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Maple Leaf Foods expecting modest annual growth in its plant-based protein

Company releases its results for the fourth quarter of 2022

Maple Leaf Foods Inc. said it's expecting modest annual growth in its plant-based protein category as the company reported a loss for its latest quarter, due in part to weaker pork markets and a cyberattack.

The Mississauga, Ont.-based food processing company raised its quarterly dividend to 21 cents, up from 20 cents, as it reported a loss of $41.5 million in the fourth quarter of 2022.

The increased payment to shareholders came as Maple Leaf said its loss for the quarter ended Dec. 31 amounted to 34 cents per share compared with a profit of $1.9 million or two cents per share in the last three months of 2021. Sales totalled $1.19 billion, up from $1.12 billion a year earlier.

"Our supply chains are normalizing now, the imbalance in our pricing for inflation is now coming into line and important Asian regions have opened up again for us,'' Maple Leaf Foods chief executive Michael McCain said in a statement.

"These unprecedented markets will normalize; they always do.''

The company said its most recent quarter included a $23-million hit related to what it called a cybersecurity incident in November and $25.8 million in startup expenses related to construction projects.

On an adjusted basis, the company lost 28 cents per share in its fourth quarter compared with an adjusted profit of nine cents per share a year earlier.

"2022 was clearly a year of unprecedented challenges for us on many fronts, including hyperinflation... supply chain dysfunction, job vacancies and a cyberattack,'' McCain said.

"Of course, our fourth-quarter results are not where we like them to be, given these unprecedented market conditions and the impacts of the cyberattack, but the underlying health of the business in normal markets is solid and in-line with where we expected to be at this point.''

The company has in recent years gone from being a packaged meats company to a "protein company,'' buying two alternative meat companies as part of its bid to be a leader in the growing product category. But sales growth for plant protein has slowed across the sector, and Maple Leaf has had to take a step back in its approach.

In 2021, Maple Leaf announced it was re-evaluating its plant protein business as it saw a slowdown in sales growth, a shift seen across the industry which had projected exponential growth for plant-based proteins that didn't materialize.

In its latest release, the company said its analysis of its plant protein business is ongoing, but said the very high growth rates previously predicted by industry experts are unlikely to bear out, citing customer feedback and experience, buy rates and household penetration.

Sales for the company's plant protein arm in the fourth quarter were $40 million, compared with $1.15 billion for meat protein, and down almost 12 per cent compared with a year earlier. The company attributed the sales decline to lower product volumes, which were partially offset by price increases.

However, Maple Leaf said it still projects growth for the plant protein category at an average annual rate of 10% to 15% this decade and has adjusted its strategy and investments accordingly.

McCain said the company continues to execute on plans to "aggressively'' build its sustainability platform and convert its plant-based business model to profitable growth. Maple Leaf is currently on track to get the adjusted earnings before interest, taxes, depreciation and amortization for its plant-based business to neutral or better this year, the company said.

The plant protein arm saw a loss of $10.3 million in the fourth quarter, compared with a loss of $10.0 million a year earlier. Maple Leaf said this decrease was driven by inflation as well as strategic investments in capacity.

Maple Leaf reported sales for the full 2022 financial year were up almost 5% at $4.7 billion compared with a year earlier. However, the company reported a loss of $311.9 million for the year compared with earnings of $102.8 million in 2021.

The company attributed the loss to several factors including inflation, labour challenges, the cybersecurity incident and a one-time impairment charge related to its plant protein arm of $190.9 million.

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