High Liner Foods TSE: HLF reported higher second-quarter sales volume and adjusted EBITDA as management cited resilient seafood demand, retail momentum and progress in pricing, promotional discipline and supply-chain execution. The company also recorded tariff recoveries that management said provide context for margin pressure absorbed during 2025 and early 2026.
For the quarter ended July 4, sales volume rose 4% to 57 million pounds from 54.8 million pounds a year earlier. Chief Financial Officer Kimberly Stephens said the increase reflected demand across the company’s product portfolio, new product launches, additional contract-manufacturing business and volume related to a U.S. Department of Agriculture contract.
Sales increased 12.4% to $269.3 million from $239.6 million, supported by higher volume and pricing in inflationary markets. Adjusted EBITDA rose 20.3% to $30.2 million, or 11.2% of sales, compared with $25.1 million, or 10.5% of sales, in the prior-year period.
Margins affected by warehouse fire, tariffs and inflation
Gross profit declined 6% to $50.1 million, while gross margin fell 370 basis points to 18.6% from 22.3%. Stephens said the decline was largely attributable to a $10.1 million inventory-related loss from a fire at a third-party warehouse. High Liner expects to recognize insurance coverage for that loss by the end of 2026, and it excluded the impact from adjusted EBITDA and adjusted net income.
The inventory loss was partly offset by a $7.9 million recovery of International Emergency Economic Powers Act, or IEEPA, tariffs recognized during the second quarter. The company incurred about $5.7 million of IEEPA-related tariffs in cost of sales during the quarter, excluding recoveries, compared with $2.8 million a year earlier.
Distribution expenses increased 24.6% to $14.2 million, driven by higher sales volume, freight costs associated with acquired Conagra Brands products, and increased fuel costs and freight rates. Reported net income fell 40% to $5.1 million, or $0.18 per diluted share, from $0.28 per share a year earlier. Adjusted net income increased 10.4% to $12.7 million, while adjusted diluted earnings per share rose to $0.44 from $0.38.
Chief Executive Officer Paul Jewer said the company still faces raw-material inflation, tariffs and other input-cost pressures, but cited progress in pricing, promotions, cost management and plant operations. He said High Liner expects year-over-year adjusted EBITDA growth for 2026 independent of tariff recoveries.
During the second quarter, the company received $7.9 million of tariff recovery and subsequently received another $27.9 million, out of $41.3 million applied for. Stephens said the additional amount will be recognized in third-quarter cost of sales. About half of the recoveries relate to tariff costs incurred in 2025, with the balance relating to 2026.
Jewer said tariffs currently affecting seafood imports into the U.S. are generally 10% or 12.5%, depending on the country, with some countries remaining at zero. He characterized that as a better environment than the earlier IEEPA tariff regime, which he said had blended rates in the high teens and included some rates above 20%.
Retail innovation and food-service performance
Chief Commercial Officer Anthony Rasetta said volumes held up despite price increases and reduced promotional activity. Product availability and fill rates improved during the quarter, supporting demand and growth in higher-margin offerings, including the company’s skin-pack product line.
Rasetta said High Liner saw strong performance in the club channel, where consumer purchases continued after promotions ended. Sea Cuisine was a standout brand in club and traditional grocery channels, aided by family-pack growth and new listings. New products included Sea Cuisine Guinness Battered Fish Strips, honey chipotle salmon and garlic bread crusted tilapia family packs.
The company also began shipping Sea Cuisine Skillet Meals to select U.S. retailers. The meal offerings include sole, salmon and shrimp options. Rasetta said the company plans to expand distribution through traditional grocery and club channels, supported by retailer-specific shopper and digital marketing.
- High Liner launched 24 new items during the first half of 2026.
- New private-label products were introduced with national discount retailers across value-added salmon, shrimp and pollock.
- In Canada, the company said it gained market share, supported by Pan-Sear, High Liner family packs and Catch of the Day products.
- In food service, High Liner cited growth in shrimp, salmon and pollock, as well as gains in casual dining and non-commercial channels such as long-term care.
Rasetta said the company’s fully cooked platform has secured a permanent listing with a major U.S. convenience customer and has expanded to additional locations. The platform was introduced to Canadian food service in April, where it secured initial distributor listings.
Outlook and balance sheet
Management maintained an outlook for low-single-digit volume growth for the full year, even as the company laps contributions from the Conagra acquisition in the third quarter and the USDA contract in the fourth quarter. Stephens said High Liner expects gross margin in the second half to be “just shy of 20%,” supported by retail pricing implemented in the second quarter.
Jewer said operational improvements are expected to build gradually through the third and fourth quarters and into the first quarter of 2027. He said the company has additional opportunities to improve plant execution and supply-chain efficiency.
Management said inflation remains a concern across several species. Jewer described cod inflation as supply-driven, while haddock and pollock inflation has been driven more by demand. He also cited supply pressure in pink salmon following a difficult Alaska catch season, while noting more favorable pricing dynamics in aquaculture species.
Net cash flow from operating activities was an outflow of $3 million, compared with an inflow of $15.6 million a year earlier, primarily because of inventory purchases, higher accounts receivable and higher cash taxes. Net debt rose to $335.8 million at July 4 from $322.4 million at the end of fiscal 2025, and net debt to adjusted EBITDA increased to 3.6 times from 3.5 times.
Stephens said the leverage ratio should improve through the year and finish slightly below the company’s long-term target of three times. The company expects annual capital expenditures of $20 million to $25 million, with a larger portion typically spent in the third quarter on maintenance projects.
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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