Investor Presentation Second Quarter Ended June 30, 2004 1 Agenda - - PowerPoint PPT Presentation

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Investor Presentation

Second Quarter Ended June 30, 2004

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Agenda

• Highlights
• Financial Summary
• Operations and Market Overview
• Questions

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Highlights

• Excellent performance in second quarter

Sales up 34% to $1.7 billion (up 6% not including Schneider Foods) Protein Value Chain operating earnings up 390%; Bakery up 49%

• Good operational execution

Operating improvements in fresh pork and Atlantic Canada operations Increased market share of branded pork and poultry Continued success of new product innovation

• Benefited from higher hog and protein prices and volumes
• Bakery Group posts strong results despite low carb threat

Leadership in whole grain and value-added categories

• Strong early results from Schneider Foods acquisition

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Agenda

• Highlights
• Financial Summary
• Operations and Market Overview
• Questions

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Sales of $1.69 Billion

Protein Value Chain(1) up 43%; Bakery up 5%

Protein Value Chain Bakery Products Group

2001 2001 2001 2001 2001 2001 2001 2001 2004 2004 2004 2004 2003 2003 2003 2003 891 1,051 1,020 1,030 958 992 957 990 944 950 932 963 891 1,359 250 500 750 1,000 1,250 1,500 $ million CAD 164 174 178 268 265 287 311 315 308 314 321 310 304 331

150 225 300 375 $ million CAD 75 Q1 Q2 Q3 Q4

Q1 Q2 Q3 Q4

(1) Protein Value Chain comprises the Company’s Meat Products and Agribusiness Groups

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Operating Earnings(1) of $64.7 Million

…up 184% from last year

Protein Value Chain Bakery Products Group

(1) All amounts exclude restructuring costs

2001 2004 2001 2004 2001 2003 2001 2004 2001 2003 2001 2003 2001 2004

6.2 7.2 10.6 13.8 12.0 19.2 21.0 17.8 13.3 13.8 16.5 14.6 17.7 20.5

0.0 5.0 10.0 15.0 20.0 25.0 $ million CAD

2001 2003

24.6 31.7 19.6 43.7 29.8 28.8 42.9 19.9 9.0 16.3 49.0 30.3 44.1 32.1

0.0 10.0 20.0 30.0 40.0 50.0 60.0 $ million CAD Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

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Significant EPS(1) Growth to $0.22

…third consecutive quarter of improvement

$0.22 $0.27 $0.12 $0.15 $0.11 $0.22 $0.16 $0.19 $0.14 $0.23 $0.05 $0.01 $0.07 $0.16

$0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 Q1 Q2 Q3 Q4 $ CAD

2001 2001 2001 2001 2003 2003 2004 2004

(1) All amounts exclude restructuring costs

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Cash Flow and Financial Position

• Net indebtedness increase due to Schneider Foods

acquisition

• Credit ratios improving in line with strong earnings
• Schneider acquisition debt to be refinanced in second half
• f 2004

Long term debt facilities Equity as required to maintain investment grade credit quality

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Agenda

• Highlights
• Financial Summary
• Operations and Market Overview
• Questions

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Protein Value Chain

Meat Products Group

• Sales increased 55% due to the Schneider Foods contribution and

higher protein volumes and prices

• Operating earnings increased $20 million despite market

challenges

High raw material costs reduced further processed margins Industry pork processor margins declined 5% from Q2 last year

• Operations improvements and better protein markets

Strong poultry margins and branded sales Increased earnings from Atlantic Canada operations Improved sales mix and operating performance in fresh pork Margin growth through new product innovation Increased profitability of exports to Japan

• Schneider Foods was accretive to net earnings for the quarter

Integration on track and business momentum maintained

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Protein Value Chain

Agribusiness Group

• Sales increased 5% over last year; operating earnings up

95%

• Hog production operations benefited from 29% increase in

hog prices

Maple Leaf’s effective hog ownership was 21% at the end of Q2

• Excellent performance in rendering operations, driven by

increased volumes and export demand

Biodiesel expansion in Montreal will provide further product and market diversification

• Canada’s historical feed cost advantage is being restored

Drought conditions abate and Canadian feed alternatives become more competitive

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USDA Pork Processor Margins …rapid rise in hog prices pressured margins

Live Hog versus Wholesale Pork Price $(0) $10 $20 $30 $40 $50 $60 $70 $80 $90 $100

1/1/03 4/1/03 7/1/03 10/1/03 1/1/04 4/1/04 7/1/04

Live Hog & Wholesale Pork Price (USD /CWT)

Spread Wholesale Pork Live Hog

Q1-03 Q2-03 Q3-03 Q4-03 Q1-04 Q2-04 Wholesale Pork 53.75 $ 60.98 $ 63.07 $ 57.28 $ 64.51 $ 77.16 $ Live Hog 47.59 $ 57.33 $ 58.14 $ 50.26 $ 59.35 $ 73.68 $ Spread 6.16 $ 3.65 $ 4.93 $ 7.02 $ 5.16 $ 3.48 $

Source: USDA

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Sharp Increase in Poultry Prices

…improved industry processor margins

Live Bird versus Wholesale Poultry Price $- $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00

1 14 27 40 53 66 79

Live Bird & Wholesale Poultry Price ($/kg)

Spread Wholesale Price Live Price (eviscerated)

Source: Shapiro Consulting Q1-03 Q2-03 Q3-03 Q4-03 Q1-04 Q2-04 Wholesale Poultry 2.13 $ 2.30 $ 2.46 $ 2.53 $ 2.49 $ 2.84 $ Live Bird (evisc.) 1.56 $ 1.63 $ 1.64 $ 1.64 $ 1.64 $ 1.62 $ Spread 0.57 $ 0.67 $ 0.82 $ 0.89 $ 0.85 $ 1.22 $

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U.S. Meat Production in 2004 …good supply and demand balance forecasted

Annual US Commercial Pork, Beef and Chicken Production (metric tonnes)

• 2,000

4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Pork, Beef & Broiler Production (metric tonnes) 27,000 29,000 31,000 33,000 35,000 37,000 All Species Production (metric tonnes)

Pork 8,609 8,744 8,578 8,680 8,920 9,035 9,224 Beef 11,636 11,970 12,146 11,840 12,287 11,900 11,503 Chicken 12,639 13,490 13,833 14,183 14,621 14,834 15,358 Total all species 32,884 34,205 34,557 34,703 35,829 35,769 36,085 % of PY 104.0% 101.0% 100.4% 103.2% 99.8% 100.9% 1998 1999 2000 2001 2002 2003 2004*

Source: USDA, Sparks C ,

% change in 2004 forecast - month over month - 0.6%

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Bakery Products Group

• Sales rose 5%; operating earnings up 49% due largely to

strong Fresh Bakery performance

Growth in higher margin whole grain categories Resolution of labour dispute which impacted 2003 results Price increases in late 2003/early 2004 mitigated rising input costs

• Strong UK Bakery performance

Continued growth in bagel market Production expansion underway

• Par-baked sales in North America increased, although not

to historic levels

Strong Foodservice sales partially offset by slower retail growth due to work stoppage involving several major US customers Expect return to normal business levels

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Bakery Products Group

• Continued to mitigate potential impact of low carb trend

Strong growth of Dempster’s Stays Fresh despite Canadian market decline in commercial white bread sales Contrasts to 8% sales growth in whole grain bread market, where Canada Bread has market leadership

• New product innovation expands par-baked categories

Clever Carb line of new low-carb par-baked products Wholesome Harvest branded wheat and grain par-baked products

• Maintain strategy to increase weighting towards value-

added products

Higher margin whole grain and premium bakery products Well positioned to benefit from rising importance of nutrition

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Q2 New Product Launches

• Two new Maple Leaf Fully Cooked Roast products

Honey Garlic Pork; Sun Dried Tomato & Basil Turkey Breast

• Schneiders Oh Naturel Meatless Entrees (Soy)

Chicken & Beef Strips, Meatballs, Chick’n Burgers, Weiners

• Nine new Schneiders Hot Rod meat snacks products
• Maple Leaf Chili Dogs and Mini Bites snacking wieners
• New Prime Naturally sausage flavours

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Summary

• Continued trend of excellent earnings growth
• Good execution and improved markets
• Bakery leadership in high growth categories
• Highly successful product innovation
• Solid results from Schneider Foods acquisition
• Strong momentum heading into back-half of 2004

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Investor Presentation

Second Quarter Ended June 30, 2004