Maple Leaf Foods Inc.

Good morning, ladies and gentlemen, thank you for standing by and welcome to Maple Leafs second 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, Ken, and good morning, everyone. Speaking on the call this morning will be Curtis Frank, President and Chief Executive Officer, Dave Smiles, Chief Financial Officer, and Dennis Organ, President, Port Complex, and the incoming CEO of the Newport Company. Before we begin, I would like to remind you that some statements made on today's call may constitute forward-looking information, and our results may differ materially from what we discussed. Please refer to our second quarter 2024 MD&A and other information on our website for broader descriptions of operational and risk factors that could affect the company's performance. We've uploaded our second quarter investor deck to our website, which includes the material for the quarter. And as always, the IR team will be available up to call for any follow-up questions you may have. And I'll give it over to Chris.

Okay. Thank you, Janet. And good morning, everyone. It's great to be with you here again today. In our comments this morning, I'll begin our discussion with an overview of our strong second quarter results and outline the progress we are making in delivering against our 2024 priorities. David Smales, our CFO, will provide a deeper dive into our financial results along with the outlook for 2024. Dennis Organ, the president and incoming CEO of our pork company and I, will touch on our transformative transaction that will unlock value and unleash our two distinct businesses Maple Leaf Foods and the New Pork Company. And we will, of course, open up the call for your questions. With that, I'll go ahead and jump right into our second quarter, where the headline is that we made excellent progress in advancing the execution of our priorities. As a result, adjusted EBITDA grew approximately 37% year-over-year to $141 million, and free cash flow increased by $103 million in the quarter versus last year. Our adjusted EBITDA margin of 11.2% was a 310 basis point improvement versus last year, which was largely fueled by the improvement in pork markets and the contribution from our large capital projects in London poultry and the Bacon Center of Excellence. We also saw a sequential quarterly improvement in adjusted EBITDA in terms of our margin of 110 basis points from Q1, with seasonally improving results in prepared meats and poultry, along with accelerating contributions from our large capital projects. While pork market conditions improved from last quarter, the net benefit of markets when including Japan had a minimal impact on adjusted EBITDA margins sequentially. From a relative performance perspective, our margin of 11.2% not only establishes us as leaders amongst our peers, but also continues to provide us with the confidence that we can deliver to build on the quarters and years ahead as we continue to migrate toward our 14 to 16% target in normal market conditions. Of course, it will not be a straight line, and not every quarter will improve sequentially along the way, but the long-term potential of the business to create value continues to be very exciting. Turning to revenue, sales of approximately $1.3 billion were essentially flat year over year, which was in line with our expectations. There are three reasons that we were pleased with this outcome. The first is the strength in sales growth that we saw in our prepared foods operating unit, which consists of prepared meats, poultry, and plant protein, where we grew revenue by 1%, and our core CPG prepared meats business delivered a 3.2% increase in revenue year over year. This level of sales growth against the backdrop of the current consumer demand environment truly demonstrates the resilience of our brands, the ability of our sales and marketing teams to quickly adapt to changing market conditions, and the strength of our connection to both customers and consumers. A second, poultry sales were down 3.9% as compared to last year. However, the important context in poultry is that we delivered significant growth in the retail channel of over 12%, which was more than offset by reduced sales to industrial channels, which we expected as part of executing our plan to repatriate volumes from a co-manufacturer and into London poultry. The mixed benefit from this shift, supported by improving profits in the poultry business, helped us this past quarter. The impact of this transition will continue to play out in Q3 as well and will be fully lapped by Q4 this year. A third in the pork complex, it's important to note that sales are not a key metric since the business is driven by spreads. In Q2, despite the fact that revenue in the pork complex declined by 4.2%, a result of less buy-sell activity and foreign exchange impacts, our financial results improved materially relative to the prior year, and also improve sequentially. Within the supplemental materials we provided earlier this morning, we included a summary of our second quarter business highlights to provide some additional context to our performance. Within prepared meats, we delivered solid results in what is clearly a dynamic consumer demand environment. And although there is work yet to do to fully recover volume and mix in the retail channel, and we haven't been immune to the consumer environment, it was certainly a positive quarter of progress overall. We've continued to adapt our brand and growth strategies to the evolving consumer environment, and we are seeing improvements in specific areas of focus. In Q2, prepared meat sales grew at just over 3% year over year for the second consecutive quarter. Food service volumes were positive, supported by the capital investments we've made to enable higher sales of precooked bacon and further processed poultry. We saw double-digit growth in both sustainable meats and in the U.S. market, including sales growth at every one of our current U.S. Greenfield brand customers, while gaining incremental distribution of Greenfield brand offerings through a very large retailer in the United States. In the poultry business, our financial results improved sequentially and year over year. The London Poultry Facility is delivering in almost every aspect. The majority of the year-over-year improvement was driven by the contributions from this capital project, and we remain fully on track to achieve the full business case by the end of the year. Outside of London, what really stood out in this quarter was the resilience of our leading brands, where we grew retail channel sales by nearly 13% and increased our market share across our key brands, Prime, Maple Leaf, and Mina Halal. Here too, while it's important to recognize the progress we have made, we are also clear that we still have work to do. Like many other companies, we are seeing softness in consumer demand for premium offerings, such as RWA and organic fresh poultry, largely attributable to the overall economic environment, as we've shared previously. As well, supply and demand are still working their way into balance. Looking at plant protein, we did not deliver on break-even levels of profitability this quarter, as our SG&A increased sequentially from a seasonality point of view, driven by higher levels of ad and promo that were aimed at stimulating sales demand. With these slightly elevated levels of investment, our sales performance did outpace the overall refrigerated category in the U.S., but we were not able to deliver the volumes that are required to achieve profitability. Our focus for the plant protein business remains on achieving overall profitability in line with the balance of our business through a combination of reigniting growth and continuing cost efficiencies. In the pork complex, the important takeaway is that our financial results are improving, largely due to actions taken to optimize our sales mix, along with the improvements in the vertically integrated pork margin, which were partially offset by the impact of the Japanese market. The net impact of market headwinds, including Japan, was approximately 16 million or about 125 basis points in the second quarter, as compared to what we would describe as normal markets, the five-year pre-pandemic average. All told, with a significant step up in profitability versus a year ago, along with subsiding capital needs of the business following the completion of our two large projects, we have improved our free cash flow performance and we continue to strengthen our balance sheet. We have been clear that deleveraging is a priority, and we are making progress as our net debt to EBITDA closed Q2 at 3.4 times. I'm now going to turn the call over to David to discuss our financial results in a little bit more detail, and then I'll hop back on to update you on our transformational transaction, our playbook for the future, and our progress against the balance of our 2024 priorities. David.