GFI ANNOUNCES FIRST QUARTER 2023 RESULTS

Gross profit increases 118% from growth
of higher margin business lines

SUMMARY

• Plant-based pet food ingredient sales of $7.6 million, an increase of 15.3% over the previous quarter
  
  
• Plant-based consumer packaged good sales of $0.3 million, driven by the launch of YoFiit's plant-based chickpea milk in select Costco locations in June 2022
  
  
• Adjusted gross profit¹ totalled $2.9 million, an increase of 14.2%, representing adjusted gross profit margin¹ of 9.5% of revenue
  
  
• Completed an equity financing of subscription receipts for gross proceeds $3.6 million.
  
  
• Closed Qualifying Transaction (as defined in the policies of the TSX Venture Exchange) with Pivotal Financial Corp. to become a publicly traded company, with trading of GFI's shares on the TSX Venture Exchange beginning on June 20, 2022.
  
  
• Completed commissioning of a state-of-the-art pea splitting facility at GFI's existing plant-based ingredient processing complex in Zealandia, Saskatchewan capable of processing over 60,000 metric tonnes of yellow and green peas into split peas and pea fibre annually.
  
  
• Began sales of a YoFiit plant-based milk product in 15 Costco stores in Ontario and Quebec, which was subsequently expanded to 21 stores.

TORONTO, Aug. 29, 2022 /CNW/ - Global Food and Ingredients Ltd. (TSXV: PEAS) ("GFI" or the "Company"), is pleased to announce the first quarter results for the three months ended June 30, 2022.

"GFI is pleased to report its first quarterly results as a public company with our continued commitment to be a global leader in plant-based food ingredients and farm to fork consumer packaged goods", commented David Hanna, GFI's CEO. "I am extremely proud of the hard work and commitment of our employees, the backing and support of our stakeholders, and our dedicated farmers supplying locally grown, quality Canadian crops, as well as our growing customer base. Getting listed on the TSX Venture Exchange was an important and exciting milestone in our Company's evolution which will help support our ambitious plans for growth."

Mr. Hanna added, "In the last twelve months, our Company acquired a plant-based pet food facility, two consumer product brands, completed our go public listing and commissioned a state-of-the-art pea splitting facility. All of these strategically identified milestones were executed with our key focus in mind to be a vertically integrated plant-based food and ingredients supplier providing premium, sustainable plant-based protein ingredients directly from the farm to consumers' homes. Not only has our plant-based pet food facility allowed us to create a zero-waste system, but we are generating an attractive return on our investment as plant-based pet food sales represented over 25% of our sales in Q1 2023 while operating at a higher margin than our core business. The successful commissioning of our state-of-the-art pea splitting facility will not only drive higher margins, but will allow us to begin to develop value-added ingredients that are fundamental inputs to plant-based consumer products."

"We are extremely excited about the prospects and future growth of our recently acquired YoFiit and Bentilia brands. YoFiit successfully launched in select Costco locations in Eastern Canada and continues to make good progress on the development of our new plant-based product lines under our Protein Industries Canada-backed research and development project. Bentilia just launched a rebranding and is set for a major expansion in the US and Canadian markets."

Mr. Hanna concluded, "We are excited about the road ahead of us and we are starting to see positive reinforcement from our funded investment strategy. We continue to see attractive opportunities ahead of us this year in both our core ingredients and consumer packaged goods markets. We are excited about the future of the business and believe that GFI is ideally situated to respond to current global challenges with its strengthened balance sheet, its locally sourced network of over 500+ farmers in Western Canada and four wholly-owned processing facilities that allow GFI to maximize value creation from each input that goes into our process, complemented by our unique line up of plant-based consumer packaged goods."

First Quarter Results

Financial Highlights

• Revenue decreased by 10.9%, to $30.3 million in the first quarter of 2023 compared to the first quarter of 2022 of $34.0 million, predominantly attributable to:
• GFI's focus on higher margin revenue streams such as plant-based pet food ingredients which generated revenue of $7.6 million or 25.2% of total revenue in the period;
• plant-based consumer packaged good sales of $0.3 million in the quarter from our recently acquired YoFiit and Bentilia brands; and
• reduction of lower margin sales flows to improve the overall business mix and increase blended gross profit margins.
• Gross profit totalled $2.2 million, compared to $1.0 million in Q1 2022. Gross profit margin¹ was 7.2% of revenue, compared to 2.9% in the prior comparable period.
• Adjusted gross profit¹ totalled $2.9 million in comparison to $2.5 million in Q1 2022. Adjusted gross profit margin¹ was 9.5% of revenue, compared to 7.4% in the prior comparable period, attributable to:
• the addition of operating results from plant-based pet food ingredients; and
• the Company's shift in focus to higher margin, premium ingredient products.
• Adjusted EBITDA¹ of $0.2 million, a decrease of $0.2 million from $0.4 million in Q1 2022, related to:
• increased operating costs of $0.6 million to support the growth of the plant-based consumer packaged goods and business as a whole; offset by
• $0.4 million improvement in adjusted gross profit.
• Adjusted EBITDA margin¹ represented 0.5% of revenue, compared to 1.2% in Q1 2022.
  
  
• Loss for the period of $4.3 million in Q1 2023, compared to loss of $0.8 million in Q1 2022, predominately attributable to the additional costs associated with closing the reverse takeover ("RTO") and other one-time transaction-related expenses, including:
• non-cash, $2.1 million listing expense related to the accounting for the RTO;
• $1.1 million attributable to non-recurring professional, legal and transaction fees for YoFiit and Bentilia acquisitions, rebranding and product development and go public related costs;
• $0.5 million, non-cash loss related to realized movement in foreign exchange;
• $0.1 million related to net accounting losses on the revaluation of the convertible debentures and warrant liability; and
• increased operating, finance and depreciation costs to support the growth of the business.

Income Statement Summary

		Three months ended			Change
		Q1 2023	Q1 2022		$	%
Revenue		$          30,314,530	$          34,011,309		$        (3,696,779)	(10.9)	%
Cost of sales		28,138,451	33,011,982		(4,873,531)	(14.8)
Gross profit		2,176,079	999,327		1,176,752	117.8
Expenses:
General and administration		1,824,683	1,557,185		267,498	17.2
Depreciation and amortization		228,710	47,847		180,863	378.0
Profit (loss) before the undernoted		122,686	(605,705)		728,391	(120.3)
Other expenses (income)		5,023,772	(61,480)		5,085,252	(8,271.4)
Loss before income taxes		(4,901,086)	(544,225)		(4,356,862)	800.6
Income tax expense (recovery)		(562,675)	225,462		(788,137)	(349.6)
Loss for the period		$          (4,338,411)	$             (769,687)		$         (3,568,724)	463.7	%

Non-IFRS Measures Summary¹

		Three months ended			Change
		Q1 2023	Q1 2022		$	%
Gross profit margin		7.2 %	2.9 %
Adjusted gross profit		$             2,890,792	$             2,530,348		$            360,444	14.2	%
Adjusted gross profit margin		9.5 %	7.4 %
EBITDA		$           (3,690,078)	$                (80,277)		$        (3,609,801)	4,496.7
EBITDA margin		(12.2 %)	(0.2 %)
Adjusted EBITDA		$               152,602	$                400,946		$           (248,344)	(61.9)
Adjusted EBITDA margin		0.5 %	1.2 %

1 Gross profit margin, adjusted gross profit, adjusted gross profit margin, EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-IFRS performance measures. Refer to "Cautionary Statements - Non-IFRS Measures" in this release for further details.

The unaudited condensed consolidated interim financial statements for the three months ended June 30, 2022 ("Financial Statements") and related Management's Discussion & Analysis ("MD&A") for the three months ended June 30, 2022, are available under the Company's profile at www.sedar.com.

About GFI

GFI is a fast-growing Canadian plant-based food and ingredients company, connecting the local farm to the global supply chain for peas, beans, lentils, chickpeas and other high protein specialty crops. GFI is organized into four primary business lines: Pea Protein Inputs, Plant-Based Ingredients, Plant-Based Pet Food Ingredients and Plant-Based Consumer Packaged Goods. Headquartered in Toronto, GFI buys directly from its extensive network of farmers, processes its products locally at its four wholly-owned processing facilities in Western Canada and ships to 37 countries across the world.

GFI's vision to become a vertically integrated farm-to-fork plant-based company providing traceable, locally sourced, healthy and sustainable food and ingredients. Through recent acquisition and development activities, GFI now offers a full suite of Plant-Based Consumer Packaged goods with over 20 SKUs under the YoFiit, Bentilia and Five Peas in Love brands.

Disclaimer

Neither the TSXV nor its Regulation Service Provider (as defined policies of the TSXV) accepts responsibility for the adequacy or accuracy of this press release.

Cautionary Statements

Non-IFRS Measures

This news release contains the financial performance metric of gross profit margin, adjusted gross profit, adjusted gross profit margin, EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin, all of which are measures that are not recognized or defined under IFRS (collectively the "Non-IFRS Measures"). As a result, this data may not be comparable to data presented by other food and ingredients companies. The Company believes that the Non-IFRS Measures are useful indicators of operational performance and are specifically used by management to assess the financial and operational performance of the Company.

Changes to Prior Period Presentation

In FY 2023, management undertook a review of historical adjusting items as part of an effort to reduce the number of non-IFRS items it adjusts for in its financial reporting. Management concluded that in order to present adjusting items in a manner more consistent with current and future fiscal year operating results, the Company will no longer adjust for net insurance proceeds associated with the take-or-pay toll processing agreement cancelled in Q4 FY 2021.

Starting in the first quarter of FY 2023, net insurance proceeds will not be considered an adjusting item. The rationale for the adjustment to the allocation of net insurance proceeds to the FY 2022 presentation is that in comparing the period over period performance in FY 2022 to FY 2021, the net insurance proceeds were relevant, but the same is not the case in comparing the FY 2023 to FY 2022 results. Toll processing services totaled $3.7 million or approximately 6% of the revenue in FY 2021 in comparison to $0.2 million or less than 1% of revenue in FY 2022. Therefore, in order to accurately compare the relevant performance of the periods, management allocated a portion of the proceeds recorded in FY 2021 to FY 2022 to show a quantitative comparison as if the toll processing services continued in FY 2022. Given the toll processing related services were cancelled prior to FY 2022 (with minor residual contracts being executed in the period) and are not part of the operating business in FY 2023, management has assessed that it is more relevant to compare the operating results without the inclusion or allocation of any insurance proceeds in the comparable period.

Non-IFRS Measures Definitions

Gross profit margin is defined as gross profit divided by revenue.

Adjusted gross profit is calculated by adding or deducting, as applicable from gross profit, certain costs, charges or benefits incurred in such period which in management's view are either not indicative or are directly correlated to the Company's process to sell its products, including: (a) realized foreign exchange loss (gain) and (b) overhead costs attributable to brining inventory to a saleable condition that have been recorded as cost of sales under IFRS. Adjusted gross profit margin represents adjusted gross profit divided by revenue.

EBITDA calculates, for the applicable period, earnings before interest, taxes and depreciation and amortization. Interest includes all finance costs net of interest income and depreciation and amortization includes the depreciation of property, plant and equipment, amortization of right-of-use assets, amortization of intangible assets and amortization of deferred financing fees. Management does not use EBITDA as a financial performance metric. EBITDA margin represents EBITDA divided by revenue.

Adjusted EBITDA is calculated by adding and deducting, as applicable from EBITDA, certain expenses, costs, charges or benefits incurred in such period which in management's view are either not indicative of underlying business performance, impact the ability to assess the operating performance of our business or are deemed non-cash, non-recurring or one-time in nature. Adjusted EBITDA margin represents adjusted EBITDA divided by revenue.

The following tables provide a reconciliation of the Non-IFRS Measures to the most directly comparable financial measures disclosed in the Financial Statements.

The following table provides a reconciliation of segment and consolidated gross profit to adjusted gross profit for the periods presented:

		Three months ended			Change
		Q1 2023	Q1 2022		$	%
Gross profit		$    2,176,079	$      999,327		$   1,176,752	117.8	%
Less:
Realized foreign exchange loss (gain) (1)		461,825	(780,112)		1,241,937	(159.2)
Plus: Total costs attributable to bringing inventory to a saleable condition: (2)
Overhead		964,964	596,039		368,925	61.9
Amortization of property plant and equipment		211,574	154,870		56,704	36.6
Adjusted gross profit		$   2,890,792	$   2,530,348		$      360,444	14.2
Adjusted gross profit margin		9.5 %	7.4 %

(1)	Consists of realized gains and losses on foreign exchange rates for executed transactions. The does not participate in hedge accounting practices, but books forward contracts at the time the Company enters into a new contract with a foreign currency denominated vendor. The gain or loss realized at the time of sale is directly related to each of the executed contracts and as a result is indicative of the margin realized on said contract.
(2)	This is an IFRS adjustment to allocate applicable overhead costs, including compensation and benefits and other general and administration costs, and amortization of property, plant and equipment specifically related to the Company's operating facilities to cost of sales. Management views these costs as fixed in nature and does not assess them as being indicative of the variable cost of selling its products.

The following table provides a reconciliation of consolidated loss for the period to EBITDA and adjusted EBITDA for the periods presented:

		Three months ended			Change
		Q1 2023	Q1 2022		$	%
Loss for the period		$ (4,338,411)	$     (769,687)		$  (3,568,724)	463.7	%
Plus:
Income tax expense (recovery)		(562,675)	225,462		(788,137)	(349.6)
Interest (1)		763,967	249,603		514,364	206.1
Depreciation and amortization (2)		447,041	214,345		232,696	108.6
EBITDA		(3,690,078)	(80,277)		(3,609,801)	4,496.7
Other expense (income) (3)		(5,060)	18,136		(23,196)	(127.9)
Loss on derivative liability related to convertible debentures (4)		221,173	-		221,173	n/a
Loss on warrant revaluation (4)		(90,426)	-		(90,426)	n/a
Unrealized loss (gain) on derivative financial instruments (5)		526,572	249,424		277,148	111.1
Unrealized foreign exchange loss (gain) (5)		19,300	201,810		(182,510)	(90.4)
Listing expense (6)		2,075,733	-		2,075,733	n/a
Acquisition / one-time transaction costs (6)		1,073,939	-		1,073,939	n/a
Share based compensation (7)		21,449	11,853		9,596	81.0
Adjusted EBITDA		$      152,602	$      400,946		$     (248,344)	(61.9)
Adjusted EBITDA margin		0.5 %	1.2 %

(1)	Interest includes all finance costs net of interest income.
(2)	Depreciation and amortization includes depreciation of property, plant and equipment, amortization of right-of-use assets, amortization of intangible assets and amortization of deferred financing fees.
(3)	Consists of incomes and expenses incurred outside of the normal course of operation.
(4)	This is a non-cash item that consists of the fair value revaluation of the convertible debentures and warrants.
(5)	Consists of (i) non-cash, unrealized gains and losses attributable to foreign exchange rate fluctuations and (ii) non-cash gains and losses on foreign exchange "mark-to-market" in connection with our derivative financial instruments.
(6)	Consists of acquisition, integration and other costs such as legal, consulting and other fees and expenses incurred in respect of acquisitions, financing, rebranding and product development costs and Transaction-related activities completed during the applicable period.
(7)	This is a non-cash item and consists of the amortization of the estimated fair value of share-based options granted under the Company's share-based option plan.

Non-IFRS Measures should be considered together with other financial information prepared in accordance with IFRS to enable investors to evaluate the GFI's operating results, underlying performance and prospects in a manner similar to GFI's management.

Accordingly, these Non-IFRS Measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Forward-Looking Statements

This press release may contain certain forward-looking information and statements ("forward-looking information") within the meaning of applicable Canadian securities legislation, that are not based on historical fact, including without limitation statements containing the words "believes", "anticipates", "plans", "intends", "will", "should", "expects", "continue", "estimate", "forecasts" and other similar expressions. Forward looking statements in this press release include without limitation statements relating to GFI continuing to add further downstream processing and the effects thereof and GFI's business objectives. Readers are cautioned to not place undue reliance on forward-looking information. Actual results and developments may differ materially from those contemplated by these statements. GFI undertakes no obligation to comment analyses, expectations or statements made by third-parties in respect of GFI, its securities, or financial or operating results (as applicable). Although GFI believes that the expectations reflected in forward-looking information in this press release are reasonable, such forward-looking information has been based on expectations, factors and assumptions concerning future events which may prove to be inaccurate and are subject to numerous risks and uncertainties, certain of which are beyond GFI's control, including the risk factors discussed in GFI's Filing Statement dated May 30, 2022, which are incorporated herein by reference and are available through SEDAR at www.sedar.com. The forward-looking information contained in this press release are expressly qualified by this cautionary statement and are made as of the date hereof. GFI disclaims any intention and has no obligation or responsibility, except as required by law, to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

SOURCE Global Food and Ingredients

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