High Liner Foods Q1 profit more than doubles, revenue up 22 per cent

Current economic conditions may be gutting bigger fish but so far Lunenburg, N.S., based High Liner Foods (TSX:HLF) seems to have escaped the sharp edge of the recession.

HALIFAX — Current economic conditions may be gutting bigger fish but so far Lunenburg, N.S., based High Liner Foods (TSX:HLF) seems to have escaped the sharp edge of the recession.

The Canadian seafood giant released 2008 results Wednesday, its first full cycle after acquiring Fishery Product International’s manufacturing and marketing group in late 2007.

President and CEO Henry Demone also tabled the company’s first quarter results for 2009 at the annual meeting in Halifax — and both look strong.

‘Last year at this time I mentioned that our increased scale, expanded product offerings and strengthened capabilities made us much stronger to deal with challenging market conditions,” Demone said during a media briefing in advance of the annual shareholders meeting.

‘Now in hindsight that remark looks almost prophetic,” he said in describing 2008 as a banner year for Canada’s largest fish processor.

High Liner was able to grow sales in several areas last year, despite price increases that averaged seven per cent. The company also raised its dividend twice, paid down debt significantly and simplified its capital structure.

‘While we are not immune to the impact of the current economic crisis, we are certainly less susceptible as a result of our market leadership and scale,” said Demone.

He credited strong branding of High Liner’s frozen seafood entrees, value-priced offerings in the retail sector and a focus on recession-resistant customers in the food services market such as health care and education.

Earlier Wednesday, High Liner said its first quarter earnings more than doubled to $6.7 million or 36 cents a share, up from up from a net profit of $3.1 million or 20 cents a share in the first quarter of 2008. Sales were $183.3 million compared to a year-earlier $149.2 million, partially on the effects of a weaker Canadian dollar.

‘The strongest contributors to our performance for the quarter were our Canadian food service and U.S. retail divisions,” said Demone, adding a cautionary note.

‘We do expect 2009 to be characterized by challenging market conditions and volatility as consumers react to the economic recession,” he said.

‘The world has become very unpredictable in terms of what the price of fuel will be, the price of raw materials or the exchange rate”.

Demone said with that kind of uncertainty it’s easy to make mistakes that tend to be more costly.”

Currency fluctuations for a Canadian-based company that acquires most of its resources in U.S. dollars and generates sales in the American marketplace can create chaos for the bottom line.

Generally a stronger Canadian dollar is beneficial to earnings but the converse can increase costs and decrease sales and related profit.

‘If you look at the first quarter of 2009 the Canadian and U.S dollars were roughly at par and in the first quarter of 2009 the average, I think, was about $1.23. That’s an enormous increase in costs.”

However, Demone said that they are hedged against extremes and that their raw materials are usually under longer term contracts.

Most of the fish the company buys, whether frozen or in blocks, comes from Alaska, Norway and Russia with some commodities, like shrimp, coming from warmer waters around the world.

Demone said he does not anticipate any further price hikes this year and that the company’s four processing plants, two in Canada and two in the U.S., should be operating at or above 2008 levels due to increased volume.

High Liner employs about 1,000 people.

Sales in the company’s Canadian operations were up 7.9 per cent in the first quarter while U.S. sales were up 8.6 per cent.

Despite price increases implemented in late 2008 and early 2009, sales volumes increased by 1.3 per cent to 49.5 million pounds.

High Liner shares were up 18 cents to $6.80 in Wednesday trading on the Toronto Stock Exchange.

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