High Liner Foods reported lower earnings in Q2 2023 – the first time it has seen a decline after an eight-quarter growth streak – as market headwinds and softer consumer demand hurt its bottom line.
The company posted adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in Q2 2023 of USD 53.3 million (EUR 48.3 million), a decrease of USD 500,000 (EUR 453,000), or 0.9 percent, compared to Q2
Net income in Q2 2023 also decreased to USD 13.8 million (EUR 12.5 million) to USD 19.8 million (EUR 17.9 million), down 41.1 percent compared to the USD 33.6 million (EUR 30.4 million) the company posted in Q2 2022. Gross profit increased to USD 120.4 million (EUR 109.2 million), up USD 2.1 million (EUR 1.9 million), or 1.8 percent, from the USD 118.3 million (EUR 107.3 million) the company posted in Q2 2022. However, gross profit as a percentage of sales decreased to 20.6 percent in Q2 2023, compared to 21.6 percent in Q2 2022.
While earnings were down, the company saw both sales volume and sales dollar growth. The company increased its sales to USD 254.3 million (EUR 230.7 million) in Q2 2023, up slightly from USD 253.5 million (EUR 230 million) posted in Q2 2022. Sales volume increased 1 percent from 58.8 million pounds to 59.4 million pounds.
“Our foodservice business continued to perform well and outpace the category in terms of growth," High Liner Foods President and CEO Rod Hepponstall said in a release. "However, softer consumer demand in the retail category and higher inventory levels across the frozen seafood industry continued in the quarter. This had an impact on our profitability during the quarter and together with higher inventory costs, led to a decline in Adjusted EBITDA, compared to a period of markedly different market conditions a year ago."
The retail market, High Liner Foods Chief Commercial Officer Anthony Rasetta said during a conference call reviewing the results, has changed significantly compared to Q2 2022.
“The retail category overall is seeing pretty consistent declines across brands,” Rasetta said.
Hepponstall said that the company expects those declines to remain consistent for the remainder of the year, and that operating conditions in Q3 and Q4 will “remain challenging. Despite those challenges, he said, High Liner will still achieve year-over-year adjusted EBITDA growth.
“We know how to deliver the right product to the right customer at the right price,” he said.
Part of that growth, Rasetta said, will stem from High Liner’s diversified product portfolio.
“The only growth that we’re seeing in the [retail] category right now is private label, and the good news for us is we’re a major supplier of private label,” he said. “Consumers are still looking for convenience at the right price.”
Other aspects of the company’s financial growth, High Liner CFO Paul Jewer said, will stem from it managing its spending.
“We’re very carefully managing our costs associated with our supply chain, both in production facilities and in terms of transportation and logistics,” Jewer said. “We feel good about our ability to manage costs in the back half of the year.”
Jewer added that the company is expecting to see deflationary impacts in the latter half of 2023, a departure from the months of inflation that drove the company to implement inflationary pricing.
That pricing, he said, is “behind us” and any inflation experienced across its various categories “won’t be the significant inflation we saw a year ago.”
As costs begin to come down, Jewer added that High Liner may be able to pass those lower costs on to customers.
“Certainly in our commodity business, as costs come down there will be the opportunity to pass that through,” he said. “In other parts of our business, we’re taking the advantage to do promotional activity to drive volume.”
Overall, Hepponstall said the company is confident the seafood category still has significant growth opportunities ahead, and that High Liner has worked over the past four years to be able to capitalize on those opportunities.
“We are in a fundamentally different place because of the work we’ve been undertaking to optimize our portfolio,” Hepponstall said. “Our business is well positioned despite firm headwinds.”
Photo courtesy of High Liner Foods
