mF International Limited Price & Performance (MFI)

We've uploaded our fourth quarter investor deck to our website, which includes support material for the quarter. And the year. As always, the Investor Relations team will be available after the call for any follow-up questions you may have And now I'll turn the call over to Curtis.

Thank you, Janet, and good morning, everyone. A pleasure to be with you here today as we review our fourth quarter and full year 2024 results and look ahead to what promises to be an exciting year in 2025.

Joining me on the call today are David Smales, our CFO of Maple Leaf Foods and Dennis Organ, President of our Port Complex and incoming CEO of Canada Packers. As we highlighted in our supporting materials and press releases that were recently issued, We have plenty of positive news to share with you here today. The headline is that we closed out 2024 with strong momentum setting the stage for what we are describing as a transformational year ahead. With that, I'll start by reflecting on our 2024 performance, and summarizing our fourth quarter results, before handing it over to David for a deeper dive into our financials. Towards the end of the call, I'll come back to reiterate our outlook for 2025 and of course we'll leave time for your questions. Looking back at 2024, I feel an enormous sense of pride in what our team has accomplished. Through resilience and the relentless execution of the Maple Leaf Blueprint, we have made meaningful strides toward achieving our vision of becoming the most sustainable protein company on earth. We delivered significant financial improvement and what continued to be a challenging condition in the market positioned ourselves for success in twenty twenty five and beyond.

Here are just a few highlights from our year We successfully adapted our brand strategies to the evolving consumer environment, leveraging our portfolio of leading brands to deliver consolidated sales growth of 1.1%, driven by 3.9% growth Prepared Foods business, and prepared meats business We completed the play on the highly successful startup of over $1,000,000,000 in major capital projects at London Poultry and the Bacon Centre of Excellence where both projects achieved full business case benefits in Q4 we completed the first phase of our fuel for growth initiative advancing our playbook to sharpen our cost focus and our competitive edge, delivering supply chain savings and SG and A reductions exiting 2024 We met our commitment to significantly expand our adjusted EBITDA margin in 2024 delivering a two fifty basis point improvement for the year, and reaching 12.5% in the fourth quarter Our adjusted EBITDA grew by 125,000,000 nearly 30% from $428,000,000 in 2023 to $553,000,000 in 2024 We increased our annual dividend for the tenth consecutive year We demonstrated our ability to outperform our peers in both top and bottom line performance through a combination of disciplined capital expenditures and the improved profitability of the business, We rapidly deleveraged the balance sheet as we said we would.

Delivering $385,000,000 in free cash flow in 2024 two ninety six million dollars improvement from 2023 while exiting 2024 with a net debt to adjusted EBITDA of 2.7 comfortably within our target range. We announced our plans to unlock value as a purpose driven consumer packaged [indiscernible] by unleashing our world leading pork company, Canada Packers, through a text free spin off and last and perhaps most importantly, we have put the right team of incredible Maple Leaf leaders in place to lead us well into the future. With that as context for the full year of 2024, I'll briefly offer a few comments on our fourth quarter of the year. Our Q4 sales growth accelerated to 4.3% year over year with prepared meats growth of 6.5%. We are obviously pleased with the performance on the top line which was driven through the continued execution of our proven growth strategies as we continued to have success in leveraging our portfolio of leading brands accelerating the pace of impactful innovation leveraging our leadership in sustainable meats, expanding our reach into The U. S. Market, and plugging our unique capabilities into our customer strategies. We made meaningful progress in Q4 with Prepared Meats sales and volume growing in both the retail channel and the foodservice channel, supported by double digit sales growth in our sustainable meats portfolio, and in our U. S. Platform.

On the innovation front, our new Schneider's frozen breakfast portfolio has been very well received by our customers and consumers delivering strong initial sales and winning the BrandSpark twenty twenty five Best New Product Award. In addition to driving sales growth, we also took meaningful steps to improve our cost structure. We have now completed the first phase of our fuel for growth initiative aimed at reducing cost, increasing efficiency and in the case of our strategic manufacturing review, looking to unlock future opportunities to boost capacity utilization, In Q4, we completed an SG and A reorganization in our commercial and operations functions as well as in our plant protein business. Reducing overall headcount. We also wrapped up a procurement project that focused in on leveraging our scale purchases, to drive cost efficiency, This work combined with the improvement in pork market conditions, The full benefit of our large capital projects and growth in our prepared meats business resulted in an adjusted EBITDA margin of 12.5% a two forty basis point improvement from the same quarter last year and an adjusted EBITDA that grew by nearly 30% to $155,000,000 within the quarter. This strong business performance in turn generated increasing $66,000,000 year over year for the quarter.

All said, we are entering 2025 with momentum in results that when combined with the completion of the spin off of Canada Packers, that's the stage for our transformational year ahead. I'll come back to close the call, but before I do, I wanted to pass things over to Dennis to discuss the port complex and then to Dave to review our detailed financial results. Dennis? In our pork complex, we continue to see strong improvements in financial performance.

Our premium value added sales mix is driving meaningful revenue growth Input costs have stabilized and we remain focused on operational excellence to enhance both top and bottom line results. Revenue isn't the primary metric for the port complex, we delivered a 3.5% increase in sales This growth was fueled by higher processing volumes and favorable foreign exchange impacts from a stronger U. S. Dollar. Adjusted EBITDA margins have improved in both Q4 and on a full year basis versus 2023. Looking ahead, we expect input costs to remain within a stable range supporting continued margin consistency. Our pork complex soon to be Canada packers operates with a well defined intangible business model underpinned by a vertically integrated pork production value chain. We have a diversified and resilient business mix and we continue to leverage our competitive edge in sustainable premium pork This strategic foundation positions us for long term growth and leadership in high quality protein production. As we move toward the closure of this transformational transaction, our team remains laser focused on maximizing the value of our premium sales mix, driving efficiency through cost discipline and growing through increased capacity utilization. We have been disciplined and methodical in building best pure play pork business in North America we will carry the same rigor into the next chapter of Canada Packer's historic legacy.

Now is the time for Canada Packer. Thank you everyone for being with us today. And I will now turn it over to Dave for his comments.

Thanks, Dennis, and good morning, everyone. Turning to our results.

I'll comment on the company's consolidated results for the quarter and for the full year, before addressing the balance sheet and discussing the overall outlook for 2025. Overall, one of the key takeaways from the year is how the step up in financial performance improving profitability of the business throughout 2024 generated a substantial increase in free cash flow delivered a significant improvement to our balance sheet. Delivering on the priorities and outlook we set coming into the year all of which I'll expand on. Total sales in the fourth quarter were $1,240,000,000 an increase of 4.3% compared to last year. For the full year, total sales were $4,900,000,000 increase of 1.1% over 2023. In the fourth quarter, adjusted EBITDA increased by 29% to $155,000,000 dollars with an adjusted EBITDA margin of 12.5% compared to 10.1% in Q4 last year. Adjusted EBITDA for the full year also increased by 29% to $553,000,000 representing a margin of 11.3% an increase of two fifty basis points over 2023. Earnings for the quarter were $53,500,000 or $0.43 per basic share compared to a loss of $9,300,000 or $0.08 per share last year. Earnings for the full year were $96,600,000 or $0.79 per basic share compared to a loss of $125,000,000 or $1.03 per share in 2023.

After removing the impact of the non cash fair value changes in biological assets and derivative contracts, startup costs and restructuring costs adjusted earnings were $0.38 per share for the quarter, compared to $0.08 per share in the fourth quarter of twenty twenty three.

Full year adjusted earnings was $0.78 per share compared to $0.09 per share in 2023. The 4.3% sales growth in the fourth quarter compared to 2023 was driven by Prepared Foods, where sales were up 4.6% over the prior period.

We saw an increase in sales in prepared meats of 6.5% and poultry of 1.8% which was partially offset by a decline in plant protein of 10.3%. For the full year, our 1.1% sales growth was driven by Prepared Foods, where sales were up 1.8% compared to 2023. We saw an increase in sales in prepared meats of 3.9% which was partially offset by declines in poultry of 2.6% and plant protein of 4.3%. Prepared meats in the fourth quarter saw higher volume in foodservice and retail along with improved category mix and similar trends drove our full year sales performance. In Plant Protein, fourth quarter sales were negatively impacted by volume declines which were driven by performance of the overall U. S. Refrigerated cat screen, with a similar story reflected in full year sales. In poultry, sales for the quarter were up due to improved channel mix with growth in retail volume, and reduced industrial sales, For full year sales, the New London poultry facility has allowed us to improve our mix by increasing our tray pack capacity replacing third party sourced tray packs, allowing us to reduce lower value and volatile industrial channel volume, resulting in a decline in poultry sales year over year for improved mix and margin performance.

Pork sales in the fourth quarter increased 3.5% due to volume growth from an additional 38,000 hogs that were processed in the quarter as well as favorable movements in foreign exchange. For the full year, pork sales were down due to lower resale activities unfavorable product mix which was partly offset by favorable pricing. As I previously mentioned, adjusted EBITDA continued to grow funding $155,000,000 for the fourth quarter a 29% increase compared to the fourth quarter of twenty twenty three, full year results were equally impressive also improving 29% to $553,000,000 For the fourth quarter, within Prepared Foods, increased profitability was primarily driven by Prepared Meats and poultry which were partly offset by plant protein. Prepared meats performance benefited from higher retail and foodservice volumes As well as the Bacon Center of Excellence project, which reached its full business case contribution during the quarter. Increased trade investment to support volume growth was a partial offset. Improved poultry profitability in the fourth quarter was largely driven by the London poultry [indiscernible] reaching its full business case benefits. Bulk markets were also a tailwind to our fourth quarter results. Reflecting a significant improvement in the vertically integrated spread compared to the fourth quarter of twenty twenty three partly offset by a slight decline in the packer spread.

For the full year within Prepared Foods, profitability improved across Prepared Meats, Poultry and Plant Protein. The drivers of prepared meats and poultry performance were similar to the quarter. For plant protein, efforts to drive cost out the business throughout the year led to improved profitability. Pork markets were also a significant contributor on a full year basis We bought the first clean spread and packer spread improving compared to 2023. SG and A was relatively flat in the fourth quarter versus [indiscernible] Compared to 2023, full year SG and A was up $32,000,000 dollars in large part due to the impact of variable compensation. For the fourth quarter, adjusted EBITDA margin came in at 12.5%, up two forty basis points from Q4 in the previous year. This improvement contributed to the two fifty basis point increase in our full year adjusted EBITDA margin of 11.3% compared to the 8.8% we recorded in 2023. In total, during the quarter, we invested $29,000,000 in capital expenditures compared to $42,000,000 in Q4 last year. During the year, we invested 96,000,000 compared to $197,000,000 in 2023. Decrease in both periods is largely due to the completion of our large cap Looking ahead to capital expenditures for 2025, we expect to invest between $175,000,000 to $200,000,000 primarily focused on maintenance capital with growth capital related to cost efficiency, support for profitable growth initiatives.

In the fourth quarter, free cash flow improved to $130,000,000 up $66,000,000 from the same quarter last year Contributing to the full year free cash flow of $385,000,000 an increase of $296,000,000 compared to 2023. Improved earnings after the removal of non cash items and lower restructuring payments drove the increase. On the balance sheet, net debt ended the year down $231,000,000 to approximately $1,500,000,000 and down from a peak level of $1,800,000,000 during our large capital project investment phase.

In line with our stated priorities, we saw a significant improvement in leverage ratio over the past four quarters with a net debt to trailing twelve month adjusted EBITDA ratio [indiscernible] compared to 3.1 times at the end of the third quarter of twenty twenty four and four point one times at the end of twenty twenty three. As we move into 2025, we previously announced an increase in our annual dividend of approximately 9% to $0.96 per share the tenth consecutive year of annual dividend increase. And we also announced the elimination of the discount on the dividend reinvestment program. We will continue to focus on strengthening the balance sheet and maintaining leverage in an investment grade range. As we progress our strategic initiatives and deliver on our performance objectives, we'll continue to examine all capital allocation options. We remain on track to deliver the 2025 outlook we shared in early We continue to expect mid single digit sales growth and significant improvements in adjusted EBITDA which we forecast will meet or exceed $634,000,000 making progress toward our 14% to 16% adjusted EBITDA margins Arrowwood reflects our current expectations. And in that context, we've had a number of questions with respect to the potential for tariffs and the related impact.

While there's still a lot of uncertainty around whether tariffs will be applied to what extent, when and for how long, Bottom line is tariffs are not an existential threat to our business but there could be an impact to a relatively small percentage of our total sales with roughly 7.5% of our sales being products exported from Canada into The U. S. The other uncertainty could be supportive of mitigating the impact of tariffs, is exactly what the Canadian government response to U. S. Tariffs might be. At the same time, we've seen a lot of activity already among customers and consumers in Canada, focused on buying Canadian products and seeking out security of quality Canadian supply. We will continue to monitor this situation and as a company are prepared to execute on a range of mitigation strategies. Before handing it back to Curtis, I wanted to reiterate our expectations around the spin off of Canada packers. As we move to our expected close in the second half of twenty twenty five, we intend to hold the shareholder vote in June with the management information circular being filed in early May. This would set us up for closing the transaction the second half of twenty twenty five once we have the ruling from CRA on the tax free nature of the spin out.

As recently announced, the initial leverage ratio of Canada Packers is expected to be in the range of 2.5 to three times.

In addition, the current intention is for the initial combined dividends of Maple Leaf Foods and Canada Packers to not be less than Maple Leaf Foods annual dividend immediately prior to the completion of the spin out. I'll now turn the call back to Curtis.

Okay. Thank you, David. As I mentioned in my opening remarks today, 2024 was clearly a pivotal year for Maple Leaf Foods in many ways. We're entering 2025 with laying the foundation for what we will continue to describe as our The outlook we issued in January best captures our excitement for the future. And we expect that in 2025, we will firstly deliver mid single digit sales growth driven by the continued execution of our proven growth strategies Secondly, deliver a third consecutive year of significant adjusted EBITDA improvement where we expect to meet or exceed $634,000,000 which was the analyst consensus at the time when we released our 2025 outlook back in January. A third to maintain an investor friendly balance sheet, and disciplined capital allocation ensuring we stay within our investment grade leverage target while also making strategic investments to modernize, sustain and grow our business, And finally, to complete the spin off of Canada Packers in the second half of the year, unlocking significant value and unleashing both Maple Leaf Foods and Canada Packers to pursue their exciting independent growth strategies. As a purpose driven Canadian food company, Maple Leaf stands today uniquely positioned to meet the growing global demand for sustainably produced protein.

And we have the right strategy right blueprint, and the right people in place to make it happen.

We move on to questions, I want to take a moment to express my heartfelt gratitude to the entire Maple Leaf team. I'm incredibly fortunate to work alongside such talented and passionate people Our success would not be possible without each of you. With that operator, we can now open the call for questions.

Comes from the line of Irene Narel. Please go ahead.

Thanks and good morning everyone. Congratulations on a great quarter. Now that you've achieved the 12.5% in Q4 and you've reiterated the 14% to 16% target, you walk us through the building blocks of, I guess, number one, how sustainable the current run rate is pardon me? And then how you get from where we are today to the 14% to 16%? Good morning Irene. Thanks for your question. So let's start with the outlook and guidance we provided for 2025 in the area of mid single digit growth and to meet or exceed $634,000,000 of adjusted EBITDA. That puts us I think if you back into the math, somewhere in the mid-12s range in terms of adjusted EBITDA margin as an outlook for the year. That's in line with what we delivered here in the fourth quarter. So we So we continue to have a high level of confidence in our ability to meet our outlook. So that's number one. There are four things that I think are important contributors in terms of our ability to to meet the outlook next year. We should start with those. That's first harvesting the full year benefits of our large capital projects at London Poultry and the Bacon Centre of Excellence.

I'm very pleased with how we exited in Q4 a rate on plan as we expected and had communicated. But we obviously get the full year of benefit from those projects. The second comes from a full year benefit of more normalized pork market conditions. We're obviously operating in a more normal range today and continue to be confident that that will set stage for the year ahead.

The third comes from the important work that we're doing mostly around the consumer, what I would describe as kind of executing our brand management and our revenue management plans to drive profitable growth in our CPG business. And I felt that team did a pretty darn good job there in the fourth quarter. In terms of balancing our volumetric growth, our sales growth and our mix within the business. And obviously, there's more work to do in 2025. Also pleased with the innovation in our portfolio. I think we launched over 50 items in 2024 and also have a pretty robust pipeline in 2025. And then the last component comes from our fuel for growth initiative that we've started to talk about and provide a little more detail around with the first phase being completed, which was the SG and A reorganization in our commercial and our operations functions. We actually reduced Irene the top two levels in the commercial and operating functions by 22% in terms of work design and Maple some pretty significant changes there. And also completed the supply chain source [indiscernible] will be supportive to next year as well. So those are the things that give us confidence in our ability to deliver our year and the outlook we've provided. $14,000,000 to percent continues to be our North Star in terms of strategic margin target.

So your question is where do we go beyond 12.5 ish or where we are today in terms of the building blocks to get to 14% to 16%. There too, there are maybe three or or four important factors that I would point to. The first is the continued profitable growth strategies. Made significant progress in 2024 and and I think well positioned for 2025. The third is the consumer element. And the pace of the consumer environment recovery. Our outlook suggests progress in 2024, but not perfection in terms of the volatility of the consumer environment we're dealing with today. There continues to be a consumer that's under stress. We've embedded that in the impact the best we can in our current outlook. But we would certainly expect an improving consumer environment to contribute to our ability to achieve 14% to 16%. There's more work to do in our Pork strategic playbook for the future. And then of course, the fuel for growth initiative will continue to pay dividends from a cost reduction focus beyond 2025. Those would be the, I think, foundational elements in terms of how we go from where we are today to operating within our 14% to 16% range.

And that's really helpful. Thank you. And just to [indiscernible] environment, can you talk about how you exited the year in terms of the nature of demand? And are we still in a market where RWA is kind of a little bit or let me rephrase that, where consumers are focused on value and social sales of RWA are still below where they need to be?

Yes. I would describe the consumer environment Irina, Maple.

Not a material change quarter to quarter, but still dealing with the effects of a consumer that's under stress a flight to value to a certain degree, and mix impacts in sustainable meats versus our conventional portfolio. That continues. And played out again in the fourth quarter. It's a really interesting time from a consumer point of view because on one hand, we're dealing with the environment where the consumer continues to be under stress. I think things are moderating. On the other hand, the Buy Canadian movement really seems to be taking hold. The duration of that emotion and energy in the market, I think, is a bit of a to be determined. But there's a lot going on from the consumer point of view. In the market today. Thank you. Your next question comes from the line of Mark Petrie. Please go ahead.

Yes, thanks. Good morning. Just a follow-up on a couple of those things, I guess.

First, in poultry, I think you've said and I think you just said product mix is still a headwind sort of value versus premium.

But is channel mix back to normal or where does that stand exactly? Channel mix in good morning, Mark.

Firstly. Channel mix is improving. And we did see retail sales growth. That was pretty robust in the last quarter. I think close to 4.4%. In the retail channel, which is which was very healthy and robust. So we're getting the level of growth that we would expect. The mix within that growth particularly in the retail channel, we would still expect to move more of our sales mix to the sustainable meats portfolio. Still some more work to do on the consumer side. And things are, I would describe as improving. But not yet optimized in terms of the consumer behavior in pull So you're exactly right to point that out. But in terms of channel mix, I'm very pleased with the 4% retail growth that we delivered in the last quarter.

And I guess Maple more specifically like is industrial for poultry like is that back down to a normal level or is that still a place where you're ending up putting more product than you would otherwise want to because of imbalances in Yes. I think I think you might be kind of honing in on the fact that earlier in the year, we had talked about the mismatch between supply and demand and the kind of the market dislocations in poultry. And the impact that that had in our business. I would describe the supply demand environment as more balanced today, more in line with a normalized balance. And it wouldn't have been a key contributor in the fourth quarter for certain.

Okay. Helpful. Thank you. I also wanted to follow-up on the on the sort of cost control piece of it. And or fuel for growth, I guess. Can you just sort of help shape the relative impact of the different pieces of work you've undertaken? Head count, supply chain and procurement, And then I guess the manufacturing review still come. I know that's still underway, but you just give us a sense of the magnitude of each of these buckets And then how much of that is reflected in Q4? Like are we sort of seeing 20% of the sort of benefits that you think will accrue or is it more like over half like just any kind of sense to sort of bring some Bring some magnitude into this.

Well, I'll give you some color on them, Mark.

On the fuel for growth initiative, maybe more broadly first and then we can talk about the impact from a financial point of view. For our Fuel for Growth initiative, important work streams, the three important work streams. The first is optimizing our SG and A. And the intention there is to improve our execution or continue to improve our execution through a leaner organizational structure The second is leveraging our scale in supply chain purchases And we went through a pretty important procurement project to optimize our costs. And the third is, as you pointed out, in completing a strategic manufacturing review, to optimize our network utilization.

I'll take those one at a time in terms of just some color.

On the SG and A front, we completed the first phase of the work, which was really around reorganizing our commercial and operations of parts of our business and the plant protein reorganization kind of another round of updates to size the shoe to fit if you will, in the plant protein business.

We reduced the number of roles in the top two layers. I think I commented on this earlier this morning by over 20% in those functional areas.

Which is a pretty significant change. And the benefits showed up within most of the benefits most of those benefits, not all most of those benefits have showed up within the fourth quarter. We'll be doing a second part of that work, but that will come later in the year aligned to the timing of the separation of Canada packers because we have to take all of the enabling functions that support our businesses and and separate them into two public companies obviously.

The second component is the procurement work. And that was fully embedded in the fourth quarter. So we went through a very successful project from a procurement and supply chain point of view. And that will be supportive to our 2025 outlook, but work was completed and embedded in the fourth quarter. On the network optimization front, the work is really just starting, I think would be the best way to describe it. Some important context, we have to keep in mind that a lot has changed on the consumer behavior front over the past number of years for lots of different reasons, most of which you clearly understand. So we're making certain that we step back and make sure that our assets are aligned to the most lucrative areas of consumer demand so that we can drive full utilization in our So we recently kicked off a bit of a strategic review And the goal is really to help to accelerate our cost reduction focus but really look at opportunities to boost capacity utilization. And most of those benefits, Mark, I would think of as 2026 and 2027. Although I would give you one Maple, that's more real time.

And that is the closure Actually, retirement is probably a more appropriate word. The retirement of our Brantford further processed poultry plant. I'm comfortable talking about this one because we've announced it [indiscernible] It's a 100 year old facility, which is why I use the word retirement. And we have the opportunity to which would require significant capital to continue to operate. And that we have the opportunity to repatriate production from that facility into two other Maple Leaf plants that have existing capacity today. And bank the overhead kind of cost savings come with that and the efficiency benefit. So there's work to do more certainly on the network optimization front, a little bit work left on the SG and A component. And the procurement benefits are included in our fourth quarter. In terms of breaking out the relative kind of basis point improvement of each one of those, I don't think that would be helpful. But what I would say is all of those are supportive to A, delivering on our outlook for 2025 which is which is $634,000,000 or better And secondly, enabling us to deliver on our 14% to 16% strategic margin target.

I did want to ask one follow-up which was on that Brentford or the Walker Road. I think facility, if I'm getting this getting the names all straight. When did that happen? And how much can you give us some sense of the overall benefits? Like I'm assuming this is in a significantly smaller impact than say even the Winnipeg Bacon facility, which I think was $30,000,000 EBITDA payoff, Can you give us some sense of the magnitude of that and then the timing?

The Walker Road investment Mark, was, yes, significantly smaller than the Winnipeg Bank and Center of Excellence Capital investment with smaller returns. But important returns to the business. We basically added a a cooked further processed poultry line in our Walker Road facility to support a strategic partnership with one of our most important customers. And very pleased to do that as part of our strategy to plug into our customer strategies. We also utilize RWA raw materials in that case. And those raw materials are sourced from our London poultry plant. So you think about from processing to creating raw materials to using RWA raw materials, to investing in manufacturing line to support growth and development of a customer was really important to us.

It was roughly a $60,000,000 capital investment with roughly $14,000,000 or $15,000,000 of annualized returns. And again, that would be supportive to our 2025 outlook and one of the reasons why we continue to have confidence in the business. But I would think about that as embedded within our kind of our structural approach to capital deployment in terms of maintenance and growth moving forward. Those are the types of smaller but important projects that we'll have moving forward.

Appreciate all the comments and all the best. Thank you, Mark.

And your next question comes from the line of Michael Van Nuys Good morning. Thank you. And good results.

I wanted to first start on the The U. S. Business. So you said 7.5% of the product is exported from Canada into The U. S. Can you just split that between pork fresh pork and prepared meats? [indiscernible] The way to think about the tariff discussion, Mike and good morning, is if you look at our disclosure today, our sales to The U. S. Market our sales within The U. S. Market are about $500,000,000 just over $500,000,000 in terms of revenue, which is about 10% of our business. A portion is obviously made and sold in The United States, which is our plant protein business and a little bit of prepared meats production. It's made and sold in The U. S. So not impacted Of that $500,000,000 in revenue, about $350,000,000 to $400,000,000 is exported from Canada to The U. S. So we would potentially be in scope. And to answer your question directly, that $350,000,000 to $400,000,000 is roughly split roughly half pork and half prepared meats, I think would be the way to think about it, Mike. And we're obviously we've got a team of people working on preparedness and and a number of mitigation strategies that we could put in place.

They're different of those mitigation strategies between prepared meats and pork. The pork business is very much a global market, as you know, and we would look to potentially if we were forced to repatriate sales to other markets. The prepared meats business would certainly be more impacted But again, as David noted in his opening comments, the implications of tariffs are really very much linked to what the Canadian situation, which we're obviously watching and evolving closely. And I think the headline David provided is the right one. Tariffs are have the potential to place some noise in our results this year, which we would prefer to avoid. For obvious reasons, but they are not an existential threat for Maple Leaf with a maximum of 7.5% of our portfolio impacted.

Yes. So I do want to touch more on The U. S. Side, but just since you brought that up How have you built in tariffs into that $634,000,000 EBITDA target? If at all? We haven't, Mike.

There's just too much uncertainty with how things might play out. In the situation for us, Number one, a smaller percentage of our portfolio impacted And number two, as I said, depending on the Canadian response, the outcomes could be [indiscernible] to neutral to even slightly positive if there were opportunities for us created in the Canadian market in a counter tariff situation. So we have not baked that into our 2025 outlook. I think it would be premature to do that. Just based on our lack of precision on knowledge on how things are going to play out. And so if half of those exports are prepared meats roughly, and most of that seems to be your RWA and primarily Greenfield Natural Meat.

And This Was That's A High Margin High Sorry, A High Cost Product To Start With. Is It A Product You Think That Could Keep Some Level Of Sales In The U. S. While with a 25% lift in the in cost pass through or tariff pass through, Well, that's that's possible. I mean, the consumer at the end of the day will make that decision. Hope to give them the opportunity to make that decision and working with our customers. There would obviously need to be pretty significant level of price inflation in that situation. But yes, I'm optimistic that we'll be able to sustain given the depth of the customer relationships, the strength of the brands and the performance of the products on shelf that we'll be able to a level of distribution and obviously, Mike duration plays a role in this too.

If we're in a tariff situation, which we don't know yet that we will be, if we're in a tariff situation, duration also has a pretty significant impact Okay.

And then just looking at Slide 15 where you talk about The strength in your Greenfield Natural meat. And you show some big retailers like Walmart and Costco and Albertsons as as current customers in sustainable meat. Then you also talk about new customers in The U. S. For '20 in 2024 for Costco and Trader Joe's to name two.

Are those were those RWA and is there the reason why it's shown separately is are those more private label There isn't a reason why they're showing separately. So I wouldn't I wouldn't kind of over infer based on that. We are today we do have distribution in United States at each one of the top 10 retailers, Mike.

We support both in the RWA part of our business in The United States. We support and have a rapidly growing branded business in our Greenfield Natural Meat Company. Portfolio, but also support premium private label in The U. S. US through RWA as well, which has proven to be a very compelling growth strategy on both fronts. What you're seeing is visually is number one, a reflection of not only the the size and breadth of the customers that we're doing business with today in The United States, but also where we're continuing to grow distribution of of our AA products. I often reference the statistics. You walk into a Canadian grocery store, we have well over 100 items shelf in any Canadian grocery store would be the average that you would see through Nielsen. As an example and in The United States and the combination of the plant and meat protein portfolio, we're in every one of those top 10 retailers. And our average distribution of items is about 13. So our priority focus as a business is obviously closing the gap between thirteen and one hundred plus. And any progress we make on that gives us momentum in the growth trajectory.

And keep in mind, we have a sales team in The U. S. An office in Chicago, a marketing team in The U. S, a distribution network that runs now and is a proven distribution network to all of those customers. So So we continue to feel good about the progress we're making, not only in the U. S. But also in our capabilities within The United States.

Excellent. Thank you.

And your next Thank you. And your next question comes from the line of Shreedhar. Please go ahead.

Hi. Thanks for taking my questions. Maybe this question is premature. But given your manufacturing review, but regarding operational capability, do you foresee any large capital spends in the future And as I ask this question, I'm reflecting on the purpose of the tariffs, which is to draw more investment The U. S. For your U. S. Growth ambitions, which still seem to be very much on the floor. Anurag, good morning, Michelle.

Thank you. It's an excellent question.

Question and I think an important one for us to clarify.

We've been very disciplined in our approach to to capital deployment here in the last little while and that will continue well into 2025 and beyond. To answer your question directly, no. There are no large scale capital projects planned from a manufacturing point of view. And I think that's an important distinction. I mean, our last chapter was obviously marked by several years of construction start up and now delivering the returns on the London poultry and bacon center of excellence assets. But that work is now fully behind us and we're more focused on capital deployment directed at supporting the existing manufacturing network driving our cost and supporting growth into the future. But there will be no large scale capital investments on the plan.

Thank you for that.

I was hoping I could get your perspective on your internal capabilities on forecasting. In the past, and you can correct me if I've misspoken, but I believe you may have mentioned there was some opportunity to improve the organization's ability forecast and within your commentary, you suggested you foresee normalized market conditions. For the variety of vectors that you look at. So how confident are you in that assessment about the normalized market factors? And Maple what are some of the puts and takes around that, which could cause that to deviate from your expectation? Sure. I think that's mostly a pork market question.

I'll pass it over to Dennis and he can give you some context.

Yes. As far as forecasting pork, remember, we know an awful lot about the mix.

Six to eight months already. Whether we from a risk management perspective, we're buying ahead or doing some hedging. There's also the markets that you can follow. So to the extent that you think the futures are a good indication of where the markets will shake out, then Then that's a good indication. So I guess I would simply answer how confident are we for the end year, we're very confident.

It's two to five years that you can get some of the market fluctuations and things that would be a larger impact.

The thing, Michelle, the only other context I would add is is, we've commented in the past that our predictive capabilities in forecasting pork markets that were impaired. And that was through a time of very material disruption The combination of global conflicts the feed impact implications of say a war in Ukraine, coupled with a pandemic and a post pandemic economy. I mean those things combined are wildly unusual, wildly unusual. And happened all at the same time certainly impaired our predictive capability. We will not be perfect at predicting the future, I don't want to leave you with the wrong impression. But in a more stable environment, the ability to look forward in futures markets Based on everything we know today, we're entirely confident with our outlook that we've provided.

Okay. And With respect to the impact of the tariffs, you've commented very openly about the explicit nature of the the portion of business which is impacted via the The U. S. Trade. But how about the secondary impact? On the consumer? The Bank of Canada had said that significant consequences for the Canadian economy And wondering how that was contemplated as you reflected on your outlook?

Well, you heard me talk earlier, we're in a situation where the consumer continues to be under Aside from tariffs, I would have said that the situation is improving interest rates, easing inflation, easing we should be setting ourselves up for an improvement as we think about 2025. The unknown impacts of the tariff situation certainly play a role. And but I also commented earlier on on the balance of the consumer environment on a consumer under stress but at the same time so so proud of the by Canadian movement. And we'll be dealing in the case of the potential for tariffs with both of those situations. The consumer under stress, possibly some more inflation, a consumer who is tired on the inflation front, but at the same time motivated and inspired by by Canadian. So I think personally that that could have some portfolio opportunities for us. We've evaluated them very, very carefully. And we'll continue to do that as things play out here.

Thank you. Congrats on the quarter.

Thank you very much.

Thank you. Your next question comes from the line of Luke Hannon. Please go ahead.

Yes, thanks and good morning. Chris, I want to go back to the line of questioning around the fuel for growth initiative. So you've completed this initial phase. Of rightsizing and streamlining the business and then the second phase is going to kick off later this year. In as far as order of magnitude, I'm assuming the second phase will be a little bit smaller in scope versus the first phase? And will those benefits accrue more to one to either pro form a Maple Leaf or or Canada packers or will those benefits be roughly evenly split?

David, maybe you want to take that one? Yes. I think we're obviously still going through that process right now. So I don't want to quantify it, but there's certainly tangible benefits to be achieved from that process. Probably not dissimilar to what we've already achieved in the commercial and operational side of the business, but still a work in progress. The focus is on the Canada Packer side, they're pointing together their organization on a go forward basis. On the Maple Leaf side, we're looking at what people transfer over to Canada Packer's business and then how we right size our SG and A for The Maple Leaf business going forward after the split. And so in terms of savings per se, you're going to see those really in the Maple Leaf side the business because that's where we're looking at the right structure for a overall smaller business going forward And so when you look at enabling functions and the support functions, you would expect those areas to be smaller as they support the business post split.

Okay. Thanks. The only thing I'd add, Luke, is that the moving part in terms of the implications are the benefits of the SG and A work David's described The timing of variable compensation through the year and how we think about the investments we make in advertising and promotion, which will be agile with as the year progresses depending on the consumer environment. So there's some there's some important moving parts inside of that as well.

Okay, that's helpful. Thanks. And then I wanted to ask also about so as mentioned for the pork business during the quarter that volume growth was big factor for sales growth. And I know you guys think more about spreads than you do about sales growth, but it was still an interesting call out to me. So Dennis, I wanted to ask know you've talked in the past about doing some of those smaller scale CapEx projects that help increase utilization. Is that was that reference made in in reference, I guess, to those CapEx projects? And then similarly, when you think about the year ahead from a volume growth perspective, I mean, I don't expect you to share the number of hogs that you expect to to grow or process or that sort of thing. But can you help us think or just dimensionalize what the volume growth opportunity will be for Canada packers in 2025?

Yes.

So our our story for Canada Packer is a growth story and primarily because of the latent capacity that we have today. We have a few different avenues to continue to procure more hogs to to fill up that capacity. And so I would think of low single digit consistent growth over a five year This didn't require any capital projects. We have some automation things that we can move forward. And just like Curtis and David have been describing, We have our version fuel for growth that we'll have to come out with. Most of it is we're going to grow on the top line. We have some automation things that we can do. And we'll have to figure out our capital structure and and all of the things that go into that dividends and debt. And when we start speaking, probably post circular and doing road shows, we'll start publishing [indiscernible] and utilizing the existing sales mix, geographic sales mix that we have to be accretive to margin.

Great. Thanks. My last one here and then I'll pass the line. I wanted to ask about innovation. You talked about, Curtis, I think 50 SKUs that you introduced in 2024 and that's going to accelerate in 2025. As well. So what specifically are you doing behind the scenes to help facilitate the acceleration of that innovation? And then can you help us think from a high level I assume that's beneficial for price and mix and bike extension margin as well. But if there's anything maybe I've mischaracterized or spoken about, you can clarify that.

Yes. No, thank you. It's an excellent question. Appreciate that.

The big thing that's changed let me say what are you doing behind the scenes, I would describe that with one word.

And that is focus.

We're making a very important transition from a multi protein approach in the company to a singularly focused consumer packaged goods business, branded consumer packaged goods business. And innovation sits at the heart of that, as you know.

You know. Our abilities from an innovation perspective were somewhat impaired through the pandemic and the post pandemic experience as was the case I think for probably CPG across North America.

So the ability to get back to focusing on what matters the most in our business, which is the consumer at the heart of everything, and offering consumer focused solutions through an innovation platform that's meaningful to company is important and it's an area that we're now focused on. That focus showed up last year in 50 plus SKUs being launched into the market. Some receiving important recognition as I highlighted in my opening comments. In terms of their success and no question that will continue on in terms of our pipeline for 2025. We'll talk about those items as they roll out. I think that's more prudent. But that's essentially what's changed and sits at the heart of the business. Again, those benefits embedded directly in our outlook mid single digit sales growth. I think you'll find exciting from a consumer packaged goods perspective in the context of kind of the North American market.

These days. So that shows up In our both our top line outlook and our bottom line outlook as well.

Great. Thank you very much.

Thank you.

Thank you. And I'm showing no further questions at this time. I would like to turn it back to Mr. Frank for closing remarks.

Okay, great. Thank you for joining us this morning.

We're obviously pleased with what I would describe as a very solid quarter in Q4. Pleased very much by the significant financial progress that we made within the year. The growth strategies are proving resilient the improving profitability of the business the discipline around our capital expenditures, the free cash flow generation, and the strengthening in our balance sheet are all setting us up for what we continue to describe as an exciting positive and transformational year ahead. So thanks very much for joining us today. And we look forward to talking to you at the end of our first quarter.

Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.