This time last year I reported on the resilience of our organization through the first year of the COVID-19 pandemic and the unwavering commitment of our people who came together to support our customers and deliver a steady supply of frozen seafood across North America.
I am pleased to say that these same qualities continued to shine brightly in 2021, despite constant and varied challenges related to the global supply chain and the ongoing pandemic.
Through it all, our team was nimble and proactive. We took every opportunity to deepen our customer relationships and brand loyalty. We remained grounded in our newly stated purpose — reimagining seafood to nourish life. We invested in our business, further diversified our supply chain, built inventory, continued to shift our portfolio towards higher margin branded, value-added products and worked together to serve our customers. And above all else, we continued to prioritize the health, safety and well-being of our people.
As a result, we were able to mitigate much of the impact of pandemic related challenges on our business and were able to still deliver year-over-year Adjusted EBITDA performance, surface organic growth and advance towards our goal of becoming the North American leader in branded value-added seafood.
I am proud to report that we delivered year-over-year Adjusted EBITDA(1) growth for the third consecutive year, increasing our 2021 result by $2.4 million, to $90.4 million. Among the financial highlights of 2021 (as compared to Fiscal 2020):
Together with the Board, we were also pleased to increase the quarterly dividend by 3.0 cents (from $0.07 to $0.10) in the third quarter of 2021. Our ability to increase the return of capital to shareholders indicates how well our team has been able to navigate ongoing market challenges, while continuing to drive profitability. Based on our improving performance, we can comfortably support the dividend increase while simultaneously investing in our business to fuel growth and continuing to reduce debt.
We have come a long way in three years
Despite the challenges of the pandemic and global supply chain, our business continues to move from strength to strength. While top-line growth has inevitably been impacted, High Liner Foods today is much stronger than prior to the pandemic. For example, we have significantly improved our profitability, growing Gross Profit as a Percentage of Sales by 300 basis points since 2019. We grew our Adjusted EBITDA by $5.1 million during that timeframe as well. Both of these significant improvements were the result of executing against our branded, value-added strategy and strong execution across our entire organization.
As we navigated challenges of the past year in partnership with our customers and suppliers, we deepened relationships, strengthened loyalty and showcased the benefits of our diversified portfolio and supply chain. Our sales team delivered new business wins and our marketing team put advertising and consumer investments to work to build brand value and drive product awareness. These results provide further evidence of the opportunity that is out there for us as market conditions stabilize and we continue to aggressively pursue growth in branded, value-added seafood in targeted categories and channels across North America.
We owe our success to the hard work and dedication of our global team of employees who worked safely together in our plants and warehouses, collaborated virtually, and transitioned to an evolving working model for our offices. Our people lived our purpose day in, day out and continue to take care of our customers and each other in trying times. I speak on behalf of the entire Executive Leadership Team and Board of Directors when I express my gratitude.
Looking ahead, we believe there is a significant runway for organic growth within our existing business and we will direct as much attention and resources as possible to realizing this value. We are fortunate to have a strong business foundation, proven market leadership, successful products, and a branded, value-added offering that targets the evolving and diverse needs of our customers and consumers. And of course, these attributes are supported by the strength of our balance sheet and leverage ratio, which gives us the financial flexibility required to grow even under prolonged headwinds.
Our strategy to generate top-line growth is simple — expand where we lead today; expand our market share where we know we can. We will do this by leveraging trusted customer relationships deepened during the pandemic, continuing to go to market differently through sharpening our execution and evolving our approach to anticipate customer needs, and capitalizing on brand equity and recognition through targeted marketing. We will also drive continuous improvement and efficiencies across our operations, including modernization of our asset base, exploration of automation opportunities and further diversification of our supply chain.
We are also exploring opportunities to accelerate growth through potential M&A opportunities and strategic relationships. We will be extremely prudent as we evaluate potential opportunities to ensure a strong strategic rationale, value upside and alignment with our purpose.
Living our purpose and unlocking value
Thank you for your ongoing support and confidence in our business. There’s no doubt that the challenges facing our industry are vast and complex, but there is also no doubt in my mind that High Liner Foods and its people will continue to rise to the challenge, evolve and grow — just as we have for more than 120 years. I look forward to another year of living our purpose and creating value for all our stakeholders.
Sincerely,
Rod Hepponstall
President and CEO
High Liner Foods
(1) Please refer to the Non-IFRS Measures section of High Liner Foods’ MD&A for the fifty-two weeks ended January 1, 2022 for definitions of the non-IFRS financial measures used by the Company, including “Adjusted EBITDA” and “Net Debt to Rolling Twelve-Month Adjusted EBITDA”.
We have the scale and global reach to deliver the products our customers and consumers want.
Our brand portfolio is diversified across species and price points, maximizing customer and consumer reach, and offering quality and versatility for multiple eating occasions and settings.
(1) See the Non-IFRS Financial Measures section of High Liner Foods’ Management’s Discussion and Analysis (“MD&A”) for the fifty-two weeks ended January 1, 2022 for definitions of the non-IFRS financial measures used by the Company, including Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted Earnings per Share.
(1) See the Non-IFRS Financial Measures section of High Liner Foods’ Management’s Discussion and Analysis (“MD&A”) for the fifty-two weeks ended January 1, 2022 for definitions of the non-IFRS financial measures used by the Company, including Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted Earnings per Share.
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.
We source seafood from around the world.
No matter where we source, our requirements are the same: suppliers must strive to catch or farm seafood responsibly, protect against overfishing and limit impacts on the natural environment. Our suppliers are also expected to treat their employees well and uphold high worker safety and social standards.
Our purpose reflects a deep commitment to not only provide healthy, delicious seafood, but to meet the needs of our employees and communities and help them thrive, while reimagining how we work and how our business operates at a time of rapid change.
Here are just a few of the ways we have lived our purpose and reimagined our business at a time of rapid change and transformation in the world.
As we live our purpose to reimagine seafood, we are also empowering our people to reimagine what work looks and feels like at a time of rapid change. Our teams continued to collaborate in new and different ways, driving cross-functional engagement across the business and ensuring that each project tapped into our collective expertise and experience as One High Liner Foods.
We refreshed and reimagined roles, responsibilities and performance indicators, and invested in professional development to help our people grow and reimagine their personal and professional potential at High Liner Foods. We developed a new hybrid work model for our corporate employees that reimagined how we could foster a strong workplace culture, allow for connection and interaction, while still managing through the pandemic and affording our people the benefits of flexible working arrangements.
Our Diversity, Equity and Inclusion (DEI) Committee — led by Sarah Rajmoolie, Director Total Rewards, and Omar Turay, Manufacturing Manager, Newport News — led education and training initiatives for the organization and is leading the work to ensure that DEI considerations feature prominently in our recruitment strategies and help to foster a strong sense of belonging for the Company.
All of this came together to support a high-performance culture and helped High Liner Foods be recognized by Canada’s Top 100 Employers as one of Atlantic Canada’s Top Employers for 2022.
Global supply chain challenges created a significant hurdle for our business in 2021. In response, we reimagined how we procured, exported, transported and processed our seafood, while prioritizing safety, ensuring consistent quality standards, and requiring all partners to adhere to rigorous operational and sustainability standards.
Further diversifying by geography
We took proactive steps to diversify our production into Indonesia and Northeast Asia. Thanks to our partners in the region and the agility of our team, we were able to establish a strong foothold in a relatively short timeframe.
Opportunistically building inventory
In the face of a North American shortage of seafood, we acted to take advantage of all opportunities to build inventory, even if it was above and beyond our initial orders. Our strong balance sheet afforded us the ability to move quickly and build supply, and our diversified business enabled us to move species across customers to help satisfy demand.
Doing whatever it takes as One HLF
Throughout the year, we frequently faced delays at North American ports and, to avoid disappointing our customers, we pivoted to other points of entry and trucked product to our production facilities and warehouses. In every respect, our procurement, supply chain, retail and foodservice sales and marketing teams worked together with a common goal to satisfy demand for High Liner Foods products and maximize fill rates for customers. The realignment efforts to create One High Liner Foods back in 2018 paid dividends in this regard in 2021.
In 2021, we became much more proactive in our consumer marketing, speaking directly to North American consumers via digital channels and marketing campaigns. We invested in our brands, showcased the ease and convenience of preparing restaurant quality seafood at home and significantly stepped up our e-commerce profile.
Connecting with customers in a different way
Our procurement teams interfaced directly with customers to demonstrate the exhaustive efforts High Liner was undertaking to procure and deliver products. This helped deepen customer relationships and showcased to our customers our agility and the breadth and depth of our global relationships.
Our increasing focus on branded, value-added seafood fits very well with the evolving needs of foodservice customers who are adapting to a new operating environment. In the face of labour shortages, frequent shutdowns and the need for physical distancing in the kitchen, operators value the convenience of value-added and the flexibility of frozen. As a result, we are growing market share, deepening relationships and see tremendous opportunity ahead once the industry fully reopens and supply chain constraints ease.
Sea Cuisine’s core line of chef-inspired, value-added seafood generated double digit growth for High Liner Foods in 2021 and increased sales for all retailers. Sea Cuisine is a great example of how we are reimagining our products and how we go to market. We will build on this success in 2022 and beyond.
At High Liner Foods, our purpose of Reimagining Seafood to Nourish Life inspires us to have a positive social impact, contribute to our communities and leverage our business for the greater good.
In 2021, we hosted a company-wide Week of Nourishment in which the High Liner Foods team, across all locations, volunteered time to nourish local community groups and help raise awareness of growing issues of hunger and food insecurity across North America.
The Week of Nourishment rallied our teams around our purpose and helped advance our goal to donate 10 Million Meals in 10 Years to the communities in which High Liner Foods operates.
For more information on High Liner Foods’ approach to environmental, social and governance issues, please see High Liner Foods Corporate Social Responsibility Report and Management Information Circular, available at www.highlinerfoods.com.
The Company engaged with approximately 500 stakeholders including shareholders, employees, customers, suppliers and NGOs. We are extremely grateful to all who participated and shared their valuable input. In conversation with our stakeholders, and supported by supplemental survey data, we heard loudly and clearly that the issues High Liner Foods’ stakeholders care most about are high standards of responsible sourcing, environmental stewardship and corporate governance.
These priorities align well with existing programs High Liner Foods has in place and confirm the direction for the Company to advance further initiatives in these areas — as it continues to build trust, realize new opportunities and meet the evolving needs of all of its stakeholders in the pursuit of long-term value and sustainability.
For more information on our brands, visit www.highlinerfoods.com/brands.
