Maple Leaf Foods swings back to Q1 profit as pork markets show signs of improvement

Pork markets are showing signs of improvement, said Maple Leaf Foods Inc. chief executive Curtis Frank, helping the company achieve a profit in its first quarter compared with a year ago even as sales edged lower. 

"Pork markets, while still compressed, now appears to be starting to show the sequential improvement that we expected in time," Frank said on a call with analysts Thursday.

He said in the earnings release that the company expects that momentum to continue building. 

The company says its profit amounted to $51.6 million or 42 cents per share for the quarter ended March 31 compared with a loss of $57.7 million or 48 cents per share a year earlier. It said net earnings were positively affected by lower feed costs, operating efficiencies and other factors. 

Gross profit for the first quarter increased to $226.3 million with a gross margin of 19.6%, compared with $76.4 million and a gross margin of 6.5%a year ago. The improvement was driven by easing pork market headwinds and other factors, the company said. 

Sales totalled $1.15 billion, down from $1.17 billion in the same quarter last year.

The small decline in sales was mostly because of "sourcing decisions to reduce outside purchases in poultry and pork, impacting sales in the short term while setting us up to deliver on our plans moving forward," said Frank in the release. 

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"It's important to note that this modest decline is not reflective of the underlying health and performance of our business," he said on the call.

The company saw sales growth return to its prepared meats business during what's traditionally a seasonally weaker quarter, said Frank. 

The company says sales in its prepared foods operating unit fell 0.4% compared with a year ago, with prepared meat sales up 2.9% offset by a 5.7% drop in plant protein and a 7.1% decline in poultry sales compared with last year.

Pressure on the plant protein category has continued, said Frank, adding the company is focused on "stimulating category growth" by planning new product innovation and improving upon existing product offerings. 

Pork operating unit sales fell 4.5% compared with the first quarter of 2023.

On an adjusted basis, Maple Leaf Foods says it earned four cents per share in its latest quarter compared with an adjusted loss of 12 cents per share a year earlier. That was partially due to a strategic decision by the company to purchase and process fewer external hogs than last year, said Frank. 

The results were in line with the company's expectations, said Frank. 

Last quarter, Maple Leaf announced it was combining its meat protein and plant protein businesses into one. Because of that, it's now reporting its business segments differently "as a consolidated protein company" with two operating units, prepared foods and pork. 

The company says it expects low-to-mid single-digit revenue growth in 2024. 

Shares in Maple Leaf closed down almost 4% at $23.39 on Thursday.