Lunenburg, Nova Scotia, Canada-based High Liner Foods reported lower sales and gross profit in the its second-quarter financial report, but CEO Rod Hepponstall said he is confident the company’s turnaround is nearly complete.
The company recorded USD 223 million (EUR 198.8 million) in total sales in the second quarter, down from USD 245.3 million (EUR 216.7 million) in Q2 of 2018. Its H1 sales total of USD 500.5 million (EUR 446.2 million) was also down year-over-year from USD 564.5 million (EUR 503.3 million) in H1 of 2018. High Liner’s gross profit decreased in the second quarter by 1.1 percent to USD 42.8 million (EUR 38.2 million), and its gross profit fell by 4.8 percent in H1 to USD 98.9 million (EUR 88.2 million).
Since he was hired in April 2018, Hepponstall has led High Liner in an organizational restructuring amidst falling sales volumes and higher material prices. He introduced a five-step “critical initiative plan” and signed off on a reduction in staffing that slimmed the company by 14 percent of its workforce.
“Our critical initiative plan is working,” Hepponstall said in the company’s earnings call on 7 August. “We’re building a better, more profitable business, reducing debt to build a strong balance sheet. The market is responding well to our new product innovations and we are launching more innovations in the second half of 2019. Our north American team is integrated and working well together. Our supply chain is increasingly efficient and our operating costs are decreasing. Finally, we are confident that the critical initiative plan will continue to deliver year-over-year adjusted EBITDA improvement in the second half of 2019 and 2020 as a result of efficiencies, improvements, and further optimizations to our business.”
In its Q2 report, High Liner reported earnings before interest, tax, depreciation and amortization (EBITDA) of USD 17.9 million (EUR 16 million), up from 12.1 million in Q2 2018. It’s USD 50.1 million (EUR 44.7 million) in adjusted EBITDA for H1 2019 also surpassed the USD 36.3 million (EUR 32.4 million) it reported in H1 2018.
“Management is confident that execution against the critical initiative plan will continue to deliver year-over-year Adjusted EBITDA improvement in 2019 and 2020,” Hepponstall said. “We expect debt reduction to continue as a result of improved cash flow management and the dividend reduction announced last quarter on the Company's common shares, but not to the same degree as was experienced in the first half of 2019 given increased working capital requirements in advance of the Lenten period.”
Consolidated sales volume for the second quarter of 2019 decreased by 5.1 million pounds, or 7.8 percent, to 60.4 million pounds,compared to 65.5 million pounds in the same period in 2018, the company reported. Company CEO Paul Jewer said this was due to lower sales volumes in the firm’s retail and foodservice businesses, “including lower sales volume as a result of a significant customer loss in the latter half of Fiscal 2018 and the exit of low-margin business.”
Hepponstall said the company has eliminated nine species and more than 240 products from its portfolio in an effort to simplify its operations. Product innovation and establishing closer relationships with customers, working hand-in-hand to create new products and offerings, will pave the company's path to success, he said on the earnings call.
