Maple Leaf Foods : Analyse de la direction

MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 | MAPLE LEAF FOODS INC.

Management's Discussion and Analysis

1. Quarterly amounts for 2023 have been adjusted to eliminate new sales agreements entered into during the year that contained an expectation of repurchase, which had previously been reported as external sales.
2. Refer to section 17. Non-IFRS Financial Measures of this document for the definition of these non-IFRS measures.

Sales for the first quarter of 2024 were $1,153.2 million compared to $1,171.1 million last year, a decrease of 1.5%. Sales in the Prepared Foods operating unit decreased approximately 0.4%, with prepared meats increasing 2.9% offset by declines in plant protein and poultry of 5.7% and 7.1% respectively, compared to last year. Sales in the Pork operating unit decreased by 4.5% compared to last year. For more details on sales performance please refer to section 2. Operating Review.

Net earnings for the first quarter of 2024 were $51.6 million ($0.42 per basic share) compared to a loss of $57.7 million ($0.48 loss per basic share) last year. Net earnings were positively impacted by reduced feed costs, operating efficiencies, lower start-up expenses, reduced restructuring costs, and a positive impact of unrealized mark to market valuation on biological assets. Results were negatively impacted by higher interest expense due to increased interest rates and higher debt, as well as increased tax expenses.

Adjusted Operating Earnings for the first quarter of 2024 were $53.0 million compared to $19.3 million last year, and Adjusted Earnings per Share for the first quarter of 2024 was $0.04 compared to loss of $0.12 last year.

Adjusted Earnings Before Taxes ("Adjusted EBT") for the first quarter of 2024 were $10.4 million compared to loss of $14.0 million last year.

For further discussion on key operational metrics and results refer to section 2. Operating Review.

2. OPERATING REVIEW

Earlier this year, the Company announced an update to its strategic blueprint ("Blueprint") that reflects the progress it has made toward achieving its Purpose and Vision and establishes the roadmap for the next chapter for how Maple Leaf Foods intends to deliver on these objectives.

To execute on this Blueprint, the Company has combined its Meat and Plant Protein businesses and aligned its organizational structure to focus on its growth potential in key markets, drive operational efficiencies, and provide clear accountability for strategic execution. Based on this realignment and focus as a protein company, as of the first quarter of 2024, Maple Leaf Foods is reporting its business and operational results as a consolidated protein company, to align with how management monitors and measures business performance. With these changes, the Company believes it is positioned to achieve a consolidated Adjusted EBITDA margin target of 14% to 16% in normal market conditions. Previously, the Company's Adjusted EBITDA margin target of 14% to 16% in normal market conditions was solely for meat protein. The Company achieved an Adjusted EBITDA margin for meat protein of 10.8% in the first quarter of 2024.

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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 | MAPLE LEAF FOODS INC.

Management's Discussion and Analysis

As a consolidated protein company, Maple Leaf Foods has two operating units: Prepared Foods and Pork, which represent on average approximately 75% and 25% of total Company revenue respectively. Prepared Foods combines the operations of prepared meats, plant protein, and poultry, which represent on average approximately 50%, 5% and 20% of total Company revenue respectively.

The following table summarizes the Company's sales, gross profit, selling, general and administrative expenses ("SG&A"), Adjusted Operating Earnings, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EBT for the three months ended March 31, 2024 and March 31, 2023.

1. Quarterly amounts for 2023 have been adjusted to eliminate new sales agreements entered into during the year that contained an expectation of repurchase, which had previously been reported as external sales.
2. Refer to section 17. Non-IFRS Financial Measures of this document for the definition of these non-IFRS measures.

Sales for the first quarter decreased 1.5% to $1,153.2 million, compared to $1,171.1 million last year. Sales in the Prepared Foods operating unit decreased approximately 0.4%, with prepared meats increasing 2.9% offset by declines in plant protein and poultry of 5.7% and 7.1% respectively, compared to last year. Sales in the Pork operating unit decreased by 4.5% compared to last year. Volume and mix drove the increase in sales in prepared meats, while decreases in volume in fresh poultry were driven by reduced sales to industrial channels; and in Pork by a reduction in hog purchases for processing and a negative foreign exchange impact.

Gross profit for the first quarter increased to $226.3 million, (gross margin(i) of 19.6%) compared to $76.4 million (gross margin(i) of 6.5%) last year. The improvement in gross profit was driven by improving pork market conditions, operating efficiencies at the London Poultry plant, and a higher unrealized mark to market valuation adjustment on biological assets, due to changes in hog and feed markets. In addition, gross profit benefited from reduced start-up expenses related to Capital Construction(ii) projects, which decreased by approximately 67% in the current quarter compared to last year.

SG&A expenses for the first quarter were $110.0 million, compared to $102.7 million last year. The increase in SG&A expenses was primarily driven by higher variable compensation.

Adjusted Operating Earnings for the first quarter were $53.0 million, compared to $19.3 million last year, driven primarily by the drivers noted above for gross profit and SG&A, and excluding the impacts of unrealized mark to market valuation adjustments and start-up expenses, which are excluded in the calculation of Adjusted Operating Earnings.

Adjusted EBITDA for the first quarter were $116.4 million, compared to $75.3 million last year, driven by factors consistent with those noted above and also excluding the impact of unrealized mark to market valuation adjustments and start-up expenses. Adjusted EBITDA Margin for 2024 was 10.1% compared to 6.4% last year, also driven by factors consistent with those noted above.

Adjusted EBT for the first quarter were $10.4 million, compared to a loss of $14.0 million last year, driven by factors consistent with those noted above, as well as a $10.5 million increase in interest expense as a result of increased interest rates and higher debt related to capital investments in recent years and also excluding the impacts of unrealized mark to market valuation adjustments and start-up expenses.

1. Gross margin is defined as gross profit (loss) divided by sales.
2. Refer to section 17. Non-IFRS Financial Measures of this document for the definition of these non-IFRS measures.

3. RESTRUCTURING AND OTHER RELATED COSTS

During the three months ended March 31, 2024, restructuring and other related costs were a net provision reversal of $0.7 million (2023: costs of $7.7 million). Of the $0.7 million, reversals of $1.3 million (2023: costs of $0.3 million) related to severance and other employee costs from the closures of the Brampton, Toronto, St. Mary's, and Schomberg poultry plants, $0.5 million (2023: $1.1 million) related to decommissioning, reversals of $0.1 million (2023: $0.0 million) related to asset impairments, and $0.0 million (2023: $1.4 million) related to accelerated depreciation due to the closures. In addition, $0.1 million (2023: $3.9 million) related to inventory impairment, $0.0 million (2023: $0.4 million) of severance and other employee related costs, and $0.0 million (2023: $0.1 million) is related to other cash costs, as a result of organizational changes in the Plant Protein business. The remaining amount of $0.1 million (2023: $0.5 million) was related to employee related costs for other organizational restructuring initiatives.

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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 | MAPLE LEAF FOODS INC.

Management's Discussion and Analysis

4. INCOME TAXES

The Company's effective rate of income tax expense in the first quarter of 2024 differed from the Canadian statutory tax rate of 26.2% primarily due to the Company not recognizing a deferred tax recovery on losses of its Plant Protein subsidiary. The effective rate of tax recovery in the first quarter of 2023 differed from the Canadian statutory tax rate of 26.2% for the same reason. The effective rate of tax expense in the first quarter of 2024 used in determining Adjusted Earnings per Share is 57.4% (2023: 6.9% tax recovery). In the first quarter of 2024, the effective tax recovery rate on restructuring charges used in the computation of Adjusted Earnings per Share is 27.6% (2023: 10.9%).

5. CAPITAL RESOURCES AND LIQUIDITY

The consumer foods industry in which the Company operates is generally characterized by high sales volume and high turnover of inventories and accounts receivable. In general, accounts receivable and inventories are readily convertible into cash. Investment in working capital is affected by fluctuations in the price of raw materials as well as seasonal and other market-related fluctuations. The Company has consistently generated a strong base level of operating cash flow, even in periods of higher commodity prices and during the restructuring of its operations. These operating cash flows provide a base of underlying liquidity that the Company supplements with credit facilities and cash on hand to provide longer-term funding and to finance fluctuations in working capital levels.

The Company's cash balance as at March 31, 2024 was $206.4 million (March 31, 2023: $79.4 million; December 31, 2023: $203.4 million). Cash is held in demand and short-term investment deposits with Canadian financial institutions having long-term debt ratings of A or higher.

The composition of long-term debt is shown below:

1. Refer to section 17. Non-IFRS Financial Measures of this document for the definition of this non-IFRS measure.

The Company has a syndicated sustainability-linked credit facility (the "Credit Facility") consisting of a $1,300.0 million unsecured committed revolving line of credit maturing June 29, 2027, and two unsecured committed term facilities for US$265.0 million and $350.0 million maturing June 29, 2027 and June 29, 2026, respectively. In February 2023, the Company amended its covenants to reflect the extended effect of the post-pandemic economy. On June 20, 2023, the Credit Facility was further amended by adding an additional $400.0 million unsecured committed term credit tranche maturing June 20, 2024, and adjusting the financial covenants to facilitate access to the new tranche. On April 30, 2024 the Company amended its Credit Facility downsizing Tranche 3 of the Term Facility to $300 million, and extending the maturity date to June 20, 2025.

The Credit Facility may be drawn in Canadian or U.S. dollars and bears interest payable monthly, based on Banker's Acceptance and Prime rates for Canadian dollar loans and based on the Secured Overnight Financing Rate ("SOFR") for U.S. dollar loans. The Credit Facility is intended to meet the Company's funding requirements for capital investments in addition to providing appropriate levels of liquidity for general corporate purposes. The interest rate on the Credit Facility may be adjusted up or down by a maximum of 5 basis points based on the Company's performance compared to specified sustainability targets.

In addition to the drawings on the revolving facility and the term credit, as at March 31, 2024 the Company had drawn letters of credit of $9.1 million on the Credit Facility (March 31, 2023: $9.2 million; December 31, 2023: $9.4 million).

The Credit Facility requires the maintenance of certain covenants. As at March 31, 2024, the Company was in compliance with all of these covenants. The primary financial covenant requires that the Company maintain a net debt to capitalization ratio below a specified threshold.

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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 | MAPLE LEAF FOODS INC.

Management's Discussion and Analysis

The Company has additional uncommitted credit facilities for issuing letters of credit up to a maximum of $105.0 million (March 31, 2023: $125.0 million; December 31, 2023: $105.0 million). As at March 31, 2024, $46.7 million in letters of credit had been issued thereon (March 31, 2023: $49.6 million; December 31, 2023: $46.7 million).

The Company has various government loans to finance specific projects. As at March 31, 2024 and 2023, these loans are non-interest bearing facilities. These loans are repayable over various terms and mature from 2024 to 2033. As at March 31, 2024, $7.0 million (March 31, 2023: $6.9 million; December 31, 2023: $7.1 million) was outstanding. All of these facilities are committed.

The Company has an accounts receivable securitization facility (the "Securitization Facility") maturing June 24, 2024. The Company expects to secure an extension of this facility on commercially reasonable terms. The maximum cash advance available to the Company under the Securitization Facility is $135.0 million (March 31, 2023: $135.0 million; December 31, 2023: $135.0 million). The Securitization Facility provides cash funding with a proportion of the Company's receivables being sold, provides the Company with competitively priced financing and further diversifies its funding sources. Under the Securitization Facility, the Company has sold certain of its trade accounts receivable, with very limited recourse, to an unconsolidated third-party trust financed by an international financial institution with a long-term AA- debt rating, for cash and short-term notes back to the Company. The receivables are sold at a discount to face value based on prevailing money market rates. The Company retains servicing responsibilities for these receivables.

As at March 31, 2024, the Company had $101.1 million (March 31, 2023: $117.8 million; December 31, 2023: $112.7 million) of trade accounts receivable serviced under the Securitization Facility. As consideration for the sale of its trade receivables, the Company will receive cash of $68.5 million (March 31, 2023: $82.3 million; December 31, 2023: $79.4 million) and notes receivable in the amount of $32.6 million (March 31, 2023: $35.5 million; December 31, 2023: $33.3 million). The notes receivable are non-interest bearing and are settled on the settlement dates of the securitized accounts receivable. Due to the timing of receipts and disbursements, the Company may, from time to time, also record a receivable or payable related to the Securitization Facility. As at March 31, 2024, the Company recorded a net payable in the amount of $66.5 million (March 31, 2023: $49.6 million net payable; December 31, 2023: $55.6 million net payable) in accounts payable and accruals. The facility is accounted for as an off-balance sheet transaction in accordance with IFRS Accounting Standards.

The Securitization Facility is subject to certain restrictions, including the maintenance of covenants. The Company was in compliance with all of the requirements of this facility as at March 31, 2024. If the Securitization Facility were to be terminated, the Company would recognize the related amounts on the unaudited condensed consolidated interim balance sheets ("Consolidated Interim Balance Sheets") and consider alternative financing if required.

6. CAPITAL EXPENDITURES

Capital expenditures in the first quarter of 2024 were $24.1 million compared to $52.6 million in the first quarter last year. The decrease in capital expenditures was primarily attributable to the completion of both the construction of the London, Ontario poultry facility and the capacity expansion in further processed poultry capacity at the prepared meats facility in Brampton, Ontario.

The Company's capital expenditure estimate for the full year of 2024 remains unchanged and in the range of $170 million to $190 million, based on the expected timing of projects and continued discipline in capital management.

7. NORMAL COURSE ISSUER BID

On May 20, 2023 the Toronto Stock Exchange ("TSX") accepted the Company's notice of intention to commence a Normal Course Issuer Bid ("NCIB"), allowing the Company to repurchase, at its discretion, up to 7.2 million common shares in the open market or as otherwise permitted by the TSX, subject to the normal terms and limitations of such bids. Common shares purchased by the Company are cancelled. The program commenced on May 25, 2023 and will terminate on May 24, 2024, or on such earlier date as the Company completes its purchases pursuant to the notice of intention. Under this bid, during the three months ended March 31, 2024, no shares were repurchased for cancellation.

On May 20, 2022 the TSX accepted the Company's notice of intention to commence a NCIB, allowing the Company to repurchase, at its discretion, up to 7.5 million common shares in the open market or as otherwise permitted by the TSX, subject to the normal terms and limitations of such bids. Common shares purchased by the Company are cancelled. The program commenced on May 25, 2022 and terminated on May 24, 2023. Under this bid, during the three months ended March 31, 2023, 0.4 million shares at an average price of $25.64 per share were repurchased for cancellation.

The Company did not adopt an Automatic Share Purchase Plan ("ASPP") in connection with the NCIB that it put in place on May 20,

2023. As at March 31, 2024, there was no obligation for the repurchase of shares (March 31, 2023: $19.2 million, December 31, 2023: $0.0 million) recognized under an ASPP.

8. CASH FLOW AND FINANCING

Cash and cash equivalents were $206.4 million at the end of the first quarter of 2024, compared to $79.4 million at the end of the first quarter of 2023, and $203.4 million as at December 31, 2023. The increase in cash and cash equivalents for the three months ended

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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 | MAPLE LEAF FOODS INC.

Management's Discussion and Analysis

March 31, 2024 was primarily due to cash earnings and reduced investment in working capital, partially offset by investment in property and equipment, interest and dividend payments as well as loan repayments on the Credit Facility.

Cash Flow from Operating Activities

Cash provided by operating activities for the first quarter of 2024 was $87.3 million compared to $35.7 million in 2023. The improvement was mainly due to higher cash earnings, partially offset by higher interest payments and a lower reduction in working capital.

Cash Flow from Investing Activities

Cash used in investing activities for the first quarter of 2024 was $23.3 million compared to $49.7 million in 2023. The decrease was mainly due to lower investment in property and equipment as the Company completes its Construction Capital projects.

Cash Flow from Financing Activities

Cash used in financing activities for the first quarter of 2024 was an outflow of $61.0 million compared to an inflow of $2.3 million in 2023. The decrease was primarily due to loan repayments (compared to loan drawings in previous quarter) on the Credit Facility, no repurchase of shares under the NCIB in the current quarter, and lower cash dividend payments with the introduction of a dividend reinvestment plan during the third quarter of 2023.

9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company applies hedge accounting as appropriate and uses derivatives and other non-derivative financial instruments to manage its exposures to fluctuations in foreign exchange rates, interest rates, and commodity prices.

During the three months ended March 31, 2024, the Company recorded a pre-tax gain of $6.0 million (2023: loss of $10.7 million) on non-designated financial instruments held for trading.

During the three months ended March 31, 2024, the pre-tax amount of hedge ineffectiveness recognized in cost of goods sold was a gain of $0.0 million (2023: gain of $0.0 million).

The table below sets out fair value measurements of derivative financial instruments as at March 31, 2024 using the fair value hierarchy:

1. Level 1 commodity contracts are net settled and recorded as a net asset or liability on the Consolidated Interim Balance Sheets.
   There were no transfers between levels for the three months ended March 31, 2024.

Determination of fair value and the resulting hierarchy requires the use of observable market data whenever available and is consistent with the methodology used in the Company's 2023 Annual Audited Consolidated Financial Statements. The classification of a financial instrument in the hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. For financial instruments that are recognized at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period.

Accumulated other comprehensive income (loss)

During the three months ended March 31, 2024, a gain of $3.6 million, net of tax of $0.2 million, was released to net earnings from accumulated other comprehensive income (loss) and included in the net change for the year (2023: gain of $3.1 million, net of tax of $1.1 million).

During the three months ended March 31, 2024, the loss on the net investment hedge recorded in other comprehensive income (loss) was $6.6 million, net of tax of $1.2 million (2023: gain of $0.1 million, net of tax of $0.0 million).

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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 | MAPLE LEAF FOODS INC.

Management's Discussion and Analysis

10. TRANSACTIONS WITH RELATED PARTIES

The Company sponsors a number of defined benefit, defined contribution and post-retirement benefit plans. During the three months ended March 31, 2024, the Company contributed $7.4 million (2023: $7.8 million) to these plans.

The Company's largest shareholder is McCain Capital Inc. ("MCI"). The Company has been informed that Mr. Michael H. McCain, Executive Chairman of the Board, is the controlling shareholder of MCI. For the three months ended March 31, 2024, the Company received services from MCI and companies directly or indirectly owned by MCI in the amount of $0.1 million (2023: $0.3 million), which represented the market value of these transactions. As at March 31, 2024, $0.1 million (March 31, 2023: $0.2 million; December 31, 2023: $0.5 million) was owed to MCI and companies directly or indirectly owned by MCI relating to these transactions.

McCain Financial Advisory Services ("MFAS"), is an entity jointly controlled by individuals including Mr. Michael H. McCain. For the three months ended March 31, 2024 and 2023, the Company provided services to and received services from MFAS for a nominal amount which represented the market value of the transactions.

11. SHARE CAPITAL

As at April 25, 2024, there were 122,942,966 common shares issued and outstanding.

12. OTHER MATTERS

On May 1, 2024, the Board of Directors approved a quarterly dividend of $0.22 per share (an increase of $0.01 per share from the 2023 first quarter dividends), $0.88 per share on an annual basis, payable June 28, 2024 to shareholders of record at the close of business June 6, 2024. Unless indicated otherwise by the Company at or before the time the dividend is paid, the dividend will be considered an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System". The Board of Directors has also approved the issuance of common shares from treasury at a two percent discount under the Company's Dividend Reinvestment Plan ("DRIP"). Under the DRIP, investors holding the Company's common shares can receive common shares instead of cash dividend payments. Further details, including how to enroll in the program are available at https://www.mapleleaffoods.com/investors/stock-information.com.

13. SUMMARY OF QUARTERLY RESULTS

The following is a summary of unaudited quarterly financial information for each quarter in the last two fiscal years:

1. Refer to section 17. Non-IFRS Financial Measures of this document.
2. Quarterly amounts for 2023 have been adjusted to eliminate new sales agreements entered into during the year that contained an expectation of repurchase, which had previously been reported as external sales.

Fluctuations in quarterly sales can be attributed to changes in pricing, volume, sales mix, and the impact of foreign currency translation.

Fluctuations in quarterly net earnings can be attributed to similar factors as noted above, pork and poultry industry processing margins, restructuring and other related costs, operating efficiencies, changes in the fair value of derivative and non-derivative financial instruments and biological assets, transitional costs incurred, provision adjustments, impairment losses, gains/losses on disposal of assets, changes in interest rates and long-term debt, and changes in tax regulations.

For an explanation and analysis of quarterly results, refer to the Company's Management's Discussion and Analysis for each of the respective quarterly periods which are filed on SEDAR+ and also available on the Company's website at www.mapleleaffoods.com.

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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 | MAPLE LEAF FOODS INC.

Management's Discussion and Analysis

14. MATERIAL ACCOUNTING POLICIES

The Company did not adopt any new accounting standards or policies during the quarter ended March 31, 2024.

Accounting Pronouncements Issued But Not Yet Effective

Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)

On May 23, 2023, the IASB issued Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7). The amendments require an entity to provide additional disclosures about its supplier finance arrangements. The amendments are effective for annual periods beginning on or after January 1, 2024. The Company intends to adopt this amendment in its Consolidated Financial Statements for the annual period ending December 31, 2024. The adoption of this amendment is not expected to have a material impact on the Consolidated Financial Statements.

Presentation and Disclosure in Financial Statements - IFRS 18

On April 9, 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements to improve reporting of financial performance. IFRS 18 replaces IAS 1 Presentation of Financial Statements. It carries forward many requirements from IAS 1 unchanged and introduces significant changes to the structure of a company's income statement, more discipline and transparency in presentation of management's own performance measures (commonly referred to as 'non-GAAP measures') and less aggregation of items into large, single numbers. IFRS 18 applies for annual reporting periods beginning on or after January 1, 2027 with the requirement of retrospective restatement. Earlier application is permitted. The Company intends to adopt this amendment in its Consolidated Interim Financial Statements for the period beginning January 1, 2027. The Company has yet to assess the impact of adoption on the Consolidated Interim Financial Statements.

All other IFRSs and amendments issued but not yet effective have been assessed by the Company and are not expected to have a material impact on the Consolidated Interim Financial Statements.

15. INTERNAL CONTROLS OVER FINANCIAL REPORTING

There has been no change in the Company's internal control over financial reporting during the period beginning on January 1, 2024 and ended on March 31, 2024, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

16. OUTLOOK

Maple Leaf Foods is a leading consumer protein company built on a powerful portfolio of brands, with a leading voice in sustainability and food security. The Company's strategic Blueprint defines how it will advance its vision to be the most sustainable protein company on earth while delivering on its commercial and financial objectives.

The Company recognizes that macro-economic factors and global conflict continue to define the current operating environment, contributing to higher interest rates, inflation, supply chain tensions, and pressures on agricultural, commodity and foreign exchange markets. As a result, consumers and businesses alike are adapting their behaviour which impacts demand and product mix. The Company leverages its data-driven insights to stay close to these dynamics, and it is confident in the resilience of its brands, business model and strategy to manage through prevailing economic conditions.

Earlier this year, Maple Leaf Foods refreshed its Blueprint and announced it was realigning its organizational structure to support its new strategic orientation as it brings together its Meat and Plant Protein businesses under a single umbrella with a clear and consistent focus on driving profitable growth in Canada, the U.S., and internationally across its entire protein portfolio.

With this focus, the Company expects to achieve an overall consolidated Adjusted EBITDA margin target of 14% to 16% in normal market conditions. Prior to this quarter, this Adjusted EBITDA margin target applied to the previous Meat Protein segment but now applies on a consolidated protein basis.

For the full year 2024, the Company expects:

• Low-to-midsingle-digit revenue growth
• Adjusted EBITDA margin expansion from 2023, supported by the benefits of:
• • Profitable growth of its leading portfolio of protein brands
  • Returns from investments in the London Poultry Plant and the Bacon Centre of Excellence
  • Leadership in sustainable meats
  • Driving operational and cost efficiencies
• To generate strong free cash flow and delever its balance sheet by:
• • Improving margins and overall profitability as outlined above

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MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2024 | MAPLE LEAF FOODS INC.

Management's Discussion and Analysis

• Generating the targeted returns on its capital investments at the London Poultry Plant and the Bacon Centre of Excellence, including reducing start-up expenses, maximizing efficiencies and onboarding new customers
• Exercising disciplined capital management, with total capital expenditures this year expected to be in the range of $170 - $190 million, largely focused on maintenance capital and optimization of its existing network

Maple Leaf Foods will also continue to advance its ambitious sustainability agenda, including leading the real food movement, advancing its animal care initiatives, seeking solutions to address food insecurity, accelerating its efforts to reduce its environmental footprint and continuing to deliver safe food made in a safe work environment.

17. NON-IFRS FINANCIAL MEASURES

The Company uses the following non-IFRS measures: Adjusted Operating Earnings, Adjusted Earnings per Share, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EBT, Construction Capital, Net Debt, Net Debt to trailing four quarters Adjusted EBITDA, Free Cash Flow and Return on Net Assets. Management believes that these non-IFRS measures provide useful information to investors in measuring the financial performance of the Company for the reasons outlined below. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS.

Adjusted Operating Earnings, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBT

Adjusted Operating Earnings, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBT are non-IFRS measures used by Management to evaluate financial operating results. Adjusted Operating Earnings is defined as earnings before other income, income taxes and interest expense adjusted for items that are not considered representative of ongoing operational activities of the business and certain items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying or related asset is sold or transferred. Adjusted EBITDA is defined as Adjusted Operating Earnings plus depreciation and intangible asset amortization, adjusted for items included in other expense that are considered representative of ongoing operational activities of the business. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by sales. Adjusted EBT is used annually by the Company to evaluate its performance and is a component of calculating bonus entitlements under the Company's short term incentive plan. It is defined as Adjusted EBITDA plus interest income, less depreciation and amortization, and interest expense.

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