Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gross profit increased by $500,000 or 1%, and adjusted EBIT grew by $1.8 million or 8.2%, indicating improved profitability.
- The company completed a refinancing of its Term Loan B ahead of schedule, resulting in annual interest savings.
- Adjusted EBITDA increased by $1.8 million or 8.2% to $23.8 million, reflecting improved operational efficiency.
- Net debt decreased by $17.2 million to $232.7 million, showing improved financial health and lower leverage.
- High Liner Foods expanded distribution in strategic areas, including club value and premium offerings, indicating growth potential in these segments.
Negative Points
- Sales volume decreased by 13% to GBP51.7 million, driven by declines in contract manufacturing and low-margin business exits.
- The frozen seafood category has not yet returned to growth, with market dynamics creating headwinds for the business.
- Sales decreased by $36 million or 14.2% to $218.3 million, impacted by volume declines and reduced pricing.
- The weaker Canadian dollar decreased the value of reported USD sales and gross profit from Canadian operations.
- Net cash flows from operating activities decreased by $6.4 million, reflecting lower cash provided by operations and higher income taxes paid.
Q & A Highlights
Q: Regarding the intentional volume cuts, are the cuts in Q2 the same as those from Q1, or have you started an additional round during this quarter?
A: The cuts in Q2 are a continuation of those made in the first quarter. The ongoing impact of contract manufacturing declines from Q1 is also reflected in Q2. (Paul Jewer, Interim CEO & CFO)
Q: Is the volume cut similar to the 7% year-over-year impact last quarter?
A: It's slightly higher this quarter. Contract manufacturing and lower-margin business collectively account for about 60% of the volume decline. (Paul Jewer, Interim CEO & CFO)
Q: Why is this volume now considered low-margin or unprofitable? Was it not the case in 2019?
A: It was lower profitability back in 2019 as well. Changes in market dynamics, raw material prices, and the inability to pass on costs have influenced our decision to cut this volume. (Paul Jewer, Interim CEO & CFO)
Q: Should we expect an acceleration in price discounting and promotional activity to support the top line?
A: The deflationary impact was about 4%, offset by a positive mix impact of about 3%. We expect a bit higher promotional activity in the back half of the year to support volume. (Paul Jewer, Interim CEO & CFO)
Q: With excess capital generation and a strong balance sheet, do you have larger M&A aspirations, or will excess capital be returned to shareholders?
A: We have aspirations for larger M&A opportunities and are actively looking for strategic fits. Meanwhile, we continue to invest in CapEx and buy back shares when opportunities arise. (Paul Jewer, Interim CEO & CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
