High Liner posts losses, decline in fourth-quarter sales
Lunenburg, Nova Scotia, Canada-based High Liner Foods posted slight losses in net income related to one-time costs from layoffs, declines in sales and gross profit, and a weakened Canadian dollar.
In a conference call reviewing the company's fourth quarter results, CEO Rod Hepponstall cautioned shareholders that the company's financials would take time to shift back to the positive. High Liner Executive Vice President and CFO Paul Jewer said that the performance was “in line” with expectations as the company undergoes five “critical initiatives” to bring the business into the black.
“Our fourth-quarter performance was aligned with our expectations for this stage in our turnaround plan,” Hepponstall said. “We’re cautiously optimistic that despite persistent headwinds, High Liner is on the right track.”
The fourth quarter of 2018, compared to 2017, largely showed declines in sales and earnings for the company. Sales decreased by USD 20.1 million (EUR 17.7 million) to USD 242.9 million (EUR 213.4 million), compared to USD 263 million (EUR 231 million) last year.
Gross profit, as well, decreased by USD 4.2 million (EUR ) to USD 40.3 million (EUR ), compared to USD 44.5 million (EUR ) last year. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) also decreased by USD 1.1 million (EUR ) to USD 12 million (EUR ).
Net income for High Liner decreased by USD 15 million (EUR 3.7 million), to a loss of USD 800,000 (EUR 700,000) compared to an income of USD 14.2 million (EUR 12.5 million) in the fourth quarter of 2018. According to High Liner, that reflects losses related to termination benefits stemming from the company laying off roughly 14 percent of its salaried workforce, in addition to other non-routine and non-cash expenses.
Those expenses, however, are a key part of the company’s plan to streamline the organization and decrease costs.
“We are now working in a much more efficient, cohesive North American-wide structure,” Hepponstall said. “I really want to stress the importance of operating as one High Liner Foods. In many ways, when I joined High Liner foods, I came to two companies, one in the United States and one in Canada, that happened to share the same name.”
The realignment, said Hepponstall, is allowing the company as a whole to operate more efficiently, and will likely realize cost savings as the company continues to work toward its goal of achieving profitable organic growth by 2020.
“With the heavy lifting of our organizational realignment behind us, we are now in a position to focus on our next critical initiative of simplifying our business, optimizing the supply chain, and integrating Rubicon,” Hepponstall said.
Simplifying the business includes streamlining the product lines that High Liner offers. That will likely include decreasing the number of products from a high of 1,500, and eliminating certain species from the company’s line-up.
“North of five species will be impacted by the simplification process,” Hepponstall said.
The company has also shifted away from value-added product lines to unprocessed products, following current sales trends.
“Unprocessed volume is slightly up, and value-added volume is slightly down,” Jewer said.
The company is also focusing on new products, and becoming more flexible and efficient when it comes to capitalizing on food trends. Hepponstall highlighted two product launches – Haddock Bites and Everything Bagel-Crusted cod fillets – as examples of the company’s drive to stay on-trend.
“It’s about recognizing opportunities and ensuring High Liner Foods is there quickly,” Hepponstall said.
Other efforts in the company's "five critical initiatives" include integrating Rubicon Resources, a Culver City California-based company specializing in frozen shrimp, into the company’s operations. Acquired in May 2017, Rubicon initially benefitted High Liner but a loss of a lucrative contract with Sam’s Club led to decreased sales.
Despite the challenges at Rubicon, Hepponstall still sees the acquisition as a positive development for the company.
“We’re already seeing enhanced information flow and sharing of best practices,” Hepponstall said. “Shrimp remains the second-fastest growing seafood category behind salmon, and we will see significant potential for growth.”
Shrimp growth is the fourth branch of the five initiatives, with a return to profitability the fifth and final goal for the company's long-term plans.
Even with the progress along the company’s realignment plan, Hepponstall cautioned that the process won’t be a “quick fix.”
“We know that we have a lot of work ahead of us and challenges to overcome, but I’m encouraged by the progress that we’re making,” he said. “I’m confident that we’re on the track to return to profitable organic growth by 2020.”