in the poultry and prepared foods business. But also that’s being offset or benefited by, certainly in the first quarter, some benefit of the Buy Canadian movement, which which was supportive and helpful to the revenue growth that we achieved within the first quarter. How that’s gonna carry into q two is a bit of a wait and see, I think, would be the appropriate way to think about that, but that was certainly beneficial for Q1. Okay.

That’s great. And I guess just a follow-up for Dennis, actually. The only thing that I can see that’s changed in the market conditions at this point is the the 25% tariff that China has put on Canadian pork. It’s obviously a lot smaller than what they have on US pork right now. But I and you only have a a small amount going to China, but it’s a it’s it’s it’s profitable.

It’s easily profitable. So can you explain how you see that impacting your business? Yeah. I think I think the first thing you said was important is it’s not just the tariff on Canada, the the the relative tariffs to the other maybe North American and European countries. Remember, it’s something less than 5% of our revenue.

So it it is a it’s a good market for us. It’s meaningful because they they tend to buy things that we don’t sell elsewhere, but I I I just wouldn’t really pull that up as a as a headline. Like, we’re we’re in good shape now, and and I don’t know what’s gonna be the outcome, but we’re we’re we’re pretty confident that it’s gonna work out after some of this tumult. The important comment, Mike, is the relative one that you made with a 25% tariff, you know, from The US market. 25% in comparison is manageable at this stage, and and we’ll see how the balance of year plays out.

But I think it’s constructive as Dennis said. Excellent. Thanks. I’ll get back in the queue. Thank you.

Your next question comes from the line of Luke Hannan from Canaccord. Your line is now open.

Speaker 1: Thanks. Good morning, everyone. I’ll echo that congratulations on the results in Q1. I wanted to follow-up within the prepared foods business. You mentioned there’s relatively balanced growth across volume and mix and pricing and sustainable.

Eats did well. The U.

John, Conference Call Operator: S. Did well. I wanted to ask a

Speaker 1: little bit more about the Bacon Center of Excellence. I mean, you mentioned that also that, that was a benefit to Prepared Foods this quarter. Is that a comment reflecting the carryover impact from the ramp up that would have taken place last year? Or is there anything that’s net new, I guess, this quarter that’s perhaps driving that strength that we can look for, for the balance of the year?

John, Conference Call Operator: Yeah. Good morning, Luke. Thanks for the question. The vacant center of excellence in Winnipeg, as you know, very successful start up. We reached for q four a very positive outcome in terms of meeting or exceeding the business case benefits that we had committed to from from a vacant center of excellence point of view.

We continued in q one to get the the benefits of the capital investments that we expected. And you’ll you’ll you know, for the first couple of quarters for sure, you’ll you’ll see the fill in benefits of that in q one, q ’2, and I think into q three as well in 2025. So all things on track, continued strong market demand as positive or maybe even more so than we would have expected at the time of the capital investment and certainly contributed to year over year margin expansion that you saw in our business in Q1.

Speaker 1: Okay. And then for my follow-up here for Dennis, it was mentioned that you were able to increase the number of hogs processed by 6%. There’s those capacity utilization opportunities that you have available in in front of you as well. But just where things stand today, assuming that you didn’t execute on those opportunities to expand capacity, I mean, where where does utilization stand at today? In other words, if you were to, let’s say, put no more capital to expanding capacity within your existing footprint, where would utilization stand as of today?

John, Conference Call Operator: Let me make sure I get to so remember, we’re we’re tapping into latent capacity. So this isn’t a massive CapEx project to to grow. We we’re we’re going to only grow in an accretive manner. So that’s that’s sort of the the threshold. We think we can we can process somewhere mathematically somewhere around 900,000 more hogs, but we’re we’re looking at them in maybe hundred thousand hog increments and making sure tranche by tranche it’s accretive.

So I don’t know if that answers your question, but it’s late in capacity that we’re tapping into, and we’re gonna make sure that it’s accretive growth.

Speaker 1: That does help. Thank you very much. I’ll get back in the queue.

John, Conference Call Operator: Yep. Your next question comes from the line of Michael Van Eelst from TD Securities. Your line is now open. Great. Seems like everybody’s on other calls, so I’ll jump back in.

So a quick question for David. Just I I did notice that the other income or expense had a nice little swing this quarter. I’m wondering how much of that is nonrecurring and versus something we can assume will be there going forward. Yeah. As I mentioned in my comments, the first quarter, we benefited from around 5,000,000 of kind of timing and and one time benefits.

So that that would be the magnitude in the first quarter. Typically, other income is, you know, small positive, small negative. But this this quarter is about $5,000,000 of kind of timing of one one time impact that benefit that number. Okay. Alright.

And then when you look at the margin improvement that you had in the quarter, I mean, it was pretty impressive even without that onetime gain. And and I know it’s not quite where you want it to be yet, but can you start by trying to give us a bit of a relative importance ranking for the drivers of that margin improvement this quarter? And then what areas can still improve to get you into that 14 to 16% aspirational range? Yeah. Sure, Mike.

Happy to happy to dig into that a little bit. We had, obviously, a $49,900,000 or 43% improvement in our adjusted EBITDA in the quarter. As you mentioned, there were about, you know, in and around $5,000,000 of kind of onetime benefits included in that. But the heavy hitters are pork market conditions continued to improve as we had projected and and often communicated that we had a high level of confidence that they would. So pork market conditions continue to improve as expected.

The volume and mix in prepared meats and poultry were very positive. As an example, Mike, we had 3% volumetric growth in the prepared meats business. In today’s current consumer demand environment, we we view that as very positive. And and, know, so that that’s positive. We have the the return on investment benefits from both London Poultry and the Bacon Center of Excellence on a year over year basis.

And then there was a slight offset, as I said earlier, in a little bit higher advertising and promotion support to sustain the market share and and drive the volume that we drove within the quarter. So the big hitters are pork markets continue to improve as expected. The volume and mix in prepared meats and poultry and the benefits from the large scale capital projects, which we we which we should also expect. On the question of you know, I I think your question was what’s between your, you know, 13.4% margin in in q one and operating within the 14 to 16% range. I I’d highlight, I think, three things that are important in that context, although I’m sure there are other contributing factors.

The first is the consumer environment. As I said, you know, continuing to invest a little bit more than we would like in promotional and advertising support to get the full benefit of share and volume. So, you know, a full return to, you know, more normal consumer environment would be helpful and and benefit to us in both the prepared meats and the poultry businesses. We also have, on that consumer side, Mike, three price increase, an inflationary based price increase, a pass through coming in and around the June 1, you know, which is gonna be in the three to 4% range. So we wanna see the consumer response from a volumetric point of view, but consumer environment would be number one.

The second would be the continued benefits and potential benefits beyond that from our fuel for growth playbook, which we talked about, parts of the SG and A already being embedded in the margin, the procurement benefits already being embedded in the margin, but some more operational benefits that we feel we have a pathway to deliver. We’ll talk more about that in the future. And then the last is the full market recovery in the pork complex. And if you look at our supporting materials, he commented that in this quarter, there was about $12,900,000 of negative variance yet remaining at the fully normalized market conditions in the pork business. And that and I would remind you, Mike, that $12,900,000 alone would take us well into the 14 to 16% margin range.

So those would be the kind of the three most important items. Okay. So just to follow-up on that last part. So what still has to happen on the Port Complex to get that 12.9? Yeah.

Great question. Dennis, maybe you’d add Yeah. Yeah. So so there’s there’s actually numerous paths we can get get there. Obviously, the input costs the input costs have normalized as we’ve been talking about for some time now.

The top line volume growth is is in line, if not in the the higher end of what our target is over the the our five year plan. We still have numerous opportunities in our sales execution. Remember, the disassembly operation where we’re positioning the heat and and of the the revenue we’re realizing. There’s there’s opportunities there as well. Numerous growth initiatives from co branded.

The first carbon neutral co branded item in Japan that’s that’s been underway for for roughly eight eight months or so now and showing lots of good sign line of sight. So sales execution and then operationally. You know, we’ve we’ve had a lot of success operationally on on parts of our business, but there’s there’s some areas that we’re really looking for for improvement. So some of some of the difficulty when we’re in these calls is we’re talking about what happened, and we’re always trying to frame that against what we we know is happening and what’s gonna happen. And so lots of confidence in in those things coming to fruition.

And as we continue to release quarters, you’ll see it in the trailing 12. The the the only color I would add the only color I would add, Mike, if it’s okay, is, you know, we’re operating in line with our outlook as we as we reiterated today for the full year of 2025. From a strategic margin target point of view, 14% to 16% continues to be the North Star. And probably what we’re most pleased with after a couple of quarters of momentum here is the fact that it’s our view, and I and I think this is accurate, that we would be amongst, if not the highest performing protein company in any of any of our North American peers in both our revenue growth and our EBITDA margin amongst our North American peers. So, you know, we see it certainly as a positive, not just quarter, but last couple of quarters, and and that’s probably why we’re so excited about the momentum we’re building in the business on a relative basis.

Okay. I’ll just ask one more question. Yeah. You you had a great quarter. You beat expectations.

You probably beat your own internal budget, I’m guessing. But what so you but you didn’t increase your guidance for the year. And I know it’s not uncommon for companies to to wait beyond q one, but is there anything that is holding you what’s holding you back from raising that your guidance at this stage given how strong q one was? Well, I think, you you know, as you said, was a very solid quarter. And we’re we’re entirely confident, as you heard from Dennis, David, and myself, in delivering our outlook for this year.

We elected to sustain our outlook for the year based on the words we chose, which we’re very careful, which was $634,000,000 of adjusted EBITDA or better. 634,000,000 or better. As I said, you know, there there are a few moving parts. Number one, it’s just the end of the first quarter. You know, there’s much more to play out this year.

And number two, on the positive side, we we, you know, we obviously got some level of benefit from the buy Canadian movement, and we wanna see how that plays out in the quarters ahead. We are taking some inflationary based pricing in the second quarter. We want to see how the volume response to that pricing plays out in the market. And also, you when you think about the geopolitical backdrop and the trade related tension that’s existed in the last number of months, while positive in the moment, you know, create some level of, you know, ambiguity to navigate and feel like we’re very well positioned, entirely confident in our outlook, but thought it was prudent to to keep it in line with what we had originally communicated. Your next question comes from the line of Vishal Shreedhar from National Bank.

Hi. Thanks for taking my questions. With respect to the spinout and the 14 to 16, how will once the spinout happens, how will investors keep track of that 14 to 16, or are you gonna rebase the targets for us once you spin out? And and what will you rebase that to? Good morning, Michelle.

Thank you for your for your question. Yeah. It’s we’ve we’ve been communicating that it’s premature for us to be new strategic targets for the separate entities. We wanted to get the management information circular out into the market more broadly. That happens, I believe, on Monday this coming week, which will provide a little better basis for the foundational profitability and information that’s required in the pork business.

And then I think once that material is out into the market fully absorbed and we get past the shareholder vote in June, which is another key and critical milestone, we’ll start then to communicate more broadly the separate and distinct strategic targets for the two independent companies. So it’s more of a timing related thing with with some exciting and important milestones ahead of us, the release of the information circular on on this coming Monday, and then the June. Okay. And with respect to the the the sales trends, you commented that there’s possibly some transient benefits including the Buy Canada movement and how that evolves. And and and I know it’s difficult, but are you able to internally have an estimate on on your sales list associated?

It it’s a it’s a great question. It’s obviously very much top of mind for us. It’s really hard to tease out, Vishal, as I as I’m sure you can appreciate, you know, the combination of what I view as really solid execution, some really great brand marketing and investment and support behind our leading brands, and the consumer response to the Buy Canadian movement. You know, teasing that out of the data is a really difficult thing to do with precision, and we do expect there’s some benefit. But, again, you know, I I would point you to the fact that we had double digit growth in The US market last quarter, which was not due to the by Canadian movement.

So the diversity and strength of the growth strategies is really coming through, and that’s what we’re probably most excited about from a sustainability point of view of the margins, sustainability of the sales growth and the margins. The other comment I would make is our outlook is for mid single digits. We did choose to, you know, stay in line with that, and and I think we just, you know, need to see another quarter in front of us. Okay. And were there other elements that may have helped your sales, including a shift towards towards the products that you sell due to inflation or heightened inflation in other categories?

Does that does that happen, and to what degree did you deem that to be helpful for your for your sales? I don’t I don’t think so necessarily. The only thing I would say is demand for protein in particular, all things protein, continues to be a very robust and very strong. The consumer data and the consumer desire for more protein in their diet and all life stages, day parts continues to be very, very strong and I think only accelerating. So all to say, great time to be in the protein business.

And I’m sure from a macro trend point of view, it’s supportive of our our results. The the the incremental advertising and and promotional dollars, is that in response particularly to the value seeking consumer, or is that an approach to elevate your brand and to and more of a long term sustained spend? How should we think that up think of that evolving through the course of the year? Well, yeah, it shows up in both ways. I mean, in the in the short term and the near term, it’s promotional pricing to support market share and and volume growth, as I said earlier.

But we are also investing, you know, as the number one and number two brand leader in the Canadian market. And given the strength of our sustainable meats brand, we are also investing in our brands. And you saw some of our advertising examples. I think we actually included a couple of them in our supporting materials that we posted this morning, which include our our conviction and support behind the Buy Canadian movement. And I’m making it clear to every Canadian household that that Maple Leaf is a strong Canadian brand, and, you know, I’m certain we got some support in that area as well.

It’s the long term investments and the health of the brands, which are deeply important and give us a leadership position and also the short term implications of investing a little bit more in promotion than maybe we had historically to sustain the levels of volume growth that we’re generating. Okay. So any insight on how how that should evolve the course of the year? Should we expect year over year increases in that line?

I think continued stability from where we’re at today would be a reasonable starting point, and we’ll continue to monitor the consumer environment as the balance of the year plays out. But, again, all things constructive to achieving or exceeding our current outlook. Thank you. Congrats on the on the momentum. Thank you very much.

Thank you. Your next question comes from the line of Luke Hannon from Canaccord. Your line is now open.

Speaker 1: Yeah. Thanks. I just had one quick follow-up here. It’s it’s on the innovation. I think you had mentioned that you have 28 new items in the market, and that follows roughly 50 items that you had launched, last year.

And I’m just curious to know, is this more about filling any white space that exists within your portfolio, like the the Schneider’s breakfast sandwiches, for example? Is it gonna be more about revamping existing SKUs? And then how do we think about, you know, either on a price spectrum in the form of good, better, best or value all the way to premium? Where where is more of that innovation going to show up? Thanks.

John, Conference Call Operator: Yeah. Thank you. That’s a excellent question. Newbie, you know, innovation serves many purposes in our portfolio. Everything from creating new news in our core categories, you saw several examples of in the in the kind of the 28 items that we that we showed within our supporting materials to utilizing our assets in a really constructive and innovative way.

We launched a new Schneider’s thick cut, fully cooked bacon, leveraging the new assets in in the Winnipeg Bacon Center of Excellence as an example, to be supportive of our prime brand, which operates in the premium end of the poultry category at a time when, you know, consumers are under a little bit more pressure to seasonally relevant items, supportive of our summer grilling platform to continuing to be aligned to the changing demographics of the Canadian market and innovating in products like our Mina Halal offering with a chicken based hot dog that we are launching in the spring. We are always bringing new news to our sustainable meats platform, which I think is really, really important given the consumer support for that particular brand, the importance of sustainable meats to our portfolio, and the fact that we wanna keep that that that growth engine running. And and we didn’t talk about it today, but we are also bringing, you know, three launches that I’m actually pretty excited about to the plant protein category, where the category, as you know, more holistically has been under stress. And we view it as our responsibility to take a leadership role in bringing new and exciting news to the plant protein category to restimulate growth and also bring some excitement to to plant based consumers.

So, you know, innovation plays a broad role across the portfolio. The category adjacency that you commented on in the breakfast sandwich launch is certainly one of them from an incrementality point of view, but but there are many, many others as well. And what I’m probably most excited about is getting the innovation engine up and running again. Those couple of years through the pandemic and the post pandemic economy were a little bit more challenging for most North American and global consumer packaged goods companies in terms of being able to allocate time and resources and operational excellence towards innovation, and we’re now back into a place where we’re making excellent progress. That’s great.

Thank you very much. Thank you. There are no further questions at this time. I will now turn the call over to mister Frank for closing remarks. Okay.

Thank you everyone for joining us today. We’re very pleased with what we view as a successful first quarter of the year. As we’ve talked about 8% growth in revenue, a very significant improvement of $50,000,000 in adjusted EBITDA and a strong margin that’s materializing in line with what we had been expecting over a period of time. And we look forward very much to talking to you when we release our second quarter results. And, obviously, we’ll be communicating next week the management information circular for the new Canada Packers, which I know all of you are keenly interested to dig into.

So thank you once again for your time today, and look forward to speaking with you after our q two call. Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.

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