High Liner Foods, a leading North American value-added frozen seafood company, has posted financial results for the thirteen and thirty-nine week periods ended September 28, and announced a 13.3% dividend increase of CAD $0.02 per share.
“During the third quarter we delivered Adjusted EBITDA growth as well as sequential improvement to sales and volume,” said Paul Jewer, president, and chief executive officer of the Lunenburg, Nova Scotia, Canada-headquartered company “We are executing well to meet the evolving needs of customers and consumers across both retail and foodservice. Our promotional strategies are driving expanded distribution and supporting top line recovery. While market conditions remain challenging, I am encouraged by our gains this quarter and believe we are well positioned to continue this positive trajectory.”
Third quarter sales volume decreased by 4.2 million pounds, or 6.9%, to 56.8 million pounds compared to 61.0 million pounds in the thirteen weeks ended September 30, 2023. This was due to customer and consumer pull back and the continued impact of a decline in contract manufacturing business and exiting of low margin business.
On the retail business front, while the company experienced year-over-year decline in volumes, it once again expanded distribution in strategic areas including club and premium offerings. In the foodservice sector, High Liner saw continued success of new value-added innovations in terms of volume and expanded distribution, and saw continued growth in alternative species despite the overall year-over-year decline in volume.
Sales in the third quarter decreased by $30.8 million, or 11.9%, to $228.9 million compared to $259.7 million in the same period in 2023, driven by volume declines amid challenging market conditions and reduced pricing reflecting deflationary markets. Given the highly promotional and price sensitive retail and foodservice markets, the company continues to take actions on promotions, innovation and distribution to strengthen its competitive positioning and mitigate the impact of external pressures while preserving profitability.
The weaker Canadian dollar in the first three quarters of 2024 compared to the same period in 2023 decreased the value of reported USD sales from our CAD-denominated operations by approximately $1.0 million relative to the conversion impact last year.
Gross profit in the third quarter of 2024 decreased by $1.3 million to $48.3 million compared to $49.6 million in the same period in 2023 and gross profit as a percentage of sales increased by 200 basis points to 21.1% compared to 19.1%. The decrease in gross profit reflects the decline in sales volume previously mentioned. This was partially mitigated by the benefit of lower inventory levels, lower raw material costs and the favorable changes in the product mix reflected in the improved gross profit as a percentage of sales. In addition, the weaker Canadian dollar decreased the value of reported USD gross profit from our CAD-denominated operations by $0.2 million relative to the conversion impact last year.
Adjusted EBITDA in the third quarter of 2024 increased by $1.5 million to $21.5 million compared to $20.0 million in the same period in 2023 and Adjusted EBITDA as a percentage of sales increased to 9.4% compared to 7.7%. The increase in Adjusted EBITDA reflects favourable distribution expenses and lower net SG&A expenses, partially offset by lower gross profit.
Reported net income in the third quarter rose by $12.8 million to net income of $18.3 million (diluted EPS of $0.61) compared to $5.5 million (diluted EPS of $0.16) in the same period in 2023. The increase in net income reflects the increase in Adjusted EBITDA discussed previously, a $13.0 million gain on the modification of long term debt recorded in finance costs (income), lower depreciation and amortization costs and an increase in business acquisition, integration and other (income) expense, partially offset by higher income taxes.
Reported net income in the third quarter of 2024 and 2023 included certain non-routine expenses classified as “business acquisition, integration and other expense (income).” Excluding the impact of these non-routine items or other non-cash expenses, and share-based compensation, Adjusted Net Income in Q3 increased by $0.7 million, or 14.3% to $5.6 million compared to $4.9 million in the same period in the prior year and Adjusted Diluted EPS increased $0.06 in the third quarter of 2024 to $0.20 as compared to $0.14 in the same period in the prior year.
Net cash flows provided by operating activities in the third quarter of 2024 decreased by $40.6 million to an inflow of $13.4 million compared to an inflow of $54.0 million in the same period in 2023 despite higher net income and lower interest paid. This is due to net changes in non-cash working capital balances. Capital expenditures were $17.2 million in the first three quarters of 2024 compared to $13.1 million in the prior year reflecting the continued significant investment in the business.
Net Debt decreased by $10.3 million to $239.6 million at September 28, 2024 compared to $249.9 million at December 30, 2023, reflecting lower bank loans, long-term debt, lease liabilities, and a higher cash balance as at September 28, 2024.
High Liner Foods’ retail branded products are sold throughout the United States and Canada under the High Liner, Fisher Boy, Mirabel, Sea Cuisine and Catch of the Day labels, and are available in most grocery and club stores. The company also sells branded products to restaurants and institutions under the High Liner, Mirabel, Icelandic Seafood and FPI labels, and is a major supplier of private label value-added seafood products to North American food retailers and foodservice distributors.
