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In a press release dated August 4th Maple Leaf Foods Inc. (MFI-TO) announced results for the second quarter of FY 2022 ended June 30th.

The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as US$ x 1,000 except EPS (conversion of CAN$1=US$0.78)

1. Restructuring charge of $14.9 million in Q2
2. June 30th 2022/2021

Q2 2022 Meat Protein Segment:

Sales, $905 million, up 3.8% from Q2 2021.

Adjusted operating earnings $45.0 million down 33.8% from Q2 2021.

Q2 2022 Plant Protein Segment:

Sales, $31.8 million, down 15.2% from Q2 2021.

Adjusted operating loss $(26.5) million 16.7% deterioration from Q2 2021.

52-Week Range in Share Price: $17.17 to $25.43 50-day Moving average $20.58

Forward P/E 23.9 Beta 0.4

Market Close pre-release August 3rd $21.01

Market Open post-release August 4th $17.46

Insider shareholding 39.2%. Institutional shareholding 26.0%

In commenting on Q2 results Michael H. McCain, president and CEO of Maple Leaf Foods stated, “This chaotic and unpredictable operating environment is unprecedented in my 40-year career in the food industry," He continued “Driven by a post-pandemic economy and the tragic conflict in Eastern Europe, we have been unable to hire adequate people resources to operate our supply chains, experienced unnatural agricultural and trading markets, and realized hyper-inflation that has been challenging to keep up with pricing. While our Q2 results fell short of expectations with an Adjusted EBITDA margin of 9 percent in the Meat Protein Group, we see signs of these conditions abating. Our commitment to achieve 14-16 percent. Adjusted EBITDA was grounded in the assumption of normal, five-year average market conditions and we are confident we will deliver that once the environment stabilizes, although predicting this timeline at the moment is challenging. Our focus on executing our Blueprint to be the most sustainable protein company on earth is absolute.”

Addressing the Plant Protein segment McCain said "We are in full motion executing our transition to a different business model,” He added “At the end of Q2, we took steps to materially reduce the size of the organization. We expect to achieve our SG&A targets by the end of this year, and a right sizing of the manufacturing footprint in the first half of 2023, giving us the back half of 2023 as time to make final adjustments. Revenue management adjustments will also occur over the course of the next 12 months. This is a business model in transition back to one of profitable growth."

The Company provided the following comments on strategy and guidance:-

• Meat Protein: “Expect mid-to-high single digit sales growth with Adjusted EBITDA Margin expansion near the lower end of the 14% - 16% target by the end of 2022, once markets normalize, driven by mix-shift benefits in prepared meats resulting from growth in sustainable meats and brand renovation, as well as operational efficiencies”.

• Plant Protein: “The Company is pivoting its strategy and investment thesis for the Plant Protein Group and has set a new goal to deliver neutral or better Adjusted EBITDA in the latter half of 2023. Work is ongoing to implement this pivot. Given the current size of the Plant Protein Group of approximately US$150 million of annual revenue in 2021, the expected resultant business model from this strategy would deliver a 30% gross margin, with less than US$50 million in SG&A, to achieve the stated Adjusted EBITDA target.

In late 2021, the Company announced that it was re-evaluating its outlook for the Plant Protein Group and launching a comprehensive review of the overall plant protein category. This decision was driven by a pronounced slowdown in growth rates in the category, particularly in the second half of the year, which fueled the Company’s imperative to identify and thoroughly assess the causes, near and long-term trends, and overall implications. While the Company’s analysis is ongoing, the results to date confirm that the very high category growth rates previously predicted by many industry experts are unlikely to be achieved given current customer feedback, experience, buy rates and household penetration. Based on this new information, the Company believes that the category will continue to grow at more modest, but still attractive rates. Current estimates suggest that the category will grow at an average annual rate of 10% to 15%, making it a $6 billion to $10 billion market by 2030.

The Company announced in May 2022 that it is moving forward with a planned leadership transition plan for the Board and Management. Michael McCain will serve as the Executive Chair of the Board and will continue as CEO for the next year as part of the management transition plan. Curtis Frank, currently the President and COO, will assume the role of CEO during Q2 of 2023.