First Quarter Results 2013 May 2, 2013 Some of the statements in - - PowerPoint PPT Presentation

First Quarter Results 2013

Some of the statements in this presentation may constitute forward-looking information and future results could differ materially from what is included. Please refer to the Company’s Management’s Discussion & Analysis for the period ended December 31, 2012 and other public filings for a description of operations and factors that could impact the Company’s financial results.

May 2, 2013

Difficult first quarter

• Expected volatility in the first half of 2013, after droughts of 2012
• Market conditions more severe than anticipated, but transitional
• Significant pricing actions taken and to be absorbed
• Expecting growth in the second quarter
• Focused on commercial performance and execution of strategy

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Resulted in a significant short-term earnings decline

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Adjusted Operating Earnings Adjusted Earnings per Share

10 20 30 40 50 60 70 80 90

Q1 Q2 Q3 Q4

(0.10) (0.05) 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35

Q1 Q2 Q3 Q4

2012 figures have been restated to reflect changes in accounting for pension expense

$ Millions

2013 2012 3

Protein market conditions was the key driver

| Maple Leaf Foods 4 $32 ($24) ($7) ($10) $9 $12 ($4) $8 Q1 2012 Protein Market Conditions Prepared Meats Network Transformation Costs Fresh and Prepared Meats Volume Prepared Meats Transformation Benefits Bakery Improvement Other Q1 2013 $ Millions

Expected volatile market conditions in the first half of 2013

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• High grain/feed costs
• Pork/hog markets; hedging
• Decline in Yen
• Weaker by-products markets
• Poultry processor margins

$32 ($24) ($7) ($10) $9 $12 ($4) $8 Q1 2012 Protein Market Conditions Prepared Meats Network Transformation Costs Fresh and Prepared Meats Volume Prepared Meats Transformation Benefits Bakery Improvement Other Q1 2013 $ Millions

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Solid track record of managing commodity markets, despite short-term volatility

Since 2008, commodity prices have risen substantially

CORN

38%

PORK

40%

CHICKEN

32%

BEEF

29%

Protein Group EBITDA Margin Growth

4.0% 4.8% 4.6% 5.6% 6.6% 7.8% 8.2%

0% 2% 4% 6% 8% 10%

2006 2007 2008 2009 2010 2011 2012

(1) (1) As reported, before pension accounting change

Outlook is positive

| Maple Leaf Foods 7 $32 ($7) ($10) $9 $12 ($4) $8 $ Millions ($24) Q1 2012 Protein Market Conditions Prepared Meats Network Transition Costs Fresh and Prepared Meats Volume Prepared Meats Transformation Benefits Bakery Improvement Other Q1 2013

Grain/feed costs declining Pork/hog markets expected to improve Poultry processor margins improving Yen pricing action required By-products markets improving

Network transformation costs on track with expectations

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• Start-up costs
• Duplicative manufacturing
• verhead
• Transformation SG&A

$32 ($7) ($10) $9 $12 ($4) $8 $ Millions ($24) Q1 2012 Protein Market Conditions Prepared Meats Network Transformation Costs Fresh and Prepared Meats Volume Prepared Meats Transformation Benefits Bakery Improvement Other Q1 2013

…and increased benefits exceeded higher costs in the quarter

| Maple Leaf Foods 9 $32 ($7) ($10) $9 $12 ($4) $8 $ Millions ($24) Q1 2012 Protein Market Conditions Prepared Meats Network Transformation Costs Fresh and Prepared Meats Volume Prepared Meats Transformation Benefits Bakery Improvement Other Q1 2013

Entering the intense final phase of transformation

($7) $9 vs.

8% prepared meats volume decline in the wake of pricing action

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• Four pricing events in 12 months

totalling 5.7% to cover raw material costs

• Volumes improving monthly
• Expecting year-over-year growth in Q2

and balance of year

• Substantial innovation launching in 2013

$32 ($7) ($10) $9 $12 ($4) $8 $ Millions ($24) Q1 2012 Protein Market Conditions Prepared Meats Network Transformation Costs Fresh and Prepared Meats Volume Prepared Meats Transformation Benefits Bakery Improvement Other Q1 2013

Realizing early benefits from network transformation

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• Plant overhead savings
• Productivity gains
• Product simplification benefits

$32 ($7) ($10) $9 $12 ($4) $8 $ Millions ($24) Q1 2012 Protein Market Conditions Prepared Meats Network Transformation Costs Fresh and Prepared Meats Volume Prepared Meats Transformation Benefits Bakery Improvement Other Q1 2013

Bakery performance continues to improve

| Maple Leaf Foods 12 $32 ($7) ($10) $9 $12 ($4) $8 $ Millions ($24) Q1 2012 Protein Market Conditions Prepared Meats Network Transformation Costs Fresh and Prepared Meats Volume Prepared Meats Transformation Benefits Bakery Improvement Other Q1 2013

• Operational improvements
• SG&A reduction
• Pricing
• Offset by lower quarterly volume

EBITDA margin declined to 3.6% in the quarter

| Maple Leaf Foods 13 Segmented Margins Q1/12 Q1/12 LTM Q1/13 Q1/13 LTM Protein 6.6% 7.5% 1.9% 6.2% Bakery 4.1% 8.1% 7.5% 10.5% Maple Leaf 5.4% 7.6% 3.6% 7.5%

Protein Group Bakery Group Maple Leaf

2006 2007 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 10% 8% 6% 4% 2% 0% LTM margins Quarterly margins 4.3% 4.9% 6.4% 6.9% 5.2% 5.7% 6.4% 9.0% 7.8% 8.2% 7.9% 7.3% 6.6% 6.5% 6.9% 9.0% 1.9% 2006 2007 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 14% 12% 10% 8% 6% 4% 2% 0% LTM margins Quarterly margins 8.7% 10.0% 8.1% 8.0% 9.0% 6.8% 7.4% 4.1% 7.5% 11.6% 11.0% 11.5% 9.9% 10.5% 10.2% 9.9% 11.0% 2006 2007 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 LTM margins Quarterly margins 12% 10% 8% 6% 4% 2% 0% 5.6% 5.8% 6.8% 7.3% 7.3% 5.4% 3.6% 9.8% 8.2% 8.0% 8.5% 8.9% 8.6% 7.5% 7.1% 7.7% 6.4%

EBITDA % excluding MLAN

3.9% 5.5% 5.9% 5.8% 6.6% 5.8% 6.7% 7.2% 8.0% 8.6%

0% 2% 4% 6% 8% 10%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Longer-term strategies are working

| Maple Leaf Foods 14 Schneiders Acquisition Launched Fresh Pork Restructuring Product Recall Launched Prepared Meats Strategy

EBITDA ($M) excluding MLAN

$172 $313 $329 $306 $345 $303 $349 $358 $391 $419

$0 $100 $200 $300 $400 $500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

(1) (1) (1) As reported, before pension accounting change

2013 is a year of intense activity

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Prepared Meats

• Saskatoon cooked sausage commissioning underway
• Winnipeg bacon commissioning underway; closed bacon facility

in Saskatchewan

• Commissioning fresh/frozen sausage expansion in Brampton
• New prepared meats facility commissioning begins in Q3/13
• New eastern Distribution Centre opens Q3/13

Transformation Initiatives

Bakery

• Closing third Toronto bakery in June/13; consolidating volume
• Closing two snack cakes bakeries in Q2/13
• Closed Edmonton fresh bakery in Q1/13
• Selling specialty bakery in London, UK

Balance sheet review

• Net Debt of $1.2B at the end of Q1/13
• Cash used in operations improved to $2.4 million (Q1/12: $24.9 million)
• Net Debt to EBITDA ratio of 3.3x (Q4/12: 2.8x)
• As expected, ratio increased due to increased network transformation expenditures
• Adoption of accounting standard had a 0.3x impact on Q1/13 ratio
• Excluding change in pension accounting, Net Debt to EBITDA ratio was 3.0x
• Sale of potato processing product facility in Lethbridge for $58.0 million

($45.4 million gain)

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Revised EBITDA margin targets for pension accounting

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Original 2015 Target Revised 2015 Target Protein EBITDA %

12.5% 11.4%

Bakery EBITDA %

12.5% 12.3%

Total EBITDA %

12.5% 11.7%

Capital expenditures

• Q1 capital expenditures of $76.1 million

(2012: $55.8 million) including:

• $56.3 million – Prepared Meats network
• $2.9 million – SAP implementation

| Maple Leaf Foods 18 | Maple Leaf Foods

• 20

40 60 80 100 120

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Base Capital SAP-related Capital Hamilton Bakery-related Capital Prepared Meats Network

2010 2011 2012 2013

$ Millions

Restructuring costs

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$ Millions

Total recorded in Q1/13 Cash portion recorded in Q1/13 Network Enhancements / Plant Closures $38.2 $30.4

Prepared Meats network transformation 33.9 26.0 Fresh Bakery Distribution Network 1.4 1.4 Ontario Bakery consolidation 2.9 3.0

Cost Reductions in SG&A 8.8 8.8 Other 0.2

• Total

$47.2 $39.2

19

Cash outflows will occur with facility closures over the next two years

Summary

• Market factors anticipated and transitory
• Volumes strengthening after price increases
• Strategies are delivering results
• 2013 is an challenging year of significant change
• Expecting margin growth through balance of year

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Non-IFRS financial measures

21 | Maple Leaf Foods Adjusted Operating Earnings: Adjusted Operating Earnings, a non-IFRS measure, is used by Management to evaluate financial operating results. It is defined as earnings before income taxes adjusted for items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. Adjusted Earnings per Share: Adjusted Earnings per Share, a non-IFRS measure, is used by Management to evaluate on- going financial operating results. It is defined as basic earnings per share attributable to common shareholders, and is adjusted for all items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA is calculated as earnings from operations and before interest and income taxes plus depreciation and intangible asset amortization, adjusted for items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. EBITDA for 2010 and thereafter is calculated based on results reported in accordance with IFRS. EBITDA for periods before 2010 is calculated based on results previously reported under Canadian GAAP. Net Debt: The Company calculates Net Debt as long-term debt and bank indebtedness, less cash and cash equivalents. Management believes this measure is useful in assessing the amount of financial leverage employed. All 2012 figures in this presentation have been restated for the impact of adopting the revised International Accounting Standard 19 Employee Benefits (“IAS 19”), as disclosed in Note 24 of the Company’s 2013 first quarter unaudited condensed consolidated interim financial statements

Some of the statements in this presentation may constitute forward-looking information and future results could differ materially from what is included. Please refer to the Company’s Management’s Discussion & Analysis for the period ended December 31, 2012 and other public filings for a description of operations and factors that could impact the Company’s financial results.

First Quarter Results 2013

May 2, 2013