High Liner Foods Incorporated (TSX: HLF) (“High Liner Foods” or “the Company”), a leading North American value-added frozen seafood company, today announced financial results for the thirteen and twenty-six weeks ended July 1, 2023.
“During the second quarter we once again delivered sales volume and dollar growth. Our foodservice business continued to perform well and outpace the category in terms of growth,” said High Liner Foods President and CEO Rod Hepponstall. “However, softer consumer demand in the retail category and higher inventory levels across the frozen seafood industry continued in the quarter. This had an impact on our profitability during the quarter and together with higher inventory costs, led to a decline in Adjusted EBITDA, compared to a period of markedly different market conditions a year ago.”
Mr. Hepponstall added, “For the first half of the year, we generated in excess of $50 million in cash flow from operations and improved our leverage ratio to 3.3x. With our stronger balance sheet and diversified portfolio and customer base, I am confident that we are well positioned to navigate headwinds, that will likely persist through the second half of the year. We continue to believe in the growth potential of our business and the category.”
Mr. Hepponstall concluded, “At a challenging time globally for the category, as a market leader, we are continuing to invest and innovate despite market headwinds, and we are coupling these efforts with targeted and strategic promotions to support our customers and help us return to normalized inventory levels by the end of the year.”
Key financial results, reported in U.S. dollars (“USD”), for the thirteen weeks ended July 1, 2023, or the second quarter of 2023, are as follows (unless otherwise noted, all comparisons are relative to the second quarter of 2022):
- Sales increased by $0.8 million, or 0.3%, to $254.3 million compared to $253.5 million and sales volume increased by 0.6 million pounds, or 1.0%, to 59.4 million pounds compared to 58.8 million pounds;
- Gross profit decreased by $4.3 million, or 7.6%, to $52.0 million compared to $56.3 million, and gross profit as a percentage of sales decreased to 20.4% compared to 22.2%;
- Adjusted EBITDA(1) decreased by $3.3 million, or 13.0%, to $22.0 million compared to $25.3 million, and Adjusted EBITDA as a percentage of sales decreased to 8.7% compared to 10.0%;
- Net income decreased by $13.1 million, or 68.9%, to $5.9 million compared to $19.0 million and diluted earnings per share (“EPS”) decreased to $0.17 per share, compared to $0.54 per share;
- Adjusted Net Income([1]) in the second quarter of 2023 and 2022 was $10.0 million and Adjusted Diluted EPS(1) in the second quarter of 2023 and 2022 was $0.29 per share; and
- Net Debt(1) to Rolling Twelve-Month Adjusted EBITDA(1) was 3.3x at July 1, 2023 compared to 3.7x at the end of Fiscal 2022 and 3.0x at July 2, 2022. This ratio increased during the second half of Fiscal 2022 due to increased investment in inventory.
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| (1) This is a non-IFRS financial measure. For more information on non-IFRS financial measures, see “Non-IFRS Measures” below and see “Non-IFRS Financial Measures” in our Second Quarter 2023 Management’s Discussion and Analysis (“2Q2023 MD&A”). |
Key financial results, reported in U.S. dollars (“USD”), for the twenty-six weeks ended July 1, 2023, or Fiscal 2023, are as follows (unless otherwise noted, all comparisons are relative to the twenty-six weeks ended July 2, 2022, or “Fiscal 2022”):
- Sales increased by $35.3 million, or 6.4%, to $583.5 million compared to $548.2 million and sales volume increased by 4.3 million pounds, or 3.3%, to 136.4 million pounds compared to 132.1 million pounds;
- Gross profit increased by $2.1 million, or 1.8%, to $120.4 million compared to $118.3 million, while gross profit as a percentage of sales decreased to 20.6% compared to 21.6%;
- Adjusted EBITDA([2]) decreased by $0.5 million, or 0.9%, to $53.2 million compared to $53.7 million, and Adjusted EBITDA as a percentage of sales(1) decreased to 9.1% compared to 9.8%;
- Net income decreased by $13.8 million, or 41.1%, to $19.8 million compared to $33.6 million and diluted earnings per share (“EPS”) decreased to $0.57 per share compared to $0.96 per share; and
- Adjusted Net Income(1) increased by $1.4 million, or 5.6%, to $26.5 million compared to $25.1 million and Adjusted Diluted EPS(1) increased to $0.77 per share compared to $0.72 per share.
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| (2) This is a non-IFRS financial measure. For more information on non-IFRS financial measures, see “Non-IFRS Measures” below and see “Non-IFRS Financial Measures” in our Fiscal 2022 Management’s Discussion and Analysis (“2022 MD&A”). |
Q2 Operational Update
In the Company’s foodservice business, High Liner delivered its ninth consecutive quarter of growth despite a slowdown within the category overall. The performance of High Liner Foods’ foodservice business during the second quarter was anchored by the relative stability of non-commercial customers and increased contract manufacturing business. The Company also performed well in casual dining and quick service restaurants and grew volumes as a result of newer product lines, new business and improved customer service levels.
High Liner Foods’ retail business continues to be impacted by softer demand for protein, including seafood products as consumers switch to lower cost meal solutions. The Company is focused on targeted promotions to drive sales and demonstrate value of seafood as a healthy, affordable protein.
Demand in both businesses was also impacted by the earlier timing of lent compared to the prior year.