Maple Leaf Foods reports $26.2M Q2 loss as company prepares to spin off pork business

Maple Leaf Foods Inc. reported a loss of $26.2 million in its latest quarter compared with a loss of $53.7 million a year earlier as it prepares to spin off its pork business. 

The Mississauga, Ont.-based meat producer and processor's president and CEO Curtis Frank told analysts on a call Thursday (August 8) that investor reaction to the plan to hive off the pork business into a new, publicly traded company next year has been positive.

"We remain confident that this is a move that will lead to greater levels of growth and value creation as each business is provided the opportunity to pursue its own strategies with a dedicated management team that's focused on executing its unique playbook," he said. 

Maple Leaf previously said the split will make it a more focused and brand-led consumer packaged goods company. Its portfolio will include the prepared meats business, which houses brands like Maple Leaf and Schneiders; and its poultry and plant protein operations.

Existing Maple Leaf shareholders will receive shares in the new company, while Maple Leaf will retain a 19.9% ownership position.

The two companies will also enter into an evergreen pork supply agreement, with the new business providing Maple Leaf with a secure supply of pork for its prepared foods division.

The new pork company will be led by Dennis Organ, who joined Maple Leaf Foods in February 2023 as president, pork complex.

The primary objectives as the spin-off approaches are to reduce costs related to raising hogs and processing, Organ told analysts, as well as to advance automation projects. 

“Thankfully, feed markets have begun to normalize to pre-2020 levels, and this improvement is reflected in our results," he said.

Maple Leaf said its loss amounted to 21 cents per diluted share for the quarter ended June 30 compared with a loss of 44 cents per diluted share for the same quarter last year.

Frank attributed the quarter's performance to sales growth in prepared meats, better pork market conditions, growth in the company's sustainable meats portfolio, a better overall sales mix, and contributions from large capital projects. 

Capital expenditures in the quarter were $16 million, down from $53 million a year earlier, reflecting the completion of large capital projects. 

The company expects that as the year progresses, it will continue to see returns from investments into its London, Ont., poultry plant and the Bacon Centre of Excellence in Winnipeg. 

Sales in the quarter totalled $1.26 billion, down from $1.27 billion a year earlier.

Sales for Maple Leaf's prepared foods business rose about one per cent, while sales for its pork business fell 4.2% compared with last year. 

On an adjusted basis, Maple Leaf says it earned 18 cents per share in its latest quarter compared with a break even result on an adjusted per share basis a year ago.

Frank said while the company continues to see positive momentum, it’s also mindful of the current consumer environment.

“Like many other companies, we are seeing softness in consumer demand for premium offerings ... largely attributable to the overall economic environment.”

Maple Leaf said that for the full 2024 year, it expects low single-digit revenue growth. It also expects its adjusted margin will expand compared with 2023 thanks to several factors including the return on its large capital investments as well as operational and cost efficiencies. 

Shares in Maple Leaf were trading almost 8% lower on the Toronto Stock Exchange in the early afternoon at $23.44. 

This is a corrected story. An earlier version incorrectly stated the change in prepared food sales.