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Canada Packers Inc. — Management Reports 2025
Oct 9, 2025
48580_rns_2025-10-08_3efc4f9c-1f0b-433e-9dc2-2f27b94f1184.pdf
Management Reports
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Canada Packers
Combined Carve-Out Interim Financial Statements
For the First Quarter Ended
March 31, 2025
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2025 | CANADA PACKERS
Management's Discussion and Analysis
- Company Overview 3
- The Reorganization and Spin-Off 3
- Key Indicators of Performance 3
- Factors Affecting Results of Operations 5
- Basis of Presentation 5
- Results of Operations 6
- Capital Resources and Liquidity 7
- Capital Expenditures 8
- Off-Balance Sheet Arrangements 8
- Financial Instruments and Risk Management Activities 8
- Transactions with Related Parties 9
- Summary of Quarterly Results 10
- Material Accounting Policies 11
- Non-IFRS Financial Measures 11
- Subsequent Events 13
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2025 | CANADA PACKERS
Management's Discussion and Analysis
All dollar amounts are presented in Canadian dollars unless otherwise noted.
October 8, 2025
Canada Packers is a global leader in sustainably produced, premium quality, value-added pork products, built on a legacy of excellence and innovation. As used herein, the term "Canada Packers" or the "Company" refers to the Pork Operations (as defined below) prior to the completion of the Spin-Off (as defined below) and refers to Amalco (as defined below) after the completion of the Spin-Off. The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for the three months ended March 31, 2025 and 2024 should be read in conjunction with the unaudited combined carve-out financial statements of Canada Packers and related notes as at and for the three months ended March 31, 2025 and 2024 filed by Canada Packers on SEDAR+ on the date hereof (the "Combined Carve-Out Financial Statements").
This MD&A contains forward-looking information, which is based on management's reasonable assumptions and beliefs in light of the information currently available and is made as of the date of this MD&A. However, management will not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws. Actual results and the timing of events may differ materially from those anticipated in the forward-looking information as a result of various factors, including those described in "Risk Factors" of the Management Information Circular of Maple Leaf Foods Filed on SEDAR+ on May 12, 2025 (the "Circular").
The Combined Carve-Out Interim Financial Statements have been prepared in accordance with the International Accounting Standard ("IAS") 34 Interim Financial Reporting ("IAS 34") as issued by the International Accounting Standards Board ("IASB"). All amounts in this MD&A are expressed in Canadian dollars unless otherwise noted.
Additional information relating to Canada Packers (as defined herein) is available on SEDAR+ at www.sedarplus.ca.
1. COMPANY OVERVIEW
Canada Packers is a global leader in sustainably produced, premium quality, value-added pork products, built on a legacy of excellence and innovation. As a vertically integrated pork production and processing company, its diversified business mix and differentiated business strategy has demonstrated resiliency through market cycles. Canada Packers has established a track record of delivering margins that management believes compare favourably to many of the Company's peers. Canada Packers is among North America's largest producers of Raised Without Antibiotic ("RWA") pork and is a key supplier of RWA and conventional pork products to customers in Canada, the U.S., Japan, China and other international markets. Canada Packers prides itself on industry leading best practices in sustainability, animal care and worker safety. Canada Packers' sole business consists of the pork operations that were operated by Maple Leaf Foods Inc. ("Maple Leaf Foods" or the "Parent") and its affiliates up to the effective time of the Spin-Off consisting of, among other things, agricultural and hog production operations, primary pork processing, and a national and global sales and distribution network for fresh and frozen pork products, and includes all the assets and liabilities pertaining thereto that were held, directly or indirectly, by Maple Leaf Foods and its affiliates immediately prior to the effective time of the Spin-Off (but excluding the ham boning operations at the Lagimodiere prepared meats facility) (the "Pork Operations").
Canada Packers' two processing facilities in Brandon and Lethbridge have the capacity to process 4.9 million hogs annually. Approximately 45% of the roughly 4.0 million hogs per year that Canada Packers currently processes at its two facilities are raised by Canada Packers, and approximately 55% are sourced from third-party suppliers.
2. THE SPIN-OFF
Canada Packers Inc. ("Subco") and 16923534 Canada Inc. ("Newco") were incorporated under the Canada Business Corporations Act (the "CBCA") on December 9, 2024 and April 17, 2025, respectively, in connection with Maple Leaf Foods' spin-off of the Pork Operations into an independent, publicly traded company, pursuant to an arrangement under section 192 of the CBCA (the "Spin-Off"). In connection with the Spin-Off, Subco and Newco amalgamated on October 1, 2025 under the CBCA to form an amalgamated entity named "Canada Packers Inc." ("Canada Packers" or "Amalco") whose registered office is located at 6985 Financial Dr., Suite 201, Mississauga, Ontario, L5N 0A1, Canada. For the period from the date of its incorporation to July 28, 2025, Subco did not conduct any business activities other than those required for its formation.
The purpose of the Spin-Off was to separate Maple Leaf Foods into two independent, publicly listed companies: Maple Leaf Foods and Canada Packers. Upon the completion of the Spin-Off, the assets and liabilities of the Pork Operations were held by Amalco (named, as noted above, Canada Packers Inc.), and Maple Leaf Foods shareholders ("MLF Shareholders") received, for each common share of Maple Leaf Foods (each, a "MLF Common Share") held before the Spin-Off, one MLF Common Share and 0.2 of a common share of Canada Packers, with Maple Leaf Foods retaining a 16.0% ownership interest in Canada Packers. References herein to Maple Leaf Foods, where the context requires, refer only to the non-Canada Packers activities of Maple Leaf Foods. For additional information regarding the Spin-Off, please refer to the section entitled "The Arrangement" of the Circular, and the Subsequent Events section in this MD&A.
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2025 | CANADA PACKERS
3. KEY INDICATORS OF PERFORMANCE
To evaluate Canada Packers' performance, management monitors a number of key indicators, which are described below.
Sales
Canada Packers recognizes revenue from the sale of fresh pork primarily within Canada, the United States, and Asia. The Company's sales are to Maple Leaf Foods' prepared foods business, and also to arm's-length third parties through retail, foodservice and industrial channels. Sales are primarily impacted by commodity prices, hog volumes processed, mix of demand in different channels and geographies and foreign exchange. Following the Spin-Off, Canada Packers' sales channels have remained consistent with those described herein, and it is anticipated that they will largely continue to do so.
Gross profit
Gross profit refers to sales less cost of goods sold. Cost of goods sold primarily consists of costs associated with the raising, purchasing, and processing of hogs and is primarily impacted by feed input costs, hog prices and the costs of labour and overhead in processing facilities. Unrealized mark-to-market changes in valuations of biological assets and derivatives associated with hog costs are also included in gross profit. Since July 28, 2025, cost of goods sold has also included tolling fees paid to Maple Leaf Foods for co-manufacturing activities for certain products.
Selling, general and administrative expenses
Selling, general and administrative expenses ("SG&A") primarily consists of costs required to run the business that are not involved with the direct production of goods, such as selling, marketing, administrative, advertising and promotional expenses. It also includes functional costs that are directly incurred, and costs indirectly allocated from Maple Leaf Foods for support functions such as information services, finance, and human resources. These expenses are primarily impacted by inflation, variable compensation, and the timing of project and consulting spend. Since July 28, 2025, Canada Packers has additionally incurred brokerage fees payable to Maple Leaf Foods in respect of sales to some North American customers, licensing fees payable to Maple Leaf Foods in respect of trademarks and other intellectual property, and incremental costs associated with being a standalone public company that were not previously incurred. The shared SG&A allocated to Canada Packers from Maple Leaf Foods have, however, ceased, with the exception of costs under a short-term transitional services agreement for certain administrative services, and a long-term information services support agreement. Costs under the short-term transitional services agreement are at the approximate cost of the service based upon current cost incurred by Maple Leaf Foods in servicing Canada Packers. Costs under the long-term information services support agreement will be at the approximate cost based upon the current cost incurred by Maple Leaf Foods to support Canada Packers, and an incremental overhead fee. For more information, see the sections in the Circular under the headings "The Arrangement – Transaction Agreements – Long-Term Services Agreement" and "The Arrangement - Transition Agreements - Transition Services Agreement."
Interest expense
Interest expense consists of interest on leases attributable directly to Canada Packers and is primarily impacted by interest rates and capacity decisions regarding the number of barn spaces leased. Following the completion of the Spin-Off, interest expense has also included interest payable on credit facilities entered into by the Company for the purpose of funding the purchase of assets from Maple Leaf Foods and for the purpose of general liquidity. For more information, see "Subsequent Events." This additional interest expense will be impacted by changes in interest rates, as well as the amount of borrowings required to fund future investment decisions made by Canada Packers management. Historically all debt and related financing costs, other than those associated with lease obligations used directly in the operations of Canada Packers, have been incurred corporately by Maple Leaf Foods and have not been recorded or allocated to Canada Packers. As a result, interest expense and financing costs presented in the Combined Carve-Out Financial Statements are expected to differ significantly from the interest expense and financing costs Canada Packers might have incurred if it had operated as an independent group during the reporting periods presented.
Income tax expense (recovery)
Canada Packers' income tax expense (recovery) is primarily a function of its earnings before taxes, which has continued to be the case following the Spin-Off.
Adjusted Operating Earnings, Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") and Adjusted Earnings Before Taxes ("Adjusted EBT")
Management uses Adjusted Operating Earnings, Adjusted EBITDA and Adjusted EBT to monitor Canada Packers' overall performance, as it believes these measures more accurately reflect the structural performance of the business. These metrics exclude fair value adjustments on items that will be realized in future periods, as well as items not considered representative of ongoing operations.
Free Cash Flow and Adjusted Free Cash Flow
Management uses Free Cash Flow and Adjusted Free Cash Flow to evaluate cash flow after investing in maintenance of Canada Packers' asset base.
See the section titled "Non-IFRS Financial Measures" in this MD&A for reconciliations and definitions of these measures.
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2025 | CANADA PACKERS
4. FACTORS AFFECTING RESULTS OF OPERATIONS
Market Influences for Pork Value Chain
The following table outlines the change in key commodity prices that affected the business and financial results of the Canada Packers:
| (Unaudited) | Quarterly Averages | ||
|---|---|---|---|
| March 31, 2025 | March 31, 2024 | % Change | |
| Pork cutout (US$ per cwt)(i) | $ 94.93 | $ 89.63 | 5.9 % |
| Hog market price per cwt (US$ per cwt)(i) | $ 86.14 | $ 74.99 | 14.9 % |
| Hog market price per cwt (CAD per cwt)(i) | $ 123.59 | $ 101.12 | 22.2 % |
(i) Averages are based on daily prices within the period. Sources: CME and USDA.
The pork cutout significantly impacts the market selling price of pork products, which Canada Packers sells directly to customers. The hog market price is the main driver of the cost the business pays for its externally sourced hogs, which account for approximately 55% of Canada Packers' hog supply. Corn costs are a key factor in the cost of feed and therefore are a significant input cost to hogs raised by Canada Packers.
For the three months ended March 31, 2025, market pricing for the pork cutout was higher than for the same period in the prior year which contributed to overall sales growth. Gross profit margins were negatively affected by increases in hog market prices, which increased at a higher rate compared to the increase in cutout values, but partially offset by lower cost of hog production, primarily due to lower feed costs. Canada Packers' feed costs reflect feed purchased and consumed during the entire production cycle, whereas current market prices represent spot rates, not costs actually incurred in the period. Canada Packers uses derivatives and other non-derivative financial instruments to manage its exposure to fluctuations in commodity prices.
Impact of Currency
The following table outlines the changes in currency rates that have affected the business and financial results of Canada Packers:
| (Unaudited) | Quarterly Averages | ||
|---|---|---|---|
| March 31, 2025 | March 31, 2024 | % Change | |
| Canadian dollars per U.S. dollar(i) | $ 1.43 | $ 1.35 | 5.9 % |
| Japanese yen per Canadian dollar(i) | ¥ 106.26 | ¥ 110.12 | 3.5 % |
(i) Source: Bloomberg.
The U.S. dollar average for the three months ended March 31, 2025, strengthened relative to the Canadian dollar by 5.9% compared with the three months ended March 31, 2024. In general, a stronger U.S. dollar increases the value of Canada Packers' U.S. dollar denominated sales and the sales prices achieved by Canada Packers' primary pork processing.
The Japanese yen average for the three months ended March 31, 2025, strengthened relative to the Canadian dollar by 3.5% compared the three months ended March 31, 2024. In general, a stronger Japanese yen increases margins on exports to Japan for Canada Packers' fresh pork operations.
Canada Packers manages currency fluctuations through pricing, cost reductions, investment in value-added products as well as derivative instruments.
Animal Disease
Canada Packers' operations and the demand for Canada Packers' products can be significantly affected by outbreaks of disease among livestock, whether they occur within Canada Packers' production operations or in the operations of third parties. Canada Packers monitors herd health status and has strict bio-security procedures and employee training programs throughout its operations and ensures the animals receive veterinary medications as required. There were no disease outbreaks that materially impacted Canada Packers' operations during the three months ended March 31, 2025 or 2024.
Seasonality
Canada Packers is sufficiently large, with a diversified and balanced business mix, that seasonal factors across the parts of its operations tend to offset each other; therefore, in isolation, they do not have a material impact on Canada Packers' consolidated earnings. For example, in general, margins on fresh pork products tend to be higher in the last half of the year when hog prices historically decline which in turn lowers margins from raising hogs, maintaining balance within Canada Packers. Exceptions occur when unplanned events such as animal disease or disruptions to global supply have short term impacts on the business.
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2025 | CANADA PACKERS
5. BASIS OF PRESENTATION
Canada Packers historically has not been structured or operated as a stand-alone business within Maple Leaf Foods. As a result, the financial information included in this MD&A and in the Combined Carve-Out Financial Statements may not be indicative of the Company's future performance and does not necessarily reflect what its results of operations, financial position and cash flows would have been had Canada Packers operated as an independent group during the reporting periods presented. The basis of presentation is described in detail in the Notes to the Combined Carve-Out Financial Statements, including a quantification of allocated costs included in Note 12.
6. RESULTS OF OPERATIONS
Results for the three months ended March 31, 2025 and 2024
The following table sets out selected financial data of Canada Packers for the periods presented.
| (in millions of Canadian dollars)
(Unaudited) | Three months ended March 31, | | |
| --- | --- | --- | --- |
| | 2025 | 2024 | % Change(i) |
| Sales | $ 452.0 | $ 393.9 | 14.8 % |
| Cost of goods sold | 382.7 | 293.1 | 30.6 % |
| Gross profit | $ 69.3 | $ 100.7 | (31.2)% |
| Selling, general and administrative expenses | 18.2 | 16.4 | 11.2 % |
| Earnings before the following: | $ 51.1 | $ 84.4 | (39.4)% |
| Other expense | 3.1 | 0.5 | nm |
| Earnings before interest and income taxes | $ 48.0 | $ 83.9 | (42.8)% |
| Interest expense | 1.2 | 0.9 | 32.2 % |
| Earnings before income taxes | $ 46.8 | $ 83.0 | (43.6)% |
| Income tax expense | 12.7 | 21.9 | (42.1)% |
| Earnings | $ 34.1 | $ 61.1 | (44.2)% |
| Adjusted Operating Earnings(ii) | $ 38.2 | $ 14.2 | 169.0 % |
| Adjusted EBITDA(ii) | 49.6 | 26.3 | 88.6 % |
| Adjusted EBITDA Margin(iii) | 11.0 % | 6.7 % | 4.3 % |
| Adjusted EBT(ii) | $ 36.4 | $ 13.0 | 179.7 % |
| Earnings Margin(iii)(iii) | 7.6 % | 15.5 % | (7.9)% |
| Hogs processed (in thousands) | 1,059 | 997 | 6.3 % |
| Internally sourced - %(iii) | 45.0 % | 43.7 % | 1.3 % |
| Externally sourced - %(iii) | 55.0 % | 56.3 % | (1.3)% |
(i) "nm" indicates "not meaningful" where percentage changes are not considered informative.
(ii) Represents a non-IFRS measure. For more information, see "Non-IFRS Financial Measures" elsewhere in this document.
(iii) Changes in percentage amounts are calculated as 2025 value less 2024 value.
Quarterly Results
Sales for the first quarter of 2025 increased 14.8% to $452.0 million compared to $393.9 million for the first quarter of 2024. Sales growth was driven by higher volumes and higher average hog weights, favourable market pricing, and favourable U.S dollar and Japanese yen exchange rates.
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2025 | CANADA PACKERS
During the first quarter of 2025, Canada Packers processed 1.06 million hogs, a 6.3% increase over 1.00 million hogs processed in the first quarter of 2024. In the first quarter of 2025, 45% of processed hogs were internally raised and 55% were externally sourced, compared with 44% internally raised and 56% externally sourced in the first quarter of 2024.
Gross profit for the first quarter of 2025 was $69.3 million (gross margin of 15.3%) compared to $100.7 million (gross margin of 25.6%) in 2024. The non-cash fair value changes in biological assets was a benefit to gross profit of $16.4 million in the first quarter of 2025, compared to a $69.1 million benefit in the first quarter of 2024; these amounts are excluded in the calculation of Adjusted Operating Earnings, Adjusted EBITDA and Adjusted EBT. Gross profit was positively impacted by higher sales volume with increased hogs processed, lower feed costs and favourable currency exchange rates, which were partially offset by lower packer margins (pork cutout less hog market price).
SG&A expenses for the first quarter of 2025 were $18.2 million (4.0% of sales), which was relatively consistent with SG&A expenses incurred in the first quarter of 2024 of $16.4 million (4.2% of sales).
Interest expense for the first quarter of 2025 was $1.2 million, compared to $0.9 million for the first quarter of 2024, as a result of interest related to lease obligations.
Canada Packers' income tax expense for the first quarter of 2025 resulted in an effective tax rate of 27.1%. The effective tax rate for the first quarter of 2025 differs from the 2025 Canadian statutory tax rate of 26.4% primarily due to non-deductible expenses and income earned in other jurisdictions. Canada Packers' income tax expense for the first quarter of 2024 resulted in an effective tax rate of 26.4%, consistent with the 2024 Canadian statutory tax rate.
Earnings for the first quarter of 2025 were $34.1 million compared to $61.1 million in 2024. The decline in earnings is due to the factors outlined above in gross profit and SG&A.
Earnings margin for the first quarter of 2025 was 7.6% compared to 15.5% in 2024. The decline in margin is consistent with the factors noted above for earnings.
Adjusted Operating Earnings for the first quarter of 2025 were $38.2 million compared to $14.2 million in 2024 due to similar factors as noted above for gross profit and SG&A, excluding the change in fair value of biological assets and derivatives, which are excluded in the calculation of Adjusted Operating Earnings.
Adjusted EBITDA for the first quarter of 2025 was $49.6 million compared to $26.3 million in 2024 due to similar factors as noted above for Adjusted Operating Earnings.
Adjusted EBITDA margin for the first quarter of 2025 was 11.0% compared to 6.7% in 2024. The increase in margin is consistent with the factors noted above for Adjusted EBITDA.
Adjusted EBT for the first quarter of 2025 was $36.4 million compared to $13.0 million in 2024. The factors impacting Adjusted EBT in the first quarter of 2025 are similar to the factors noted above for Adjusted EBITDA and higher interest expense.
(1) Gross margin is defined as gross profit (loss) divided by sales.
7. CAPITAL RESOURCES AND LIQUIDITY
Canada Packers has historically relied on Maple Leaf Foods to manage its liquidity requirements at the corporate level including working capital and cash management, and funding operations as required. As such, Canada Packers has not had access to standalone credit facilities nor raised capital of its own. Following the Spin-Off, Canada Packers has entered into its own syndicated credit facility (see "Subsequent Events" elsewhere in this MD&A).
Canada Packers historically participated in a centralized cash management system of Maple Leaf Foods. Substantially all receipts and disbursements except those of foreign subsidiaries were processed through Maple Leaf Foods' centralized cash sweep accounts. The net result of processing all cash transactions through these cash sweep accounts is that cash was not allocated to Canada Packers, as it was historically held centrally. Cash and cash equivalents shown on the Combined Carve-Out Interim Balance Sheets of Canada Packers represent balances held by foreign subsidiaries that are not part of this program. Following the Spin-Off, it is expected that Canada Packers will generate strong operating cash flow, based upon high sales volume, operating margins and high turnover of fresh meat inventory. Accounts receivable and inventories are readily convertible into cash. These operating cash flows are expected to provide a base of underlying liquidity.
Cash and cash equivalents on the Combined Carve-Out Interim Balance Sheets was $14.1 million at March 31, 2025, compared to $11.4 million at March 31, 2024 and $18.8 million at December 31, 2024, these balances comprised cash held in foreign jurisdictions, and are not representative of what cash levels are expected to be maintained by Canada Packers as a standalone entity. Fluctuations in cash were attributable to sales volumes and pricing in foreign subsidiaries and timing of dividend and loan payments to Maple Leaf Foods. Following the Spin-Off, it is expected that cash and working capital requirements will be higher, reflecting the standalone business requirements of Canada Packers, including cash balances related to its sales and disbursements which have historically been managed through Maple Leaf Foods' centralized cash sweep accounts and are therefore not included in the cash and cash equivalents amounts reflected in the Combined Carve-Out Financial Statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q1 2025 | CANADA PACKERS
Cash flows for the quarter ended March 31, 2025 and 2024
Operating Activities
Cash provided by operations for the first quarter of 2025 was $43.5 million compared to $15.0 million in the same period of 2024. The increase was primarily driven by higher earnings net of non-cash items and lower investment in non-cash working capital.
Until October 1, 2025, working capital, other than inventory, was historically managed primarily by Maple Leaf Foods including collection and account payables policies and participation in the Maple Leaf Foods' accounts receivable securitization facility.
Investing Activities
Cash used in investing activities was $5.9 million for the first quarter of 2025 compared to $3.4 million in the same period of 2024. The increase is primarily due to increased capital expenditures related to maintenance projects associated with hog barns.
Financing Activities
Cash used in financing activities for the first quarter of 2025 was $42.2 million compared to $9.6 million in the same period of 2024, primarily due to higher net cash transfers with Maple Leaf Foods as a result of centralized cash and working capital management. Payments of lease obligations were relatively flat year over year. As a result of this centralized cash management, Canada Packers' historical financing cash flows are not indicative of financing cash flows of the capital structure of Canada Packers as a standalone entity.
Free Cash Flow and Adjusted Free Cash Flow (see Section 14. NON-IFRS FINANCIAL MEASURES) for the three months ended March 31, 2025 and 2024
Free Cash Flow for the first quarter of 2025 was $35.8 million compared to $10.5 million in the same period of 2024. The increase was primarily driven by increased earnings after adjusting for non-cash items and lower working capital investment, partially offset by increased Maintenance Capital spending.
Adjusted Free Cash Flow for the first quarter of 2025 was $39.1 million compared to $19.9 million in the same period of 2024. The increase was driven by similar factors as above for Free Cash Flow excluding the change in non-cash operating working capital.
8. CAPITAL EXPENDITURES
Capital expenditures (which are a component of cash used in investing activities and identified as "additions to long-term assets" in the Combined Carve-Out Financial Statements) in the first quarter of 2025 were $7.9 million compared to $4.9 million in the first quarter last year. The increase in spending from 2024 is primarily related to maintenance projects associated with hog barns.
9. OFF-BALANCE SHEET ARRANGEMENTS
Canada Packers has no material off-balance sheet arrangements.
10. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT ACTIVITIES
Canada Packers applies hedge accounting as appropriate and uses derivatives and other non-derivative financial instruments to manage its exposures to fluctuations in foreign exchange rates and commodity prices.
During the three months ended March 31, 2025, Canada Packers recorded a pre-tax loss of $1.1 million (2024: gain of $1.3 million) on non-designated financial instruments held for trading.
During the three months ended March 31, 2025 and 2024, hedge ineffectiveness was negligible.
The table below sets out fair value measurements of derivative financial instruments as at March 31, 2025 using the fair value hierarchy:
| ($ thousands)
(Unaudited) | Level 1 | Level 2 | Level 3 | Total |
| --- | --- | --- | --- | --- |
| Assets: | | | | |
| Foreign exchange contracts | $ — | $ 267 | $ — | $ 267 |
| Commodity contracts(i) | 1,753 | — | — | 1,753 |
| | $ 1,753 | 267 | — | $ 2,020 |
| Liabilities: | | | | |
| Foreign exchange contracts | $ — | 1,670 | — | $ 1,670 |
| | $ — | 1,670 | — | $ 1,670 |
(i) Level 1 Commodity Contracts are net settled and recorded as a net asset or liability on the Combined Carve-Out Interim Balance Sheets.
There were no transfers between levels for the three months ended March 31, 2025 and 2024.
Determination of fair value and the resulting hierarchy requires the use of observable market data whenever available. 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, Canada Packers 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)
Canada Packers estimates that $0.5 million, net of tax of $0.2 million, of the unrealized loss included in accumulated other comprehensive income (loss) will be reclassified into earnings (loss) within the next 12 months. The actual amount of this reclassification will be impacted by future changes in the fair value of financial instruments designated as cash flow hedges. The actual amount reclassified could differ from this estimated amount.
During the three months ended March 31, 2025, a loss of $1.2 million, net of tax of $0.4 million, was released to earnings from accumulated other comprehensive income (loss) and included in the net change for the year (2024: a gain of $0.7 million, net of tax of $0.2 million).
11. TRANSACTIONS WITH RELATED PARTIES
Transactions with Maple Leaf Foods
The Combined Carve-Out Financial Statements include transactions between Canada Packers and Maple Leaf Foods. During the periods covered by the Combined Carve-Out Financial Statements, Maple Leaf Foods was a related party, as Maple Leaf Foods was the ultimate parent company of, and controlled, Canada Packers up to the effective time of the Spin-off. Transactions between these companies have been recorded at their historical exchange amounts.
Canada Packers participated in a centralized cash management system with Maple Leaf Foods. Substantially all receipts and disbursements were processed through Maple Leaf Foods' centralized cash sweep accounts. The net result of processing all cash transactions through these cash sweep accounts is that cash was not allocated to Canada Packers. Instead, it is presented under net parent investment in the Combined Carve-Out Interim Balance Sheets.
Historically all debt has been held by Maple Leaf Foods in arrangements with third parties and has not been recorded for each respective operating unit within Maple Leaf Foods. For the purpose of these financial statements, no debt or related interest expense is allocated as the debt is not deemed to pertain specifically to Canada Packers, and Canada Packers will not assume the debt of Maple Leaf Foods upon separation. In addition, Maple Leaf Foods enters into certain interest rate swaps to hedge the variability in interest rate risk. As these swaps are directly associated with the interest expense of Maple Leaf Foods, which has not been allocated, neither these derivatives nor the related gains or losses have been allocated to Canada Packers. As a result, interest expense and financing costs may differ significantly from the interest expense and financing costs Canada Packers might have incurred if it had operated as an independent group during the reporting periods presented.
Accounts receivable from Maple Leaf Foods were recorded in accounts receivable on the Combined Carve-Out Interim Balance Sheets. Related party receivables are settled monthly on a net basis.
Maple Leaf Foods maintains a securitization program whereby it sells certain trade receivables in exchange for cash and non-interest bearing notes receivable. A portion of the receivables sold into the facility relate to Canada Packers and as a result, receivables related to Canada Packers are derecognized, consistent with their treatment at Maple Leaf Foods. Maple Leaf Foods collects the cash and notes receivable, and Canada Packers records a related party receivable from Maple Leaf Foods.
The following summarizes accounts receivable from Maple Leaf Foods:
10
| ($ thousands)
(Unaudited) | As at March 31, 2025 | As at March 31, 2024 | As at December 31, 2024 |
| --- | --- | --- | --- |
| Accounts receivable from Maple Leaf Foods | $ 10.9 | $ 18.9 | $ 7.9 |
Canada Packers received certain services and support functions from Maple Leaf Foods and was dependent on Maple Leaf Foods' ability to perform these functions. As a result, costs were included for these shared services based on direct usage when identifiable, or allocated based on a reasonable estimate of the utilization of services. These allocated costs may not be indicative of how Canada Packers would have operated had it been a standalone company. The allocated costs have been recorded in either cost of goods sold or selling, general and administrative expenses, depending on the nature of the support, in the Combined Carve-Out Interim Statements of Earnings.
Canada Packers received corporate administrative support including human resources, finance, legal and other corporate costs. These have been allocated to Canada Packers primarily based on the relative level of support provided to Canada Packers and Maple Leaf Foods. Compensation costs, including pension expense and share-based compensation expense, related to participating employees that indirectly provide support to Canada Packers have been allocated based on time spent.
Information technology costs, including the Canada Packers' share of using Maple Leaf Foods' software intangible assets, have been allocated primarily on a relative usage or access basis.
The following summarizes transactions with Maple Leaf Foods:
| Three months ended March 31, | ||
|---|---|---|
| ($ millions) | ||
| (Unaudited) | 2025 | 2024 |
| Sales to Maple Leaf Foods | $ 114.2 | $ 92.3 |
| Administrative support costs | $ 6.4 | $ 6.6 |
| Information technology costs | $ 5.6 | $ 3.8 |
| Pension costs | $ 2.3 | $ 2.4 |
| Share-based compensation costs | $ 1.2 | $ 0.9 |
12. SUMMARY OF QUARTERLY RESULTS
The following is a summary of unaudited quarterly financial information for each quarter in the last two fiscal years:
| First Quarter | Fourth Quarter | Third Quarter | Second Quarter | |||||
|---|---|---|---|---|---|---|---|---|
| ($ millions except margin) | ||||||||
| (Unaudited) | 2025 | 2024 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 |
| Sales | $ 452.0 | $ 393.9 | $ 424.0 | $ 394.5 | $ 420.2 | $ 426.7 | $ 420.5 | $ 411.7 |
| Gross Profit (Loss) | $ 69.3 | $ 100.7 | $ 94.3 | $ 33.9 | $ 47.6 | $ 28.4 | $ (11.8) | $ (23.4) |
| Earnings (Loss) | $ 34.1 | $ 61.1 | $ 50.6 | $ 12.0 | $ 19.4 | $ 9.0 | $ (22.9) | $ (30.4) |
| Earnings (Loss) Margin(i) | 7.6 % | 15.5 % | 11.9 % | 3.0 % | 4.6 % | 2.1 % | (5.4)% | (7.4)% |
| Adjusted Operating Earnings(i) | $ 38.2 | $ 14.2 | $ 34.7 | $ 7.6 | $ 28.1 | $ 14.4 | $ 21.8 | $ (12.1) |
| Adjusted EBITDA(i) | $ 49.6 | $ 26.3 | $ 45.2 | $ 20.9 | $ 41.5 | $ 25.8 | $ 33.2 | $ (1.1) |
| Adjusted EBITDA Margin(i) | 11.0 % | 6.7 % | 10.7 % | 5.3 % | 9.9 % | 6.0 % | 7.9 % | (0.3)% |
| Hogs processed (thousands) | 1,059 | 997 | 1,023 | 986 | 1,007 | 960 | 989 | 937 |
| Internally sourced - % | 45 % | 44 % | 44 % | 45 % | 44 % | 45 % | 44 % | 43 % |
| Externally sourced - % | 55 % | 56 % | 56 % | 55 % | 56 % | 55 % | 56 % | 57 % |
(i) Represents a non-IFRS measure. For more information, see "Non-IFRS Financial Measures" elsewhere in this document.
Fluctuations in quarterly sales can be attributed to changes in pricing, volume, sales mix, and foreign exchange.
Fluctuations in quarterly net earnings can be attributed to similar factors as noted above, pork industry processing margins, operating efficiencies, changes in the fair value of derivative and non-derivative financial instruments and biological assets, provision estimate adjustments, gains/losses on disposal of assets and changes in tax regulations.
11
13. MATERIAL ACCOUNTING POLICIES
Canada Packers did not adopt any new accounting standards or policies during the quarter ended March 31, 2025.
Accounting Pronouncements Issued But Not Yet Effective
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. Canada Packers has yet to assess the impact of adoption on the Combined Carve-Out Interim Financial Statements.
All other IFRSs and amendments issued but not yet effective have been assessed by Canada Packers and are not expected to have a material impact on the Combined Carve-Out Interim Financial Statements.
14. NON-IFRS FINANCIAL MEASURES
Canada Packers uses the following non-IFRS measures: Adjusted Operating Earnings, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EBT, Free Cash Flow, Adjusted Free Cash Flow and Earnings Margin. Management believes that these non-IFRS measures provide useful information to investors in measuring the financial performance of Canada Packers 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, Adjusted EBT and Earnings Margin
Adjusted Operating Earnings, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EBT and Earnings Margin are non-IFRS measures used by Management to evaluate financial operating results. Adjusted Operating Earnings is defined as earnings before income taxes adjusted for items that are not considered representative of ongoing 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 EBITDA is defined as Adjusted Operating Earnings plus depreciation and amortization, adjusted for items included in other expense that are not 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 Canada Packers 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 less depreciation and amortization and interest expense. Earnings Margin is calculated as earnings as determined in accordance with IFRS, divided by sales.
The table below provides a reconciliation of earnings before income taxes as reported under IFRS in the Combined Carve-Out Interim Financial Statements to Adjusted Operating Earnings, Adjusted EBITDA and Adjusted EBT for the periods ended, as indicated below. Management believes that these non-IFRS measures are useful in assessing the performance of Canada Packers ongoing operations and its ability to generate cash flows to fund its cash requirements, including Canada Packers capital investment program.
| ($ millions except margin)
(Unaudited) | Three Months Ended March 31, | |
| --- | --- | --- |
| | 2025 | 2024 |
| Earnings before income taxes | $ 46.8 | $ 83.0 |
| Interest expense | 1.2 | 0.9 |
| Other expense^{(i)} | 3.1 | 0.5 |
| Earnings from operations | $ 51.1 | $ 84.4 |
| Increase in fair value of biological assets^{(ii)} | (16.4) | (69.1) |
| Change in unrealized loss (gain) on derivative contracts^{(iii)} | 3.5 | (1.0) |
| Adjusted Operating Earnings | $ 38.2 | $ 14.2 |
| Depreciation and amortization | 12.1 | 12.4 |
| Items included in other expense representative of ongoing operations^{(iv)} | (0.6) | (0.3) |
| Adjusted EBITDA | $ 49.6 | $ 26.3 |
| Adjusted EBITDA margin^{(v)} | 11.0 % | 6.7 % |
| Interest expense | (1.2) | (0.9) |
| Depreciation and amortization | (12.1) | (12.4) |
| Adjusted EBT | $ 36.4 | $ 13.0 |
| Earnings Margin^{(v)} | 7.6 % | 15.5 % |
(i) Other expense primarily consists of Spin-Off costs allocated to Canada Packers and certain costs associated with sustainability projects.
(ii) Refer to Note 6 of the Combined Carve-Out Interim Financial Statements for further details regarding biological assets.
(iii) Changes in unrealized losses and gains on derivative contracts are reported within cost of goods sold in the Combined Carve-Out Interim Financial Statements.
(iv) These items primarily consist of activities that management believes to be representative of the ongoing operations of Canada Packers such as gains and losses on the sales of fixed assets or lease modifications as well as certain costs associated with sustainability projects.
(v) Changes in percentage amounts are calculated as 2025 value less 2024 value.
Free Cash Flow and Adjusted Free Cash Flow
Free Cash Flow and Adjusted Free Cash Flow are non-IFRS measures used by Management to evaluate cash flow after investing in maintenance of the Company's asset base. Free Cash Flow is defined as cash provided by operating activities, less Maintenance Capital$^{(ii)}$ and associated interest paid and capitalized. Adjusted Free Cash Flow is defined as Free Cash Flow modified to exclude changes in non-cash operating working capital. The following table calculates Free Cash Flow and Adjusted Free Cash Flow for the periods indicated.
| ($ millions) | Three Months Ended March 31, | |
|---|---|---|
| 2025 | 2024 | |
| Cash provided by operating activities | $ 43.5 | $ 15.0 |
| Maintenance Capital^{(i)} | (7.6) | (4.4) |
| Interest paid and capitalized related to Maintenance Capital | (0.1) | (0.1) |
| Free Cash Flow | $ 35.8 | $ 10.5 |
| Changes in non-cash operating working capital^{(ii)} | 3.3 | 9.4 |
| Adjusted Free Cash Flow | $ 39.1 | $ 19.9 |
(i) Maintenance Capital is defined as non-discretionary investment required to maintain the Company's existing operations and competitive position, as estimated by management.
(ii) Changes in non-cash operating working capital are not considered a source or use for the purposes of adjusted free cash flow.
15. SUBSEQUENT EVENTS
On October 1, 2025, the Spin-Off was completed and MLF Shareholders received, for each MLF Common Share held before the Spin-Off as of the September 30, 2025 record date, one MLF Common Share and 0.2 of a Canada Packers Share, with Maple Leaf Foods retaining a 16.0% ownership interest in Canada Packers. Following the Spin-Off, Canada Packers is now a separate independent, publicly traded company under the ticker symbol "CPKR" on the Toronto Stock Exchange. Based upon 124,899,062 issued and outstanding MLF Common Shares as of September 30, 2025, on October 1, 2025, 29,737,473 Canada Packers Common Shares were outstanding immediately following completion of the Arrangement, of which 24,979,414 were allocated pro rata to MLF Shareholders and 4,758,059 of which were retained by MLF. As of the date hereof, 29,737,459 Canada Packers Shares are outstanding, of which 24,979,400 were distributed pro-rata to MLF Shareholders and 4,758,059 of which were retained by MLF. An unlimited number of Canada Packers Shares are authorized for issuance.
In contemplation of the separation of the Pork Operations from Maple Leaf Foods pursuant to the Spin-Off, Canada Packers entered into a Separation Agreement and various other agreements with Maple Leaf Foods as of July 28, 2025, to transfer the Pork Operations to Canada Packers and provide a framework for its relationship with Maple Leaf Foods after completion of the Spin-Off, including a Supply Agreement, a Long-Term Services Agreement, a Support Services Agreement, a Pensions and Benefits Agreement and an employee matters agreement, collectively, the "Spin-Off Agreements". The material Spin-Off Agreements were filed on SEDAR+ on October 1, 2025.
On October 1, 2025, Canada Packers entered into a four-year senior secured credit agreement ("the Credit Agreement") with a syndicate of financial institutions led by Bank of Montreal, under which it has the capacity to incur indebtedness of up to $615.0 million, consisting of $415.0 million in aggregate principal amount of term loans and a $200.0 million revolving credit facility. Letters of credit are available under the Credit Agreement in an aggregate amount of up to $50.0 million. As of October 1, 2025, $415.0 million was outstanding under the term loans and no amount was drawn under the revolving credit facility. Approximately $0.7 million letters of credit were outstanding.
Canada Packers received net proceeds from borrowings under the Credit Agreement net of debt issuance costs. In connection with the borrowings, Canada Packers used the net proceeds of such indebtedness to repay its outstanding indebtedness with Maple Leaf Foods, and to effect a return of capital to Maple Leaf Foods, with the remaining amount being retained by Canada Packers. After the Spin-Off, Canada Packers will no longer rely on Maple Leaf Foods' central cash management and financing program and will instead rely on its own credit and financing arrangements.