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

First Quarter Results 2013 May 2, 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.

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 2 | Maple Leaf Foods

Resulted in a significant short-term earnings decline Adjusted Earnings per Share Adjusted Operating Earnings $ Millions 0.35 90 0.30 80 70 0.25 0.20 60 2012 50 0.15 2013 40 0.10 30 0.05 20 0.00 10 (0.05) 0 (0.10) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 figures have been restated to reflect changes in accounting for pension expense 3 | Maple Leaf Foods

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

Expected volatile market conditions in the first half of 2013  High grain/feed costs  Pork/hog markets; hedging $ Millions  Decline in Yen $32  Weaker by-products markets  Poultry processor margins $12 $8 ($24) ($4) $9 ($7) ($10) Q1 2012 Protein Prepared Meats Fresh and Prepared Meats Bakery Other Q1 2013 Market Network Prepared Transformation Improvement Conditions Transformation Meats Benefits Costs Volume 5 | Maple Leaf Foods

Solid track record of managing commodity markets, despite short-term volatility Since 2008, commodity prices have risen substantially CORN PORK CHICKEN BEEF 38% 40% 32% 29% Protein Group EBITDA Margin Growth 10% 8.2% 7.8% 8% 6.6% 5.6% 4.8% 6% 4.6% 4.0% 4% 2% 0% (1) 2006 2007 2008 2009 2010 2011 2012 (1) As reported, before pension accounting change 6 | Maple Leaf Foods

Outlook is positive Grain/feed costs declining Pork/hog markets expected to improve $ Millions Poultry processor margins improving $32 Yen pricing action required By-products markets improving $12 $8 ($24) ($4) $9 ($7) ($10) Q1 2012 Protein Prepared Meats Fresh and Prepared Meats Bakery Other Q1 2013 Market Network Prepared Transformation Improvement Conditions Transition Costs Meats Benefits Volume 7 | Maple Leaf Foods

Network transformation costs on track with expectations  Start-up costs  Duplicative manufacturing $ Millions overhead  Transformation SG&A $32 $12 $8 ($24) ($4) $9 ($7) ($10) Q1 2012 Protein Prepared Meats Fresh and Prepared Meats Bakery Other Q1 2013 Market Network Prepared Transformation Improvement Conditions Transformation Meats Benefits Costs Volume 8 | Maple Leaf Foods

…and increased benefits exceeded higher costs in the quarter Entering the intense final phase of transformation $ Millions $9 $32 vs. ($7) $12 $8 ($24) ($4) $9 ($7) ($10) Q1 2012 Protein Prepared Meats Fresh and Prepared Meats Bakery Other Q1 2013 Market Network Prepared Transformation Improvement Conditions Transformation Meats Benefits Costs Volume 9 | Maple Leaf Foods

8% prepared meats volume decline in the wake of pricing action  Four pricing events in 12 months totalling 5.7% to cover raw material costs $ Millions  Volumes improving monthly  Expecting year-over-year growth in Q2 $32 and balance of year  Substantial innovation launching in 2013 $12 $8 ($24) ($4) $9 ($7) ($10) Q1 2012 Protein Prepared Meats Fresh and Prepared Meats Bakery Other Q1 2013 Market Network Prepared Transformation Improvement Conditions Transformation Meats Benefits Costs Volume 10 | Maple Leaf Foods

Realizing early benefits from network transformation  Plant overhead savings $ Millions  Productivity gains  Product simplification benefits $32 $12 $8 ($24) ($4) $9 ($7) ($10) Q1 2012 Protein Prepared Meats Fresh and Prepared Meats Bakery Other Q1 2013 Market Network Prepared Transformation Improvement Conditions Transformation Meats Benefits Costs Volume 11 | Maple Leaf Foods

Bakery performance continues to improve  Operational improvements  SG&A reduction $ Millions  Pricing $32  Offset by lower quarterly volume $12 $8 ($24) ($4) $9 ($7) ($10) Q1 2012 Protein Prepared Meats Fresh and Prepared Meats Bakery Other Q1 2013 Market Network Prepared Transformation Improvement Conditions Transformation Meats Benefits Costs Volume 12 | Maple Leaf Foods

EBITDA margin declined to 3.6% in the quarter Protein Group 10% 9.0% 9.0% 7.8% 8.2% 7.9% 6.9% 8% 6.9% 6.4% 6% 4.9% 7.3% 6.6% 6.5% 4.3% 5.7% 6.4% 5.2% 4% 2% LTM margins 1.9% Quarterly margins 0% 2006 2007 2008 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 Bakery Group Q1/12 Segmented Q1/12 Q1/13 LTM Margins Q1/13 LTM 14% 11.5% 11.6% 12% 11.0% 11.0% 10.5% 10.2% 9.9% Protein 6.6% 7.5% 1.9% 6.2% 9.9% 10% 10.0% 8% 8.7% 8.1% 9.0% 8.0% 7.4% 6.8% 7.5% 6% Bakery 4.1% 8.1% 7.5% 10.5% 4% 4.1% LTM margins 2% Quarterly margins 0% Maple Leaf 5.4% 7.6% 3.6% 7.5% 2006 2007 2008 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 Maple Leaf 12% 9.8% 10% 8.9% 8.6% 8.2% 8.5% 8.0% 7.7% 7.1% 7.5% 8% 6.4% 7.3% 6% 7.3% 6.8% 5.8% 5.6% 5.4% 4% 3.6% LTM margins 2% Quarterly margins 0% 2006 2007 2008 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 13 | Maple Leaf Foods

Longer-term strategies are working EBITDA % excluding MLAN 10% 8.6% 8.0% 7.2% 6.7% 8% 6.6% 5.9% 5.8% 5.8% 5.5% 6% 3.9% 4% 2% 0% (1) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 EBITDA ($M) excluding MLAN $500 $419 $391 $358 $349 $400 $345 $329 $313 $306 $303 $300 $172 $200 $100 $0 (1) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Schneiders Product Launched Launched Acquisition Recall Fresh Pork Prepared Meats Restructuring Strategy (1) As reported, before pension accounting change 14 | Maple Leaf Foods

2013 is a year of intense activity Transformation Initiatives  Saskatoon cooked sausage commissioning underway  Winnipeg bacon commissioning underway; closed bacon facility in Saskatchewan Prepared  Meats Commissioning fresh/frozen sausage expansion in Brampton  New prepared meats facility commissioning begins in Q3/13  New eastern Distribution Centre opens Q3/13  Closing third Toronto bakery in June/13; consolidating volume  Closing two snack cakes bakeries in Q2/13 Bakery  Closed Edmonton fresh bakery in Q1/13  Selling specialty bakery in London, UK 15 | Maple Leaf Foods

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) 16 | Maple Leaf Foods

Revised EBITDA margin targets for pension accounting Original Revised 2015 Target 2015 Target 12.5% 11.4% Protein EBITDA % Bakery EBITDA % 12.5% 12.3% 12.5% 11.7% Total EBITDA % 17 | Maple Leaf Foods

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 $ Millions 120 100 80 60 40 20 - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011 2012 2013 Base Capital SAP-related Capital Hamilton Bakery-related Capital Prepared Meats Network 18 | Maple Leaf Foods | Maple Leaf Foods

Restructuring costs Total recorded Cash portion $ Millions in Q1/13 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 Cash outflows will occur with facility closures over the next two years 19 | Maple Leaf Foods

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 20 | Maple Leaf Foods