Acquisitions aid Maple Leaf Foods sales
In the three months to 31 March, it reported that sales were up 11% while its adjusted EBITDA margin was down due to investments in growth for plant-based protein, start-up in new capacity in protein kits and meat pies, and integration of 2018 acquisitions.
"Our first quarter of 2019 is headlined by higher sales growth, fuelled by recent acquisitions, combined with some in-quarter margin compression as we invested in that growth." said Michael H. McCain, president and CEO. "While market conditions continued to be adverse, they are expected to improve for the balance of the year. We are progressing on track on all strategic platforms to deliver structural margin expansion and pursue our vision to be the most sustainable protein company on earth."
Sales growth in the core business was 1.4% was driven primarily by pricing actions, taken in the fourth quarter of 2018 to mitigate inflationary pressures, and favourable mix due to food renovation. The business said “continued expansion of sustainable meats and plant-based protein also contributed to growth in sales”.
Adjusted Operating Earnings were CAD$42.1m compared to CAD$52.8m in the first quarter of 2018. It reported that this “solid commercial performance was driven primarily by pricing actions taken in the prior quarter, improved sales mix from the company's food renovation initiatives, lower input costs for prepared meats, and growth in value-added fresh pork and poultry”.
These improvements were more than offset by adverse fresh market conditions and the impact of growth initiatives. Growth initiatives in the quarter included investments in plant-based protein to support the brands, start-up costs related to capacity expansion in protein kits and meat pies and the short-term dilutive impact of 2018 acquisitions.
Already in the second quarter of the year Maple Leaf announced plans to build a US$310m plant-based processing facility in Shelbyville, Indiana. The new Shelbyville facility will be supported by approximately US$50m in US Government and utility grants and incentives, including US$9.6m toward capital and one-time start-up costs, and approximately US$40m in 10-year operational support.
It will also invest approximately US$26m to support ongoing growth in demand at its existing facilities. The project will be funded by a combination of cash flow from operations and debt. Construction of the new will start in late spring 2019, and production is expected to commence in late 2020.
