High Liner Foods reports disappointing third quarter, cuts made to salaried staff
High Liner Foods Inc. yesterday reported a disappointing financial report for its third quarter, and consequently to cut costs the company said it has let go of 14 per cent of its salaried employees and will be employing five critical initiatives designed to drive cost savings, enhance the efficiency of the business and return the company to profitable organic growth by 2020.
Key financial results, reported in U.S. dollars, for the thirteen weeks ended September 29, 2018, or the third quarter of 2018, are as follows (unless otherwise noted, all comparisons are relative to the third quarter of 2017):
- Sales decreased by $41.5 million to $241.2 million compared to $282.7 million;
- Gross profit decreased by $4.3 million to $44.0 million compared to $48.3 million;
- Adjusted EBITDA1decreased by $3.1 million to $14.2 million compared to $17.3 million;
- Net income decreased by $1.5 million to $4.5 million compared to $6.0 million and diluted earnings per share (EPS) decreased to $0.13 compared to $0.18;
- Adjusted Net Income1decreased by $8.0 million to $0.4 million compared to $8.4 million and Adjusted Diluted EPS1decreased to $0.01 compared to $0.25;
- Net cash flows provided by operating activities in the third quarter of 2018 increased by $11.0 million to $15.4 millioncompared to $4.4 million;
- Net interest-bearing debt1decreased by $9.3 million to $362.6 million at September 29, 2018 compared to $371.9 million at June 30, 2018 and by $25.3 million compared to $387.9 million at the end of Fiscal 2017; and
- Net interest-bearing debt to rolling twelve-month Adjusted EBITDA was 5.7x at September 29, 2018 compared to 5.6x at June 30, 2018 and 5.9x at the end of Fiscal 2017 (5.6x at the end of Fiscal 2017 when calculated including trailing twelve-month Adjusted EBITDA for Rubicon).
Subsequent to the end of the third quarter of 2018, High Liner completed its organizational realignment, resulting in a reduction of 14 per cent of its salaried workforce. The full realignment will generate approximately $7 million in net annualized run rate cost savings, which gives the Company full confidence that it will achieve in excess of the previously disclosed $10 million net annualized run rate cost savings that will be generated by executing against its five critical initiatives. High Liner expects the cost savings to be delivered within the next twelve to fifteen months. There will be a one-time charge of approximately $4.5 million associated with the latest round of restructuring, $3.3 million of which will be recognized in the fourth quarter of 2018, with the remainder to be recognized in 2019.
“Our disappointing third quarter financial performance reflects challenges in both the external operating environment and our internal operations, and reinforces the need for action to realign the business and drive cost efficiencies,” said Rod Hepponstall, president and CEO of High Liner Foods. “The good news is that demand for seafood continues to be strong and the company is well positioned to meet this demand because of its established market position, well known brands and seafood expertise. To capitalize on these opportunities, we must first set our business up for success.”
Hepponstall said that over the next 12 to 15 months the company will focus on five critical initiatives that will ensure it has the most efficient supply chain, a simplified business with lower costs, the right talent in the right roles, a tighter integration with Rubicon, and a stronger strategic marketing platform to grow consumer demand for seafood and our value-added offerings. “We are focusing all of our attention on ensuring swift and effective execution against these plans to stabilize the business and create optimal conditions for innovation, industry leadership and growth in support of long-term value creation for our stakeholders,” he said.