Maple Leaf Foods Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Maple Leaf's first quarter 2024 financial results conference call. As a reminder, this conference call is being broadcast live on the internet 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 over to Janet Craig, Investor Relations at Maple Leaf Foods. Please go ahead, Ms. Craig.

Thank you, Joelle, and good morning, everyone. Speaking on the call this morning will be Curtis Frank, President and Chief Executive Officer, and Dave Smales, Chief Financial Officer. 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 materially differ from what we discuss. Please refer to our Q1 2024 MD&A and other information on our website for a broader description of operations and risk factors that could affect the company's performance. We've uploaded our Q1 investor deck to our website, which includes support material for the quarter. And as always, the Investor Relations team will be available after the call for any questions you might have. And with that, I'll turn the call over to Chris Frank. Please go ahead, Chris.

Well, thank you, Janet. And good morning, everyone. It's great to be with you here again today. When we were last together in February, we had just announced our refreshed strategic blueprint. We also communicated our plans to migrate to a new business structure that will lead us into our next chapter of creating shared value. With these changes now in place, we have updated our reporting for this quarter. Now that plant protein is integrated as a category, we've moved away from reporting the meat protein and plant protein segments separately. and have migrated instead to reporting a one Maple Leaf view of our consolidated earnings. That said, to help bridge through this transition, we've also provided you with some additional information that outlines how we think about our two operating units, the key drivers of our business, and some helpful reference points to help you to understand our performance. The supporting materials that we issued this morning also include the Evolved Maple Leaf Blueprint, It's important to understand the Blueprint serves as the foundation for all we do on our transformational journey to becoming a globally mired and brand-led consumer packaged goods company. To reflect this ambition, we have structured our business into two operating units. The first is our prepared foods business, which includes prepared meats, poultry, and plant protein, and represents approximately 75% of our total company sales. Our prepared foods business houses the number one and number two packaged meats brands in Canada, Schneider's and Maple Leaf. The number one sustainable meats brand in Canada and number three in the US in Greenfield Natural Meats. The number one brand in fresh poultry in Maple Leaf Prime. The number one halal fresh poultry brand in Mena Halal and a portfolio of leading brands in the US plant protein category through the combination of light life, field roast, and Chow Cheese. These leading brands, supported by a broad portfolio of regional and specialty brands, are engaged in more than 20 product categories. You will find our products distributed throughout thousands of North American grocery stores and available to consumers across the vast offering of North American food service operations. The second operating unit is our pork complex, which has a very attractive business mix that includes intercompany supply for prepared meats, North American retail sales. And a long standing global presence headlined by strategic relationships in the Japanese market. Just like our prepared foods business within the pork complex, we have established unique capabilities in sustainability programs such as raised without antibiotics and gestation crate free. In our MDNA and in the investor deck we provided, you'll be able to see more details on each of our operating units. With that as important context, I'm going to jump in with a recap of our first quarter before I turn it over to David for a deeper dive into our financial results. I'll also spend a few minutes towards the end of my remarks to update you on our strategic priorities looking forward. And of course, we will leave some time for toward the second half of our call today to answer your questions. The headline is that in the first quarter of 2024, we delivered results that were in line with our expectations and consistent with the outlook that we shared the last time we were together. We grew our first quarter adjusted EBITDA to $116 million, a 55% improvement from Q1 2023, and our adjusted EBITDA margin expanded to 10.1%, 370 basis points better than the 6.4% we delivered in this same quarter last year. In our meat protein business, we delivered an adjusted EBITDA margin of 10.8%, a 310 basis point improvement versus last year, and a 30 basis point sequential improvement from the 10.5% that we delivered in the fourth quarter of 2023. The year over year improvement was predominantly driven by contributions from our major capital investments, along with improving pork market conditions. Pork markets, while still compressed, now appear to be starting to show the sequential improvement that we expected in time. Quarter over quarter adjusted EBITDA margins benefited from these improving pork markets, stronger results in prepared meats, and experienced a slight offset by increased SG&A expense. Turning now to sales, you'll see that top line sales were 1.5% lower than Q1 2023. It's important to note that this modest decline is not reflective of the underlying health and performance of our business. The positive news in the quarter is we saw sales growth return to our prepared meats business in what a traditionally seasonally weaker quarter is and lower volumes into commodity markets for both pork and poultry, which led to lower sales but improving mix. Within prepared meats, our top line growth was 2.9%. supported by sales growth in our brands and volume growth in the combined retail and food service channels. This underscores the strength and resilience of our brands in the face of broader macroeconomic challenges that the consumer is facing today. We held our market share in packaged meats in aggregate and delivered market share growth in many key categories, including bacon, ham, meat snacks, kits, and further processed poultry. In poultry, we saw sales dip of 7.1% in the quarter, mostly a function of repatriating COPAC volumes back into London poultry, which also subsequently reduced sales into the lower margin commodity market relative to last year and will lead to improving sales mix over time. It's also important to note that in poultry, while commodity market values remain depressed, Combined, our retail and food service channels grew in the first quarter, setting us up well for the eventual return of the supply and demand balance within the poultry markets. In plant protein, we experienced a year-over-year top line decline of 5.7% as overall category headwinds continued to persist. While we held plant protein market share flat over this period, our focus is squarely set on stimulating category growth as reflected in our plans for both new product innovation and the renovation of several key items within our portfolio. This, along with the synergies that will come from completing the integration of the Greenleaf business, will continue to drive improved financial results in plant protein as the year progresses. And lastly, although both markets and profits improved in the pork business in Q1, pork complex sales declined by 4.5% as compared to last year, driven by two factors. Firstly, a strategic decision to purchase and process fewer external hogs than last year. And secondly, there was also a smaller impact from foreign exchange. To put a fine point on it, our first quarter can best be summarized as another quarter of progress, but certainly not perfection. And while we took an excellent step forward, we continue to be motivated by the momentum that's building in our business, Here's why. We delivered a significant profit improvement versus last year in Q1, and with a seasonal margin in the meat protein business of 10.8%, our results are improving in line with our expectations. We drove improvements in branded sales growth in the face of the overall macroeconomic environment that has been so difficult for consumers. This is reflective of the strength of our brands, and our ability to adapt to the current consumer demand environment. Within the upcoming spring launch window, we are launching more than 25 new items into the market that will deliver on convenience, taste, and appeal to a broad and changing population in North America. We continue to be excited about the forward-looking growth prospects of our sustainable meats business, which broadly speaking is about 15% of our sales, serves as one of our differentiators, and represents a significant competitive advantage for us as we look to accelerate growth across our footprint in the US led by our Greenfield Natural Meats product line. We are continuing our disciplined approach to capital management and we remain focused on deleveraging our balance sheet where we continue to make progress. And we are confident in our ability to deliver our consolidated adjusted EBITDA margin target of 14 to 16% updated to include plant protein in normal market conditions where we have clear priorities and the right team and the right structure in place to deliver i'll be back to share a little bit more on this in a few minutes but first i want to turn the call over to david to walk us through our detailed financial results david thank you curtis and good morning everyone based on the realignment and focus as an integrated protein company