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Q & A Highlights

Q: Congratulations on a great quarter. Now that you've achieved the 12.5% in Q4 and reiterated the 14% to 16% target, can you walk us through the building blocks of how sustainable the current run rate is and how you plan to reach the 14% to 16% target? A: Curtis Frank, President and CEO, explained that the company is confident in achieving mid-single-digit growth and meeting or exceeding $634 million of adjusted EBITDA in 2025. Key contributors include full-year benefits from capital projects, normalized pork market conditions, brand management, and the Fuel for Growth initiative. The 14% to 16% margin target will be supported by continued execution of growth strategies, consumer environment recovery, and further cost reductions.

Q: Can you talk about the consumer environment and whether consumers are still focused on value, affecting sales of RWA (Raised Without Antibiotics) products? A: Curtis Frank noted that the consumer environment remains stable, with consumers still under stress and showing a flight to value. However, there is a growing buy Canadian movement, which could influence consumer behavior positively. The company continues to focus on balancing its product mix between sustainable meats and conventional offerings.

Q: In Poultry, is the channel mix back to normal, or are there still imbalances? A: Curtis Frank stated that the channel mix is improving, with robust retail sales growth. However, there is still work to be done in optimizing the consumer behavior in Poultry, particularly in shifting more sales to the sustainable meats portfolio. The supply-demand environment is more balanced now, which was not a key contributor in Q4.

Q: Can you provide more details on the Fuel for Growth initiative and its impact on cost control? A: Curtis Frank explained that the Fuel for Growth initiative focuses on optimizing SG&A, leveraging scale in supply chain purchases, and conducting a strategic manufacturing review. The first phase, including SG&A reorganization and procurement optimization, showed benefits in Q4. The manufacturing review is ongoing, with most benefits expected in 2026 and 2027.

Q: Regarding the US business, can you split the exports between pork and Prepared Meats, and how have tariffs been factored into the 2025 outlook? A: Curtis Frank mentioned that about $350 million to $400 million of exports to the US are roughly split between pork and Prepared Meats. Tariffs have not been factored into the 2025 outlook due to uncertainty. The company is prepared with mitigation strategies, and tariffs are not seen as an existential threat, affecting a maximum of 7.5% of the portfolio.

Q: Do you foresee any large capital spends in the future, especially in light of tariffs aimed at drawing more investment into the US? A: Curtis Frank clarified that there are no large-scale capital projects planned. The focus is on supporting existing manufacturing networks, driving cost efficiency, and supporting growth without significant new capital investments.

Q: How confident are you in forecasting normalized market conditions, particularly in the pork market? A: Dennis Organ, President of the Pork Complex, expressed confidence in short-term forecasting due to risk management and market knowledge. However, long-term predictions are more challenging due to potential market fluctuations. Curtis Frank added that while past disruptions impaired predictive capabilities, the company is confident in its current outlook.

Q: Regarding the Fuel for Growth initiative, will the benefits of the second phase accrue more to Maple Leaf or Canada Packers? A: David Smales, CFO, indicated that the focus is on right-sizing SG&A for both companies post-split. Savings will primarily be seen in Maple Leaf Foods as it adjusts to a smaller business structure. The benefits will support the company's strategic objectives and financial targets.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.