mF International Limited Q1 FY2026 earnings call

Okay, thank you, Omar, and good morning, everyone. Joining me on our call today is our Chief Financial Officer, David Smales. I will begin with a strategic and operational update. Dave will walk you through the financial results in more detail, and then I will return with a few closing thoughts before we open the line to questions. The headline for today is that we delivered a solid first quarter, and we are firmly on track to deliver our 2026 outlook. Sales in Q1 were $963 million, up just over 6% year-over-year, driven by our proven and resilient growth platforms. WholeTree delivered double-digit growth, supported by improved panel mix and strong consumer demand across both the retail and food service channels. And Prepared Foods also delivered sales growth, supported by pricing and mix. Adjusted EBITDA was approximately $122 million, up nearly 6% year-over-year, and our adjusted EBITDA margin was 12.7%. Margin improved sequentially by 90 basis points, as we expected, supported by the inflation-based pass-through pricing we implemented in the quarter. Productivity initiatives and efficiency improvements, including our Fuel for Growth program and Better Sales Mix, are contributing to EBITDA growth and supporting continued margin resilience. This disciplined execution reflects the benefits of the separation of our pork operations, which has sharpened our focus as a purpose-driven, protein-focused, and brand-led CPG company, and has strengthened our ability to accelerate profitable growth and generate free cash flow. Earlier this year at our Investor Day, we introduced our 2030 financial ambitions and the strategic blueprint that will guide us to achieving them. That ambition is supported by a clear value creation framework. First, scaling the core business through our proven growth platforms, leading in sustainable meats, building a portfolio of loved brands, accelerating impactful innovation, expanding our reach into the U.S., new channels and new categories, and aligning more deeply with our customer strategies. Second, expanding structural margins through improved commercial mix, disciplined revenue management, and a productivity-driven operating model supported by the continued benefits of our Fuel for Growth program. And third, allocating capital with discipline, maintaining a strong balance sheet, investing to support growth and efficiency, and returning capital to shareholders in a balanced and consistent way. By executing against this framework, we are targeting approximately $5 billion in revenue, approximately 750 million in adjusted EBITDA, and cumulative free cash flow of approximately 1.7 to 1.8 billion by 2030, while maintaining an investment-grade leverage below three times net debt to adjusted EBITDA. Our 2026 outlook demonstrates progress toward these ambitions. In January, we introduced 2026 guidance, calling for mid-single-digit revenue growth, adjusted EBITDA in the range of approximately $520 to $540 million, and continued discipline in capital allocation, including dividend growth, capital investments of approximately $160 to $180 million, and maintaining leverage below three times. Today, we are reaffirming that outlook. I do, however, want to offer some context with respect to how we see the balance of the year playing out. First, despite the noise of the external market, our focus remains on executing our strategic blueprint. We have an experienced and highly capable team, proven growth strategies, and a productivity playbook that is active across the business. We are also maintaining a disciplined, shareholder-friendly approach to capital allocation. Second, food inflation remains an active area of management focus. Geopolitical developments, including the conflict involving Iran, are affecting energy markets and increasing transportation costs in the near term. We are monitoring these pressures closely, and we are responding with speed and with discipline. In addition to the inflation-based pricing actions implemented in February, we have introduced a temporary fuel surcharge as a direct pass-through tied to higher transportation costs. This provides transparency around the underlying drivers of those increases and will be removed if or as fuel markets normalize. With the pricing actions we have taken to date, along with the optimization of our ongoing promotional programs and the discipline we are showing in managing our costs, we are confident we are well positioned today to mitigate these inflationary impacts. Of course, should additional inflation justify pricing become necessary, we will act as quickly as possible, respecting the normal lag time required for our CPG industry. And finally, we've been examining the seasonality patterns of the new maple leaf foods and our business profile following the spinoff of Canada Packers. As we noted in our MD&A, revenue is typically the lowest in the first quarter, and then remains relatively consistent throughout the balance of the year, while raw material input costs are often higher in the second half. This can create some variability in margins from quarter to quarter, as we've seen in recent years, particularly in the third quarter, reflecting our typical business mix and input cost profile at that time of year. You can see this clearly in our supporting slides. which illustrates this pattern in 2024 and 2025. Importantly, this is a matter of phasing and does not impact our full year expectations. As we look ahead, we remain confident in the trajectory of the business and confident in delivering our full year outlook. Protein continues to be one of the most attractive and resilient segments in food, with demand supported by strong consumer fundamentals and long-term structural growth. We have a clear strategic blueprint, a portfolio of leading brands, a focused operating model, and a team that is executing with precision and with discipline. Our focus is set squarely on staying close to the consumer, responding to changing needs, demonstrating excellence in revenue management, protecting service and quality, and continuing to drive cost efficiency across our business. The fundamentals of the business are strong, and our priorities are clear. With that, I will now turn it over to Dave to walk through the financial results in more detail. Dave? Thank you, Curtis, and good morning, everyone. Today, I'll comment on results for the first quarter before turning to the balance sheet and outlook for 2026. Sales in the quarter were $963 million, an increase of 6.2% compared to last year. This robust growth was driven by both poultry and prepared foods, which grew by 11.7% and 2.3% respectively. In poultry, sales increased compared to the same quarter a year ago due to improved channel mix with growth in both retail and food service volume, as well as pricing impacts. Prepared food sales growth was driven by improved mix, related pie revenue, and pricing impacts, which were partially offset by lower volume tied to timing of promotional activity and lower industrial sales, as well as unfavorable foreign exchange translation on U.S. sales. Adjusted EBITDA of $122.4 million increased by 5.7% versus the first quarter of last year, with an adjusted EBITDA margin of 12.7%, compared to 12.8% last year. Improved profitability was mainly driven by advances in operating efficiency, inclusive of the benefits from our productivity playbook and fuel for growth program, and favorable poultry channel mix tied to retail and food service volume growth. These factors were partially offset by the impact of non-recurring items which were a benefit in the first quarter of last year, as well as increased trade promotion spending this year. Adjusted EBITDA margin of 12.7% was comparable to last year, despite the impact of non-recurring items that were a benefit in the first quarter a year ago. Importantly, the implementation of pass-through price increases in mid-February following the inflation we saw in the second half of 2025, contributed to a sequential margin improvement of 90 basis points from the fourth quarter. SG&A expenses were 101.9 million in the quarter, broadly consistent with 103.1 million last year, while SG&A's percentage of sales improved by 80 basis points. Earnings from continuing operations were $46.1 million for the quarter, or $0.37 per basic share, compared to $16 million, or $0.13 per share, last year. The increase in earnings was driven by strong operating performance, reduced interest expense due to lower debt levels, and changes in unrealized net gains on commodity futures contracts which were partially offset by the impact of non-recurring items that benefited the first quarter of last year. Capital expenditures were $21.3 million in the quarter compared to $25.1 million in the same period last year. The decrease was driven by approximately $8 million of prior year capital expenditures related to discontinued operations. partially offset by increased spending in the first quarter of this year on maintenance projects. Looking ahead, and consistent with our 2026 guidance, we still expect capital investments for the full year to be in the range of $160 to $180 million, with spend focused on maintenance and productivity enhancement initiatives. We generated $36.6 million in free cash flow in the quarter. an increase of $50.2 million compared to the same period last year. The improvement was driven by a lower level of investment in working capital, improved cash earnings from continuing operations, and lower interest payments, which were partially offset by prior year cash earnings generated by discontinued operations. Consistent with our stated capital allocation priorities, our leverage ratio remains well within an investment grade range, with a net debt to trailing 12 months adjusted EBITDA ratio of 2.1 times at the end of the quarter, in line with leverage at the end of the fourth quarter and down from 2.6 times a year ago. Strong free cash flow generation and an investment grade balance sheet provide flexibility to execute a more balanced approach to capital allocation. In the first quarter, we returned $36 million in capital to shareholders through a combination of our first quarter dividend, which increased by 10.5% from the prior year, and the repurchase of approximately 0.3 million shares under the NCIB. We intend to remain active with the NCIB to, at a minimum, offset the impact of dilution. As Curtis mentioned in his remarks, we are reaffirming our 2026 guidance and as such expect to deliver mid-single-digit revenue growth and adjusted EBITDA in the range of approximately $520 to $540 million while executing a balanced approach to capital allocation. I will now turn the call back to Curtis. Okay, thank you, Dave. Let me close with a few key messages which closely mirror those of our recent investor day. First, the transformation of Maple Leaf Foods is complete. Over the past decade, we have reshaped the business through major capital investment, portfolio simplification, and strategic focus. That work and the capital associated with it is now firmly behind us. Second, we now operate with stronger structural advantage as a purpose-driven, protein-focused and brand-led CPG company. These advantages are showing through in our performance relative to our peers and the broader CPG market. Third, we are firmly in our delivery and return phase. Our focus is on growth, margin expansion, cash generation and improving returns on invested capital. Our 2025 results and our first quarter of 2026 performance reflect the benefits of that focus fourth our strategic blueprint is future ready our strategy our assets and our team are aligned to deliver long-term value with a clear line of sight to our 2030 financial ambitions and finally we are reaffirming our 2026 outlook today as i close here this morning i want to recognize the maple leaf team You continue to live our values and deliver outstanding results in a demanding operating environment, while at the same time advancing our bold vision to be the most sustainable protein company on earth. Thank you.

Sales in Q1 were $963 million, up just over 6% year-over-year, driven by our proven and resilient growth platforms. WholeTree delivered double-digit growth, supported by improved panel mix and strong consumer demand across both the retail and food service channels. And Prepared Foods also delivered sales growth, supported by pricing and mix. Adjusted EBITDA was approximately $122 million, up nearly 6% year-over-year, and our adjusted EBITDA margin was 12.7%.

In January, we introduced 2026 guidance, calling for mid-single-digit revenue growth, adjusted EBITDA in the range of approximately $520 to $540 million, and continued discipline in capital allocation, including dividend growth, capital investments of approximately $160 to $180 million, and maintaining leverage below three times. Today, we are reaffirming that outlook.

Second, food inflation remains an active area of management focus. Geopolitical developments, including the conflict involving Iran, are affecting energy markets and increasing transportation costs in the near term. We are monitoring these pressures closely, and we are responding with speed and with discipline. In addition to the inflation-based pricing actions implemented in February, we have introduced a temporary fuel surcharge as a direct pass-through tied to higher transportation costs. This provides transparency around the underlying drivers of those increases and will be removed if or as fuel markets normalize. With the pricing actions we have taken to date, along with the optimization of our ongoing promotional programs and the discipline we are showing in managing our costs, we are confident we are well positioned today to mitigate these inflationary impacts. Of course, should additional inflation justify pricing become necessary, we will act as quickly as possible, respecting the normal lag time required for our CPG industry. And finally, we've been examining the seasonality patterns of the new maple leaf foods and our business profile following the spinoff of Canada Packers. As we noted in our MD&A, revenue is typically the lowest in the first quarter, and then remains relatively consistent throughout the balance of the year, while raw material input costs are often higher in the second half. This can create some variability in margins from quarter to quarter, as we've seen in recent years, particularly in the third quarter, reflecting our typical business mix and input cost profile at that time of year.

Ladies and gentlemen, we will now begin the question and answer session. If you'd like to ask a question, just press star one on your touchstone phone. And if you would like to withdraw your question, just press star two. Our first question comes from the line of Michael Van Isles from TD Cohen. Please go ahead. Hi, good morning. I want to start off with some questions around the consumer because there was some commentary on a conference call yesterday that talked about trade down, particularly and actually mentioned poultry trading down from, I guess, a private label RWA product down to entry-level price points at a double-digit pace. I'm wondering if you're seeing the same things, given that you've had some pretty strong momentum in your branded items at retail in recent quarters and whether that's changed. Good morning, Mike. Thank you. Before I answer your question, which I will, I understand that today is most likely your last call with us given your retirement. So I wanted to first congratulate you, and second, thank you for your coverage and support of Maple Leaf Foods over the past many number of years. And you've been with us on a lengthy journey, and I and we all at Maple Leaf certainly appreciate that. So thank you and congratulations. Thank you. On the topic of poultry and trade down, which I think was predominantly your question and a little bit around the consumer environment, the consumer environment we've been saying consistently and for a relatively lengthy period of time here that things are stable, but that still means the consumer is under stress. We continue, as David mentioned in his comments, to be investing in promotional allowances that are right-sized to the consumer environment today. You know, that intensity hasn't changed, I don't think, in any material way quarter to quarter. But on the poultry side, I think there's some important clarification for our own portfolio. We had a very successful first quarter in the poultry business, which you saw in our top line results. Sales grew at a little over 11% in the poultry business for us in Q1, which was, again, a very strong quarter. But underneath that, you know, the prime brand in particular, which is our premium brand positioned in the RWA segment grew at around the same pace in a double digit range. Our sustainable meats, fresh poultry business grew at double digits. And we actually picked up a little more than 1.7 points of market share gains in the first quarter. So, you know, overall, it was a pretty successful first quarter in the poultry business for us. So, you know, we're optimistic that will continue over the balance of the year. But I think all things positive on the poultry front. Did you see any change recently, at least in the last month or so, as fuel prices have spiked? Not materially. I think not materially in terms of change. I would point to the fact, Mike, that our prepared foods business revenue growth in the quarter was around 2.3%, predominantly driven by mix in pricing. and we had a small volume decline in the prepared foods business, small, between 1% and 2%. That's not atypical in the period following price adjustments. As you know, we took our prices up in February, and that would be in line with kind of the normal consumer behavior following a price change like that. So我在这里需要继续把整个问答部分完整地整合进去，但是由于内容较多，我需要确保准确复制。不过根据格式要求，我现在要把整个question_and_answer部分的内容完整放入。最终的JSON应该是：{