High Liner sales volume up, but sales, earnings, and profit drop in Q3 2023
High Liner Foods posted higher sales volumes but lower earnings and gross profit in Q3 2023.
The Lunenburg, Nova Scotia, Canada-based seafood company is predicting it won’t see any growth in its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in its 2023 fiscal year.
High Liner said it sold 61 million pounds of seafood in Q3 2023, up 1 percent from the 60.4 million pounds sold in Q3 2022. Despite the increase in volume, sales value decreased by USD 11.5 million (EUR 10.7million), or 4.2 percent to USD 259.7 million (EUR 242.3 million) in the quarter, compared to USD 271.2 million (EUR 253 million) in the same period in 2022.
The company said the lower sales were related to changes in its sales mix and “sharper” pricing on commodity products in 2023 compared to the same period of 2022.
Coupled with higher volumes sold and lower sales value, High Liner's gross profit as a percentage of sales decreased to 19.1 percent in Q3 2023 compared to 20.9 percent in Q3 2022. Gross profit for the quarter dropped USD 7.1 million (EUR 6.6 million), or 12.5 percent, to USD 49.6 million (EUR 46.2 million) from the USD 56.7 million (EUR 52.9 million) the company posted in Q3 2022.
High Liner's Q3 2023 adjusted EBITDA sank 19.4 percent, or USD 4.8 million (EUR 4.4 million), to USD 20 million (EUR 18.6 million) compared to the USD 24.8 million (EUR 23.1 million) the company saw in Q3 2022. Adjusted EBITDA as a percentage of sales also decreased to 7.7 percent, compared to 9.1 percent.
"We continued to deliver year-over-year volume growth in the third quarter driven by market share gains across our foodservice and Canadian retail business and continued strong execution in priority growth segments and increased market share," High Liner Foods Interim CEO Paul Jewer said. "However, the pricing and promotional activity required to support sales in the current economic climate, along with the impact of ongoing industry-wide elevated inventory levels, led to a decline in Adjusted EBITDA for the quarter.”
The quarter was Jewer's first at the helm after former High Liner Foods President and CEO Rod Hepponstall resigned in August 2023.
High Liner had posted eight consecutive quarters of growth until market headwinds in Q2 2023 broke its streak. The company said as a result of the challenges it “no longer anticipates year-over-year adjusted EBITDA growth for fiscal 2023.”
High Liner's foodservice business continued to achieve gains and sales growth in Q3 2023, which constituted “broad-based gains” across channels and species. Growth was strong in the long-term care, quick-service restaurant, and casual dining segments, it said.
“The strength of High Liner Foods' foodservice business continued to be supported by growth in our contract manufacturing and successful targeted promotions and partnerships,” the company said.
High Liner's retail business, meanwhile, saw more headwinds in Q3 2023. The company said that an overall slowdown in the frozen seafood and protein categories across grocery channels in North America resulted in its U.S. market share remaining relatively flat, though it posted some gains in the Canadian market.
“High Liner Foods is working closely with customers to invest in supporting category growth and offer targeted customer promotions to demonstrate the value and versatility of frozen seafood to consumers,” High Liner said.
Jewer said the company’s balance sheet has improved with a reduced leverage to 3.1x as a result of “significant cash flow from our operations of USD 54 million [EUR 50.4 million].”
“We will continue to focus on improving cash flow and utilize the benefits of our diversification, scale, and relationships to support our customers and create the conditions for continued profitable growth for our business,” he said.
Looking forward, the company said it has identified potential improvements to plant efficiencies that can help improve its profit margins.
“The steps we are taking to enhance our value offering and drive efficiencies across our operations will allow us to mitigate the impact of external headwinds on our business as we move into 2024,” Jewer said.
Photo courtesy of High Liner Foods