High Liner Foods Q2 2026 Earnings Report

High Liner Foods EPS Results

• Actual EPS: C$0.63
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: C$0.28

High Liner Foods Revenue Results

• Actual Revenue: $382.35 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

High Liner Foods Announcement Details

• Quarter: Q2 2026
• Date: 8/13/2026
• Time: After Market Closes
• Conference Call Date: Friday, August 14, 2026
• Conference Call Time: 10:00AM ET

High Liner Foods (TSE:HLF) is the leading North American processor and marketer of value-added frozen seafood. Their retail branded products are sold throughout the United States, Canada and Mexico under the High Liner, Fisher Boy, Sea Cuisine and C. Wirthy & Co. labels, and are available in most grocery and club stores. They also sell branded products under the High Liner, Icelandic Seafood, and FPI labels to restaurants and institutions, and are a major supplier of private-label, value-added frozen seafood products to North American food retailers and foodservice distributors.

High Liner Foods Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Adjusted EBITDA rose 20.3% year over year to CAD 30.2 million, while adjusted EPS increased to CAD 0.44 from CAD 0.38, supported by pricing, disciplined promotions, SG&A savings and operational improvements.
• Positive Sentiment: Sales volume increased 4% to 57 million pounds and sales rose 12.4% to CAD 269.3 million, with resilient retail and club-channel demand, new product launches, contract manufacturing and the USDA contract contributing to growth.
• Positive Sentiment: High Liner received an additional CAD 27.9 million in tariff recovery after quarter-end, to be recognized in the third quarter, and management said it is now more confident in delivering year-over-year adjusted EBITDA growth excluding tariff recoveries.
• Negative Sentiment: Gross profit margin fell 370 basis points to 18.6%, pressured by inflation, higher seafood, fuel and freight costs, ongoing tariffs, product mix and a CAD 10.1 million third-party warehouse fire-related inventory loss; management expects second-half gross margin to remain just below 20%.
• Negative Sentiment: Operating cash flow declined to a CAD 3 million outflow, net debt increased to CAD 335.8 million and leverage rose to 3.6x adjusted EBITDA, while management expects continued inflation in pollock and Pacific salmon and only gradual supply-chain improvement.

Presentation

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the High Liner Foods Incorporated conference call for results of the second quarter of 2026. Please note at this time, all participant lines are in listen-only mode. Following management's prepared remarks, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star key followed by zero for operator assistance at any time. This conference call is being recorded today, Friday, August 14, 2026, at 10:00 A.M. Eastern Time for replay purposes. I would like to turn the call over to Matt MacDonald, Vice President of Finance and Investor Relations for High Liner Foods. Please go ahead.

[Matt MacDonald, VP of Finance and Investor Relations at High Liner Foods]

Good morning, everyone. Thank you for joining the High Liner Foods conference call today to discuss our financial results for the second quarter of 2026. On the call from High Liner Foods are Paul Jewer, Chief Executive Officer, Kimberly Stephens, Chief Financial Officer, and Anthony Rasetta, Chief Commercial Officer. I would like to remind listeners that we use certain non-IFRS measures and ratios when discussing our financial results, as we believe these are useful in assessing the company's financial performance. These measures are fully described and reconciled to IFRS measures in our MD&A. Listeners are also reminded that certain statements made on today's call may be forward-looking statements under applicable securities law.

[Matt MacDonald, VP of Finance and Investor Relations at High Liner Foods]

Management may use forward-looking statements when discussing the company's investments and acquisitions, strategy, business, and markets in which the company operates, as well as operating and financial performance in the future. These statements are based on assumptions that are believed to be reasonable at the time they were made and currently available information. Forward-looking statements are subject to risks and uncertainties. Actual results or events, including operating or financial results, could differ materially from those anticipated in these forward-looking statements. High Liner Foods includes a thorough discussion of the risks and other factors that could cause its anticipated outcomes to differ from actual outcomes in its publicly available disclosure documents, including its most recent annual MD&A and annual information form.

[Matt MacDonald, VP of Finance and Investor Relations at High Liner Foods]

Please note that High Liner Foods is under no obligation to update any forward-looking statements discussed today. At the close of markets yesterday, August 13, High Liner Foods reported its financial results for the second quarter ended July 4, 2026. That news release, along with the company's MD&A and unconsolidated condensed interim consolidated financial statements for the second quarter of 2026 have been filed on SEDAR+ and can also be found in the investor section of the High Liner Foods website. If you'd like to receive our news release in the future, please visit the company's website to register. Lastly, please note that the company reports its financial results in USD, and therefore, the results to be discussed today are also stated in USD unless otherwise noted.

[Matt MacDonald, VP of Finance and Investor Relations at High Liner Foods]

High Liner Foods common shares trade on the Toronto Stock Exchange and are quoted in CAD. I will now turn the call over to Paul for his opening remarks.

[Paul Jewer, CEO at High Liner Foods]

Thanks, Matt, and thank you for joining us on today's call. The second quarter marked an encouraging step forward in strengthening the underlying performance of our business. Demand remained resilient, and we maintained top-line momentum, particularly in retail, while adjusted EBITDA increased year-over-year, both on a reported basis and when normalizing for tariff-related costs and recovery. We achieved these results despite continued pressure on gross profit from inflation, higher raw material costs, and continued tariffs, providing early evidence that our actions across pricing, promotions, and supply chain are gaining traction. Let me briefly update you on the progress we are making across each of these priorities. On pricing, we utilized the available post-run pricing window to implement increases in our retail portfolio.

[Paul Jewer, CEO at High Liner Foods]

These actions are an important step towards strengthening margins, although external conditions continue to evolve as new tariffs are implemented and raw material and fuel costs continue to rise. On promotions, following increased activity around Lent, we took a more targeted and disciplined approach in the second quarter with greater emphasis on margin and return on investment. As you will hear from Anthony, demand remains strong even as our promotional activity moderated, particularly in the club channel. On supply chain, improved product availability and retail fill rates during the second quarter reflect our efforts to strengthen execution across our plants and operations. We have a series of initiatives underway to drive efficiencies across the supply chain, and this work remains critical to our ability to offset inflationary cost pressures while maintaining compelling value for customers and consumers.

[Paul Jewer, CEO at High Liner Foods]

The IEEPA tariff recoveries announced today help explain the margin pressure the business experienced during 2025 and the beginning of 2026. While the recoveries will be recognized in our second and third quarter results, they relate to costs incurred during those earlier periods, and as we have discussed before, during those periods, we were not able to immediately or fully price for the tariffs. The tariff refunds show the extent to which tariffs affected our margins and provide a clearer view of the underlying performance and potential of the business. With improving execution, continued innovation, and the underlying strengths of our business, we are confident in our ability to strengthen performance in the core and build sustainable growth over time. Seafood remains underconsumed, and demand for healthy, affordable, and convenient protein solutions remains as relevant as ever.

[Paul Jewer, CEO at High Liner Foods]

For more than 100 years, we have worked in partnership with our customers to navigate changing conditions and deliver compelling value to consumers across North America. We will continue to do so with a balanced and disciplined approach focused on making steady progress on the factors within our control while investing for the opportunity ahead. With that, I will pass the call over to Kimberly to discuss our financial results.

[Kimberly Stephens, CFO at High Liner Foods]

Thanks, Paul, and hello, everyone. As Paul described, our second quarter results reflect continued top-line momentum and year-over-year adjusted EBITDA growth, both on a reported basis and when normalizing for the impact of the IEEPA tariff. This demonstrates progress on the strategic initiatives that we have underway on promotion, price, and plant operations, the benefit of our right-sized organizational structure, and the ongoing cost discipline to support our value proposition amid the inflation and the higher raw material costs. From a volume perspective, sales volume increased in the second quarter by 2.2 million pounds or 4% to 57 million pounds compared to 54.8 million pounds in the second quarter of 2025, due to the sustained demand for High Liner's diversified product portfolio, the successful launch of the new product innovation, additional contract manufacturing business, and the volumes associated with the U.S. Department of Agriculture, USDA, contract.

[Kimberly Stephens, CFO at High Liner Foods]

Sales increased in the second quarter by CAD 29.7 million or 12.4% to CAD 269.3 million compared to CAD 239.6 million in the same period last year, driven both by the increased volume as well as increased pricing reflected in inflationary markets. Gross profit decreased in the second quarter by CAD 3.2 million or 6% to CAD 50.1 million, and gross profit as a percentage of sales decreased by 370 basis points to 18.6% as compared to 22.3% in the second quarter of 2025. The decrease in gross profit, though, is largely driven by the CAD 10.1 million in inventory-related losses associated with a fire at a third-party warehouse facility, which the company expects to recover through the recognition of insurance coverage by the end of 2026.

[Kimberly Stephens, CFO at High Liner Foods]

The impact of this has been normalized in both adjusted EBITDA and adjusted net income. The inventory loss is partially offset by the CAD 7.9 million in International Emergency Economic Powers Act tariff recovery, otherwise known as IEEPA tariff, recognized during the second quarter. Gross profit in the second quarter of 2026 includes approximately CAD 5.7 million in incurred IEEPA-related tariff in the cost of sales, excluding the tariff recoveries discussed previously compared to CAD 2.8 million in the same period of 2025. Distribution expenses consisting of freight and storage increased in the second quarter by CAD 2.8 million or 24.6% to CAD 14.2 million compared to CAD 11.4 million in the same period in the prior year. The increase in distribution expense was mainly due to the increase of sales volume.

[Kimberly Stephens, CFO at High Liner Foods]

As well as increased freight costs incurred on the sales associated with the newly acquired brands from Conagra Brands and the incremental distribution costs from increased fuel costs and freight rates. As a percentage of sales, distribution expenses increased to 5.3% in the second quarter compared to 4.8% in the same period in the prior year. Adjusted EBITDA increased in the second quarter by CAD 5.1 million or 20.3% to CAD 30.2 million compared to CAD 25.1 million in the same period in the prior year, and adjusted EBITDA as a percentage of sales increased to 11.2% compared to 10.5%. The increase in adjusted EBITDA reflects the company's balanced approach to pricing, favorable SG&A, and the tariff recovery previously mentioned.

[Kimberly Stephens, CFO at High Liner Foods]

Reported net income decreased in the second quarter by CAD 3.4 million or 40% to CAD 5.1 million, while diluted earnings per share decreased to CAD 0.18 compared to CAD 0.28 in the prior year. The decrease in net income reflects the decrease in gross profit previously mentioned, increased distribution expenses and higher financing costs, partially offset by favorable SG&A and lower business acquisition integration and other expenses. Excluding the impact of certain non-routine or non-cash expenses that are explained in our MD&A, adjusted net income in the second quarter of 2026 increased by CAD 1.2 million or 10.4% to CAD 12.7 million. Adjusted diluted earnings per share increased to CAD 0.44 from CAD 0.38 in the same period in 2025.

[Kimberly Stephens, CFO at High Liner Foods]

With regard to cash flow from operations and the balance sheet, net cash flows from operating activities in the second quarter of 2026 decreased by CAD 18.6 million to an outflow of CAD 3 million compared to an inflow of CAD 15.6 million in the same period in 2025. The decrease is primarily driven by cash outflows from non-cash working capital balances, specifically purchases of inventory and higher accounts receivable balances, partially offset with an increase of accounts payable balances. Cash flows also increased as a result of higher cash taxes paid. These are partially offset with higher cash flows provided through operations in the second quarter of 2026 compared to the prior year.

[Kimberly Stephens, CFO at High Liner Foods]

Net debt at the end of the second quarter of 2026 increased by CAD 13.4 million to CAD 335.8 million compared to CAD 322.4 million in the end of fiscal 2025, reflecting higher bank loans and lease liabilities partially offset with a lower long-term debt and higher cash balances. Net debt to adjusted EBITDA was 3.6 times at July 4, 2026 compared to 3.5 times at the end of fiscal 2025. We expect the ratio to improve throughout the year and be slightly below the company's long-term target of three times by the end of fiscal 2026. While the company recognized the CAD 7.9 million of tariff recovery received during the second quarter, the company received further tariff recovery of CAD 27.9 million of the total CAD 41.3 million applied for subsequent to quarter end.

[Kimberly Stephens, CFO at High Liner Foods]

This amount will be recognized in the company's third quarter of 2026 financial results. As Paul noted, the recoveries provide an important context for the tariff pressure absorbed by the business during 2025 and 2026, of which approximately half of the tariff recoveries relate to tariff cost of sales in 2025 and the remainder relates to 2026. We are still in the process of analyzing the full tariff impact, including the extent to which those costs may have been partially offset by pricing actions. Given the number of variables and the assumptions involved, any analysis to isolate normalized performance absent IEEPA tariff streaming is complex. However, the broader takeaway is that the recoveries provide further evidence of the underlying resilience, performance, and the potential of our business.

[Kimberly Stephens, CFO at High Liner Foods]

I'll now hand over the call to Anthony to discuss our operational performance.

[Anthony Rasetta, Chief Commercial Officer at High Liner Foods]

Thanks, Kimberly, and hello, everyone. As Paul and Kimberly have outlined, we once again delivered a strong quarter on the top line, supported by sustained demand and improving execution. From a commercial perspective, volumes held despite implementing pricing and reduced promotional activity. We saw improved product availability and a positive reaction to new product innovation, leading to new listings and expanded distribution across the 24 new items launched so far in 2026. In our retail business, we carried the strong momentum we experienced at the start of the year into the second quarter. Operationally, better product availability helped us improve fill rates, meet demand more consistently, and importantly, grow higher margin products, including our skin pack product line.

[Anthony Rasetta, Chief Commercial Officer at High Liner Foods]

While inflation and price sensitivity continue to shape the category, consumers are being deliberate about where they direct their spending and prioritizing restaurant quality, value-oriented seafood meals at home. Against this backdrop, the breadth of our portfolio across species, formats, and price points served us well, with growth across both premium and value offerings. We delivered strong performance in the club channel on both the top and bottom line, with consumers continuing to purchase our products after promotions ended. This was very encouraging to see, as it validates both the strength of our value proposition beyond price, including the quality, convenience, and breadth of our offering, as well as our strategy on promotional investments through the holiday and Lent period.

[Anthony Rasetta, Chief Commercial Officer at High Liner Foods]

We are also seeing the benefit of the overall investment we have made in this growth channel over the past 18 months, as our customers are quick to provide prominent placement for our new innovations, including our continued expansion in Sea Cuisine. This premium brand was once again a standout performer during the quarter, driving significant gains across both club and traditional grocery, with family pack growth and new listings expanding its reach. Customers have responded very strongly to our new Sea Cuisine innovations, including our Sea Cuisine Guinness Battered Fish Strips, a highly relevant breaded and battered solution, as well as the honey chipotle salmon and garlic bread crusted tilapia family packs, which are expanding our value-added portfolio and creating new opportunities for profitable growth.

[Anthony Rasetta, Chief Commercial Officer at High Liner Foods]

During the quarter, we also began shipping our new Sea Cuisine Skillet Meals to select retailers across the U.S. This innovation is helping to expand the category with complete restaurant quality meal solutions that offer the taste, convenience, and protein today's consumers are looking for with sole, salmon, and shrimp options. We know that uncertainty around how to prepare cooked and cooked seafood remains a barrier to greater at-home consumption. At the same time, consumers are dining out less and looking for affordable, low-effort ways to create high-quality dining experiences at home. Sea Cuisine Skillet Meals address both needs by making seafood easier and more approachable through a complete meal solution that can be prepared with confidence and minimal effort.

[Anthony Rasetta, Chief Commercial Officer at High Liner Foods]

We are excited by the opportunity this represents and will continue to prioritize building distribution in both the traditional grocery and club channels in the coming quarters, supported by retailer-specific shopper and digital marketing. Innovation also remains critical on the value side of our portfolio. During the quarter, we launched new private label products with national discount retailers across value-added salmon, shrimp, and pollock, target growth species for our business that are strategically important as we further diversify our species mix. Mrs. Paul's and Van de Kamp's are now well integrated into our portfolio, and we're on track with recognizing the expected synergies and have also secured new distribution. We remain focused on supporting both brands with targeted investment and marketing.

[Anthony Rasetta, Chief Commercial Officer at High Liner Foods]

In Canadian retail, we gained significant market share and performed well during the quarter, despite the inflationary pressures weighing on the category. Our performance was driven by the strength and diversity of our portfolio across species, which supports the stability of our business and provides a strong value proposition to consumers. We saw strong demand for our Pan-Sear and High Liner family pack offerings, supported by a number of key promotional programs, along with the continued strength in our Catch of the Day product line. In food service, the breadth of our portfolio helped us navigate softer consumer demand, gain market share, and successfully implement price during the quarter, despite category challenges. Consumers remain price-sensitive and are trading down in the face of inflationary pressures that are impacting many species, especially cod and haddock.

[Anthony Rasetta, Chief Commercial Officer at High Liner Foods]

We saw growth in our shrimp, salmon, and pollock offerings, key areas of focus for us with room for further development. Against this backdrop, we continue to support operators with value-oriented products that keep seafood on the menu amidst inflation-driven price increases, as well as value-added distributor label solutions that help offer better pricing and help operators drive traffic. By channel, our overall performance was again supported by gains in casual dining and non-commercial channels, including long-term care. Turning to innovation, our fully cooked platform represents a key growth opportunity in our pipeline, and we're encouraged by our early commercial progress with permanent listing at a major U.S. convenience customer performing well and expanding to additional locations. In April, we introduced the platform to Canadian food service and secured initial listings with multiple distributors.

[Anthony Rasetta, Chief Commercial Officer at High Liner Foods]

Our focus is now on converting that committed distribution and a strong sales pipeline into meaningful volume. Building a new platform of this scale will take time, and we're applying the insights from our U.S. rollout to accelerate its development in Canada. While we expect the operating environment to remain challenged in the back half of the year, the diversity of our portfolio and the strength of our team give me confidence in our ability to execute and build on the progress that we're seeing. With that, I'll hand the call back to Paul for his concluding remarks.

[Paul Jewer, CEO at High Liner Foods]

Thanks, Anthony. This was a quarter with a lot of moving parts, but when you look through the noise, the message is clear. Our business remains resilient, and we are taking the necessary steps to return to the level of profitability we have proven our business can deliver. We delivered top and bottom line growth, supported by advancements across the strategic initiatives we have underway on price, promotion, cost management, and operational efficiencies. While we still have work to do, particularly as tariffs continue and higher raw material and other input costs persist, we are encouraged by the traction we are seeing and remain focused on optimizing the factors within our control. As we have said, we expect the benefits of these actions to become even more evident in the second half of the year.

[Paul Jewer, CEO at High Liner Foods]

The progress we have made in the second quarter gives me confidence in our ability to deliver year-over-year adjusted EBITDA growth independent of any tariff recoveries. As a market leader with a diversified portfolio, a resilient global supply chain, strong balance sheet, and a track record of navigating challenging market conditions, we are well positioned to drive improved performance in the short term and profitable growth over time. The fundamentals of our business are strong and the long-term opportunity, driven by growing consumer demand for healthy, high protein, convenient meal solutions remains as compelling as ever. We are committed to capitalizing on that opportunity from a position of stability and strength. With that, we will open the line for questions.

[Operator]

Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touchtone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now should you have any questions. Thank you. First, we will hear from Luke Hannan at Canaccord Genuity. Please go ahead.

[Luke Hannan, Analyst at Canaccord Genuity]

Thanks, and good morning, everyone. I wanted to start on the topic of tariffs. Specifically, you called out the refunds or the recoveries that you got in Q2, and then also what you've gotten in Q3 to date. It was also mentioned in prepared remarks that you're almost undertaking an analysis to figure out what exactly is sort of the normalized earnings power going forward. We can't just take those refunds and add that to the EBITDA to get a sense of exactly what that is, which I do sort of understand in practice for a couple of reasons. One, you talked about the pricing increases, but also the new tariffs that are in place. I think I'd like to start with that second piece first.

[Luke Hannan, Analyst at Canaccord Genuity]

Can you just frame up for us what the net tariff headwind, I guess, or just the gross tariff headwind will be for the balance of the year, and then also what to expect on a steady-state basis going forward? I imagine it wouldn't be as much as what the IEEPA tariff recoveries would imply, but maybe we'll just start there.

[Paul Jewer, CEO at High Liner Foods]

Yeah, sure. I think that's a good place to start. Luke, the reality is you're right. The IEEPA tariffs were at higher rates than what we're currently facing in the business today. We transitioned from those higher IEEPA tariffs to a short period of basically a 10% tariff on just about everyone, to now a situation where on most countries that we import seafood from into the U.S., we would have either a 10% tariff or a 12.5% tariff, depending on the country, with a few actually still remaining at zero. We will still have tariffs that we have to pay. We feel good about where we are in terms of having to price for those tariffs like before, where we haven't been able to fully price for them.

[Paul Jewer, CEO at High Liner Foods]

We've got to continue to manage our business well and try to offset rising raw material costs and inflation in other areas. But it's a better environment as we look forward on tariffs than what it's been in the past, because the reality, in particular with the IEEPA tariffs, is they came fast, they were significant, and we certainly weren't able to pass on all of it in the form of pricing.

[Luke Hannan, Analyst at Canaccord Genuity]

Okay, and maybe just following up on that last piece there, Paul. Typically, what we've seen from CPG companies is any time that there is pass that's, price, pardon me, that's implemented during the quarter, pricing that's passed through, it tends to be a volumetric pullback from the consumer before settling out longer term. Did you see any of that as a function of the price increases? Did you see any pullback in volumes during the quarter? Because on a reported basis, obviously it looks fine, but I'm just wondering if there's anything going on underneath that.

[Paul Jewer, CEO at High Liner Foods]

Yeah, I think as we said in our remarks, the resiliency in the volume has been better than we expected. Some of that is the reality on the species where prices had to go up the most, cod and haddock being a great example. Supply is also a challenge. In a scarce market, I think you do not have the elasticity or as much of the elasticity that you might have otherwise had. We feel good about how volume has held up. As you know, in the first quarter, part of that was supported by us in terms of promotional activity. As we mentioned, in the second quarter, I think we are still seeing some positive benefit associated with some of that volume staying, even when not on promotion.

[Paul Jewer, CEO at High Liner Foods]

We feel good overall about where we are on balancing that need to protect margin, and having to price in order to do that, while also continuing to support growth in the category overall. We would love to do it in an environment where we did not have tariffs or where raw material increases were not as significant as they have been. But we are managing to do it even in that environment, we believe.

[Luke Hannan, Analyst at Canaccord Genuity]

Okay, thanks. For my last question, then I will pass the line. I just want to make sure I understand the moving parts when it comes to refunds as well, specifically when it comes to your net leverage target. So you reiterated that you should finish the year just under 3x net leverage. But if I understand it correctly, and if I have done the math correctly, if we take the expected tariff proceeds that you will get from Q3 and beyond, that should actually show up in adjusted EBITDA as well, purely because of the matching principle, and so it makes sense why you would not adjust that out. But the number that I get is actually closer to 2.5x rather than just other 3x when we account for that.

[Luke Hannan, Analyst at Canaccord Genuity]

Is there anything, I guess, that we should be thinking about as far as incremental investments in the back half of the year that would get you closer to just under 3x versus 2.5x?

[Kimberly Stephens, CFO at High Liner Foods]

No, Luke, your math is exactly right. Outside of the tariff impact, we are also seeing improved leverage ratio because of just how we are operating the business. But obviously the impact of the IEEPA tariffs both in adjusted EBITDA as well as the cash received will get us approximately, I think, to where the numbers are that you have listed.

[Luke Hannan, Analyst at Canaccord Genuity]

Okay, I will pass the line. Thanks.

[Operator]

Next question will be from Michael Glen at Raymond James. Please go ahead.

[Michael Glen, Managing Director at Raymond James]

So maybe just some follow-ons there. The accounting, as we look into Q3, the accounting for the CAD 27.9 will be identical to how we saw the accounting take place this quarter? Just want to make sure I am thinking about that right.

[Kimberly Stephens, CFO at High Liner Foods]

Yes, exactly. It will be in cost of sales.

[Michael Glen, Managing Director at Raymond James]

Okay. Are you able to indicate what the blended average rate was you were paying under the IEEPA tariffs?

[Paul Jewer, CEO at High Liner Foods]

Oh, God. That would be hard to do. If you look at the blended average rate now, Michael, of somewhere between 10 and 12.5, I think under IEEPA tariffs, it would have been in the high teens for sure because there were some countries that were north of 20 and there were a lot of countries that were in those high teens, and there were a few countries that were 10. So that is an order of magnitude. I certainly do not have any more specific analysis to help you with that.

[Michael Glen, Managing Director at Raymond James]

No, that is fine. I was just trying to gauge how to think about that a little bit. Kimberly, you touched on the inventory build in Q2. At least from my side, it was unexpected to see that size of an inventory build take place right now. Can you maybe give a little bit of insight into that?

[Kimberly Stephens, CFO at High Liner Foods]

Yeah, absolutely. I'd say a third of it is actually related to the higher inflation that we're seeing across our species. We're also doing opportunistic buying, both just to secure volume, as well as just getting ahead of some of the upcoming inflationary impact that we're expected to see in some of our key species as well.

[Michael Glen, Managing Director at Raymond James]

Okay. Maybe one for Anthony. On the product introductions that you're talking about in retail, are the introductions you're making at retail additive to floor space, or are they replacing other products? Then maybe to follow on that, maybe speak to overall grocery trends towards square footage to seafood right now. Thanks.

[Anthony Rasetta, Chief Commercial Officer at High Liner Foods]

Yeah. Hi, Michael. Yes. I think the answer is we are helping the category gain space. When you think about a line extension, as we would consider it, on something like Guinness, that wouldn't be incremental to a shelf. It's incremental to us, but probably not for the category overall, versus something like the Skillet Meals launch that we just introduced, where it's absolutely incremental to seafood. There are placements happening in the frozen meals section, which is incremental to seafood, as well as some of them happening within seafood overall. When you think about the club channel, which is where we've had the most success, that's completely incremental, because if you think about going into a Costco and you see a pallet space or a space in the freezer door, that would be expanded distribution also.

[Anthony Rasetta, Chief Commercial Officer at High Liner Foods]

Within grocery, I think we're seeing nice tailwind as consumers are shifting somewhat, given the inflationary environment, away from eating out and into at home. We're seeing the category volume hold up, even in spite of the inflationary pressures, while the introduction of the innovation that we have, both on the premium side with the success of Sea Cuisine and on the value side in Sea Cuisine with the launch of our value packs as well as what we're doing within club and private label. We continue to help the category stay propped up in an inflationary environment.

[Michael Glen, Managing Director at Raymond James]

Okay. Thank you.

[Operator]

Next question will be from George Doumet at Ventum Financial. Please go ahead.

[George Doumet, Managing Director at Ventum Financial]

Yeah. Hi. Good morning, guys. Even after accounting for the entire recoveries and the inventory loss, it feels that gross margins are down materially year-over-year. Do we need to take more pricing to get a better margin profile in the second half? Maybe some of the offsets as we go into the second half of the year that improve that margin would be helpful.

[Paul Jewer, CEO at High Liner Foods]

Yeah, I think there's a couple of things, George. You're right on, you've identified the tariff recovery piece and the insurance piece. But also remember that while we had a tariff recovery, we also had tariff costs in the quarter that we incurred that the refunds relate to. I think you got to factor that in to the analysis. You're right, there is some margin compression associated with mix. Certainly, Kimberly, in her remarks, spoke about where some of our growth was coming from. If you think about USDA or industrial volume as an example, that's going to be at some lower margins on average. The other thing you have to factor in is just, frankly, the math of significant inflation, right?

[Paul Jewer, CEO at High Liner Foods]

When you deliver the same gross margin dollars or EBITDA dollars on a significantly inflated sales number, even when you pass on the dollars, it results in some margin compression. I think you're also right. The reality is we still have some more work to do on pricing and promotion. I thought we made quite a bit of progress in the second quarter, but more to come there. The operational improvements, particularly in our supply chain that we have available to us, we started to see those kick in in the second quarter, but there's still more opportunity there that will be supportive of margin expansion as well.

[George Doumet, Managing Director at Ventum Financial]

Yeah. On that topic of operational improvements, should we expect that to be more gradual, like in the next few quarters into next year? Or would you expect a bit of a step change in kind of the back half?

[Paul Jewer, CEO at High Liner Foods]

No, I think you're right. I think it's more gradual. It's squeezing the benefit out of better operational execution of plants is one of the more significant opportunities. So I would see that as growing through Q3 and Q4 into the first quarter of next year.

[George Doumet, Managing Director at Ventum Financial]

Okay. Just one quick one, if I may. Kimberly, you mentioned kind of upcoming inflation. I'm just wondering about your outlook for inflation for the rest of the year, if you expect perhaps some of the white, brown fish prices to come off a little bit. In that context, just wondering also if you think in this environment it would be easier to hold onto price at all? Thanks.

[Paul Jewer, CEO at High Liner Foods]

Yeah, I think on whitefish species, George, a lot of that inflation, certainly on cod and haddock, is already in the number because it's been so significant, as you know, over the last 18 months. Where we will see some inflation and are starting to see some inflation is in pollock. Demand there has been good, so we're seeing some inflation in that species. And we're certainly expecting to see some inflation in pink salmon because the catch rates in Alaska on pink salmon this year have certainly been a challenge on the supply front. I think it's changing where it's showing up in terms of the species mix, but there still is going to be inflation as we look forward.

[Paul Jewer, CEO at High Liner Foods]

Of course, we're managing through the inflation on higher fuel prices and how that affects, obviously, distribution and shipping costs, but also how it affects packaging and other ingredients in that regard. So we're not expecting inflation to go away. It's going to have to be something that we continue to manage as we look forward. And of course, we talked about the tariff piece as well. But I think the other thing, and just as a reminder that we're trying to do, is wherever we can, find cost savings and operational efficiency initiatives so that we can cover the cost of some of that inflation while protecting margins, so that we can maintain value for customers and consumers in the category.

[George Doumet, Managing Director at Ventum Financial]

Great. Thanks for the answers.

[Operator]

Next question will be from Nevan Yochim at BMO Capital Markets. Please go ahead.

[Nevan Yochim, VP of Equity Research at BMO Capital Markets]

Yeah, thank you, and good morning. You touched on it a little bit earlier, but I just wanted to circle back to the H2 volume outlook. First half results were strong, but I think comps get a little bit tougher here in the second half of the year. You are going to lap the benefit from Conagra Brands acquisition in Q3, and then the USDA contract in Q4. As we think about the second half of the year, are you expecting volume growth to moderate as we move through?

[Anthony Rasetta, Chief Commercial Officer at High Liner Foods]

Nevan, it's Anthony. Yeah, I think as Paul said earlier, we are really happy with how volume has held up in spite of some of the inflation. I think in terms of guidance on the full year with what we know we are going to be lapping, we are still in that low single digit volume growth for the full year. Yeah, expecting that for the full year outlook.

[Nevan Yochim, VP of Equity Research at BMO Capital Markets]

Okay. Thanks, Anthony. On gross margins, maybe just excluding the potential tariff refunds and some of the other one-time costs, you are up against a relatively easier gross margin comp in the second half of the year. Can you provide some detail on the potential magnitude of an improvement as we move through Q3 and then into Q4? Could we potentially see gross margin above the 20% level in the second half of the year?

[Kimberly Stephens, CFO at High Liner Foods]

Nevan, this is Kimberly. Yeah. As I think Anthony and Paul have been able to indicate, we have been able to get some of the pricing through in retail in Q2, and so that will roll into Q3 and Q4, and favorably impact our gross margin percentage. I anticipate that we will be able to maintain that. Into the back half of the year, I would say just shy of 20% is probably a good outlook to be.

[Nevan Yochim, VP of Equity Research at BMO Capital Markets]

Okay. Thanks, Kimberly. Finally, just putting it all together, the outlook for year-over-year EBITDA growth, ignoring some of the benefits that you're receiving from these tariff refunds, would you say that you're incrementally more positive on the full year outlook than you were at Q1? If so, can you maybe give a couple of reasons as to why that's the case?

[Paul Jewer, CEO at High Liner Foods]

Yeah, I think we are incrementally more positive now after Q2 than we were after Q1, for a couple of reasons. One, just based on the Q2 performance. Two, as we've updated our outlook for the back half of the year with the progress we've made on some of the initiatives that we've talked about, what we currently see in terms of the tariff reality. Yeah, I think we are incrementally more positive after Q2 than we were after Q1.

[Nevan Yochim, VP of Equity Research at BMO Capital Markets]

Okay. That's helpful. Thank you.

[Operator]

Next question will be from Michael Glen at Raymond James. Please go ahead.

[Michael Glen, Managing Director at Raymond James]

Hey, Paul, I just wanted to follow on the inflation discussion for the industry because the level does seem quite elevated. Is this a demand situation driving it, or is it a supply situation that is driving it? I am just trying to understand where the primary source for the inflation is across the supply chain right now.

[Paul Jewer, CEO at High Liner Foods]

Yeah, sure. It is a great question, and it does vary by species. In the case of cod, it is a supply driven inflation because cod stocks, particularly in Norway, which is a major source, have been a challenge. In haddock, interestingly enough, I would call it a demand driven inflation because haddock is a species that as cod prices went up, many people switched to haddock, and so that caused inflation in haddock. On pollock, I would say it is more of a demand driven inflation because pollock demand, as a more affordable whitefish alternative to cod and haddock, has been strong. In pink salmon, as I mentioned, that is more of a supply driven inflationary dynamic because it has been a tough catch season in Alaska.

[Paul Jewer, CEO at High Liner Foods]

Listen, that fishery is always cyclical in terms of good catches and tougher catches. This year was, I would say, more tougher than expected.

[Michael Glen, Managing Director at Raymond James]

[crosstalk] Go ahead.

[Paul Jewer, CEO at High Liner Foods]

Oh, sorry. Just to finish that comment. I would say the good news is on aquaculture species, pricing is more favorable because there is better matching of the supply and demand dynamics.

[Michael Glen, Managing Director at Raymond James]

Okay. Some of the supply driven situation you are seeing or describing, does that alleviate? Are you seeing that alleviating next year, or will it continue?

[Paul Jewer, CEO at High Liner Foods]

Yeah. On cod, I would say we are seeing a little bit of alleviation, but not much. We are trying, as you know, in that scenario to do what we can with Newfoundland cod, where it definitely is alleviating because the quota is growing there, and with farm cod, where the volume is also growing. The supply situation in haddock is actually good. We do not see any concerns with the supply situation in pollock. I think Pacific salmon, the challenge is going to be, it is going to be a tough year on Pacific salmon, but typically a tough year is followed by a good year. So we will see what next summer brings. Until then, I think we would expect to see supply challenges on the Pacific salmon front.

[Michael Glen, Managing Director at Raymond James]

Okay. Thank you.

[Operator]

Next question will be from Ryland Conrad at RBC Capital Markets. Please go ahead.

[Ryland Conrad, VP of Equity Research at RBC Capital Markets]

Yeah, thanks very much. Good morning. To start, I know your CapEx guidance is unchanged for the year, but just given what we have seen spent so far in the first half, could you give us a bit of a sense of whether you expect a meaningful step-up in the back half, or are you tracking towards the lower end of that range?

[Kimberly Stephens, CFO at High Liner Foods]

Yeah, Ryland, if you looked at a historical CapEx spend, the majority of it usually is in Q3, because we spend a lot of time investing in our maintenance projects during that time period. We are anticipating that the overall capital expenditures for the year will remain consistent what you've seen in the past few years, which is ranging anywhere between CAD 20 million and CAD 25 million.

[Ryland Conrad, VP of Equity Research at RBC Capital Markets]

Okay, got it. Thank you. SG&A so far has been in the low 8% range as a percentage of sales this year. How should we be thinking about the continuation of that trend in the back half, just as you've completed some organizational changes and would also continue to invest in innovation?

[Kimberly Stephens, CFO at High Liner Foods]

Yeah, exactly. The cost savings initiative that we undertook in the beginning of Q2 will remain consistent throughout the year. I would say that we're on track of continuing to invest in key priorities in the business as well. That trend should continue into the full end of the year.

[Ryland Conrad, VP of Equity Research at RBC Capital Markets]

Okay, great. Just last for me, we're certainly seeing a protein tailwind more broadly around food categories. I believe last year you outlined an opportunity around improving the protein messaging on your product packaging. I was just curious if you could give us an update there, just where you are in that process. If it has already been implemented, are you seeing that clear messaging resonate with consumers?

[Anthony Rasetta, Chief Commercial Officer at High Liner Foods]

Hey, Ryland, this is Anthony. Yes, the answer is yes. We continue to do that every new product launch, and every time we're touching our current packaging, we're making sure that we're calling that out. In particular, I'll note the new launch of the Sea Cuisine Skillet Meals that we have right now. One of the key features that we're featuring on pack and in our consumer communication is the high protein content in it. From a meals standpoint, there isn't a lot of seafood currently offered in the market right now, and we think that's a great opportunity for us, and consumers told us they were interested in the variety that we would be bringing.

[Anthony Rasetta, Chief Commercial Officer at High Liner Foods]

But beyond that, the high protein count, we're talking 19-22 grams of protein in a serving within these new Sea Cuisine Skillet Meals that we have in the market. Yes, we are continuing to do that. We think we're seeing the benefit. That's what helps continue to kind of stabilize and hold the volumes on our business in the face of this inflationary market and always have seen that as a tailwind in seafood and hopefully that will continue going forward.

[Ryland Conrad, VP of Equity Research at RBC Capital Markets]

Yeah, great. Appreciate the color. Thank you.

[Operator]

Ladies and gentlemen, a reminder to please press star one should you have any questions. Thank you. Next is a follow-up from George Doumet at Ventum Financial. Please go ahead.

[George Doumet, Managing Director at Ventum Financial]

Hi, thanks for squeezing me in. I just had a high-level question I wanted to ask you, Paul. I know historically we've targeted that kind of 10% EBITDA margin range, but taking into account the current operating environment, is there a willingness to invest some of that margin over the next few years to perhaps drive more consistent volume growth?

[Paul Jewer, CEO at High Liner Foods]

Yeah. I think, George, you've seen us do that a little bit, frankly, even over the last few quarters. Part of that, as we talked about earlier, is just driven by the nature of inflation and protecting margin dollars, not being always able to protect margin rate. I would say over time, our target would still be to be in that 10% range. The way you get there, to your point in this environment, is you've got to find ways to deliver on efficiencies and cost-saving benefits, because you're not going to be able to do it all in pricing if you want to be able to continue to support the growth in the category. Some of the pricing is clearly absolutely necessary given the magnitude of the raw material increases.

[Paul Jewer, CEO at High Liner Foods]

Where you can find ways not to have to price or price and find ways to promote to support volume in the category, we're always going to continue to work with our customers to look at doing that. Listen, this is a balance, as you know, that if you look at an individual quarter or even an individual year, you may be a little out of balance, but over time, we've been pretty effective at making sure that we stay in that right balance.

[George Doumet, Managing Director at Ventum Financial]

Okay, thanks. One last one, if I may. Does the Conagra platform that we currently have in place open any doors for other types of acquisitions that perhaps we wouldn't have looked at in the past?

[Paul Jewer, CEO at High Liner Foods]

I wouldn't say it opens the doors for more acquisitions that we might not have looked at in the past. I think it continues to build our confidence on our ability to do acquisitions well. The reality is we integrated the Conagra business quickly. We believe we integrated it well. Our teams are now managing it well. I think the Conagra business, the Conagra brands for us, give us more opportunity on growth in and around our core, with some innovation actually coming associated with those brands. It just instills our confidence that there will be other M&A opportunities, not necessarily exactly like the Conagra Brands one, but in a fragmented space like seafood is, there will be other M&A opportunities that we believe we'll be well positioned to continue to execute on.

[George Doumet, Managing Director at Ventum Financial]

All right. Thank you guys for your answers.

[Operator]

At this time, we have no other questions registered. I would like to turn the call back over to Paul Jewer.

[Paul Jewer, CEO at High Liner Foods]

Great. Thank you, operator, and thank you all for joining our call today. We look forward to updating you with our results for the third quarter of 2026 on our next conference call in November.

[Operator]

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines. Have a great week.

Participants

Executives

• Matt MacDonald, VP of Finance and Investor Relations
• Paul Jewer, CEO
• Kimberly Stephens, CFO
• Anthony Rasetta, Chief Commercial Officer

Analysts

• Luke Hannan, Analyst at Canaccord Genuity
• Michael Glen, Managing Director at Raymond James
• George Doumet, Managing Director at Ventum Financial
• Nevan Yochim, VP of Equity Research at BMO Capital Markets
• Ryland Conrad, VP of Equity Research at RBC Capital Markets