Maple Leaf Foods Inc. has announced updates on its outlook for 2025, completion of the initial phase of restructuring initiatives to reduce costs and maximize the company’s potential, and advancement of the planned spin-out of Canada Packers, all contributing to momentum for a transformative year ahead.

"This year will be a significant year of strategic transformation and financial progress for Maple Leaf Foods," said Curtis Frank, president and CEO of Maple Leaf Foods. "Our growth strategies have proven to be resilient and successful even in the most challenging conditions, our capital projects are exiting 2024 contributing expected benefits, market conditions and consumer behavior are recovering as anticipated, and we recently completed the first phase of our Fuel for Growth cost competitiveness initiatives, all of which we expect will underpin a meaningful improvement in profitable growth and the ongoing de-leveraging of our balance sheet."

The company’s recently approved 2025 operating plan highlighted core elements of this transformational year, including:

Related:Hormel CEO to retire at fiscal year-end

"Maple Leaf Foods has demonstrated its ability to outperform our peers in both top and bottom-line performance," said Frank. "We expect this trend to accelerate in 2025 as our long-term strategies and focus yield clear and measurable results."

Organic growth

Growth strategies of Maple Leaf Foods have delivered consistent performance over time which is expected to continue in 2025 and beyond. Central elements of these long-term strategies include:

Related:Competition underscores importance of duty-free access for U.S. pork

Significant year-over-year Adjusted EBITDA improvements

The company expects another year of continued improvement in Adjusted EBITDA performance. Its 2025 operating plan is expected to deliver Adjusted EBITDA that will meet or exceed current analyst consensus estimates of $634 million. Key drivers of the company’s Adjusted EBITDA growth include:

Related:U.S. red meat complements local ingredients in Honduras tourism industry

Effective capital allocation

Following several years of aggressive investments, the current focus of using Free Cash Flow to deleverage and maintain an investment grade balance sheet is expected to continue in 2025, facilitating more choice for capital allocation in the future, benefiting shareholders short and long-term. Key initiatives this year include:

"At Maple Leaf Foods, we have always been dedicated to building long-term value for our stakeholders," said Michael H. McCain, executive chair of Maple Leaf Foods. "Long-term value creation is generated by running day-to-day operations well, making smart investment and capital allocation choices, and building the foundations of our business over time. This is exactly what we are doing, and we believe 2025 will be a pivotal year for Maple Leaf Foods in building value. We understand that the value of long-term investing is often under-appreciated by investors, and we have seen the impact of that on our trading multiple recently. Based on current analyst consensus for 2025, Maple Leaf is trading at approximately 6.5x Adjusted EBITDA which is a significant discount to the intrinsic value of the business which is currently outperforming most peers. Based on this insight, the board will continue to evaluate dividend policy, capital allocation choices and investor initiatives which will build investor confidence."

Update on the Canada Packers Spin Out

In 2024, Maple Leaf Foods announced the planned separation of its pork business as a standalone public company to be called Canada Packers Inc. Following the separation, Canada Packers will be a focused, integrated pork company, a leader in sustainably produced, premium quality, value-added pork products, and a key supplier of RWA and conventional pork products to customers in Canada, the U.S. and internationally.

Recently, the company shared that it was advancing the transaction as a tax-free butterfly reorganization that would require an advance tax ruling from the Canada Revenue Agency. The ruling request has been submitted, and a decision is anticipated in approximately nine months. The company is scheduling a meeting of shareholders in June 2025 to approve the transaction, which would allow closing to occur as soon as a positive CRA ruling has been received, assuming that the other customary closing conditions are also satisfied. Assuming these approvals are received, the transaction is on pace to close in the second half of 2025 as expected.

Work on the separation of the two companies is continuing, including planning of capital structure and dividend policies. The current plan 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 spinoff. Future dividends will be at the discretion of each company’s board of directors. The capital structure for the two companies is also being evaluated, with current planning being based on a Canada Packers initial leverage ratio in the range of 2.5x to 3.0x Net Debt to Adjusted EBITDA. Full details will be included in the Management Information Circular that is expected to be filed in May of this year in advance of the shareholder meeting to approve the transaction.

"With pork markets more or less normalized, the timing to complete the transaction this year is very positive," said Frank. "We are pleased with the progress we have made on the business and operational plans to maximize readiness once we have secured all the necessary approvals, and we are excited for the value creation potential that this transaction holds for both companies and their stakeholders going forward."

Next stakeholder update

The company will provide a further update on its 2025 outlook in connection with the release of its fourth quarter and full year 2024 results on Feb. 25.