Maple Leaf Foods : Investor Webcast Transcript

FINAL TRANSCRIPT

Maple Leaf Foods Inc.

Third Quarter 2022 Financial Results Conference Call

November 8, 2022 - 8:00 a.m. E.T.

Length: 74 minutes

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CORPORATE PARTICIPANTS

Mike Rawle

Maple Leaf Foods Inc. - Vice President, Investor Relations & Treasury

Michael McCain

Maple Leaf Foods Inc. - Executive Chair & Chief Executive Officer

Curtis Frank

Maple Leaf Foods Inc. - President & Chief Operating Officer

Geert Verellen

Maple Leaf Foods Inc. - Chief Financial Officer

CONFERENCE CALL PARTICIPANTS

Michael Van Aelst

TD Securities - Analyst

Mark Petrie

CIBC World Markets - Analyst

Peter Sklar

BMO Capital Markets - Analyst

George Doumet

Scotiabank - Analyst

Derek Dley

Canaccord Genuity - Analyst

Steve Arpin

Beutel Goodman - Analyst

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PRESENTATION

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Maple Leaf's Third Quarter 2022 Financial Results Conference Call. As a reminder, this conference call is being broadcast live on the Internet and recorded. All lines have been placed on mute to prevent any background noise. Please note that there will be a question-and-answer session following the formal remarks. We will go over the instructions for the question-and-answer session following the conclusion of the formal presentation.

I would now like to turn the conference call over to Mike Rawle, Investor Relations at Maple Leaf Foods. Please go ahead, Mr. Rawle.

Mike Rawle - Vice President, Investor Relations & Treasury, Maple Leaf Foods Inc.

Thank you, Michelle, and good morning, everyone. Speaking on the call this morning will be Michael McCain, Executive Chair and Chief Executive Officer; Curtis Frank, President & Chief Operating Officer; and Geert Verellen, Chief Financial Officer.

Before we begin, I would like to remind you that some statements made on today's call may constitute forward-looking information and our future results may differ materially from what we discuss. Please refer to our third quarter 2022 MD&A and other information on our website for a broader description of operations and risk factors that could affect the Company's performance. We have also uploaded our Q3 investor deck to our website, which includes support material for the

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quarter. As always, the Investor Relations team will be available after the call for any follow-up questions that you might have.

And with that, I'll now turn the call over to Michael McCain. Michael?

Michael McCain - Executive Chair & Chief Executive Officer, Maple Leaf Foods Inc.

Thank you, Mike, and good morning, everyone. Welcome to Maple Leaf Foods' third quarter 2022 earnings call. You've all seen our operational and financial results for this quarter, so our goal this morning is to demonstrate that, notwithstanding very narrow, identifiable, and very short-term factors, we're at an important inflection point in our business.

Our goal this morning is to leave today's discussion with three, just three, essential takeaways. First, we hope that you take away a very clear and identifiable understanding of the external forces that are driving this short-term,highly-abnormal outcome with the confidence that these forces won't be with us for long, and but for a normalization of these pandemic and war-induced forces, we are right now, right now operating at the underlying commitment of 14%-plus adjusted EBITDA margins, targets that we set five years ago because of the structural health in our business today. Second, we hope that you take away, with the same confidence that we have in our plant-based business, that we will not only meet our commitment to adjusted EBITDA neutral or better by the end of 2023 as we transition the business model, we are now even working on initiatives that we feel could exceed this target and, long- term, after this transition is complete, this category, and remember it is just a food category, not a revolutionary new concept, this category will give us reasonable steady growth and be highly profitable as well. Third and finally, we hope you take away the confidence to know that we have effectively placed

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$1 billion of brand-new assets on the ground in three new facilities and we're on the cusp of pivoting these investments from cash out to cash in with a return on capital that you expect from us.

In our meat business, our adjusted EBITDA margin was 8.5%, roughly in line with the last quarter, but these three things are really, really material takeaways to drill into. So here are some of the highlights of what you're going to be hearing this morning from Curtis and from Geert. You're going to hear a quantified detail on why the short-term gap exists and what the outlook is. It's solid and it's an optimistic story. You'll hear that we have closed over 50% of the gap in our adjusted EBITDA losses in plant-based protein, I prefer to call them investments, by the fourth quarter, just after six months, and there's more detail going to be offered today on plans for the remainder of that gap. You're going to hear from Curtis and Geert that we have over $1 billion of new assets and you're going to hear that they're now fully in start-up mode. You're going to hear that this is actually two-thirds of our debt level in two facilities and they're on the cusp of pivoting to generating $130 million of new cash flow. Finally, you will hear from Geert about a non-cash technical accounting adjustment in our plant business. I would urge you not to be distracted by this. It is simply a technical accounting valuation change driven mostly by a modelling assumption of rising interest rates. It is non-cash and it has no material consequences. In fact, many would believe it is a positive thing.

Great investors commonly separate the value of a company and the price of its stock at any moment in time. Inflection points, as you well know, are important to identify in this analysis. I believe our stock price today is not at all reflecting the underlying value of our Company due to the three factors that I described above, but we are at such an important inflection point. If you're a potential buyer of our shares to take advantage of this, thank you for sharing in our confidence. If you are a potential seller

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