High Liner Foods Inc (HLNFF) Q4 2024 Earnings Call Highlights: Navigating Challenges with ...

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Fri, Feb 28, 2025, 12:23 AM 4 min read

Sales Volume: Increased by 0.8 million pounds or 1.3% to 60.4 million pounds in Q4.
Sales Revenue: Decreased by $2.1 million or 0.9% to $235 million in Q4.
Gross Profit: Increased by $2.3 million or 4.7% to $51 million; gross profit margin increased by 120 basis points to 21.7%.
Adjusted EBITDA: Increased by $1.9 million or 8.7% to $23.8 million; adjusted EBITDA margin improved to 10.1%.
Net Income: Decreased by $0.5 million or 7.8% to $5.9 million; diluted EPS remained at $0.20.
Adjusted Net Income: Increased by $5.2 million or 71.2% to $12.5 million; adjusted diluted EPS increased by $0.18 to $0.41.
Free Cash Flow: Generated $90.6 million for the full fiscal year 2024.
Net Cash Flows from Operating Activities: Decreased by $46.3 million to $20.6 million in Q4.
Capital Expenditures: $23.8 million in 2024 compared to $19 million in the prior year.
Net Debt: Decreased by $16.7 million to $233.2 million; net debt to adjusted EBITDA ratio improved to 2.3 times.

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Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

High Liner Foods Inc (HLNFF) achieved a 1.3% increase in volume and an 8.7% increase in adjusted EBITDA in Q4 2024 compared to the previous year.
The company generated $90.6 million in free cash flow for the full fiscal year of 2024, maintaining strong financial flexibility.
Strategic investments in Norwegian aquaculture companies, Norcod and Andfjord, support long-term growth and innovation in sustainable seafood.
Gross profit increased by 4.7% to $51 million in Q4 2024, with a favorable gross profit margin increase to 21.7%.
Net debt decreased by $16.7 million, improving the net debt to adjusted EBITDA ratio to 2.3 times, indicating strong financial health.

Negative Points

Sales decreased by $2.1 million, or 0.9%, in Q4 2024 due to reduced pricing and increased promotional activity.
The food service business experienced flat volume growth due to a slowdown in dining outside the home.
The weaker Canadian dollar negatively impacted reported US dollar sales and gross profit from Canadian operations.
Net income decreased by 7.8% to $5.9 million in Q4 2024, reflecting increased SG&A expenses and higher income tax expenses.
Net cash flows from operating activities decreased significantly by $46.3 million in Q4 2024 compared to the same period in 2023.

Q & A Highlights

Q: Can you explain the impact of the on-purpose elimination of lower margin volume on Q4 results? A: Paul Jewer, President and CEO, stated that the impact was less significant in Q4, and by the end of the quarter, they had largely lapped it. Improvements in retail and good performance in the food service distributor business contributed to the positive results.

Q: How significant was the year-over-year gain in the retail channel for Q4? A: Paul Jewer noted that while the gain was positive, it wasn't in the double-digit range. The growth was driven by strong performance in the club channel and a shift in consumer behavior towards dining at home.

Q: Are the gains in the retail channel, particularly in the club channel, sustainable? A: Anthony Rasetta, Chief Commercial Officer, expressed confidence in the consistency of the listing base gained in the club and traditional channels. Some items are limited editions, but they have a full calendar of promotions planned for 2025 to maintain momentum.

Q: What is the outlook for volume growth in 2025, considering macroeconomic pressures? A: Paul Jewer believes High Liner Foods can grow volume regardless of macro pressures due to their initiatives. However, ongoing inflation, particularly tariffs, could impact consumer demand. They plan to manage costs efficiently to support volume growth.

Q: How will the delayed Lenten period affect Q1 2025 revenue, and will it be recovered in Q2? A: Paul Jewer mentioned it's hard to quantify the impact yet, but they expect some effect. They plan to recover any Q1 declines in Q2, supported by strong promotional activity and new product innovations.

Q: What are your expectations for raw material costs and promotional activity in 2025? A: Paul Jewer anticipates higher raw material costs, especially for cod and haddock, due to supply shortages. They plan to manage costs efficiently and may pass on price increases if necessary. Promotional activity will focus on maintaining and growing market share.

Q: How does the current macro and political uncertainty affect your M&A plans? A: Paul Jewer stated that uncertainty might create opportunities for High Liner Foods, as they approach from a position of strength. They are actively looking at both small to medium-sized acquisitions and minority investments to support long-term growth.

Q: Can you quantify the potential impact of US tariffs on your business? A: Paul Jewer explained that while the absolute impact of tariffs could be significant, they have strong mitigation plans. Most of their US sales are produced in the US, and they have capacity to mitigate impacts on cross-border sales.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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