Weak U.S. food service industry causing decreased sales for High Liner Foods

LUNENBURG, N.S. – Declining sales in the U.S. food service industry continue to be a concern for High Liner Foods Inc. (TSX:HLF), its president said Friday as the frozen seafood company discussed its quarterly outlook.

In a conference call with company officials, Keith Decker said continued pressure on its U.S. sales reflects weak sales in the restaurant industry associated with a sluggish economic recovery.

“These declines continue to be disappointing, however to the extent there are improvements in this sector of the U.S. economy, we believe the company is well-positioned for its U.S. food service sales to improve,” said Decker.

More than half of the Nova Scotia-based company’s total sales in the quarter that ended Sept. 28 — US$216.5 million — were in the U.S.

Sales from its U.S. operations decreased by $4.6 million to $140.7 million compared with the same period a year ago.

High Liner Foods, which keeps its books in U.S. dollars, more than tripled its quarterly earnings to $7.4 million or 48 cents per diluted share this quarter, compared with a profit of $2.2 million or 14 cents per diluted share a year ago.

Decker said that increase was helped by lower raw material and financing costs.

In its outlook, the company said higher prices for shrimp and haddock may hurt volumes as well as margins for certain products over the balance of the year and into 2014.

Decker said the impact of the rising cost of haddock — due to reduced quotas in places like Russia and Norway — will hit its Canadian retail market this year.

“We’re going to have to increase our prices in Canadian retail to account for what has happened in the haddock market and we’ll need to do that over the next few months,” he said.

Adjusted earnings increased in the third quarter to $10.4 million, or 66 cents per diluted share, up from $8 million, or 52 cents per share, a year ago. Revenue was $216.5 million, down from $219.9 million.

Last month, High Liner acquired American Pride Seafoods. It paid $34.5 million in cash for American Pride’s inventory, plant and other tangible assets in New Bedford, Mass., excluding $15.5 million in accounts receivable.