Sales have risen, but net income is down for North America’s leading producer and distributor of value-added frozen seafood products as it copes with higher financing costs to service debt, less favorable changes in the valuation of an embedded derivative and interest rate swaps, and a $1.6 million increase in stocked-based compensation expenses.
Lunenburg, Nova Scotia, Canada-headquartered High Liner Foods, which sells everything from champagne shrimp and pan-seared haddock to tilapia and fish cakes, on August 12 reported that second quarter (13-week period ended June 28) net income fell 47.5% to $5.2 million even though sales rose 14.9% to $235.5 million.
Earnings decreased compared to last year’s Q2 results largely as a result of lower margins on certain products in High Liner’s Canadian business, according to Henry Demone, chief executive officer.
“Raw material costs in our Canadian business have increased in 2014, in part due to a weaker Canadian dollar, and have not been fully recovered through price increases to our customers,” said Demone.
“Unfortunately,” he continued, “many of our major customers operating in the US foodservice industry are continuing to experience soft sales, creating a challenging environment for this part of our business. We are focused on working with our customers to develop innovative seafood products to help drive increased sales.”
Looking at High Liner’s performance over the past six months, one see that sales rose 12.1% to $538.2 million. Adjusted net income increased by the same percentage, increasing by $2.3 million to 21.3 million.
“The American Pride integration, which started after Lent, is on track to be completed by the end of this year. We have engaged outside expertise to assist with the supply chain optimization program, and $20 to $25 million in annual cost savings should begin to be realized in 2015, with the full benefit being achieved in 2016,” stated Demone. “We also continue to believe opportunities exist to further consolidate the frozen seafood industry in North America.”
The chief executive officer continued: “Certain product margins may continue to be negatively impacted through the remainder of this year as high costs on certain key species continue and sales in the US foodservice sector may remain challenging, particularly as the underlying market dynamics of the US restaurant industry shift for our major US foodservice customers. However, we are committed to product innovation in our sector and are working with existing and new customers to bring innovative offerings to consumers.”
About High Liner Foods
High Liner Foods is a publicly traded Canadian company, trading under the symbol HLF on the Toronto Stock Exchange. Its retail branded products are sold throughout grocery and club stores in the United States, Canada and Mexico under the High Liner, Fisher Boy, Mirabel and Sea Cuisine labels. The company also sells branded products to restaurants and institutions under the High Liner, Icelandic Seafood, FPI, Viking, Mirabel, Samband of Iceland and American Pride Seafood labels, and is the major supplier of private label value-added seafood products to North American food retailers and foodservice distributors.
