Lunenburg, Nova Scotia, Canada-based High Liner Foods posted higher profits and earnings in Q2 2024 compared to the same period of 2023, but its sales volume decreased in part due to headwinds in its foodservice business.
The company posted a gross profit of USD 52.5 million (EUR 48.1 million) in the quarter, up USD 500,000 (EUR 458,000) from the USD 52 million (EUR 47.6 million) it posted in Q2 2023. Gross profit as a percentage of sales also increased to 24 percent, up from 20.4 percent. The company’s EBITDA also increased, rising to USD 23.8 million (EUR 21.8 million) – up USD 1.8 million (EUR 1.6 million), or 8.2 percent, compared to the USD 22 million (EUR 20.1 million) it posted in Q2 2023.
Sales, however, decreased in both volume and value terms for the quarter. The company sold 51.7 million pounds of product in Q2 2024, down 7.7 million pounds, or 13 percent, from the 59.4 million pounds High Liner sold in Q2 2023. Sales value decreased by an even higher percentage, dropping to USD 218.3 million (EUR 200 million) – down USD 36 million (EUR 33 million), or 14.2 percent, from USD 254.3 million (EUR 232.9 million).
High Liner Foods President and CEO Paul Jewer said the positive profit and earnings came as the company continued to find efficiencies in the business as the company faced headwinds from a difficult consumer environment.
“We continue to operate in a dynamic market in which market data shows that despite easing inflation, the consumer continues to feel stretched and pull back on discretionary spending, such as dining outside of the home, and remains price sensitive in the grocery store,” Jewer said during a conference call covering the company’s Q2 results. “We are seeing these trends play out as the foodservice traffic slowdown in Q2 lead to an overall category decline.”
The frozen seafood category in retail has also remained relatively stagnant, and there were year-over-year declines in volume for High Liner, Jewer said.
“Against this backdrop, we're focused on leveraging the opportunities associated with our value and premium offerings and using the diversity of our business to lean into areas of greatest stability and opportunity in terms of species, channel, or customer,” Jewer said.
Despite the overall negative trend in both foodservice and retail, some of High Liner’s products saw great successes during the quarter. High Liner Foods Chief Commercial Officer Anthony Rasetta said that the company has continued to drive momentum on its premium products in U.S. retail, which has boosted High Liner Foods’ market share.
“This was driven by the robust performance and expanded distribution of our Sea Cuisine and C. Wirthy premium products, as well as our new branded value-added shrimp SKUs,” he said. “We saw a particularly strong performance in our C. Wirthy premium Atlantic salmon brand, which was the fastest-growing value-added brand in frozen seafood in the U.S. during the second quarter.”
Not all of the volume declines were related to headwinds in foodservice and retail. Jewer said that roughly 60 percent of the company’s volume decline comes from the cessation of contract manufacturing – a move that the company made in Q1 2024 to move away from lower-margin operations.
“As market dynamics change and you see increases in raw material prices and if you conclude that you’re not able to pass those on or there’s a decline in the volume anyway – so the scale of the business doesn’t support the benefit that you would get from plant absorption – those are the types of things that factor into our decision about what volume we want to continue to do at what price,” Jewer said.
High Liner is also benefiting from refinancing some of its debt – which Jewer said will help the company in annual interest savings.
Overall, the company’s balance sheet is strong and leaves it in a good position to continue merger and acquisition and investment activity. In Q1 2024, High Liner invested in Norwegian cod-farming company Norcod and later participated in a funding round for Andfjord Salmon – investing USD 10 million (EUR 9.1 million) in the company.
During the conference call, Jewer hinted at acquisitions or mergers in High Liner’s future that could be larger than either the amount it spent on Norcod or Andfjord – but that the company continues to remain conservative to ensure it invests in the right business.
“We’re out there actively looking at opportunities, but as I said in my remarks, we’re making sure it has the right strategic fit, that it has got the right financial profile, and that we can execute well on it,” Jewer said.
Jewer said that looking forward, the company expects to see slight deflation on its pricing as it engages in promotional activity and that the company is on track to a positive 2024 despite the ongoing challenges.
“Overall, the quarter was in line with our expectations given market conditions and the year-over-year shifts in contract manufacturing and inventory levels,” Jewer said. “That said, there's still much work to do to support category recovery, improvement on the top line, and a return to profitable growth. I am confident in our ability to do this, and we will continue to ensure that our focus is oriented to the evolving needs of the consumer and opportunities for our business beyond this point of the market cycle.”
