Maple Leaf Foods Inc.

Thank you. Good morning, ladies and gentlemen. Thank you for standing by. Welcome to May Fulip's fourth quarter and fiscal year 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 Invest Relations at Maple Leaf Foods. Please go ahead.

Thank you, Ludie, 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, and Chief Executive Officer, the Corp 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 for looking information, and our future results may differ materially from what we discussed. Please refer to our fourth quarter and fiscal year 2024 MD&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 uploaded our fourth quarter investor deck to our website, which includes support material for the quarter and the year. As always, the Invest Relations team will be available after the call for any follow-up questions you may have. And now I'll turn the call over to Curtis.

Thank you, Janet, and good morning, everyone. It's a pleasure to be with you here today as we review our fourth quarter and full year 2024 results and look ahead to what promises to be an exciting year in 2025. Joining me on the call today are David Smales, our CFO of Maple Leaf Foods, and Dennis Organ, President of our Port complex and incoming CEO of Canada Packers. As we highlighted in our supporting materials and press releases that were recently issued, we have plenty of positive news to share with you here today. The headline is that we closed out 2024 with strong momentum, setting the stage for what we are describing as a transformational year ahead. With that, I'll start by reflecting on our 2024 performance and summarizing our fourth quarter results before handing it over to David for a deeper dive into our financials. Before the end of the call, I'll come back to reiterate our outlook for 2025, and of course, we'll leave time for your questions. Looking back on 2024, I feel an enormous sense of pride in what our team has accomplished. Through resilience and the relentless execution of the Maple Leaf Blueprint, we have made meaningful strides toward achieving our vision of becoming the most sustainable protein company on earth. We delivered significant financial improvement and would continue to be a challenging condition in the market and positioned ourselves for success in 2025 and beyond. Here are just a few highlights from our year. We successfully adapted our brand strategies to the evolving consumer environment, leveraging our portfolio of leading brands to deliver consolidated sales growth of 1.1%, driven by .9% growth in our CPG prepared foods business and prepared meats business. We completed the play on the highly successful startup of over $1 billion in capital projects at London Poultry and the Bacon Center of Excellence, where both projects achieved full business case benefits in Q4. We completed the first phase of our fuel for growth initiative, advancing our playbook to sharpen our cost focus and our competitive edge, delivering supply chain savings and SG&A reductions exiting 2024. We met our commitment to significantly expand our adjusted EBITDA margin in 2024, delivering a 250 basis point improvement for the year and reaching .5% in the fourth quarter. Our adjusted EBITDA grew by 125 million, or nearly 30%, from 428 million in 2023 to 553 million in 2024. We increased our annual dividend for the 10th consecutive year. We demonstrated our ability to outperform our peers in both top and bottom line performance. Through a combination of disciplined capital expenditures and the improved profitability of the business, we rapidly deleveraged the balance sheet as we said we would, delivering 385 million in free cash flow in 2024, 296 million improvement from 2023, while exiting 2024 with a net debt to adjusted EBITDA of 2.7, comfortably within our target range. We announced our plans to unlock value as a purpose driven consumer packaged goods company by unleashing our world leading pork company Canada Packers through a tax free spin off. And last and perhaps most importantly, we have put the right team of incredible Maple Leaf leaders in place to lead us well into the future. With that as context for the full year of 2024, I'll briefly offer a few comments on our fourth quarter of the year. Our Q4 sales growth accelerated to .3% year over year, with prepared meats growth of 6.5%. We were obviously pleased with the performance on the top line, which was driven through the continued execution of our proven growth strategies as we continued to accelerate the pace of impactful innovation, leveraging our leadership in sustainable meats, expanding our reach into the US market, and plugging our unique capabilities into our customer strategies. We made meaningful progress in Q4 with prepared meats sales and volume, growing in both the retail channel and the food service channel, supported by double digit sales growth in our sustainable meats portfolio and in our US platform. On the innovation front, our new Schneider's frozen breakfast portfolio has been very well received by our customers and consumers, delivering strong initial sales, and winning the Brandspark 2025 Best New Product Award. In addition to driving sales growth, we also took meaningful steps to improve our cost structure. We have now completed the first phase of our Fuel for Growth initiative, aimed at reducing cost, increasing efficiency, and in the case of our strategic manufacturing review, looking to unlock future opportunities to boost capacity utilization. In Q4, we completed an SG&A reorganization in our commercial and operations functions, as well as in our plant protein business, reducing overall headcounts. We also wrapped up a procurement project that focused in on leveraging our scale purchases to drive cost efficiency. This work, combined with the improvement in pork market conditions, the full benefit of our large capital projects, and growth in our prepared meats business, resulted in an adjusted EBITDA margin of 12.5%, a 240 basis point improvement from the same quarter last year, and an adjusted EBITDA that grew by nearly 30% to 155 million within the quarter. This strong business performance in turn generated substantial free cash flow, increasing 66 million year over year for the quarter. All said, we are entering 2025 with momentum and results, that when combined with the completion of the spin-off of Canada Packers, sets the stage for our transformational year ahead. I'll come back to close the call, but before I do, I wanted to pass things over to Dennis to discuss the pork complex, and then to Dave to review our detailed financial results. Dennis?

In our pork complex, we continue to see strong improvements in financial performance. 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 pork complex, we delivered a .5% increase in sales compared to Q4 last year. This growth was fueled by higher processing volumes and favorable foreign exchange impacts from a stronger U.S. dollar. Adjusted EBITDA margins have improved in both Q4 and on a full year basis versus 2023. Looking ahead, we expect input costs to remain within a stable range, supporting continued margin consistency. Our pork complex, soon to be Canada Packers, operates with a well-defined and tangible 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 toward 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 best pure-plate pork business in North America, and we will carry this same rigor into the next chapter of Canada Packers' historic legacy. Now is the time for Canada Packers. Thank you, everyone, for being with us today, and I'll now turn it over to Dave for his comments.

Thanks, Dennis, and good morning, everyone. Turning to our results, I'll comment on the company's consolidated results for the quarter and for the full year before addressing the balance sheet and discussing the overall outlook for 2025. Overall, one of the key takeaways from the year is how the step-up in financial performance and improving profitability of the business throughout 2024 generated a substantial increase in free cash flow and delivered a significant improvement to our balance sheet, delivering on the priorities and outlook we set coming into the year, all of which I'll expand on. Total sales in the fourth quarter were $1.24 billion, an increase of .3% compared to last year. For the full year, total sales were $4.9 billion, an increase of .1% over 2023. In the fourth quarter, adjusted EBITDA increased by 29% to $155 million, with an adjusted EBITDA margin of .5% compared to .1% in Q4 last year. Adjusted EBITDA for the full year also increased by 29% to $553 million, representing a margin of 11.3%, an increase of 250 basis points over 2023. Earnings for the quarter were $53.5 million, or $0.43 per basic share, compared to a loss of $9.3 million, or $0.08 per share last year. Earnings for the full year were $96.6 million, or $0.79 per basic share, compared to a loss of $125 million, or $1.03 per share in 2023. After removing the impact of the non-cash fare value changes in biological assets and derivative contracts, startup costs and restructuring costs, adjusted earnings were $0.38 per share for the quarter, compared to $0.08 per share in the fourth quarter of 2023. Full year adjusted earnings were $0.78 per share, compared to $0.09 per share in 2023. The .3% sales growth in the fourth quarter, compared to 2023, was driven by prepared foods, where sales were up .6% over the prior period. We saw an increase in sales in prepared meats of .5% and poultry of 1.8%, which was partially offset by a decline in plant protein of 10.3%. For the full year, our .1% sales growth was driven by prepared foods, where sales were at .8% compared to 2023. We saw an increase in sales in prepared meats of 3.9%, which was partially offset by declines in poultry of .6% and plant protein of 4.3%. Prepared meats in the fourth quarter saw higher volumes in food service and retail, along with improved category mix and similar trends drove our full year sales performance. In plant protein, fourth quarter sales were negatively impacted by volume declines, which were driven by performance of the overall US refrigerated category, with a similar story reflected in full year sales. In poultry, sales for the quarter were up due to improved channel mix, with growth in retail volume and reduced industrial sales. For full year sales, the New London Poultry Facility has allowed us to improve our mix by increasing our tray pack capacity, replacing third party source tray packs, allowing us to reduce lower value and volatile industrial channel volume, resulting in a decline in poultry sales year over year for improved mix and margin performance. Pork sales in the fourth quarter increased .5% due to volume growth from an additional 38,000 hogs that were processed in the quarter, as well as favorable movements in foreign exchange. For the full year, pork sales were down due to lower resale activities and unfavorable product mix, which was partly offset by favorable pricing. As I previously mentioned, adjusted ebic-dar continued to grow, landing at 155 million for the fourth quarter, a 29% increase compared to the fourth quarter of 2023, and full year sales were equally impressive, also improving 29% to 553 million dollars. For the fourth quarter, within prepared foods, increased profitability was primarily driven by prepared meats and poultry, which were partly offset by plant protein. Prepared meats performance benefited from higher retail and food service volumes, as well as the Bacon Center of Excellence project, which reached its full business case contribution during the quarter. Increased trade investment to support volume growth was a partial offset. Improved poultry profitability in the fourth quarter was largely driven by the London poultry facility reaching its full business case benefits. Pork markets were also a tailwind to our fourth quarter results, reflecting a significant improvement in the vertically integrated spread compared to the fourth quarter of 2023, partly offset by a slight decline in the packer spread. For the full year, within prepared foods, profitability improved across prepared meats, poultry, and plant protein. The drivers of prepared meats and poultry performance were similar to the quarter. The plant protein efforts to drive cost out of the business throughout the year led to improved profitability. Pork markets were also a significant contributor on a full year basis, with both the vertically integrated spread and packer spread improving compared to 2023. SG&A was relatively flat in the fourth quarter versus the prior year. Compared to 2023, full year SG&A was up 32 million, in large part due to the impact of variable compensation. For the fourth quarter, adjusted EBITDA margin came in at 12.5%, up 240 basis points from Q4 in the previous year. This improvement contributed to the 250 basis point increase in our full year adjusted EBITDA margin of 11.3%, compared to the .8% we recorded in 2023. In total, during the quarter, we invested $29 million in capital expenditures, compared to $42 million in Q4 last year. During the year, we invested $96 million, compared to $197 million in 2023. Decrease in both periods is largely due to the completion of our large capital projects. Looking ahead to capital expenditures for 2025, we expect to invest between $175 to $200 million, primarily focused on maintenance capital, with growth capital related to cost efficiency and support for profitable growth initiatives. In the fourth quarter, free cash flow improved to $130 million, up $66 million from the same quarter last year, contributing to the full year free cash flow of $385 million, an increase of $296 million compared to 2023. Improved earnings after the removal of non-cash items and lower restructuring payments drove the increase. On the balance sheet, net debt ended the year down $231 million to approximately $1.5 billion, and down from a peak level of $1.8 billion during our large capital project investment phase. In line with our stated priorities, we saw a significant improvement in leverage ratio over the past four quarters, with a net debt to trailing 12-month adjusted EBITDA ratio of 2.7 times at the end of the year, compared to 3.1 times at the end of the third quarter of 2024, and 4.1 times at the end of 2023. As we move into 2025, we previously announced an increase in our annual dividend of approximately 9% to 96 cents per share, the 10th consecutive year of annual dividend increase, and we also announced the elimination of the discount on the Dividend Reinvestment Program. We will continue to focus on strengthening the balance sheet and maintaining leverage in an investment grade range. As we progress our strategic initiatives and deliver on our performance objectives, we will continue to examine all capital allocation options. We remain on track to deliver the 2025 outlook we shared in early January. We continue to expect mid-single digit sales growth and significant improvements in adjusted EBITDA, which we forecast will meet or exceed $634 million, making progress toward our -16% adjusted EBITDA margin strategic target. Our outlook reflects our current expectations, and in that context we've had a number of questions with respect to the potential for tariffs and the related impact. While there's still a lot of uncertainty around whether tariffs will be applied to what extent, when, and for how long, the bottom line is tariffs are not an existential threat to our business, but there could be an impact to a relatively small percentage of our total sales, with roughly .5% of our sales being products exported from Canada into the US. The other uncertainty, which could be supportive of mitigating the impact of tariffs, is exactly what the Canadian government response to US tariffs might be. At the same time, we have seen a lot of activity already among customers and consumers in Canada, focused on buying Canadian products and seeking out security of high quality Canadian supply. We will continue to monitor the situation when, as a company, we are prepared to execute on a range of mitigation strategies. Before handing it back to Curtis, I wanted to reiterate our expectations around the spin-off of Canada Packers. As we move to our expected close in the second half of 2025, we intend to hold a shareholder vote in June, with the management information circular being filed in early May. This would set us up for closing the transaction in the second half of 2025, once we have the ruling from CRA on the tax-free nature of the spin-out. As recently announced, the initial leverage ratio of Canada Packers is expected to be in the range of 2.5 to 3 times. In addition, the current intention is for the initial combined dividends of Maple Leaf Foods and Canada Packers to not be less than Maple Leaf Foods annual dividend immediately prior to the completion of the spin-out. I'll now turn the call back to Curtis.

Okay, thank you, David. As I mentioned in my opening remarks today, 2024 was clearly a pivotal year for Maple Leaf Foods in many ways. We're entering 2025 with momentum, laying the foundation for what we will continue to describe as our transformational year ahead. The outlook we issued in January best captures our excitement for the future, and we expect that in 2025, we will firstly, deliver -single-digit sales growth, driven by the continued execution of our proven growth strategies. Secondly, deliver a third consecutive year of significant adjusted EBITDA improvement, where we expect to meet or exceed $634 million, which was the analyst consensus at the time when we released our 2025 outlook back in January. A third to maintain an investor-friendly balance sheet and disciplined capital allocation, ensuring we stay within our investment-grade leverage target, while also making strategic investments to modernize, sustain, and grow our business. And finally, to complete the spin-off of Canada Packers in the second half of the year, unlocking significant value and unleashing both Maple Leaf Foods and Canada Packers to pursue their exciting and independent growth strategies. As a purpose-driven Canadian food company, Maple Leaf stands today uniquely positioned to meet the growing global demand for sustainably produced protein. And we have the right strategy, the right blueprint, and the right people in place to make it happen. Before we move on to questions, I want to take a moment to express my heartfelt gratitude to the entire Maple Leaf team. I'm incredibly fortunate to work alongside such talented and passionate people. Our success would not be possible without each of you. With that, operator, we can now open the call for questions.

Thank you. And ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press a star, followed by the number one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, you may press a star, too. One moment, please, for your first question. And your first question comes from the line of Irene Nadell. Please go ahead.

Thanks, and good morning, everyone. Congratulations on a great quarter. Now that you've achieved the .5% in Q4 and you've reiterated the 14 to 16% target, can you walk us through the building blocks of, I guess, number one, how sustainable the current run rate is, pardon me, and then how you get from where we are today to the 14 to 16%.

Good morning, Irene. Thanks for your question. So let's start with the outlook and guidance we provided for 2025 in the area of -single-digit growth. And to meet or exceed $634 million of adjusted EBITDA, that puts us, I think, if you back into the math, somewhere in the mid-12s range in terms of adjusted EBITDA margin as an outlook for the year. That's in line with what we delivered here in the fourth quarter. So we continue to have a high level of confidence in our ability to meet our outlook. So that's number one. There are four things that I think are important contributors in terms of our ability to meet the outlook next year. We should start with those. That's first, harvesting the full year benefits of our large capital projects at London Poultry and the Bacon Centre of Excellence. I'm very pleased with how we exited in Q4, a rate-on plan as we expected and had communicated. But we obviously get the full year of benefit from those projects. The second comes from a full year benefit of more normalized pork market conditions. We're obviously operating in a more normal range today and continue to be confident that that will set the stage for the year ahead. The third comes from the important work that we're doing mostly around the consumer. What I would describe as kind of executing our brand management and our revenue management plans to drive profitable growth in our CPG business. And I felt the team did a pretty darn good job there in the fourth quarter in terms of balancing our volumetric growth or sales growth and our mix within the business. And obviously there's more work to do in 2025. Also pleased with the innovation portfolio. I think we launched over 50 items in 2024 and also have a pretty robust pipeline in 2025. And then the last component comes from our Fuel for Growth initiative that we've started to talk about and provide a little more detail around with the first phase being completed, which was the SG&A reorganization in our commercial and our operations functions. We actually reduced Irene the top two levels in the commercial and operating functions by 22 percent in terms of org design. And that made some pretty significant changes there and also completed the supply chain sourcing initiative in the back part of the year that will be supportive to next year as well. So those are the things that give us confidence in our ability to deliver our year and the outlook we've provided. Fourteen to sixteen percent continues to be our North Star in terms of a strategic margin target. So your question is, where do we go beyond twelve and a half-ish or where we are today in terms of the building blocks to get to fourteen to sixteen percent. There are maybe three or four important factors that I would point to. The first is the continued execution of our profitable growth strategies made significant progress in 2024 and and I think well positioned for 2025. The third is the consumer element and the pace of the consumer environment recovery. You know, our outlook suggests progress in 2024, but not perfection in terms of the volatility of the consumer environment we're dealing with today. There continues to be a consumer that's under stress. We've embedded that in the impact the best we can in our current outlook, but we would certainly expect an improving consumer environment to contribute to our ability to achieve fourteen to sixteen percent. There's more work to do at our pork strategic playbook for the future. And then, of course, the Fuel for Growth initiative will continue to pay dividends from a cost reduction focus beyond 2025. So those would be the, I think, foundational elements in terms of how we go from where we are today to operating within our fourteen to sixteen percent range.

That's really helpful. Thank you. And just a couple of follow ups, please. So on the consumer environment, can you talk about how you exit the year in terms of the nature of demand? And are we still in a market where RWA is kind of a little bit, or let me rephrase that, where consumers are focused on value and so sales of RWA are still below where they need to be?

Yeah, I would describe the consumer environment arena as stable. You know, not a material change quarter to quarter, but still dealing with the effects of a consumer that's under stress, a flight to value to a certain degree, and mix impacts in sustainable meats versus our conventional portfolio. That continues and played out again in the fourth quarter. You know, it's a really interesting time from a consumer point of view because on one hand, we're dealing with the environment where the consumer continues to be under stress. And I think, you know, things are moderating. On the other hand, the bi-Canadian movement really seems to be taking hold. The duration of that emotion and energy in the market, I think, is a bit of a to be determined. But, you know, there's so there's a lot going on from the consumer point of view

in

the market today.

Thank

you. Your next question comes from the line of Mark B3.

Please go ahead.

Yeah, thanks. Good morning. Just to follow up on a couple of those things, I guess. First, in poultry, I think you've said, and I think you just said, product mix is still a headwind sort of value versus premium. But is channel mix back to normal or where does that stand exactly?

Channel mix in the morning, Mark, firstly, channel mix is improving. And we did see retail sales growth that was pretty robust in the last quarter, I think, close to I think close to four point four percent in the retail channel, which is which was very healthy and robust. So we're getting the level of growth that we would expect the mix within that growth, particularly in the retail channel. We would still expect to move more of our sales mix to the sustainable meats portfolio. So still some more work to do on the consumer side. And things are I would describe as improving, but not yet optimized in terms of the consumer behavior in poultry. So you're exactly right to point that out. But in terms of channel mix, I'm very pleased with the four percent retail growth that we delivered in the last quarter.

And I guess maybe more specifically, like, is industrial for poultry? Like, is that back down to a normal level or is that still a place where you're ending up putting more product than you would otherwise want to because of imbalances in? Yeah,

I think I think you might be, you know, kind of honing in on the fact that earlier in the year we had talked about the mismatch between supply and demand and kind of the market dislocations in poultry and the impact that that had in our business. I would describe the supply demand environment as more balanced today, you know, more in line with with a normalized balance. And it wouldn't have been a key contributor in the in the fourth quarter for certain.

OK, helpful. Thank you. I also want to follow up on the on the sort of cost control piece of it and or fuel for growth, I guess. Can you just sort of help shape the relative impact of the different piece, different pieces of work you've undertaken? You know, headcount, supply chain and procurement. And then I guess the manufacturing review still to come. I know that's still underway.

But can

you just give us a sense of, you know, the magnitude of each of these buckets and then how much of that is reflected in Q4? Like, are we sort of seeing 20 percent of the benefit of the sort of benefits that you think will accrue? Or is it more like, you know, over half? Like, just any any kind of sense to sort of bring some bring some magnitude into this?

Well, I'll give you some I'll give you some color on them. You know, Mark, on the fuel for growth initiative, maybe more broadly first, and then we can talk about the the impact from a financial point of view. Our fuel for growth initiative essentially focuses in on three important work streams, three important work streams. The first is optimizing our SGA. And the intention there is to prove our execution or continue to improve our execution through a linear organizational structure. The second is leveraging our scale in supply chain purchases. And we went through a pretty important procurement project to optimize our costs. And the third is, as you pointed out, in completing a strategic manufacturing review to optimize our network utilization. I'll take those one at a time in terms of just some color on the SGA front. We completed the first phase of the work, which was really around reorganizing our commercial and operations of parts of our business and and the plant protein reorganization. Kind of another round of updates to size the shoe to fit, if you will, in the plant protein business. We reduced the number of roles in the top two layers. I think I commented on this earlier this morning by over 20 percent in those functional areas, which is a pretty significant change. And and the benefits showed up within most of the benefits. Most of those benefits, not all most of those benefits, showed up within the fourth quarter. We'll be doing a second part of that work, but that will come later in the year naturally aligned to the timing of the separation of Canada Packers, because we have to take all of the enabling functions that support our businesses and and and separate them into two public companies, obviously. The second component is the procurement work. And that was fully embedded in the fourth quarter. So we went through a very successful project from a procurement and supply chain point of view. And and that will be supportive to our 2025 outlet. But that work was completed and embedded in the fourth quarter on the network optimization front. The work's really just starting, I think, would be the best way to describe it. Some important context, you know, we have to keep in mind that a lot has changed on the consumer behavior front over the past number of years for lots of different reasons, most of which you clearly understand. So we're making certain that we step back and and make sure that our assets are aligned to the most lucrative areas of consumer demand so that we can drive full utilization in our facilities. I think it's important time for us to do that. So we recently kicked off a bit of a strategic review. And and the goal is really to help to accelerate our cost reduction focus, but really look at opportunities to boost capacity utilization. And most of those benefits, Mark, I would think of as 2026 and 2027. Although I would give you one example that's more real time. And that is the closure. Actually, retirement is probably a more appropriate word. The retirement of our brand for further process poultry plant. I'm comfortable talking about this one because we've announced it publicly. It's a hundred year old facility, which is why I use the word retirement. And we have the opportunity to which would require significant capital to continue to operate. And we have the opportunity to repatriate production from that facility into two other maple leaf plants that have existing capacity today and and bank the overhead kind of cost savings that come with that and the efficiency benefit. So, you know, there's work to do more certainly on the network optimization front, a little bit work left on the SG&A component and the procurement benefits are included in our in our fourth quarter. In terms of breaking out the relative kind of basis point improvement of each one of those, I don't think that would be helpful. But what I would say is all of those are supportive to a delivering on our outlook for 2025, which is which is six hundred and thirty four million or better. And and secondly, enabling us to deliver on our fourteen to sixteen percent strategic margin targets.

Okay, well, thank you for that comprehensive answer. I did want to ask one follow up, which was on that on that brand for the Walker Road, I think facility, if I'm getting this getting the names all straight. When did that happen and how much can you give us some sense of the overall benefits? Like, I'm assuming this is in, you know, significantly smaller impact than say, even the Winnipeg bacon facility, which I think was a thirty million dollar pay off. Can you give us some sense of the magnitude of that and then the. Yeah.

The Walker Road investment. The mark was yes, significantly smaller than the Winnipeg bacon center of excellence. Capital investment with with smaller returns, but important returns to the business. We basically added a cooked a further process poultry line in our Walker Road facility to support a strategic partnership with one of our most important customers. And very pleased to do that as part of our strategy to plug into our customer strategies. We also utilize our raw materials in that case. And those raw materials are sourced from our London poultry plant. So you think about, you know, from processing to creating raw materials, using our raw materials to investing in in a manufacturing line to support the growth and development of a customer was really important to us. It was roughly a sixty million dollar capital investment with roughly fourteen or fifteen million dollars of annualized returns. And again, that would be supportive to our twenty twenty five outlook. And one of the reasons why we continue to have a confidence in the business. But I would think about that as embedded within our kind of our structural approach to capital deployment in terms of maintenance and growth moving forward. Those are the types of smaller, but but important projects that we'll have

moving forward.

Appreciate

all the comments and all the best. Thank you.

And your next

question comes from the line of Michael Vannos. Please go ahead.

Morning, thank you and good results.

I wanted to first start on the US business. So you said seven and a half percent of the product is exported from Canada into the US. Can you just split that between pork, fresh pork and prepared meats?

Yep, yep. The way to think about the tariff discussion, Mike and good morning is. You know, if you look at our disclosures today, our sales to the US market are sales within the US market are about five hundred million dollars. They're just over five hundred million dollars in terms of revenue, which is about 10 percent of our business. So a portion is obviously made and sold in the United States, which is our plant protein business and a little bit of prepared meats production made and sold in the US. So so not impacted of that five hundred million dollars in revenue, about three hundred and fifty to four hundred million dollars is exported from Canada to the US. So, you know, would potentially be in scope and to answer your question directly, that three hundred and fifty to four hundred million dollars is roughly split roughly half pork and half prepared meats. I think would be the way to think about it, Mike. And we're obviously, you know, we've got a team of people working on preparedness and and a number of mitigation strategies that we could put in place. They're different of those mitigation strategies between prepared meats and pork. The pork business is very much a global market, as you know, and we would look to potentially if we were forced to repatriate sales to other markets, the prepared meats business would certainly be more impacted. But again, as David noted in his opening comments, the implications of tariffs are really, you know, very much linked to what the Canadian response is and the counter-tariff situation, which we're obviously watching and evolving closely. And I think the headline David provided is the right one. Tariffs are, you know, have the potential to play some noise in our results this year, which we would prefer to avoid for obvious reasons, but they are not an existential threat for Maple Leaf with, you know, with a maximum of seven and a half percent of our portfolio impacted.

Yes, I do want to touch more on the US side, but just since you brought that up, is how have you built in tariffs into that $634 million MTA target? We haven't.

We haven't, Mike. There's just too much uncertainty, you know, with how things might play out in the situation for us. You know, number one, a smaller percentage of our portfolio impacted. And number two, as I said, depending on the Canadian response, the outcomes could be negative to neutral to even slightly positive if there were, you know, opportunities for us created in the Canadian market in a counter-tariff situation. So we have not baked that into our 2025 outlook. I think it would be premature to do that just based on our lack of precision on knowledge on how things are going to play out.

And so if half of those exports are prepared meats, roughly, and most of that seems to be your RWA and primarily greenfield natural meat, and this is that's a high margin, sorry, a high cost product to start with. Is it a product you think that consists, you know, that could keep some level of sales in the US while with a 25% lift in the cost pass-through or tariff pass-through?

Well, that's possible. I mean, you know, the consumer at the end of the day will make that decision. And we hope to give them the opportunity to make that decision in working with our customers. There would obviously need to be a pretty significant level of price inflation in that situation. But yeah, I'm optimistic that we'll be able to sustain, given the depth of the customer relationships, the strength of the brands and the performance of the products on shelf that we'll be able to sustain a level of distribution. And obviously, my duration plays a role in this too, you know, if we if we're in a tariff situation, which we don't know yet that we will be, if we're in a tariff situation, a duration also has a pretty significant impact on the outcome.

Okay. And then just looking at slide 15, where you talk about, you know, the strength in your Greenfield Natural Meat, and you show some big retailers like Walmart and Costco and Albertsons as current customers in sustainable meat. But then you also talk about new customers in the US for 20 in 2024 for Costco and Trader Joe's the name too. Are those were those RWA? And is there is a reason why it's shown separately?

Are

those

more private label products?

There isn't a reason why

they're shown separately. So I wouldn't, I wouldn't kind of over infer based on that. We are today and we do have distribution in the United States at each one of the top 10 retailers, Mike, we support both in the RWA part of our business in the United States, we support and have a rapidly growing branded business in our Greenfield Natural Meat Company portfolio, but also support premium private label in the US through through RWA as well, which has proven to be a very compelling growth strategy in both fronts. What you're seeing is visually is number one, a reflection of not only the size and breadth of the customers that we're doing business with today in the United States, but also where we're continuing to grow distribution of RWA products. I often reference, you know, the statistics, you walk into a Canadian grocery store, we have well over 100 items on shelf in any Canadian grocery store would be the average that you would see through Nielsen as an example. And in the United States in the combination of the plant and meat protein portfolio, we're in every one of those top 10 retailers, and our average distribution of items is about 13. So you know, our priority focus as a business is obviously closing the gap between 13 and 100 plus. And, and any progress we make on that gives us momentum in the growth trajectory. And keep in mind, we have a sales team in the US, an office in Chicago, a marketing team in the US, a distribution network that runs now, and as a proven distribution network to all of those customers. So, you know, we continue to feel good about the progress we're making, not only in the export business to the US, but also in our capabilities within the United

States. Excellent. Thank you. Thanks, Mike.

And your next question

comes from the line of Vishal Shradar. Please go ahead.

Hi, thanks for taking my questions. Maybe this question is premature. But given your, your manufacturing view, but regarding operational capability, do you foresee any large capital spends in the future? And as I asked this question, I'm reflecting on the purpose of the tariffs, which is to draw more investment into the US for, you know, your US growth ambitions, which, which still seems to be a good question. And I think that's an important question to be very much on the floor.

I know. Good morning, Vishal. Thank you. It's an excellent question. And I think an important one for us to clarify. We've been very disciplined in our approach to, to capital deployment here in the last little while, and that will continue well into 2025 and beyond. To answer your question directly, no, there are no large scale capital projects planned from a, from a manufacturing point of view. And I think that's an important part of an important distinction. I mean, our last chapter was obviously marked by several years of construction, startup, and now delivering the returns on the London poultry and bacon Centre of Excellence assets. But that work is now fully behind us and we're more focused on capital deployment directed at supporting the existing manufacturing network, driving out cost and supporting growth into the future. But, but, but there will be no

large scale capital investments on the plan.

Thank you for that. I was hoping I could get your perspective on your internal capabilities on forecasting in the past. And you can correct me if I've misspoken, but I believe you may have mentioned there was some opportunity to improve the organization's ability to forecast. And within your commentary, you suggested you foresee normalized market conditions for the variety of vectors that you look at. So how confident are you in that assessment of the normalized? Park market factors and and maybe what are some of the puts and takes around that, which would cause that to deviate from your expectation?

Sure, sure. I think that's mostly a pork market question. I'll pass it over to Dennis and and he can give you some some context.

Yeah, as far as forecasting pork, remember, we're we know an awful lot about the next six to eight months already, whether we from a risk management perspective, we're buying ahead or doing some hedging. There's also the markets that you can follow. So to the extent that you think the futures are a good indication of where the markets will shake out, then then that's a good indication. So so I guess I would simply answer how confident are we for the end year? We're very confident. It's, you know, two to five years that you can get some of the market fluctuations and things that would would be a larger impact.

The thing, Michelle, the only other context that I would add is we you know, we've commented in the past that our predictive capabilities and forecasting pork markets were impaired. And that was through a time of, you know, very material disruption, the combination of global conflicts, the feed impact implications of, say, a war in Ukraine, coupled with a pandemic and a post pandemic economy. I mean, those things combined are wildly unusual, wildly unusual and happen all at the same time, certainly impaired our predictive capability. We will not be perfect at predicting the future. I don't want to leave you with the wrong impression, but in a more stable environment, the ability to look forward in futures markets based on everything we know today, we're entirely confident with our outlook that we've provided. Okay,

and with with respect to the impact of the tariffs, you've commented very openly about the explicit nature of the portion of business which is impacted via the US trade. But how about the secondary impacts on the consumer? You know, the Bank of Canada has said that there could be significant consequences for the Canadian economy and wondering how that was contemplated as you reflected on your outlook.

Well, you know, we're, you heard me talk earlier, we're in a situation where, you know, the consumer continues to be under stress. Aside from tariffs, I would have said that the situation is improving interest rates, easing inflation, easing, you know, we should be setting ourselves up for an improvement as we as we think about 2025. The unknown impacts of the tariff situation certainly play a role. And, but I also commented earlier on, you know, the balance of the consumer environment on a consumer under stress, but at the same time, so, you know, so proud of the by Canadian movement. And, you know, we'll be dealing in the case of the potential for tariffs with both of those situations, a consumer under stress, possibly some more inflation to a consumer who is tired on the inflation front, but at the same time motivated and inspired by by Canadian. So I think personally that, you know, that could have some portfolio opportunities for us. We evaluated them very, very carefully. And we'll continue to do that as things play out here. Thank

you. Congrats on the quarter. Thank you very much.

Thank

you. And once again, if you would like to ask a question, simply press a star one on your telephone keypad. And your next question comes from the line of Luke Hannon. Please go ahead.

Yeah, thanks. And good morning, Curtis. I want to go back to the line of questioning around the fuel for growth initiative. So you've completed this initial phase of right sizing and streamlining the business. And then the second phase is going to kick off later this year. In as far as order of magnitude, I'm assuming the second phase will be a little bit smaller in scope versus the first phase. And will those benefits accrue more to one to either pro forma may believe for Canada Packers or will those benefits be roughly evenly split?

David, maybe you want to take that one?

Yeah, I think, you know, we're obviously still going through that process right now. So I don't want to quantify it, but there's certainly tangible benefits to be achieved from that process. Not probably not dissimilar to what we've already achieved in the commercial and operational side of the business, but still a work in progress. You know, the focus is, you know, the Canada Packers side, they're putting together their organization on a go forward basis. On the Maple Leaf side, we're looking at what people transfer over to Canada Packers business and then how we right size our SGA for the Maple Leaf business going forward after the split. And so, you know, in terms of savings per se, you're going to see those really in the Maple Leaf side of the business, because that's where we're looking at the right structure for a overall smaller business going forward. And so when you look at enabling functions and the support functions, you'd expect those areas to be smaller as they support the business post split.

Okay, thank you. I think

I'd add, Lucas, that the moving parts in terms of the implications are the benefits of the SGA network that David's described, the timing of variable compensation through the year, and how we think about the investments we make in advertising and promotion, which will be agile with as the year progresses, depending on the consumer environment. So there's some, you know, there's some important moving parts inside of that as well.

Okay, that's all. And then I wanted to ask also about, so it was mentioned for the pork business during the quarter that volume growth was a big factor for sales growth. And I know you guys think more about spreads than you do about sales growth, but it was still an interesting call out to me. So, Dennis, I wanted to ask, I know you've talked in the past about doing some of those smaller scale capex projects that help increase utilization. And then, was that reference made in reference, I guess, to those capex projects? And then similarly, when you think about the year ahead from a volume growth perspective, I mean, I don't expect you to share the number of hogs that you expect to grow or process or that sort of thing, but can you help us think or just dimensionalize what the volume growth opportunity will be for Canada Packers in 2025?

Yeah, so our story for Canada Packers is a growth story and primarily because of the latent capacity that we have today. We have a few different avenues to continue to procure more hogs to fill up that capacity. And so I would think of low single digit consistent growth over a five year span. This didn't require any capital projects. We have some automation things that we can move forward. And just like Curtis and David have been describing, we have our version fuel for growth that we'll have to come out with. Most of it is we're going to grow on the top line. We have some automation things that we can do. And we'll have to figure out our capital structure and all of the things that go into that dividends and debt. And when we start speaking, you know, probably post circular and doing road shows, we'll start publishing some of those things. But think of growth through capacity utilization and utilizing the existing sales mix, geographic sales mix that we have to be a creative to margin.

Great. Thanks. My last one here and then I'll pass the line. I wanted to ask about innovation. And then you talked about Curtis, I think 50 skews that you introduced in 2024 and that's going to accelerate in 2025 as well. So what specifically are you doing behind the scenes to help facilitate the acceleration of that innovation? And then can you help us think from a high level? I assume that's beneficial for price and mix and by extension margin as well. But if there's anything maybe I've mischaracterized or spoken about, you can clarify that.

Yeah, no, thank you. Excellent question. Appreciate that. You know, the big thing that's that's changed, you know, you say, what are you doing behind the scenes? I would describe that with one word, and that is focus. We're making a very important transition from a multi protein approach in the company to a singularly focused consumer packaged goods business, branded consumer packaged goods business. And innovation sits at the heart of that, as you know. And, you know, our abilities from an innovation perspective, we're somewhat impaired through the pandemic and the post pandemic experience, as was the case, I think, for, you know, probably CPG across North America. So the ability to get back to focusing on what matters the most in our business, which is the consumer at the heart of everything and offering consumer focused solutions to innovation platform. That's meaningful. The company is important. And it's an area that we're now focused on. That focus showed up last year in, you know, 50 plus SKUs being launched into the market. Some receiving important recognition, as I highlighted in my opening comments, in terms of their success and no question that will continue on in terms of our pipeline for 2025. We'll talk about those items as they roll out. I think that's more prudent. But that's essentially what's changed and sits at the heart of the business. Again, those benefits embedded directly in our outlook, you know, mid single digit sales growth. I think you'll find exciting from a consumer packaged goods perspective in the context of kind of the North American market these days. So that shows up in both our top line outlook and our bottom line outlook as well.

Great.

Thank you very much. Thank you.

Thank you. And I'm showing no further questions at this time. I would like to turn it back to Mr. Frank for closing remarks.

Okay, great. Thank you for joining us this morning. We're obviously pleased with what I would describe as a very solid quarter in Q4. Pleased very much by the significant financial progress that we made within the year. The growth strategies are proving resilient, the improving profitability of the business, the discipline around our capital expenditures, the free cash flow generation, and the strengthening in our balance sheet are all setting us up for what we continue to describe as an exciting, positive and transformational year ahead. So, thanks very much for joining us today, and we look forward to talking to you at the end of our first quarter.

Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.