Yahoo Finance Maple Leaf Foods Inc (MLFNF) Q2 2024 Earnings Call Highlights: Strong EBITDA Growth Amidst ...
Adjusted EBITDA: Increased by 37% year-over-year to $141 million.
Adjusted EBITDA Margin: Improved by 310 basis points to 11.2%.
Free Cash Flow: Increased by $103 million compared to last year.
Revenue: Approximately $1.3 billion, flat year-over-year.
Prepared Meats Revenue: Increased by 3.2% year-over-year.
Poultry Sales: Decreased by 3.9% year-over-year, with 12% growth in the retail channel.
Pork Complex Revenue: Declined by 4.2% year-over-year.
Net Loss: $26 million or $0.21 per basic share, compared to a loss of $54 million or $0.44 per basic share last year.
Adjusted Earnings: $0.18 per share, compared to $0 per share last year.
Capital Expenditures: $60 million in the quarter, with a full-year outlook of $120 million to $140 million.
Net Debt to EBITDA Ratio: Improved to 3.4 times from 5.8 times last year.
Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Adjusted EBITDA grew approximately 37% year-over-year to $141 million, showcasing strong financial performance.
Free cash flow increased by $103 million compared to the previous year, indicating improved cash management.
The adjusted EBITDA margin improved by 310 basis points to 11.2%, driven by better pork markets and contributions from capital projects.
Prepared meats business saw a 3.2% increase in revenue year-over-year, demonstrating resilience in a challenging consumer environment.
Significant growth in retail channel sales for poultry, with a 12% increase, highlighting strong brand performance.
Negative Points
Total sales in the second quarter were slightly down by 0.4% compared to last year, indicating stagnant revenue growth.
Poultry sales declined by 3.9% year-over-year, affected by reduced sales to industrial channels.
The plant protein segment did not achieve breakeven profitability, with increased SG&A costs impacting results.
The pork complex saw a 4.2% decline in revenue due to less buy-sell activity and foreign exchange impacts.
Consumer demand for premium offerings like RWA and organic fresh poultry remains soft, affecting sales mix.
Q & A Highlights
Q: Can you walk us through the key factors driving the gains in both prepared food and pork, and how should we think about the evolution in the back half of the year and into 2025? A: Curtis Frank, President and CEO, highlighted that the quarter saw a 37% increase in adjusted EBITDA year-over-year, driven by improvements in pork markets and capital projects. Prepared foods sales grew by 3.2%, with strong performance in sustainable meats and US growth platforms. The focus for the second half includes executing priorities, monitoring consumer landscapes, and maximizing benefits from capital projects.
Q: When is it reasonable to expect Maple Leaf Foods to achieve the 14% to 16% margin target? A: Curtis Frank explained that achieving the 14% to 16% margin target depends on several factors, including normalization of pork markets, benefits from capital projects, profitability in plant protein, and normal poultry conditions. While progress is expected in 2024, the exact timing will depend on market conditions and consumer responses.
Q: What is the outlook for capital expenditures, and is this the expected run rate for the foreseeable future? A: David Smales, CFO, stated that the updated capital expenditure outlook for the year is between $120 million to $140 million, reflecting a recalibration of maintenance capital requirements. The future run rate will depend on the ongoing budget cycle and the impact of splitting the businesses.
Q: What steps are needed for the recovery in poultry, and how much is within your control? A: Curtis Frank noted that poultry results improved sequentially and year-over-year. The focus is on executing sales and margin expansion platforms, with market share growth in retail and foodservice. The supply-demand balance in the Canadian market is reset every eight weeks, and the company is working to improve the mix in premium segments.
Q: What is the impact of market conditions on the quarter, and can you separate the impact of Japan? A: Curtis Frank mentioned that market conditions impacted the quarter by 125 basis points, including Japan. The vertically integrated margin improved significantly, while the pork processing margin decreased, and Japan faced headwinds due to rising cutout values and yen fluctuations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
