High Liner Foods Reports Operating Results for the Fourth Quarter and Full Year 2023

Continued strong free cash flow and significant balance sheet improvement

LUNENBURG, NS, Feb. 21, 2024 /CNW/ – High Liner Foods Incorporated (TSX:HLF) (“High Liner Foods” or “the Company”), a leading North American value-added frozen seafood company, today announced financial results for the fifty-two weeks ended December 30, 2023.

“In fiscal 2023 we generated the highest free cash flow in our history and took the opportunity to significantly reduce debt, invest in our business and return capital to our shareholders”, said Paul Jewer, President & Chief Executive Officer for High Liner Foods.  “While our Q4 results were below the potential of our business due to the ongoing challenges posed by the macro-economic environment, we are confident that the underlying fundamentals of our business, and our strategy, remain sound.”

Mr. Jewer added, “In the year ahead, we will continue to deliver on our proven strategy of offering customers and consumers quality and choice across a range of price points to drive improved financial performance. We believe in the long-term market opportunity of frozen seafood as a healthy and sustainable source of protein, and we are well positioned to support our customers in driving category recovery through the course of the year ahead. We are similarly well positioned to invest in our own growth and are excited about the opportunities afforded by our balance sheet strength, ongoing diversification, and scale.”

Key financial results, reported in U.S. dollars (“USD”), for the fifty-two weeks ended December 30, 2023, or Fiscal 2023, are as follows (unless otherwise noted, all comparisons are relative to the fifty-two weeks ended December 31, 2022, or “Fiscal 2022”):

Sales volume increased by 6.1 million pounds, or 2.4%, to 257.0 million pounds compared to 250.9 million pounds and sales increased by $10.6 million, or 1.0%, to $1,080.3 million compared to $1,069.7 million;
Gross profit decreased by $11.2 million, or 4.9%, to $218.7 million compared to $229.9 million, while gross profit as a percentage of sales decreased to 20.2% compared to 21.5%;
Adjusted EBITDA(1) decreased by $8.8 million, or 8.5%, to $95.1 million compared to $103.9 million, and Adjusted EBITDA as a percentage of sales(1) decreased to 8.8% compared to 9.7%;
Net income decreased by $23.0 million, or 42.0%, to $31.7 million compared to $54.7 million and diluted earnings per share (“EPS”) decreased to $0.93 per share compared to $1.56 per share; and
Adjusted Net Income(1) decreased by $13.0 million, or 25.1%, to $38.7 million compared to $51.7 million and Adjusted Diluted EPS(1) decreased to $1.14 per share compared to $1.48 per share.
Cash Flows from Operations increased by $255.5 million, or 335.3%, to an inflow of $179.3 million compared to an outflow of $76.2 million.

Key financial results, reported in USD, for the thirteen weeks ended December 30, 2023, or the fourth quarter of 2023, are as follows (unless otherwise noted, all comparisons are relative to the fourth quarter of 2022): 

Sales volume increased by 1.2 million pounds, or 2.1%, to 59.6 million pounds compared to 58.4 million pounds and sales decreased by $13.2 million, or 5.3%, to $237.1 million compared to $250.3 million;
Gross profit decreased by $6.1 million, or 11.1%, to $48.7 million compared to $54.8 million, and gross profit as a percentage of sales decreased to 20.5% compared to 21.9%;
Adjusted EBITDA(1) decreased by $3.5 million, or 13.8%, to $21.9 million compared to $25.4 million, and Adjusted EBITDA as a percentage of sales decreased to 9.2% compared to 10.1%;
Net income decreased by $4.7 million, or 42.3%, to $6.4 million compared to $11.1 million and diluted earnings per share (“EPS”) decreased to $0.20 per share, compared to $0.32 per share;
Adjusted Net Income([1]) decreased by $5.0 million, or 40.7% to $7.3 million compared to $12.3 million and Adjusted Diluted EPS(1) decreased to $0.23 per share compared to $0.35 per share;
Cash Flows from Operations increased by $122.7 million, or 219.9%, to an inflow of $66.9 million compared to an outflow of $55.8 million; and
Net Debt(1) to Rolling Twelve-Month Adjusted EBITDA(1) was 2.6x at December 30, 2023 compared to 3.7x at the end of Fiscal 2022 and 3.0x at end of Fiscal 2021. This ratio increased during the second half of Fiscal 2022 due to a planned increased investment in inventory.

Financial Results and Operational Update

For the purpose of presenting the Consolidated Financial Statements in USD, CAD-denominated assets and liabilities in the Company’s operations are converted using the exchange rate at the reporting date, and revenue and expenses are converted at the average exchange rate of the month in which the transaction occurs. As such, foreign currency fluctuations affect the reported values of individual lines on our balance sheet and income statement. When the USD strengthens (weakening CAD), the reported USD values of the Parent’s CAD-denominated items decrease in the Consolidated Financial Statements, and the opposite occurs when the USD weakens (strengthening CAD).

Investors are reminded for purposes of calculating financial ratios, including dividend payout and share price-to-earnings ratios, to take into consideration that the Company’s share price and dividend rate are reported in CAD and its earnings, EPS and financial statements are reported in USD.

The financial results in USD for the thirteen and fifty-two weeks ended December 30, 2023 and December 31, 2022 are summarized in the following table:

Sales volume for the thirteen weeks ended December 30, 2023, or the fourth quarter of 2023, increased by 1.2 million pounds, or 2.1%, to 59.6 million pounds compared to 58.4 million pounds in the thirteen weeks ended December 31, 2022 due to higher volume in our foodservice business, partially offset by lower volume in our retail business. In our foodservice business, sales volume was higher due to increased contract manufacturing business and improved customer service levels. This was partially offset by lower sales volume in our retail business due to the continued impact of inflation. This resulted from softer demand for protein, including seafood product as consumers switch to lower cost alternatives.

Sales in the fourth quarter of 2023 decreased by $13.2 million, or 5.3%, to $237.1 million compared to $250.3 million in the same period in 2022, reflecting changes in sales mix and lower pricing most notably on some of our commodity products during the fourth quarter of fiscal 2023 compared to the inflationary environment in the same period last year. This decrease was partially offset by higher sales volumes mentioned previously. The weaker Canadian dollar in 2023 compared to the same quarter of 2022 decreased the value of reported USD sales from our CAD-denominated operations by approximately $0.2 million relative to the conversion impact last year.

Gross profit in the fourth quarter of 2023 decreased by $6.1 million to $48.7 million compared to $54.8 million in the same period in 2022 and gross profit as a percentage of sales decreased by 140 basis points to 20.5% compared to 21.9%. The decrease in gross profit reflects changes in product mix,  lower pricing on some of our commodity products and some inefficiencies at our plants. The decrease in gross profit was partially offset by the increase in sales volume, discussed previously. In addition, the weaker Canadian dollar decreased the value of reported USD gross profit from our CAD-denominated operations by nominal amounts  relative to the conversion impact last year.

Adjusted EBITDA in the fourth quarter of 2023 decreased by $3.5 million to $21.9 million compared to $25.4 million in the same period in 2022 and Adjusted EBITDA as a percentage of sales decreased to 9.2% compared to 10.1%. The decrease reflects the decrease in gross profit, partially offset by the decrease in distribution costs and net SG&A expenses.

Reported net income in the fourth quarter of 2023 decreased by $4.7 million to net income of $6.4 million (diluted EPS of $0.20) compared to $11.1 million (diluted EPS of $0.32) in the same period in 2022. The decrease in net income was due to the decrease in Adjusted EBITDA, an increase in depreciation and amortization costs and income taxes in the fourth quarter of 2023 compared to the same period last year, partially offset by lower finance costs.

Reported net income in the fourth quarter of 2023 and 2022 included certain non-routine expenses classified as “business acquisition, integration and other expense (income).” Excluding the impact of these non-routine items or …

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