Mr. Paul Jewer reports

HIGH LINER FOODS REPORTS OPERATING RESULTS FOR THE THIRD QUARTER OF 2023

High Liner Foods Inc. has released financial results for the 13 and 39 weeks ended Sept. 30, 2023.

"We continued to deliver year-over-year volume growth in the third quarter driven by market share gains across our foodservice and Canadian retail business and continued strong execution in priority growth segments and increased market share," said Paul Jewer, interim chief executive officer for High Liner Foods. "However, the pricing and promotional activity required to support sales in the current economic climate, along with the impact of ongoing industry-wide elevated inventory levels, led to a decline in adjusted [earnings before interest, taxes, depreciation and amortization] for the quarter. Looking ahead, the steps we are taking to enhance our value offering and drive efficiencies across our operations will allow us to mitigate the impact of external headwinds on our business as we move into 2024."

Mr. Jewer added: "Our balance sheet strengthened during the quarter with reduced leverage to 3.1 times as a result of significant cash flow from our operations of $54-million. We will continue to focus on improving cash flow and utilize the benefits of our diversification, scale and relationships to support our customers and create the conditions for continued profitable growth for our business."

Dividend increase

The company's board of directors approved a quarterly dividend of 15 cents per share on the company's common shares, payable on Dec. 15, 2023, to holders of record on Dec. 1, 2023. The quarterly dividend of 15 cents per share represents a two-cent increase from the 13-cent-per-share quarterly dividend paid during the third quarter of 2023 and reflects the board's continued confidence in the company's operations.

"The dividend increase announced today recognizes the company's strong cash flow position," said Robert Pace, chair of the board of directors.

Key financial results, reported in U.S. dollars, for the thirteen weeks ended Sept. 30, 2023, or the third quarter of 2023, are as follows (unless otherwise noted, all comparisons are relative to the third quarter of 2022):

• Sales volume increased by 600,000 pounds, or 1.0 per cent, to 61.0 million pounds compared with 60.4 million pounds, and sales decreased by $11.5-million, or 4.2 per cent, to $259.7-million compared with $271.2-million.
• Gross profit decreased by $7.1-million, or 12.5 per cent, to $49.6-million compared with $56.7-million, and gross profit as a percentage of sales decreased to 19.1 per cent compared with 20.9 per cent.
• Adjusted EBITDA decreased by $4.8-million, or 19.4 per cent, to $20.0-million, compared with $24.8-million, and adjusted EBITDA as a percentage of sales decreased to 7.7 per cent compared with 9.1 per cent.
• Net income decreased by $4.5-million, or 45.0 per cent, to $5.5-million, compared with $10.0-million, and diluted earnings per share decreased to 16 cents per share, compared with 28 cents per share.
• Adjusted net income decreased by $9.4-million, or 65.7 per cent, to $4.9-million, compared with $14.3-million, and adjusted diluted earnings per share decreased to 14 cents per share compared with 41 cents per share.
• Net debt to rolling 12-month adjusted EBITDA was 3.1 times at Sept. 30, 2023, compared with 3.7 times at the end of fiscal 2022 and 3.2 times at Oct. 1, 2022. This ratio increased during the second half of fiscal 2022 due to increased investment in inventory.

Key financial results, reported in U.S. dollars, for the 39 weeks ended Sept. 30, 2023, or fiscal 2023, are as follows (unless otherwise noted, all comparisons are relative to the 39 weeks ended Oct. 1, 2022:

• Sales volume increased by 4.9 million pounds, or 2.5 per cent, to 197.4 million pounds, compared with 192.5 million pounds, and sales increased by $23.8-million, or 2.9 per cent, to $843.2-million, compared with $819.4-million.
• Gross profit decreased by $5.1-million, or 2.9 per cent, to $170.0-million, compared with $175.1-million, while gross profit as a percentage of sales decreased to 20.2 per cent compared with 21.4 per cent.
• Adjusted EBITDA decreased by $5.3-million, or 6.8 per cent, to $73.2-million, compared with $78.5-million, and adjusted EBITDA as a percentage of sales decreased to 8.7 per cent compared with 9.6 per cent.
• Net income decreased by $18.3-million, or 42.0 per cent, to $25.3-million, compared with $43.6-million, and diluted earnings per share decreased to 73 cents per share compared with $1.24 per share.
• Adjusted net income decreased by $8.0-million, or 20.3 per cent, to $31.4-million, compared with $39.4-million, and adjusted diluted EPS decreased to 91 cents per share compared with $1.12 per share.

Third quarter operational update

In the third quarter, the company's foodservice business continued to deliver both market share gains and net sales growth. The consistent performance in an increasingly dynamic market is a result of broad-based gains across channels and species; and executional excellence in priority growth segments of long-term care, quick-service restaurants and casual dining; as well as a focused portfolio of branded and value-added customer solutions. The strength of High Liner Foods' foodservice business continued to be supported by growth in its contract manufacturing and successful targeted promotions and partnerships.

High Liner Foods' retail business continued to be impacted by the slowdown in frozen seafood, protein categories and the grocery channel over all across North America driven by inflationary pressures on consumer spending. The company increased market share in Canada and maintained market share in the United States.

High Liner Foods is working closely with customers to invest in supporting category growth and offer targeted customer promotions to demonstrate the value and versatility of frozen seafood to consumers.

Operationally, the company's supply chain remains resilient in the face of geopolitical pressures. However, the company has identified scope for improvements to plant efficiencies, and is focused on ensuring appropriate alignment among operations, inventory and product mix to tighten efficiency and improve margins.

"We are taking all available steps to support our customers and consumers with a diversified portfolio of healthy and affordable proteins. We are also continuing to refine our offering and ensure that we support our enhanced sales approach and profitability with optimization of our plant operations," Mr. Jewer concluded.

Financial results

The financial results in U.S. dollars for the 13 and 39 weeks ended Sept. 30, 2023, and Oct. 1, 2022, are summarized in the attached table.

Outlook

The company remains confident in the long-term outlook for the business and its ability to navigate current macroeconomic challenges. However, the company anticipates that economic conditions impacting consumer spending patterns with respect to frozen seafood will continue to impact results in the short term.

As a result, High Liner Foods no longer anticipates year-over-year adjusted EBITDA growth for fiscal 2023. The company will continue to focus on improving working capital and generating cash flow from operations. The company maintains its confidence in achieving the long-term leverage ratio of 3.0 times.

The company has a strong balance sheet, and is well equipped to invest in organic growth, explore opportunities for transformative growth through potential merger and acquisition activities to build shareholder value, and continue to increase the dividend.

Conference call

The company will host a conference call on Thursday, Nov. 9, 2023, at 10 a.m. ET (11 a.m. AT) during which Mr. Jewer, and Anthony Rasetta, chief commercial officer, will discuss the financial results for the third quarter of 2023. To listen to the conference call by telephone, dial 416-764-8659 or 1-888-664-6392. Please connect approximately 10 minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay by telephone until Sunday, Dec. 10, 2023, at 12 a.m. ET. To listen to the archived conference call, dial 1-888-390-0541 and enter the replay entry code 874664 followed by the number sign.

A live audio webcast of the conference call will be available at the High Liner Foods website. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.

The company's unaudited condensed interim consolidated financial statements and management's discussion and analysis as at and for the 13 and 39 weeks ended Sept. 30, 2023, were filed concurrently on SEDAR+ with this news release and are also available at the High Liner Foods website.

About High Liner Foods Inc.

High Liner Foods is a leading North American processor and marketer of value-added frozen seafood. High Liner Foods' retail branded products are sold throughout the United States and Canada under the High Liner, Fisher Boy, Mirabel, Sea Cuisine and Catch of the Day labels, and are available in most grocery and club stores. The company also sells branded products to restaurants and institutions under the High Liner, Mirabel, Icelandic Seafood and FPI labels, and is a major supplier of private label value-added seafood products to North American food retailers and foodservice distributors. High Liner Foods is a publicly traded Canadian company, trading under the symbol HLF on the Toronto Stock Exchange.

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