High Liner Foods TSE: HLF reported stronger first-quarter sales and volume growth for fiscal 2026, but management said profitability was pressured by higher raw material costs, elevated promotions and supply chain constraints in key whitefish species.
On the company’s earnings call, Chief Executive Officer Paul Jewer said demand exceeded expectations during the quarter, supported by an earlier Lent promotional period and product innovation. However, he said that demand created operational pressure and delayed margin improvement initiatives.
“I recognize that the strength of the top line has not translated to bottom-line profitability over the past three quarters,” Jewer said. “This is being actively addressed across the business.”
Sales Rise Nearly 25% as Volume Increases
Chief Financial Officer Kimberly Stephens said sales volume rose 10.6% to 73 million pounds in the first quarter, compared with 66 million pounds a year earlier. She attributed the increase to the timing of Lent, additional contract manufacturing business, volume growth tied to a United States Department of Agriculture contract and higher retail volume from brands acquired from Conagra Brands.
Sales increased 24.8% to $334.9 million from $268.4 million in the first quarter of 2025. Stephens said the growth reflected both increased volume and pricing tied to inflationary markets.
Gross profit increased 4.9% to $66.6 million, but gross profit as a percentage of sales fell to 19.9% from 23.7% a year earlier. Stephens said the margin decline was driven by higher raw material costs, tariffs on select species, elevated promotional activity, unfavorable product mix and supply chain challenges caused by limited supply, particularly in key whitefish species.
Adjusted EBITDA decreased 8.7% to $29.3 million from $32.1 million, while adjusted EBITDA as a percentage of sales fell to 8.7% from 12%. Reported net income declined 47.7% to $8 million, and diluted earnings per share fell to $0.27 from $0.51. Adjusted net income declined 31.3% to $11.4 million, while adjusted diluted earnings per share fell to $0.39 from $0.55.
Whitefish Costs and Supply Constraints Weigh on Margins
Management said raw material inflation was a major factor in the quarter’s margin pressure. In response to an analyst question, Stephens said roughly two-thirds of the gross margin impact was related to higher raw material costs.
Jewer said the pressure was especially significant in cod and haddock. “The increases in cod and haddock in particular were significant, and we just weren’t able to pass it on fully, particularly during the Lent period,” he said.
Jewer said the supply constraints were not related to transportation, but to challenging quotas for cod in Norway and Alaska, as well as demand shifts into haddock and other species. He said High Liner Foods is supporting volume shifts to species such as pollock and Cape hake, buying cod again from Newfoundland as stocks improve and supporting cod aquaculture.
“As we come through the second quarter, we expect to be in a much better supply position across really all of our species for the back half of the year,” Jewer said.
Management Targets Pricing, Promotions and Supply Chain
Jewer said the company is focused on three areas to improve profitability: pricing, promotions and supply chain execution. He said pricing actions are now in place across the majority of the company’s portfolio for the second quarter, though management expects more frequent pricing discussions with customers if raw material costs continue to rise.
Chief Commercial Officer Anthony Rasetta said most retail customers have accepted price increases following earlier delays caused by retail lead times, blackout windows and the timing of Lent. He said it is still too early to determine the full effect of those increases on demand.
“In spite of the inflation, the demand has held up well, probably better than we thought in terms of the elasticity impact,” Rasetta said.
Rasetta said High Liner Foods will take a more targeted approach to promotions after the Lent period, balancing investments in brand support and trial with profitability. He said promotional intensity is expected to be lower for the rest of the year than it was in the first quarter.
The company is also reducing lower-return SKUs and focusing on productivity and operational discipline. Jewer said SKU reductions are a smaller incremental factor for volume, but can help improve plant efficiency.
Retail and Foodservice Demand Remain Strong
Rasetta said High Liner Foods gained share in U.S. retail during the quarter and strengthened its No. 3 manufacturer position in that market. He cited strong performance from Sea Cuisine innovations, including Guinness Battered Fish Strips and Shrimp, Honey Chipotle Salmon, Garlic Bread Crusted Tilapia and Family Packs.
The company also saw positive momentum from Mrs. Paul’s and Van de Kamp’s, the brands acquired from Conagra Brands, after targeted investment during the first Lent period with those brands in its portfolio. Stephens said the acquired brands generated incremental positive adjusted EBITDA in the quarter, as anticipated.
In Canada, Rasetta said High Liner Foods remained the No. 1 branded value-added leader and gained share during the quarter, with growth in Pan-Sear and Catch of the Day products.
In foodservice, Rasetta said the company outperformed the category and gained share, with strength in value-added salmon, shrimp and haddock. While quick-service restaurant demand softened due to pressure at a key customer, growth in casual dining and non-commercial channels helped support performance.
The company’s fully cooked product line, launched in January, secured a permanent listing with a major U.S. convenience customer after what was initially intended as a limited-time Lent offering, Rasetta said.
Cash Flow Improves; Company Maintains EBITDA Growth Outlook
Net cash from operating activities improved to an inflow of $25 million, compared with an outflow of $10.6 million a year earlier. Stephens said the improvement was primarily driven by favorable working capital changes, including accounts receivable collections and lower inventory balances tied to the earlier Lent period.
Net debt decreased to $318 million at the end of the first quarter from $322.4 million at the end of fiscal 2025. Net debt to adjusted EBITDA was 3.6 times, compared with 3.5 times at the end of fiscal 2025. Stephens said the company expects leverage to improve through the year and end fiscal 2026 slightly above its long-term target of 3 times.
High Liner Foods is applying for U.S. tariff refunds, but Stephens said the potential recovery is not reflected in the company’s financial statements because of uncertainty around the process and timing.
Jewer said the company continues to expect higher adjusted EBITDA year over year in 2026, while acknowledging that improvements will not be immediate. He said the outlook reflects pricing actions, promotional discipline, supply chain improvements and the contribution from the Conagra Brands acquisition.
“Our focus is squarely on profitable growth,” Jewer said. “While we have work to do and do not expect an immediate turnaround, we are confident in our ability to stabilize performance and deliver higher adjusted EBITDA year-over-year in 2026.”
About High Liner Foods TSE: HLF
High Liner Foods 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.
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