High Liner Foods on May 18 reported mixed results for the first quarter of 2021, as sales volume and value fell while gross profit as a percentage of sales rose compared to figures posted a year ago. The bottom line for stockholders of record on June 1 is that a quarterly dividend of CAD $0.070 per share will be paid on June 15.
For the 13-week period ending on April 3, the Lunenburg, Nova Scotia, Canada-headquartered value-added frozen seafood company saw volume decrease by 7.5 million pounds to 69.8 million pounds, compared to 77.3 million pounds during the same period in 2020.
Foodservice sector volume was lower due to the impact of Covid-19 during the entire first quarter of 2021, whereas the coronavirus pandemic only impacted the first quarter of 2020 beginning in late March. In addition to High Liner, the company’s proprietary brands in this segment include Mirabel, Icelandic Seafood and FPI.
In the retail business, sales volume was lower due to the surge in demand related to Covid-19 in the last two weeks of March 2020 that did not repeat during the first quarter of 2021. The decline in sales volume was partially offset by new business and new product sales.
Sales in the first quarter of 2021 decreased by $25.2 million to $243.4 million compared to $268.6 million in the same period in 2020 due to the lower sales volumes mentioned above partially offset by changes in sales mix. In addition, the stronger Canadian dollar in the first quarter of 2021 compared to the first quarter of 2020 increased the value of reported USD sales from the company’s CAD-denominated operations by approximately $3.2 million relative to the conversion impact last year.
Gross profit in the first quarter of 2021 decreased by $1.1 million to $57.7 million compared to $58.8 million in the same period in 2020, and gross profit as a percentage of sales increased by 180 basis points to 23.7% compared to 21.9%. The decrease in gross profit reflects the fall in sales volume discussed above, partially offset by favorable changes in product mix reflected in the improved gross profit as a percentage of sales.
“The Q1 results demonstrate the continued resilience of our business, improving gross profit and the foodservice recovery that is underway,” said Rod Hepponstall, president and chief executive officer of High Liner Foods. “In both our retail and foodservice businesses, we are executing against our strategy and driving profitability gains as a percentage of sales. Our efforts to build a strong, integrated supply chain and a diversified portfolio has served us well during this time of heightened global supply challenges.”
Adjusted EBITDA in the first quarter of 2021 decreased by $2.9 million to $27.8 million, compared to $30.7 million in the same period in 2020 and Adjusted EBITDA as a percentage remained consistent with the prior year at 11.4%. The decrease in Adjusted EBITDA is a result of the decrease in gross profit, and an increase in distribution expenses and SG&A expenses due to higher consumer marketing expenditures related to advertising in the US retail business.
Reported net income in the first quarter of 2021 increased by $3.6 million to net income of $17.8 million (diluted EPS of $0.51) compared to $14.2 million (diluted EPS of $0.41) in the same period in 2020. The increase in net income reflects a decrease in finance costs primarily reflecting the gain on modification of debt related to the debt refinancing completed in March 2021 and a decrease in income tax expense, partially offset by the decrease in Adjusted EBITDA and an increase in share-based compensation expense.
Outlook
“We continue to operate in unprecedented times with ongoing uncertainty related to consumer behavior, supply and demand dynamics and government restrictions. That said, we are seeing promising signs with foodservice recovery and remain confident that the execution of our strategy will enable us to continue on our path to profitability and growth,” stated Hepponstall.
The company is currently facing some global supply challenges that are largely due to macro-economic and pandemic-related issues beyond its control. High Liner Foods is handling the impact of the supply chain issues by drawing on the scale of its global supply chain and the diversification of specie, product, procurement and strong customer and supplier relationships to support its position. Despite these challenges, management remains confident in its ability to continue to drive Adjusted EBITDA growth in 2021.
