Lower raw material prices boosted earnings in Q3

Lower raw material prices boosted earnings in Q3

Canada-based company High Liner Foods has booked an increase in third-quarter earnings, boosted by lower raw material and financing costs.

The North American value-added frozen seafood company recorded net profit of US$7.4m in the three months ended 28 September. This compared to earnings of $2.2m last year.

Adjusted EBITDA edged up to $22.1m from $21.8m in the prior year. Sales, however, fell 1.5% to $216.5m, primarily due to sale declines in the firm's US food service business and its US and Canadian retail private label businesses.

In its outlook, the company said higher prices for shrimp and haddock may hurt volumes as well as margins for certain products over the balance of the year and into 2014.

Shrimp prices have surged since the beginning of this year, as supply from Thailand - the world's largest exporter - has been hit by an outbreak of Early Mortality Syndrome (EMS). 

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High Liner Foods Reports Third Quarter 2013 Operating Results
November 7, 2013

LUNENBURG, NS, Nov. 7, 2013 (Canada NewsWire via COMTEX) --- Third Quarter produces $10.4 million in Adjusted Net Income, a 30% increase over 2012, and the quarterly dividend increases 6% -

High Liner Foods Incorporated (TSX: HLF) ("High Liner Foods" or "the Company"), the leading North American value-added frozen seafood company, today reported financial results for the thirteen and thirty-nine weeks ended September 28, 2013. All amounts are reported in U.S. dollars ("USD") unless otherwise noted.

Financial and operational highlights for the third quarter of 2013 include (all comparisons are relative to the third quarter and first thirty-nine weeks of 2012, unless otherwise noted):

    --  Sales for the third quarter were $216.5 million, compared with
        $219.9 million;
    --  Reported net income increased in the third quarter to $7.4
        million (diluted earnings per share ("EPS") of $0.48), compared
        with $2.2 million (diluted EPS of $0.14).  Reported net income
        was $22.6 million (or diluted EPS of $1.45) for the first
        thirty-nine weeks of 2013, compared to $4.9 million ($0.32
        diluted EPS);
    --  Adjusted Net Income(1) increased in the third quarter to $10.4
        million (Adjusted Diluted EPS(1) of $0.66), compared with $8.0
        million (Adjusted Diluted EPS of $0.52).  Adjusted Net Income
        for the first thirty-nine weeks of 2013 was $29.3 million
        (Adjusted Diluted EPS of $1.88), compared to $27.4 million
        (Adjusted Diluted EPS of $1.78);
    --  Adjusted EBITDA(1) for the third quarter was $22.1 million,
        compared with $21.8 million;
    --  Standardized Free Cash Flow(1) was $64.7 million for the
        fifty-two week period ended September 28, 2013, compared with
        $41.1 million for the same period ended September 29, 2012; and
    --  Net interest-bearing debt to Adjusted EBITDA, calculated on a
        rolling fifty-two week basis, decreased to 3.16x at the end of
        the third quarter, compared to 3.40x at the end of fiscal 2012.


"We are pleased to report High Liner Foods' Adjusted Net Income was $10.4 million for the third quarter of 2013, which represents a $2.4 million, or 30%, increase over the third quarter of 2012," said Henry Demone, CEO. "Profitability improved in the third quarter, despite continued pressure on sales in certain segments of our business, and our operating cash flow was strong, as evidenced by Standardized Free Cash Flow of $64.7 million for the fifty-two week period ended September 28, 2013, compared to $41.1 million for the same period ended September 29, 2012. Strong cash flows from operating activities allowed us to reduce our net interest-bearing debt to Adjusted EBITDA ratio, also calculated on a rolling fifty-two week basis, from 3.40x at the end of fiscal 2012 to 3.16x at the end of the third quarter."

"Consistent with the first half of this year, in the third quarter we experienced sale declines compared to last year in our U.S. food service business and our U.S. and Canadian retail private label businesses. The decline in U.S. food service sales reflected continued soft restaurant sales related to a sluggish economic recovery in the U.S. and the decline in retail private label sales reflects the trend being experienced in the seafood marketplace overall of decreased demand for retail private label seafood products," explained Mr. Demone. "However, the impact of these sales declines in the third quarter was partially offset by sales growth in our branded retail business on both sides of the border and our Canadian food service business, when compared to the same period last year."

"The $2.4 million increase in Adjusted Net Income in the third quarter also reflects lower overall raw material costs, significant savings in financing costs resulting from amendments made to our term loan in the first quarter of this year, realization of synergies resulting from integrating the Icelandic USA acquisition and a lower effective income tax rate," said Mr. Demone. "In the first quarter of this year, we expedited the closure of our plant in Danvers, Massachusetts, and as a result, incurred incremental operating costs related to reduced plant throughput rates as our U.S. plants integrated new products into their respective production facilities. The extent of these incremental costs, incurred in part to ensure minimal disruption to our customers, was not fully anticipated, and while we have been successful in increasing plant throughput rates from those experienced in the first quarter, these rates have not been fully restored to optimal levels. As a result, the Company continued to incur additional operating costs in the third quarter related to the reduced throughput rates and the full impact of the synergies related to closing the Danvers plant have not yet been fully realized. Maximizing throughput rates and reducing operating costs associated with our U.S. manufacturing facilities is currently a top priority."

Original source: High Liner Foods