Lunenburg, NS-based High Liner, the publicly traded Canadian firm that processes and markets food products, said Q2 sales increased by 5.1% over last year, driven by expansion into US club stores, continued success of the company’s premium quality branded products, and the launch of Italian Village in Canada.
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Packaged Foods sales increased during the Q2. Higher US club store sales contributed to this. Sales of High Liner branded premium quality products in Canada also grew by 18.6%. Canadian food service sales increased 4.4% over the Q2 2001. The launch of Italian Village in Canada also increased sales, which were offset by expected initial listing and promotional costs.
Packaged Foods sales increases were offset by lower Fishing Division sales. Fresh fish sales decreased as a result of lower company groundfish landings, particularly perch. As well, lower scallop selling prices, relative to last year, also decreased Fishing Division sales.
Fisher Boy private label seafood sales and Gina Italian Village pasta sales were down year on year. Seafood sales to traditional channels in the US fell as some customers tried to reduce their usual inventory levels. This had no impact on consumer sales as Fisher Boy’s fish stick market share for the 13-week period ended 15 June 2002 increased 1.1 share points. Gina Italian Village sales fell due to aggressive distribution and pricing by small pasta suppliers in New York. Gina Italian Village’s market share fell to 12.8%, down 3 share points, for the H1 2002 as a result of this competition.
High Liner Canadian market share for the H1 2002 was 44.8%, down from the 47.1% for the comparable period last year, partly due to the fact that a very successful promotion featuring “bonus packs” was undertaken in 2001 with no similar promotion in 2002. For the H1 2002, Fisher Boy’s total market share was 5.1% down from 5.5% last year, however Fisher Boy’s fish stick share increased 1.1 share points, as indicated above, to 23.2%.
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By GlobalDataHenry Demone, president and CEO, commented: “I am satisfied with results for the H1. In particular, the company’s scallop business, although not as profitable as last year, is outperforming our expectations.
“As well, the market successes at club stores, premium seafood offerings in Canada, and the positive early results of Canada’s Italian Village launch, all provide momentum for positive results for the last half of the year.”
Operating EBITDA (excluding litigation costs) and net income for the Q2 2002 fell over the same period last year due to lower scallop profits and weakened Italian Village results. On a year-to-date basis, operating EBITDA (excluding litigation costs) is C$13.9m, equal to last year. Due to the schedule in the Italian Village litigation, annual costs will not be higher than in 2001. Net income for the H1 2002, at C$3.7m is slightly lower than the comparable period last year. Included in last year’s results was a gain on asset disposals of C$0.7m and goodwill amortisation, net of income taxes, of C$0.5m.
Outlook
Management expects sales and profit for the full year to exceed those of 2001. Net income should increase by about 10% on last year, excluding the positive effects of not amortising goodwill. The company will continue its success in market development and new product launches under its retail branded food business for the remainder of 2002 and beyond. The US club store initiative will continue to add to growth and the scallop business is anticipated to be more profitable than originally expected due to higher selling prices.
Dividends
Regular quarterly dividends on the company’s Second Preference Shares of C$1.24 per share were paid for the period from 31 March 2002 to 29 June 2002.
(Amounts in thousands of Q2 Six Months
C$ except per ———————————————
share amounts) 2002 2001 2002 2001
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Sales $ 71,487 $ 68,029 $ 161,058 $ 152,840
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Operating EBITDA 4,049 4,676 13,886 13,931
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Income before the following 1,284 1,186 8,084 7,041
Litigation costs (863) (240) (1,908) (763)
Gain on asset disposals – 499 – 737
Income taxes (132) (408) (2,476) (2,695)
————————————————————————-
Income before goodwill
amortization 289 1,037 3,700 4,320
Goodwill amortization,
net of income taxes – (246) – (490)
————————————————————————-
Net income $ 289 $ 791 $ 3,700 $ 3,830
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Basic earnings per Common Share:
Based on net income $ 0.00 $ 0.05 $ 0.32 $ 0.32
Based on income before
goodwill amortization $ 0.00 $ 0.07 $ 0.32 $ 0.37
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