Maple Leaf Foods Inc. said it lost $53.7 million in its most recent quarter as it grappled with inflation and other market headwinds.
"While these temporary market conditions are certainly painful, we remain certain that markets will return to equilibrium as they always do," said CEO Curtis Frank, who took the helm earlier this year.
There are some signs that pressures are easing, said Frank on a Thursday call with investors. In July, for the first time in eight months, the value of pork moved above the cost of raising a hog, he said.
"We certainly hope this is a sign of things to come."
The Mississauga, Ont.- based food company's net loss for the second quarter amounted to 44 cents per basic share compared with a net loss of $54.6 million or 44 cents per basic share a year earlier.
Adjusted operating earnings for the period ended June 30 were $45.9 million compared with $23.6 million in the second quarter of last year.
Higher interest expenses also weighed on Maple Leaf's earnings, the company said, as rates increased and it spend more on strategic capital expenditures.
Sales in the quarter totalled $1.26 billion, up from $1.19 billion a year prior. Higher volumes and prices helped boost sales in the second quarter, the company said.
Its meat business alone contributed the bulk of those sales, though gross profit for meat protein was slimmer due to headwinds in the pork market and higher costs, partially offset by higher prices.
"We're singularly focused over the next couple of quarters to get through these rough waters from the pork markets," said chief financial officer Geert Verellen on the conference call.
The company will continue to be disciplined in its capital spending, said Verellen: "We're taking this quarter by quarter."
The company expects mid-to-high single-digit sales growth for meat protein products in 2023, helped by growth in the U.S. market and sustainable meat.
Despite the broad range of headwinds affecting Maple Leaf's meat protein business, "the green shoots of improvement are growing," wrote RBC analyst Irene Nattel in a note. She said the plant protein appears well on its way to break even in the second half of 2023.
Maple Leaf said its plant protein division made $36.7 million in sales during the quarter, down from $40.8 million last year. The division saw lower sales volumes that were partially offset by pricing action in earlier quarters to mitigate inflation, the company said.
The company announced in late 2021 that it was launching a comprehensive review of its strategy for the plant protein division after seeing a slowdown in growth rates for the category. It found that the very high growth rates for plant protein products predicted by many industry experts likely won't come to pass, Maple Leaf said.
It now expects more modest growth for plant protein, with a new goal to deliver neutral or better adjusted earnings before taxes, interest, depreciation and amortization in the second half of 2023.
Maple Leaf is approaching an inflection point in late 2023 and into 2024, said Nattel, "but as always ... the road from here to there is always bumpy."
The financial results come a day after the company's board approved a quarterly dividend of 21 cents per share and 84 cents per share on an annual basis.
Maple Leaf is also ready to realize the benefits of multi-year capital investments in two facilities, said Frank, one at London Poultry and one at the Bacon Centre of Excellence in Winnipeg.
The ramp-up of these two facilities is expected to be fully complete by the end of this year, he said, contributing $130 million in incremental adjusted earnings before taxes, interest, amortization and depreciation on an annualized basis.
This report by The Canadian Press was first published Aug. 3, 2023.
Companies in this story: (TSX:MFI)
Rosa Saba, The Canadian Press
