High Liner Foods (HLF) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 rose 227% year-over-year to $19.3M, with EPS at $0.59; first half net income up 81% to $35.9M.

• Adjusted EBITDA increased 8% to $23.8M in Q2 and 9% to $58.1M for the first half, with margins improving to 10.9% and 11.7% respectively.

• Sales volume declined 13% to 51.7M lbs in Q2 and 13% to 118.6M lbs in H1, with sales down 14% in Q2 and 15% in H1, mainly due to intentional exit from low-margin business and contract manufacturing declines.

• Gross profit margin improved to 24.0% in Q2 and 23.8% for the first half, supported by lower raw material costs and normalized inventory levels.

• Strong free cash flow and reduced net debt position the company for continued investment, shareholder returns, and operational efficiency.

Financial highlights

• Q2 sales: $218.3M (down $36.0M year-over-year); first half sales: $495.3M (down $88.2M).

• Q2 gross profit: $52.5M (up $0.5M); gross margin up 3.6 pts to 24.0%.

• Adjusted EBITDA Q2: $23.8M (up $1.8M); first half: $58.1M (up $4.9M); margin up to 10.9% in Q2 and 11.7% in H1.

• Adjusted diluted EPS increased by $0.13 to $0.90 in H1; diluted EPS up $0.42 to $0.59 in Q2.

• Net cash flows from operations were $39M in Q2 and over $56M YTD Q2 2024.

Outlook and guidance

• Management expects continued market challenges but remains confident in achieving annual Adjusted EBITDA growth for 2024, supported by a strong balance sheet and free cash flow.

• Focus remains on branded and value-added strategy, supply chain diversification, and innovation.

• Exploring M&A opportunities, highlighted by recent investments in Norcod and Andfjord.

• Net debt to Adjusted EBITDA expected to remain below the long-term target of 3.0x.

• Anticipates increased promotional activity in the second half to support volume.