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Canada Packers Inc. Management Reports 2025
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Management Reports
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Management's Discussion and Analysis
For the Third Quarter Ended
September 30, 2025
CANADA PACKERS
CANADA PACKERS INC.
1
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q3 2025 | CANADA PACKERS
Management's Discussion and Analysis
- Company Overview 3
- The Spin-Off 3
- Key Indicators of Performance 4
- Factors Affecting Results of Operations 5
- Basis of Presentation 5
- Results of Operations 6
- Capital Resources and Liquidity 8
- Capital Expenditures 10
- Off-Balance Sheet Arrangements 10
- Financial Instruments and Risk Management Activities 10
- Other Matters 11
- Transactions with Related Parties 11
- Summary of Quarterly Results 12
- Material Accounting Policies 12
- Non-IFRS Financial Measures 13
- Subsequent Events 15
- Forward-Looking Statements 15
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q3 2025 | CANADA PACKERS
Management's Discussion and Analysis
All dollar amounts are presented in Canadian dollars unless otherwise noted.
November 4, 2025
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for the three and nine month periods ended September 30, 2025 and 2024 should be read in conjunction with the unaudited Condensed Consolidated Interim Financial Statements and related notes as at and for the three and nine month periods ended September 30, 2025 and 2024 (the "Condensed Consolidated Interim Financial Statements"), and in conjunction with the Company's 2022-2024 Annual Audited Combined Carve-Out Financial Statements ("Combined Carve-Out Financial Statements").
All amounts in this MD&A are expressed in Canadian dollars unless otherwise noted.
Additional information relating to Canada Packers Inc. ("Canada Packers" or the "Company") 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. It 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, and other international markets.
Canada Packers' two processing facilities in Brandon, Manitoba and Lethbridge, Alberta 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.
The address of Canada Packers' registered office is 6985 Financial Dr., Suite 201, Mississauga, Ontario, L5N 0A1, Canada.
The Company employees approximately 3,700 people in its processing facilities, hog production activities and head office.
Canada Packers Inc. trades on the Toronto Stock Exchange under the symbol "CPKR". As at November 4, 2025, there are 29,736,736 common shares issued and outstanding.
2. THE SPIN-OFF
The predecessors to the Company - one being a corporation also named Canada Packers Inc. ("Subco") and the other being a corporation named 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 Inc.'s ("Maple Leaf Foods") spin-off of the Pork Operations (as defined below) 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 the Company. 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. For the period from the date of its incorporation to October 1, 2025, Newco did not conduct any business activities other than those required for its formation. See "Subsequent Events" elsewhere in this MD&A for further details.
Before July 28, 2025, the business that is now operated by the Company consisted of the pork operations that were at the time operated by Maple Leaf Foods and its affiliates 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 included all the assets and liabilities pertaining thereto that were held, directly or indirectly, by Maple Leaf Foods and its affiliates (but excluding the ham boning operations at the Lagimodiere prepared meats facility) ("Pork Operations"). 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 Subco, as a predecessor to Canada Packers, and to provide a framework for Subco's relationship with Maple Leaf Foods, including a Supply Agreement, a Long-Term Services Agreement, a Support Services Agreement, a Pensions and Benefits Agreement and an Employment Matters Agreement (collectively, the "Spin-Off Agreements"). The material Spin-Off Agreements were filed on SEDAR+ on October 1, 2025. Subco was a wholly owned subsidiary of Maple Leaf Foods until October 1, 2025.
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 Canada Packers, 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. References below to the Company or Canada Packers include (1) prior to July 28, 2025, the Pork Operations, and (2) on and after July 28, 2025, but prior to October 1, 2025, Subco (as a predecessor to the Company), in each case except where the context otherwise requires. For additional information regarding the Spin-Off, please see "The Arrangement" section of the Management Information Circular of Maple Leaf Foods dated May 1, 2025 and filed on Maple Leaf Foods' SEDAR+ profile on May 12, 2025 (the "Circular"), and the Subsequent Events section in this MD&A.
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q3 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, Asia, and the United States. 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 are anticipated to remain consistent with those described herein.
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 the cost of ham-boning co-manufacturing services provided by Maple Leaf Foods.
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 (prior to July 28, 2025) 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, SG&A has also included costs for services provided by Maple Leaf Foods for information services, brokerage fees in respect of sales to certain North American customers, licensing fees in respect of intellectual property, as well as incremental costs associated with being a standalone public company that were not previously incurred. Effective July 28, 2025, the allocation of shared SG&A to Canada Packers from Maple Leaf Foods has ceased, with the exception of costs under a short-term transitional services agreement for certain administrative services. 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 will include 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" in this MD&A. 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 Condensed Consolidated Interim Financial Statements 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 will continue to be the case following the Spin-Off.
Adjusted Operating Earnings, Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), Adjusted Earnings Before Taxes ("Adjusted EBT"), Free Cash Flow and Adjusted Free Cash Flow
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. From 2015 to 2024, exclusive of the material impacts of the global market disruptions in 2022 and 2023, the Pork Operations maintained robust profitability, delivering, on average, double-digit Adjusted EBITDA margins. Starting in 2022 and extending through 2023, global pork markets faced unprecedented volatility due to a confluence of external factors, including the COVID-19 pandemic and the emergence of a post-pandemic economy marked by supply chain disruptions, labour shortages, historically high feed costs, and the global impact of African Swine Fever ("ASF"), particularly in China, followed by China's significant pork supply recovery. The financial impact on the industry was most pronounced starting in Q4 2022 to Q1 2024.
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q3 2025 | CANADA PACKERS
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.
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 Canada Packers:
| (Unaudited) | Quarterly Averages | YTD Averages | ||||
|---|---|---|---|---|---|---|
| September 30, 2025 | September 30, 2024 | % Change | September 30, 2025 | September 30, 2024 | % Change | |
| Pork cutout (US$ per cwt)(i) | $ 114.70 | $ 97.96 | 17.1 % | $ 104.12 | $ 95.69 | 8.8 % |
| Hog market price per cwt (US$ per cwt)(i) | $ 107.91 | $ 88.53 | 21.9 % | $ 95.90 | $ 84.67 | 13.3 % |
| Packer spread (US$)(ii) | $ 6.79 | $ 9.43 | (28.0)% | $ 8.22 | $ 11.02 | (25.4)% |
(i) Averages are based on daily prices within the period. Sources: CME and USDA.
(ii) Packer spread calculated as pork cutout less hog market price.
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. The packer spread represents the margin earned from externally purchased hogs. It is calculated as the difference between the price realized on the meat cutout (i.e., the aggregate value of the various meat products derived from processing a hog) and the cost of acquiring a live hog from the market. 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 and nine months ended September 30, 2025, market pricing for the pork cutout was higher than for the same periods 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 were 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 | YTD Averages | ||||
|---|---|---|---|---|---|---|
| September 30, 2025 | September 30, 2024 | % Change | September 30, 2025 | September 30, 2024 | % Change | |
| Canadian dollars per U.S. dollar(i) | $ 1.38 | $ 1.36 | 1.5 % | $ 1.40 | $ 1.36 | 2.9 % |
| Japanese yen per Canadian dollar(i) | ¥ 107.08 | ¥ 109.36 | 2.1 % | ¥ 105.95 | ¥ 111.11 | 4.6 % |
(i) Source: Bloomberg.
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.
In general, a stronger Japanese yen increases the value of Canada Packers' Japanese yen denominated sales and the sales prices achieved by 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 and nine months ended September 30, 2025 or 2024.
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q3 2025 | CANADA PACKERS
Seasonality
Canada Packers is sufficiently large, with a diversified global customer base 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.
5. BASIS OF PRESENTATION
Prior to July 28, 2025, Canada Packers historically was not 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 Condensed Consolidated Interim 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 company during the reporting periods prior to July 28, 2025. The basis of presentation is described in detail in the Notes to the Condensed Consolidated Interim Financial Statements, including a quantification of allocated costs included in Note 12.
6. RESULTS OF OPERATIONS
Results for the Three and Nine Months Ended September 30, 2025 and 2024
The following table sets out selected financial data of Canada Packers for the periods presented.
| (in millions of Canadian dollars)(i)
(Unaudited) | Three months ended September 30, | | | Nine months ended September 30, | | |
| --- | --- | --- | --- | --- | --- | --- |
| | 2025 | 2024 | % Change(ii) | 2025 | 2024 | % Change(ii) |
| Sales | $ 481.8 | $ 420.2 | 14.7 % | $ 1,407.0 | $ 1,234.5 | 14.0 % |
| Cost of goods sold | 418.6 | 372.6 | 12.4 % | 1,219.8 | 1,098.0 | 11.1 % |
| Gross profit | $ 63.2 | $ 47.6 | 32.8 % | $ 187.2 | $ 136.5 | 37.1 % |
| Selling, general and administrative expenses | 20.5 | 18.4 | 11.4 % | 57.4 | 51.0 | 12.5 % |
| Earnings before the following: | $ 42.7 | $ 29.1 | 46.4 % | $ 129.8 | $ 85.5 | 51.7 % |
| Other expense | 5.6 | 0.4 | nm | 11.2 | 2.5 | nm |
| Earnings before interest and income taxes | $ 37.0 | $ 28.7 | 29.0 % | $ 118.7 | $ 83.1 | 42.8 % |
| Interest expense | 1.0 | 1.2 | (15.4)% | 3.3 | 3.3 | 0.5 % |
| Earnings before income taxes | $ 36.0 | $ 27.5 | 30.9 % | $ 115.4 | $ 79.8 | 44.5 % |
| Income tax expense | 10.4 | 8.1 | 29.0 % | 32.2 | 22.1 | 45.5 % |
| Earnings | $ 25.6 | $ 19.4 | 31.7 % | $ 83.2 | $ 57.7 | 44.2 % |
| Adjusted Operating Earnings(iii) | $ 47.5 | $ 28.0 | 69.9 % | $ 125.9 | $ 64.1 | 96.4 % |
| Adjusted EBITDA(iii) | $ 60.2 | $ 41.4 | 45.4 % | $ 161.2 | $ 101.0 | 59.6 % |
| Adjusted EBITDA Margin(iii)(iv) | 12.5 % | 9.9 % | 2.6 % | 11.5 % | 8.2 % | 3.3 % |
| Adjusted EBT(iii) | $ 46.0 | $ 27.7 | 66.1 % | $ 120.7 | $ 60.3 | 100.2 % |
| Earnings Margin(iii)(iv) | 5.3 % | 4.6 % | 0.7 % | 5.9 % | 4.7 % | 1.2 % |
| Hogs processed (in thousands)(v) | 1,038 | 1,001 | 3.7 % | 3,133 | 2,977 | 5.2 % |
| Internally sourced - %(iv) | 47.2 % | 44.1 % | 3.1 % | 47.2 % | 44.1 % | 3.1 % |
| Externally sourced - %(iv) | 52.8 % | 55.9 % | (3.1)% | 52.8 % | 55.9 % | (3.1)% |
(i) Totals may not add due to rounding.
(ii) "nm" indicates "not meaningful" where percentage changes are not considered informative.
(iii) Represents a non-IFRS measure. For more information, see "Non-IFRS Financial Measures" elsewhere in this document.
(iv) Changes in percentage amounts are calculated as 2025 value less 2024 value.
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q3 2025 | CANADA PACKERS
(n) Represents a supplemental operational measure.
Quarterly Results
Sales for the third quarter of 2025 increased 14.7% to $481.8 million compared to $420.2 million for the third 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.
During the third quarter of 2025, Canada Packers processed 1.04 million hogs, a 3.7% increase over 1.00 million hogs processed in the third quarter of 2024. In the third quarter of 2025, 47% of processed hogs were internally raised and 53% were externally sourced, compared with 44% internally raised and 56% externally sourced in the third quarter of 2024.
Gross profit for the third quarter of 2025 was $63.2 million (gross margin⁽¹⁾ of 13.1%) compared to $47.6 million (gross margin⁽²⁾ of 11.3%) in 2024. The non-cash fair value changes in biological assets reduced gross profit by $4.9 million in the third quarter of 2025, compared to an increase of $3.7 million in the third quarter of 2024. These amounts are excluded in the calculation of Adjusted Operating Earnings, Adjusted EBITDA and Adjusted EBT. Gross profit is calculated as sales less cost of goods sold. It was positively impacted by favourable market conditions, including higher pork cutout values and lower feed costs which improved the vertically integrated spread, and favourable U.S. dollar and Japanese yen exchange rates. Gross profit was also positively impacted by higher processing volume and lower feed costs which was a combination of both market and operational efficiencies. Packer spread (pork cutout less hog market price) declined year over year.
SG&A expenses for the third quarter of 2025 were $20.5 million (4.3% of sales), compared to $18.4 million (4.4% of sales) last year. The increase primarily reflects costs incurred under the Long-Term Services Agreement and Supply Agreement.
Interest expense for the third quarter of 2025 was $1.0 million, consistent with the $1.2 million recognized for the third quarter of 2024, primarily reflecting interest related to lease obligations.
Canada Packers' income tax expense for the third quarter of 2025 resulted in an effective tax rate of 29.0%. The effective tax rate for the third 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 third quarter of 2024 resulted in an effective tax rate of 29.4%. The effective tax rate for the third quarter of 2024 differs from the 2024 Canadian statutory tax rate of 26.4% primarily due to the mix of income earned in different jurisdictions.
Earnings for the third quarter of 2025 were $25.6 million compared to $19.4 million in 2024. The change in earnings is due to the factors outlined above for gross profit and SG&A, as well as an increase in other expenses from 2024 to 2025 due to transaction costs in connection with the Spin-Off which are excluded from the calculation of Adjusted Operating Earnings, Adjusted EBITDA and Adjusted EBT.
Earnings margin for the third quarter of 2025 was 5.3% compared to 4.6% in 2024. The change in margin is consistent with the factors noted above for earnings.
Adjusted Operating Earnings for the third quarter of 2025 were $47.5 million compared to $28.0 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 third quarter of 2025 was $60.2 million compared to $41.4 million in 2024 due to similar factors as noted above for Adjusted Operating Earnings.
Adjusted EBITDA margin for the third quarter of 2025 was 12.5% compared to 9.9% in 2024. The increase in margin is consistent with the factors noted above for Adjusted EBITDA.
Adjusted EBT for the third quarter of 2025 was $46.0 million compared to $27.7 million in 2024. The factors impacting Adjusted EBT in the third quarter of 2025 are similar to the factors noted above for Adjusted EBITDA and lower interest expense.
Year-to-Date Results
Year-to-date sales for 2025 increased 14.0% to $1.4 billion compared to $1.2 billion for the corresponding period in 2024, driven by higher volumes and higher average hog weights, favourable market pricing, and favourable U.S. and Japanese yen exchange rates.
During the year-to-date period in 2025, Canada Packers processed 3.13 million hogs, a 5.2% increase over 2.98 million hogs processed in the corresponding period in 2024. Year-to-date 2025, 47% of processed hogs were internally raised and 53% were externally sourced, compared with 44% internally raised and 56% externally sourced in the corresponding period in 2024.
Year-to-date gross profit for 2025 was $187.2 million (gross margin⁽³⁾ of 13.3%) compared to $136.5 million (gross margin⁽⁴⁾ of 11.1%) for the corresponding period in 2024. The non-cash fair value changes in biological assets increased gross profit by $3.4 million in 2025 year-to-date, compared to $20.4 million in the corresponding period in 2024; these amounts are excluded in the calculation of Adjusted Operating Earnings, Adjusted EBITDA and Adjusted EBT. The increased gross profit was driven primarily by favourable market conditions, including higher pork cutout values and lower feed costs which improved the vertically integrated spread, and favourable U.S. and Japanese yen exchange rates. Packer spread (pork cutout less hog market price) was relatively flat year over year.
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q3 2025 | CANADA PACKERS
Year-to-date SG&A expenses for 2025 were $57.4 million (4.1% of sales), compared to $51.0 million (4.1% of sales) for the corresponding period in 2024. The increase primarily reflects costs incurred under the Long-Term Services Agreement and Supply Agreement.
Year-to-date interest expense for 2025 was $3.3 million, consistent with the $3.3 million recognized for the corresponding period in 2024, primarily reflecting interest related to lease obligations.
Canada Packers' year-to-date income tax expense for 2025 resulted in an effective tax rate of 27.9%. The effective tax rate for the year-to-date 2025 differs from the year-to-date 2025 Canadian statutory tax rate of 26.4% primarily due to non-deductible expenses and income earned in other jurisdictions. Canada Packers' year-to-date income tax expense for 2024 resulted in an effective tax rate of 27.7%. The effective tax rate for year-to-date 2024 differs from year-to-date 2024 Canadian statutory tax rate of 26.4% primarily due to the reasons described above.
Year-to-date earnings for 2025 were $83.2 million, compared to $57.7 million for the corresponding period in 2024. The improvement in earnings is due to similar factors as noted above for gross profit and SG&A, as well as an increase in other expenses from 2024 to 2025 due to transaction costs relating to the Spin-Off, which are excluded from the calculation of Adjusted Operating Earnings, Adjusted EBITDA and Adjusted EBT.
Year-to-date earnings margin for 2025 was 5.9% compared to 4.7% for the corresponding period in 2024. The increase in margin is consistent with the factors noted above for earnings.
Year-to-date Adjusted Operating Earnings for 2025 were $125.9 million compared to $64.1 million for the corresponding period in 2024 due to similar factors as noted above for gross profit and SG&A, excluding the changes in fair value of biological assets and derivatives, which are excluded in the calculation of Adjusted Operating Earnings.
Year-to-date Adjusted EBITDA for 2025 was $161.2 million compared to $101.0 million for the corresponding period in 2024 due to similar factors as noted above for Adjusted Operating Earnings.
Year-to-date Adjusted EBITDA margin for 2025 was 11.5% compared to 8.2% for the corresponding period in 2024. The increase in margin is consistent with the factors noted above for Adjusted EBITDA.
Year-to-date Adjusted EBT for 2025 was $120.7 million compared to $60.3 million for the corresponding period in 2024. The factors impacting Adjusted EBT in year-to-date 2025 are similar to the factors noted above for Adjusted EBITDA and including the impact of interest expense.
(1) Gross margin is defined as gross profit (loss) divided by sales.
7. CAPITAL RESOURCES AND LIQUIDITY
Until the Spin-Off, Canada Packers relied on Maple Leaf Foods to manage its liquidity requirements at the corporate level including working capital, cash management, and funding of operations as required. As such, Canada Packers did not have access to standalone credit facilities nor raise capital of its own. Following the Spin-Off, Canada Packers entered into its own credit agreement. See "Subsequent Events" elsewhere in this MD&A for further details.
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 Condensed Consolidated Interim Balance Sheets of Canada Packers represent balances held by foreign subsidiaries that are not part of this program, and beginning July 28, 2025, net cash generated by Canada Packers and related party financing with Maple Leaf Foods. 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 Condensed Consolidated Interim Balance Sheets was $54.3 million at September 30, 2025, compared to $15.0 million at September 30, 2024 and $18.8 million at December 31, 2024. These balances comprised cash held in foreign jurisdictions, and net cash generated beginning July 28, 2025, and are not representative of what cash levels are expected to be maintained by Canada Packers as a standalone entity.
Fluctuations in cash after July 28, 2025 were attributable to Canada Packers no longer participating in the centralized cash management system of Maple Leaf Foods, and cash received from the related party loan from Maple Leaf Foods (see "Subsequent Events" elsewhere in this MD&A).
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 Condensed Consolidated Interim Financial Statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q3 2025 | CANADA PACKERS
Cash flows for the quarters and year-to-date periods ended September 30, 2025 and 2024
Operating Activities
Cash provided by operations for the third quarter of 2025 was $39.1 million compared to cash provided by operations of $34.0 million in the same period of 2024, reflecting higher earnings, net of non-cash adjustments and higher investment in non-cash working capital, primarily due to the cessation of the accounts receivable securitization program.
Year-to-date cash provided by operations for 2025 was $159.7 million compared to $84.7 million in the same period of 2024. The increase was primarily driven by higher earnings, net of non-cash adjustments and lower investment in non-cash working capital, despite the cessation of the accounts receivable securitization program.
Until October 1, 2025, working capital, other than inventory, was historically managed primarily by Maple Leaf Foods including cash collection and account payables policies, and participation in the Maple Leaf Foods accounts receivable securitization facility.
Investing Activities
Cash used in investing activities was $6.6 million for the third quarter of 2025 compared to $6.6 million in the same period of 2024, with higher additions to long-term assets, offset by proceeds from insurance claims related to a 2023 barn fire in the current quarter.
Year-to-date cash used in investing activities was $19.5 million for 2025 compared to $18.0 million in the same period of 2024. The decrease is primarily related to additions to long-term assets net of increase in proceeds from insurance claims in the current year, with consistent capital asset additions.
Financing Activities
Cash provided by financing activities for the third quarter of 2025 was $10.1 million compared to $22.2 million use of cash in the same period of 2024, primarily reflecting the $18.0 million proceeds of a non-interest bearing loan from Maple Leaf Foods in the third quarter of 2025, and lower net transfers to parent.
Year-to-date cash used in financing activities for 2025 was $104.6 million compared to $61.2 million in the same period of 2024, primarily due to $61.0 million higher net transfers to parent, offset by the $18.0 million loan from Maple Leaf Foods. Payments of lease obligations were relatively flat year over year.
Free Cash Flow and Adjusted Free Cash Flow (see "Non-IFRS Financial Measures" elsewhere in this MD&A) for the quarters and year-to-date periods ended September 30, 2025 and 2024
Free Cash Flow and Adjusted Free Cash Flow are non-IFRS measures used by investors to evaluate cash flow after investing in maintenance of the Company's asset base. See "Non-IFRS Financial Measures" elsewhere in this MD&A for important information regarding these Non-IFRS Financial Measures.
Quarterly Results
Free Cash Flow for the third quarter of 2025 was $29.6 million compared to $25.5 million in the same period of 2024. The amounts reflect higher cash from operations, offset by higher maintenance capital expenditures compared to the prior year.
Adjusted Free Cash Flow for the third quarter of 2025 was $42.4 million compared to $28.3 million in the same period of 2024. The increase primarily reflects higher earnings, offset by higher maintenance capital expenditures.
Year-to-Date Results
Free Cash Flow for year-to-date 2025 was $134.3 million compared to $64.6 million in the same period of 2024. The increase was driven by increase in cash from operations as described above, partially offset by $5.3 million higher maintenance capital expenditures.
Adjusted Free Cash Flow for year-to-date 2025 was $127.7 million compared to $76.4 million in the same period of 2024, primarily reflecting an increase in earnings, partially offset by $5.3 million higher maintenance capital expenditures.
MANAGEMENT'S DISCUSSION AND ANALYSIS | Q3 2025 | CANADA PACKERS
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 Condensed Consolidated Interim Financial Statements) in the third quarter of 2025 were $10.6 million compared to $8.4 million in the third quarter last year. The increase in spending is primarily due to investments in delivering automation in operations.
Capital expenditures for the year to date period for 2025 were $26.3 million compared to $21.1 million for the corresponding period in 2024. The increase in spending is primarily related to maintenance projects associated with hog barns.
Capital additions were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| ($ millions) | 2025 | 2024 | 2025 | 2024 |
| Maintenance Capital(i) | $ 9.5 | $ 8.5 | $ 25.4 | $ 20.1 |
| Other | 0.4 | — | 0.2 | 1.0 |
| Capital Expenditures | $ 9.9 | $ 8.5 | $ 25.6 | $ 21.1 |
(i) Maintenance Capital is defined as non-discretionary investment required to maintain the Company's existing operations and competitive position.
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 September 30, 2025, Canada Packers recorded a pre-tax gain of $1.3 million (2024: loss of $0.6 million) on non-designated financial instruments held for trading.
During the nine months ended September 30, 2025, Canada Packers recorded a pre-tax gain of $8.6 million (2024: gain of $8.4 million) on non-designated financial instruments held for trading.
During the three months ended September 30, 2025, hedge ineffectiveness resulted in a gain of $0.1 million (2024 hedge ineffectiveness was negligible).
During the nine months ended September 30, 2025 and 2024, hedge ineffectiveness was negligible.
The table below sets out fair value measurements of derivative financial instruments as at September 30, 2025 using the fair value hierarchy:
| As at September 30, 2025 | ||||
|---|---|---|---|---|
| ($ thousands) | ||||
| (Unaudited) | Level 1 | Level 2 | Level 3 | Total |
| Assets: | ||||
| Foreign exchange contracts | $ — | $ 170 | $ — | $ 170 |
| Commodity contracts(i) | $ 1,382 | $ — | $ — | $ 1,382 |
| $ 1,382 | $ 170 | $ — | $ 1,552 | |
| Liabilities: | ||||
| Foreign exchange contracts | — | 789 | — | 789 |
| $ — | $ 789 | $ — | $ 789 |
(i) Level 1 Commodity Contracts are net settled and recorded as a net asset or liability on the Condensed Consolidated Interim Balance Sheets.
There were no transfers between levels for the three months ended September 30, 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 $0.1 million, net of tax of a nominal tax amount, of the unrealized loss included in accumulated other comprehensive income (loss) will be reclassified into earnings 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 September 30, 2025, a loss of $0.2 million, net of tax of $0.1 million, was released to earnings from accumulated other comprehensive income (loss) and included in the net change for the year (2024: a loss of $0.5 million, net of tax of $0.2 million).
During the nine months ended September 30, 2025, a loss of $1.4 million, net of tax of $0.5 million, was released to earnings from accumulated other comprehensive income (loss) and included in the net change for the year (2024: a gain of $0.2 million, net of tax of $0.1 million).
11. OTHER MATTERS
On November 4, 2025, the Board of Directors approved a quarterly dividend of $0.23 per share, $0.92 per share on an annual basis, payable on December 31, 2025, to shareholders of record at the close of business on December 10, 2025. 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".
12. TRANSACTIONS WITH RELATED PARTIES
Transactions with Maple Leaf Foods
The Condensed Consolidated Interim Financial Statements include transactions between Canada Packers and Maple Leaf Foods. During the periods covered by the Condensed Consolidated Interim Financial Statements, Maple Leaf Foods was a related party, as Maple Leaf Foods was the ultimate parent company and controlled Canada Packers up to the effective time of the Spin-Off, October 1, 2025. Transactions between these companies have been recorded at their historical exchange amounts.
Until July 28, 2025, 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 was presented under net parent investment in the Condensed Consolidated 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 the Consolidated Interim Financial statements, no debt or related interest expense was allocated as the debt was not deemed to pertain specifically to Canada Packers, and Canada Packers would 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.
Normal trading amounts due from or to Maple Leaf Foods were recorded in accounts receivable on the Condensed Consolidated Interim Balance Sheets. Related party receivables and payables are settled on negotiated terms consistent with industry practices.
The following summarizes accounts receivable from Maple Leaf Foods:
| ($ thousands)
(Unaudited) | As at September 30, 2025 | As at September 30, 2024 | As at December 31, 2024 |
| --- | --- | --- | --- |
| Accounts receivable from Maple Leaf Foods | $ 17,452 | $ 11,058 | $ 7,916 |
| Accounts payable due to Maple Leaf Foods | $ 8,787 | $ — | $ — |
Until July 28, 2025, Canada Packers received corporate administrative support functions including human resources, finance, legal and other corporate support 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. 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. 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 Condensed Consolidated Interim Statements of Earnings Information technology costs including the Canada Packers' share of using Maple Leaf Foods' software intangible assets, were allocated primarily on a relative usage or access basis.
Beginning July 28, 2025, Canada Packers received certain selling, general and administrative services, from Maple Leaf Foods in exchange for a mix of variable and fixed fees as agreed under the Supply Agreement, Transition Services Agreement and Long-Term Services Agreement, which were filed on SEDAR+ on October 1, 2025.
In addition, beginning July 28, 2025, Maple Leaf Foods has provided ham-boning services to Canada Packers under the Supply Agreement, the cost of which is recognized in cost of goods sold and inventory.
The following summarizes transactions with Maple Leaf Foods:
| ($ millions)(Unaudited) | Three months ended September 30, | Nine months ended September 30, | ||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Sales to Maple Leaf Foods | $ 125.1 | $ 97.0 | $ 351.1 | $ 283.3 |
| Purchases from Maple Leaf Foods | $ 21.4 | $ 13.4 | $ 54.5 | $ 40.9 |
13. SUMMARY OF QUARTERLY RESULTS
The following is a summary of unaudited quarterly financial information for each quarter in the last two fiscal years:
| Third Quarter | Second Quarter | First Quarter | Fourth Quarter | |||||
|---|---|---|---|---|---|---|---|---|
| ($ millions except margin)(Unaudited) | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2024 | 2023 |
| Sales | $ 481.8 | $ 420.2 | $ 473.2 | $ 420.5 | $ 452.0 | $ 393.9 | $ 424.0 | $ 394.5 |
| Gross Profit (Loss) | $ 63.2 | $ 47.6 | $ 54.7 | $ (11.8) | $ 69.3 | $ 100.7 | $ 94.3 | $ 33.9 |
| Earnings (Loss) | $ 25.6 | $ 19.4 | $ 23.4 | $ (22.9) | $ 34.1 | $ 61.1 | $ 50.6 | $ 12.0 |
| Earnings Margin(i) | 5.3 % | 4.6 % | 5.0 % | (5.4)% | 7.5 % | 15.5 % | 11.9 % | 3.0 % |
| Adjusted Operating Earnings(i) | $ 47.5 | $ 28.0 | $ 40.3 | $ 21.8 | $ 38.2 | $ 14.2 | $ 34.7 | $ 7.6 |
| Adjusted EBITDA(i) | $ 60.2 | $ 41.4 | $ 51.4 | $ 33.2 | $ 49.6 | $ 26.3 | $ 45.2 | $ 20.9 |
| Adjusted EBITDA Margin(i) | 12.5 % | 9.9 % | 10.9 % | 7.9 % | 11.0 % | 6.7 % | 10.7 % | 5.3 % |
| Hogs processed (thousands)(ii) | 1,038 | 1,001 | 1,041 | 983 | 1,053 | 993 | 1,023 | 986 |
| Internally sourced - % | 47.2 % | 44.1 % | 47.2 % | 44.2 % | 45.5 % | 44.1 % | 44.1 % | 44.6 % |
| Externally sourced - % | 52.8 % | 55.9 % | 52.8 % | 55.8 % | 54.5 % | 55.9 % | 55.9 % | 55.4 % |
(i) Represents a non-IFRS measure. For more information, see "Non-IFRS Financial Measures" elsewhere in this MD&A.
(ii) Represents a supplemental operational measure.
Fluctuations in quarterly sales can be attributed to changes in pricing, volume, sales mix, and foreign exchange.
Fluctuations in quarterly 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.
Beginning July 28, 2025, the Supply Agreement and Long-Term Services Agreement came into effect, affecting sales, cost of sales and SG&A costs. As a result, trends in financial performance may differ compared to earlier periods.
14. MATERIAL ACCOUNTING POLICIES
Canada Packers did not adopt any new accounting standards or policies during the quarter ended September 30, 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 Condensed Consolidated Interim Financial Statements.
All other IFRS pronouncements and amendments issued but not yet effective have been assessed by Canada Packers and are not expected to have a material impact on the Condensed Consolidated Interim Financial Statements.
15. 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 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 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 and income. Earnings Margin is calculated as earnings determined in accordance with IFRS, divided by sales.
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The table below provides a reconciliation of earnings before income taxes as reported under IFRS in the Condensed Consolidated 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 EndedSeptember 30, | Nine Months EndedSeptember 30, | ||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Earnings before income taxes | $ 36.1 | $ 27.5 | $ 115.4 | $ 79.8 |
| Interest expense | 1.0 | 1.2 | 3.3 | 3.3 |
| Other expense(i) | 5.6 | 0.4 | 11.1 | 2.4 |
| Earnings from operations | $ 42.7 | $ 29.1 | $ 129.8 | $ 85.5 |
| (Increase) decrease in fair value of biological assets(ii) | 4.9 | (3.7) | (3.4) | (20.4) |
| Change in unrealized loss (gain) on derivative contracts(iii) | (0.1) | 2.7 | (0.5) | (1.0) |
| Adjusted Operating Earnings | $ 47.5 | $ 28.1 | $ 125.9 | $ 64.1 |
| Depreciation and amortization | 13.2 | 12.5 | 37.2 | 37.4 |
| Items included in other expense representative of ongoing operations(iv) | (0.5) | 0.8 | (1.9) | (0.5) |
| Adjusted EBITDA | $ 60.2 | $ 41.4 | $ 161.2 | $ 101.0 |
| Adjusted EBITDA margin | 12.5 % | 9.9 % | 11.5 % | 8.2 % |
| Interest expense | (1.0) | (1.2) | (3.3) | (3.3) |
| Depreciation and amortization | (13.2) | (12.5) | (37.2) | (37.4) |
| Adjusted EBT | $ 46.0 | $ 27.7 | $ 120.7 | $ 60.3 |
| Earnings Margin | 5.3 % | 4.6 % | 5.9 % | 4.7 % |
(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 Condensed Consolidated 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 Condensed Consolidated 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.
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 $^{(i)}$ including 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.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| ($ millions) | 2025 | 2024 | 2025 | 2024 |
| Cash provided by operating activities | $ 39.1 | $ 34.0 | $ 159.7 | $ 84.7 |
| Maintenance Capital(i) | (9.5) | (8.5) | (25.4) | (20.1) |
| Free Cash Flow | $ 29.6 | $ 25.5 | $ 134.3 | $ 64.6 |
| Changes in non-cash operating working capital | 12.8 | 2.8 | (6.6) | 11.8 |
| Adjusted Free Cash Flow | $ 42.4 | $ 28.3 | $ 127.7 | $ 76.4 |
(i) Maintenance Capital is defined as non-discretionary investment required to maintain the Company's existing operations and competitive position.
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16. SUBSEQUENT EVENTS
On October 1, 2025, the Spin-Off was completed and Maple Leaf Foods Shareholders received, for each MLF common share held as of the September 30, 2025 record date, one MLF common share and 0.2 of a Canada Packers common 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. As of the date hereof, 29,736,736 Canada Packers shares are outstanding, of which 24,978,677 were distributed pro-rata to Maple Leaf Foods Shareholders and 4,758,059 of which were retained by Maple Leaf Foods in connection with completion of the Spin-Off. In connection with completion of the Spin-Off, 198,350 Maple Leaf Foods stock options were exchanged for 457,661 Canada Packers stock options. In addition, 275,156 Maple Leaf Foods RSUs and PSUs were amended so that (i) the "Share" underlying each such RSU and PSU refers to a Canada Packers common share, (ii) the aggregate number of RSUs and PSUs outstanding was equal to 634,499 RSUs and PSUs, and (iii) Maple Leaf Foods' obligations in respect of such RSUs and PSUs became obligations of Canada Packers. In contemplation of the separation of the Pork Operations from Maple Leaf Foods pursuant to the Spin-Off, Canada Packers entered into Spin-Off Agreements 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. The material Spin-Off Agreements were filed on SEDAR+ on October 1, 2025.
As part of the Spin-Out process and pursuant to the Separation Agreement, Canada Packers borrowed $18.0 million from Maple Leaf Foods. The amount was non-interest bearing, and repayable as part of the Spin-Off. As of November 4, 2025, this amount had been repaid in full.
On October 1, 2025, Canada Packers entered into a four-year senior secured credit agreement ("the Credit Agreement") with a syndicate of Canadian 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. Borrowings under the credit agreement may be drawn in Canadian or U.S. dollars and bear interest payable monthly, based on Canadian Prime Loan, Canadian Overnight Repo Rate Average ("CORRA"), Secured Overnight Financing Rate ("SOFR") or US Base Rate rates, depending on the borrowings made. Letters of credit are available under the Credit Agreement in an aggregate amount of up to $50.0 million. As of November 4, 2025, $415.0 million is 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 owing to Maple Leaf Foods, and to effect a return of capital of $417.3 million to Maple Leaf Foods.
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.
17. FORWARD-LOOKING STATEMENTS
This document contains, and the Company's oral and written public communications often contain, "forward-looking information" within the meaning of applicable securities law. These statements are based on current expectations, estimates, projections, beliefs, judgements and assumptions based on information available at the time the applicable forward-looking statement was made and in light of the Company's experience combined with its perception of historical trends. Such statements include, but are not limited to, statements with respect to objectives and goals, in addition to statements with respect to beliefs, plans, targets, goals, objectives, expectations, anticipations, estimates, and intentions. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "could", "would", "believe", "plan", "intend", "design", "target", "undertake", "view", "indicate", "maintain", "explore", "entail", "schedule", "objective", "strategy", "likely", "potential", "outlook", "aim", "propose", "goal", and similar expressions suggesting future events or future performance. These statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult to predict.
By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes the expectations reflected in the forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon.
Specific forward-looking information in this document may include, but is not limited to, statements with respect to the operating capacity of the processing facilities; the operationalization of the agreements entered into between the Company and Maple Leaf Foods and the ability of Canada Packers to execute its business strategy; expected sales channels; expected future cash flows and the sufficiency thereof, sources of capital at attractive rates, future contractual obligations, future financing options, renewal of credit facilities, compliance with credit facility covenants and availability of capital to fund growth plans including the Canada Packers capital investment program, operating obligations and dividends; the anticipated future financial performance of the Company; implications associated with the spread of foreign animal disease (such as African Swine Fever); operating risks, including the execution, monitoring and continuous improvement of the Company's food safety programs, animal health initiatives, cost reduction initiatives, and service levels; terms, timing and receipt of regulatory approval to sell into China; the impact of commodity prices and foreign exchange impacts
on the Company's operations and financial performance, including the use and effectiveness of hedging instruments; the amount and timing of dividend payments including the tax treatment thereof; the adoption of new accounting standards and the impact of such adoption on the financial position of the Company; and competitive conditions and the Company's ability to position itself competitively in the markets in which it competes.
Various factors or assumptions are typically applied by the Company in drawing conclusions or making the forecasts, projections, predictions or estimations set out in the forward-looking statements. These factors and assumptions are based on information currently available to the Company, including information obtained by the Company from third-party sources and include but are not limited to, expectations regarding the adaptations in operations, supply chain, customer and consumer behaviour, economic patterns (including but not limited to global pork markets), foreign exchange rates, tariffs and other international trade dynamics, access to capital, and potential structural changes in global economic patterns; the competitive environment, associated market conditions (including tariffs) and market share metrics, category growth or contraction, the expected behaviour of competitors and customers and trends in consumer preferences; the success of the Company's business strategy and the relationship between pricing, inflation, volume and sales of the Company's products; prevailing commodity prices, implications of tariffs, interest rates, tax rates and exchange rates; the economic condition of and the sociopolitical dynamics between Canada, the U.S., Japan and China, and the ability of the Company to access markets and source ingredients and other inputs in light of global sociopolitical disruption, and the ongoing impact of global conflicts on inflation, trade and markets; the spread of foreign animal disease (including African Swine Fever) preparedness strategies to manage such spread, and implications for the global pork market; expectations and assumptions as to the timely receipt of regulatory approval in form and substance satisfactory to allow the Company to sell into China; availability of and access to capital to fund future capital requirements and ongoing operations; prevailing regulatory, tax and environmental laws; and future operating costs and performance, including the Company's ability to achieve operating efficiencies and maintain sales volumes, turnover of inventories and turnover of accounts receivable.
Readers are cautioned that the assumptions on which this information is based may prove to be incorrect in whole or in part, and actual outcomes may differ materially from those anticipated in any forward-looking statements.
Factors that could cause actual results or outcomes to differ materially from the results expressed, implied, or projected in the forward-looking statements contained in this document include, among other things, risks associated with, the results of Canada Packers' execution of its business plan, the degree to which benefits are realized or not and the timing to realize those benefits, including the implications on the financial results; potential structural changes in global economic patterns which may have implications for the operations and financial performance of the Company, as well the ongoing implications for macro socio-economic trends, trade action and global conflict; macro-economic trends, including inflation, consumer behaviour, recessionary indicators, labour availability and labour market dynamics and international trade trends, including tariffs, duties and global pork markets; competition, market conditions, and the activities of competitors and customers, including the expansion or contraction of key categories, inflationary pressures, pork market dynamics and Japan export margins; the health status of livestock, including the impact of potential pandemics; failure to receive the regulatory approval required to be able to sell into China; international trade and access to markets and supplies, as well as social, political and economic dynamics, including global conflicts; operating performance, including manufacturing operating levels, fill rates and penalties; availability of and access to capital, and compliance with credit facility covenants; decisions respecting the return of capital to shareholders; the execution of capital projects and investment in maintenance capital; food safety, consumer liability and product recalls; climate change, climate regulation and the Company's sustainability performance; strategic risk management; acquisitions and divestitures; fluctuations in the debt and equity markets; fluctuations in interest rates and currency exchange rates; cyclical nature of the cost and supply of hogs and the competitive nature of the pork market generally; the effectiveness of commodity and interest rate hedging strategies; impact of changes in the market value of the biological assets and hedging instruments; intellectual property, including product innovation, product development, brand strategy and trademark protection; reputation; weather; compliance with government regulation and adapting to changes in laws; actual and threatened legal claims; consumer trends and changes in consumer tastes and buying patterns; environmental regulation and potential environmental liabilities; employment matters, including complying with employment laws across multiple jurisdictions, the potential for work stoppages due to non-renewal of collective agreements, recruiting and retaining qualified personnel, reliance on key personnel and succession planning; pricing of products; managing the Company's supply chain; changes in International Financial Reporting Standards and other accounting standards that the Company is required to adhere to for regulatory purposes; and other factors as set out under the heading "Risk Factors" of the Circular. The Company cautions readers that the foregoing list of factors is not exhaustive.
All forward-looking statements included herein speak only as of the date hereof. Unless required by law, the Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements contained herein are expressly qualified by this cautionary statement.
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