While Lunenburg, Nova Scotia, Canada-based High Liner Foods acquired frozen shrimp importer and distributor Rubicon Resources this week, its earnings news was not as favorable.
The acquisition of Culver City, California-based Rubico, a privately-held importer and distributor of sustainably sourced frozen shrimp products in the private-label U.S. retail market, allows High Liner to expand into a new market. Rubico had sales of around USD 234 million (EUR 215 million) in 2016.
However, High Liner’s sales in the first quarter of 2017 dropped 5.4 percent to USD 275.7 million (EUR 254 mllion), because of production challenges, a late Lent selling period and lower demand for frozen breaded and battered items. Gross profits also plummeted 15.1 percent to USD 55.5 million (EUR 51 million)
"As a result of a late Lent in 2017, a portion of the sales benefit associated with the Lenten period was shifted to April, compared to the full benefit being realized in the first quarter last year,” said Keith Decker, president and CEO of High Liner Foods. “With stronger sales and earnings in April of this year….and improved plant efficiency, we expect year-over-year sales volume and earnings trends in the second quarter of 2017 will be greatly improved from those experienced in the first quarter.”
Lower-than-expected sales volume in the quarter was also due to “production challenges that prevented our manufacturing facilities from fully serving surging demand in March related to a late Lent,” Decker said.
High Liner’s sales also fell because of “the continued impact of lower demand for traditional breaded and battered frozen seafood products, which we were unable to offset with sales from our new frozen seafood products,” the company said in a statement.
“We expect the trend of lower demand for frozen breaded and battered seafood products will continue in 2017, but are optimistic that sales from new and improved product offerings can offset this decline by the end of this year,” Decker added.
The sale of High Liner’s New Bedford scallop business last September also lowered sales volume by 0.7 million pounds and sales by USD 9 million (EUR 8.3 million). Plus, High Liner had USD 0.7 million (EUR 0.6 million) of estimated costs related to a product recall in April.