Earnings call transcript: Herbalife Nutrition Q4 2024 earnings beat expectations

Herbalife Nutrition Ltd (NYSE:HLF) reported strong financial results for the fourth quarter of 2024, significantly surpassing earnings expectations. The company achieved an earnings per share (EPS) of $0.36, well above the anticipated $0.11. This earnings surprise, coupled with revenue surpassing forecasts, led to a 38.51% increase in the stock price during after-hours trading. The stock recently saw a slight decline of 0.7%, trading at $8.62. According to InvestingPro analysis, the company appears undervalued, with a compelling P/E ratio of just 3.35x and strong free cash flow yield.

Key Takeaways

• Herbalife’s EPS of $0.36 exceeded forecasts by 227%.
• Revenue reached $1.2 billion, beating expectations by $10 million.
• Stock surged 38.51% post-earnings but recently dipped by 0.7%.
• Expansion in product lines and distribution contributed to growth.
• The company maintains a strong competitive position despite market challenges.

Company Performance

Herbalife’s performance in Q4 2024 highlighted its ability to navigate a competitive market environment. Despite a slight decrease in net income, the company managed to increase its gross profit by 4.7% to $51 million. This growth was supported by strategic product launches and expanded distribution channels, particularly in the U.S. retail market.

Financial Highlights

• Revenue: $1.2 billion, surpassing the forecast of $1.19 billion.
• Earnings per share: $0.36, compared to the forecast of $0.11.
• Gross profit increased by $2.3 million to $51 million.
• Adjusted EBITDA rose by 8.7% to $23.8 million.

Earnings vs. Forecast

Herbalife’s actual EPS of $0.36 significantly outperformed the forecasted $0.11, marking a 227% positive surprise. Revenue also exceeded expectations, coming in at $1.2 billion versus the anticipated $1.19 billion. This strong performance underscores the company’s effective cost management and operational efficiency.

Market Reaction

Following the earnings announcement, Herbalife’s stock price surged by 38.51% in after-hours trading, reflecting strong investor confidence. Despite a recent 0.7% decline, the stock remains well above its pre-earnings levels, indicating sustained positive sentiment. InvestingPro analysis indicates the stock is currently in overbought territory based on RSI readings, with a notable year-to-date return of 28.85%.

Outlook & Guidance

Looking forward, Herbalife anticipates low to mid-single-digit volume growth in 2025. The company is prepared to manage potential increases in raw material costs and tariff impacts. It targets EBITDA margins above 10% and continues to explore merger and acquisition opportunities. The company maintains a "GOOD" overall financial health score according to InvestingPro metrics, though analysts expect net income to decrease this year.

Executive Commentary

CEO Paul Jewer emphasized the company’s readiness to handle market fluctuations, stating, "We are prepared that market conditions may cause fluctuations in our performance throughout the year." Additionally, Jewer highlighted the strategic importance of aquaculture, noting, "Aquaculture will play an important role in ensuring steady and sustainable supply of seafood for the future."

Risks and Challenges

• Potential increases in raw material costs could impact margins.
• Competitive pressures in the foodservice industry may affect sales.
• Tariff impacts require careful management to maintain profitability.
• Market saturation in key regions poses a risk to growth.
• Economic downturns could reduce consumer spending on premium products.

Q&A

During the earnings call, analysts inquired about the impact of a delayed Lenten period on sales and the company’s tariff mitigation strategies. Executives detailed their approach to managing volume growth and capital allocation priorities, emphasizing a focus on maintaining a robust listing base.

Full transcript - Herbalife Nutrition Ltd (HLF) Q4 2024:

Conference Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the High Liner Foods Incorporated Conference Call for Results of the Fourth Quarter of twenty twenty four. At this time, all participants are in a 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. This conference call is being recorded today, Thursday, 02/27/2025, at 10AM Eastern Time for replay purposes. I would now like to turn the conference call over to Kimberly Stevens, Vice President of Finance for High Liner Foods. Please go ahead.

Kimberly Stevens, Vice President of Finance, High Liner Foods: Good morning, everyone. Thank you for joining the High Liner Foods conference call today to discuss our financial results for the fourth quarter of twenty twenty four. On the call from Highlighter Foods are Paul Jewer, Chief Executive Officer Daryl Bergman, Chief Financial Officer and Anthony Rosetta, 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 and A.

Listeners are also reminded that certain statements made on today’s call may be forward looking statements under applicable securities law. Management may use forward looking statements when discussing the company’s investments, 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 that they are 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 these risks and other factors that could cause its anticipated outcomes to differ from actual outcomes in its publicly available disclosure documents, including in its most recent annual MD and A and annual information form. Please note that High Liner Foods is under no obligation to update any forward looking since discussed today. Before the market opened yesterday, February 26, High Liner Foods reported its financial results for the fourth quarter ended 12/28/2024. That news release along with the company’s MD and A and audited consolidated financial statements for fiscal twenty twenty four have been filed on SEDAR Plus and can also be found in the Investors section of 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 U. S. Dollars and therefore the results to be discussed today are also stated in U. S. Dollars unless otherwise noted.

Hollander Foods’ common shares trade on the Toronto Stock Exchange and are quoted in Canadian dollars. I will now turn the call over to Paul for his opening remarks.

Paul Jewer, Chief Executive Officer, High Liner Foods: Thank you, Kimberly, and welcome, everyone. I’m joined today by our Chief Financial Officer, Daryl Bergman and our Chief Commercial Officer, Anthony Rosetta. Before I hand the call over to my colleagues, I will share my perspective on our performance and outlook, which can be summarized as follows. Our strategy is working, we are executing well and the momentum across our business continues. To recap, last year, we set out to one, grow volume in a profitable manner.

We delivered this in Q4 with a 1.3% increase in volume over Q4 twenty twenty three and an 8.7% increase in adjusted EBITDA compared to the fourth quarter last year. Two, grow adjusted EBITDA year over year. Our strong performance on the bottom line throughout 2024 led to an 8.6% year over year gain three, maintain strong free cash flow while normalizing inventory levels. Again, we achieved this and generated a total of $90,600,000 in free cash flow from operating activities for the full fiscal year of 2024. And four, and most significantly, we needed to ensure that our response to highly competitive and promotional market conditions appropriately balanced the short and long term needs of our customers and consumers.

It’s clear to me that we achieved this as well. I attribute our success across all key metrics in Q4 to strong and consistent execution by our team and the measured and thoughtful approach we took in response to market headwinds. Throughout the year, the team maximized the tools at our disposal to serve our customers and mitigate market conditions. From leveraging the diversification of our business and portfolio to capitalizing on our brand heritage in Canada during our one hundred and twenty fifth anniversary year, to working in partnership with our customers, our global team continuously identified and delivered solutions. And as Daryl will discuss, we manage our balance sheet prudently and we remain extremely well positioned financially as a result.

With low debt and strong free cash flow, we have the financial flexibility needed to invest in our business and build for the future. It’s a future that I believe over the long term is ripe with opportunities for our business and our category, but also requires constant agility to navigate what continues to be a very dynamic operating environment. We have proven that we are resilient and adept at managing the challenges that come our way. And considering the current macro environment, I fully expect that we will once again need to flex this muscle in 2025. We are certainly prepared for a challenging start to the year as consumers continue to pull back on the dining outside of home and brace for inflationary impacts of tariffs.

As we work to offset the impact of external pressures, we will keep a laser focus on the factors within our control, our people, our portfolio and our supply chain and leverage these aspects of our business to show up for our customers and consumers to offer choice, value and targeted solutions. We will also do so while continuing to plan for the future as we did last year with our strategic investments in the two Norwegian aquaculture companies, NorCOT and Anfjord. As part of yesterday’s earnings announcement, we announced our intent to continue our commitment in these investments that will reinforce our position and influence in emerging growth areas for our industry. As we disclosed yesterday, we participated in financing rounds for both companies investing approximately $6,000,000 in NorCOD and $10,000,000 in Anfjord. These investments support the continued growth, innovation and expansion of two sustainable aquaculture leaders, preserving our strategic ownership stake aligned with our long term goals to drive the future growth of the frozen seafood category in North America.

I’m excited to leverage the insight and exposure from these investments to support our long term goals. In the year ahead, we will continue to strike the right balance between the short and long term needs of our business, pivoting as necessary to serve our customers and protect the long term best interests of our company and its stakeholders. I’ll wrap up the call with more on our outlook for 2025, but for now, I will hand the call over to Daryl to discuss our financial performance. Daryl? Thank you, Paul, and hello, everyone.

Before getting into the results for

Daryl Bergman, Chief Financial Officer, High Liner Foods: the quarter, I do want to reemphasize Paul’s note on attributing our success in the quarter to strong and consistent execution by the High Liner team across the whole organization. The strength in our people is a very important driving force behind our continued and continuing success. Now turning to the results. Sales volume increased in the fourth quarter by £800,000 or 1.3% to £60,400,000. The higher sales volume is due to an increase in volume in our retail business where the company’s target approach to value driven promotion and innovations is supporting expanded distribution, especially in the growing club channel.

In the company’s foodservice business, volume was flat as a result of the slowdown across this foodservice industry as customers pulled back on dining outside of the home, especially in casual dining. The relative stability of the company’s non commercial business of schools, hospitals and long term care helped offset market pressures as did continued success of new value added innovations in terms of volume and expanded distribution. The company also saw continued growth in alternative species. Sales decreased in the fourth quarter by $2,100,000 or 0.9% to $235,000,000 driven by reduced pricing reflecting deflationary raw material costs, product mix and increased promotional activity, partially offset by the increase in volumes. Given the highly promotional and price sensitive retail and foodservice markets, the company continues to promote and innovate while adding distribution strength to its competitive position which Anthony will provide more insight on here shortly.

The weaker Canadian dollar in the fourth quarter of twenty twenty four compared to the same period in 2023 decreased the value of reported U. S. Dollar sales from our Canadian denominated operations by approximately $1,500,000 relative to the conversion impact last year. Gross profit increased in the fourth quarter by $2,300,000 or 4.7% to $51,000,000 and gross profit as a percent of sales increased by 120 basis points to 21.7% as compared to 20.5% in the fourth quarter of twenty twenty three. The increase in gross profit is due to lower raw material costs, a more profitable mix, a balanced approach to pricing and promotion focused on supporting both the bottom and top line of the business and partially offset by the decrease in sales.

High Liner Foods continues to drive continuous improvement across operations to ensure prudent cost management. In addition, the weaker Canadian dollar decreased the value of reported U. S. Dollar gross profit from our Canadian operations in 2024 by $400,000 relative to conversion impact last year. Adjusted EBITDA increased in the fourth quarter by $1,900,000 or 8.7% to $23,800,000 and adjusted EBITDA as a percentage of sales increased favorably to 10.1% compared to 9.2%.

The increase in adjusted EBITDA reflects the increase in gross profit and favorable distribution expenses, partially offset by increased SG and A. In addition, the weaker Canadian dollar decreased the value of reported adjusted EBITDA in U. S. Dollars from our Canadian operations in 2024 by $200,000 relative to the conversion impact last year. Reported net income decreased in the fourth quarter by $500,000 or 7.8 percent to $5,900,000 However, diluted earnings per share remained consistent with the prior year at $0.2 The decrease in net income reflects the increase in SG and A expenses and higher income tax expense, partially offset by the increase in gross profit and lower finance costs.

Excluding the impact of certain non routine or non cash expenses that are explained in our MD and A, adjusted net income in the fourth quarter of twenty twenty four increased by $5,200,000 or 71.2% to $12,500,000 and correspondingly adjusted diluted earnings per share increased by $0.18 to $0.41 in the fourth quarter of twenty twenty four. Now turning now to our cash flows from operations and the balance sheet. Net cash flows from operating activities in the fourth quarter of twenty twenty four decreased by $46,300,000 to an inflow of $20,600,000 compared to an inflow of $66,900,000 in the same period in 2023. The decrease is driven by reduced depreciation expense and lower changes in non cash working capital balances, specifically within inventories, accounts receivable and accounts payable. This is partially offset by the lower interest and income taxes paid.

Capital expenditures were $23,800,000 in 2024 compared to $19,000,000 in the prior year reflecting the continued investment in our business. Net debt at the end of the fourth quarter of twenty twenty four decreased by $16,700,000 to $233,200,000 compared to $249,900,000 at the end of fiscal twenty twenty three, reflecting lower bank loans, lower debt term, lease liabilities and a higher cash balance at the December ’44 as compared to 12/30/2023. Net debt to adjusted EBITDA was 2.3 times at 12/28/2024 compared to 2.6 times at the end of fiscal twenty twenty three. The ratio has continued to improve in 2024 due to lower net debt and a higher rolling twelve month adjusted EBITDA compared to fiscal twenty twenty three. In the absence of any major acquisitions or unplanned capital expenditures in 2025, we expect this ratio to continue to be lower than the company’s long term target of three times at the end of fiscal twenty twenty five.

As a final note, I would say that against a dynamic and uncertain backdrop, our financial position provides us the strength and flexibility to manage near term challenges, while investing in our future and positioning the company for growth. As we advance our plans to unlock value from growth opportunities for our shareholders, our consistent strong free cash flow supports a sustainable dividend, ongoing share buyback program and a reliable stable investment in the face of market volatility. I will now turn the call over to Anthony to discuss our operational highlights.

Anthony Rosetta, Chief Commercial Officer, High Liner Foods: Thanks, Daryl, and hello, everyone. I’ll start by echoing Paul and Daryl’s remarks that we’re pleased by our performance in Q4. We’ve been laying the groundwork to grow volume in our business all year and it’s validating to see that work start to pay off. The distribution gains made in the third quarter helped to drive improvements in volume in the fourth quarter as did the strategic investments in promotions and ongoing innovations we’ve delivered to our customers throughout the year. While we were encouraged by our fourth quarter results, market conditions during the fourth quarter remained challenging and the slowdown in foodservice, the largest area of our business became more pronounced.

This was the case across the foodservice industry as consumers are pulling back on dining outside of the home and trading down within the category. Our U. S. Distributor and branded value added business performed well as did our non commercial business, although it softened compared to the third quarter and the prior year as dyno traffic was down in most segments. This is an industry issue and one that we’re prepared to support our customers through as we seek to mitigate the impact on our business by delivering tailored solutions.

For example, we have seen a shift to private and distributor label products as our customers are seeking out greater efficiencies and the ability to offer enhanced value in a highly promotional and competitive market. As a key contributor to private and distributor label, we’re able to capitalize on this demand and provide solutions to our foodservice customers, while simultaneously supporting volume during a period of market softness. Similarly, our portfolio of innovative alternate species equips us with value driven solutions for operators who want to maintain high quality whitefish on the menu, but at a more affordable price point. During the fourth quarter, we expanded distribution of our delicious white fish alternative Southern Blue Whiting to new customers seeking a value driven alternative to cod on the menu. Haik is also a great white fish alternative to our customers and we’ve launched an expanded hake assortment in Q1 to capitalize on this interest and deliver enhanced value to operators.

We also continue to focus on targeted sales of our value added products to support back of host efficiencies. Our value added portfolio delivers innovative, consistent and cost effective solutions to ease operator concerns. During fiscal twenty twenty four, we expanded distribution of our value added shrimp SKUs and expanded our portfolio of Atlantic salmon offerings, which is aligned to our strategic focus on these growth species. While we continue to explore growth opportunities across our target species and segments, we’re prepared for the industry headwinds to continue and are confident that we are well positioned to support operators and navigate short term volatility. We will continue to emphasize innovative solutions using data driven insights to customize recommendations and implement promotional and marketing activations in partnerships with key distributors and operator partners.

Turning now to retail, in both U. S. And Canadian retail, the category continues to rebound, but it’s still highly promotional and competitive. Nonetheless, we’re making gains. In our U.

S. Retail business, we grew top line in both pounds and dollars with our premium Atlantic salmon brand Seaworthy remaining one of the fastest growing brands in the category. And we secured new distribution with national U. S. Retailers.

On the value side, Fisher Boy also continues to perform well with increased sales in discount and value channels. In our Canadian retail business, we increased value added sales as a result of targeted promotional activity in partnership with retailers and an emphasis on digital activation. In partnership with our retail customers, we have developed targeted promotions that are currently in market and will remain in place through the Lenten period to capitalize on the seasonal appeal of seafood to draw consumers back to the category and support further volume recovery. Across U. S.

And Canadian retail, we had another great quarter in the club channel, wrapping up a successful twelve months of growth driven by new listings and expanded distribution. We were particularly pleased to secure the launch of our Sea Cuisine Tortilla Crusted Tilapia in a club retailer for the first time in Canada in 2025. Throughout 2024, innovative product launches and limited time offers enabled us to pair innovation with volume to offer value beyond price and incentivize new consumers to try our products. This strategy supports volume growth without resorting to deep discounting that is prevalent in our category within mainstream retailers. As we look up to 2025, we recognize that consumer behavior is still highly value driven and anticipate that this will shape both the retail and foodservice landscape in the year ahead.

The late timing of the Lenten period, a key period for seafood consumption and sales will inevitably impact Q1 performance as compared to 2024. Nonetheless, we are still confident that we will continue to deliver solid operational and financial results. Overall, we’re very encouraged by what we achieved in 2024. I’m confident we can withstand market pressures and support profitable growth over the year. With that, I’ll hand it back over to Paul for his final remarks before we open it up to questions.

Paul?

Paul Jewer, Chief Executive Officer, High Liner Foods: Thank you, Anthony. As you’ve heard today, we delivered a solid finish to 2024. ’20 ’20 ’4 offered no shortage of macroeconomic headwinds that we were able to adapt to and either mitigate the impact of or leverage into a new opportunity for us. As all signs suggest that headwinds are set to continue into 2025, we will stay the course with our strategy and continue to run our business in a proactive and prudent manner. We are prepared that market conditions may cause fluctuations in our performance throughout the year, but we are confident that we will be able to rebound, build on the momentum of the fourth quarter and drive top and bottom line growth over the course of the year.

We will, of course, continue to carefully assess market conditions and make necessary pivots to serve our customers and support our business. As I said on the start of the call, I’m extremely passionate and optimistic on the long term opportunity for seafood as consumers need and desire for healthy, sustainable sources of protein will endure through market cycles, trends and disruptions. New opportunities come hand in hand with challenges. And as we adapt to market conditions today, we will also continue to look ahead to strengthen our position where the consumer, customers and the category is heading tomorrow. We are doing this with respect to our operations, for example, leaning into club, discount and digital channels, as well as alternative species.

And we are also prioritizing where the market is heading with respect to the emerging growth and importance of aquaculture and sustainable seafood procurement. It’s clear that aquaculture will play an important role in ensuring steady and sustainable supply of seafood for the future and our investments in NorCod and Anfjord open the door for us to continue to be at the forefront of the evolving global supply chain. We will continue to actively leverage these relationships to bring NorCod products to North America in 2025 and Ancure products in the future as they become available. As we execute against our strategy, we remain focused on preserving our balance sheet strength and we will continue to prudently allocate capital and strike an appropriate balance between investment in our business and our future and the return of capital to our shareholders through our dividend and ongoing share buybacks. We also continue to pursue M and A opportunities as part of our strategy to enhance near term performance and achieve transformative growth and long term value creation.

I look forward to another successful year ahead as we advance our business and unlock value for our shareholders. With that, I will hand the call over to the operator to open it up for our Q and A period. Operator?

Conference Operator: Thank Your first question is from Kyle MacVay from Cormark Securities. Your line is now open.

Kyle MacVay, Analyst, Cormark Securities: Hello, everyone. Good quarter. First question for me, the volume and revenue performance was better than I thought in Q4. And I just want to better understand some of the moving parts here. So in prior quarters, there was a lot of year over year drag from on purpose elimination of some of your lower margin volume.

I think it started in Q1 last year. So I don’t think it was lapped yet for Q4. But can you tell us how the drag from these on purpose cuts impacted Q4? Was it similar versus prior quarters or did the drag go away?

Paul Jewer, Chief Executive Officer, High Liner Foods: It was certainly less than Q4, Kyle. And by the end of the quarter, you’re right, we have largely lapped it now. But the other thing I would point out as we talked about in earlier quarters is we had some declines in our contract manufacturing business earlier in the year. Those declines had also dissipated by the time we got into the fourth quarter. So the volume and sales performance really is reflected of improvements in retail, good performance in the foodservice distributor business and less of a drag from the things you

Navane Youssef, Analyst, BMO Capital Markets: highlighted. Got it. Okay.

Kyle MacVay, Analyst, Cormark Securities: And then on that year over year gain in the retail channel, can you help us quantify how large that gain was in Q4 if we just isolate that moving part? I mean, my math here on the moving parts is suggesting it was nicely into the double digit range, but can you confirm that?

Paul Jewer, Chief Executive Officer, High Liner Foods: That would be high. It was positive, but it wasn’t quite into the double digit range. And it was driven by, as Anthony referred to, pretty good performance in particular in the club channel. So we’re certainly focused, particularly in this environment where we’re seeing some shifting between dining at home and dining out. We see opportunity for continued growth in retail.

Anthony Rosetta, Chief Commercial Officer, High Liner Foods: And Kyle, just to build, in addition to the success we saw in the club channel with expanded distribution, increased promotion, the brands that we’re seeing growth in U. S. Retail in particular are aligned with what we’re seeing in the macro dynamics. So we gained on Seaworthy, our premium Atlantic salmon brand. And as people are dining out less and in home more, they’ll be looking for restaurant quality solutions at home.

In addition, we saw gains in the value side of our portfolio in Fisher Boy given the continued impacts of inflation. So we’re feeling good about the breadth of the portfolio we have to be successful in this market.

Kyle MacVay, Analyst, Cormark Securities: Got it. Okay. And these gains in retail and it sounds like it was club channel heavy. I mean, are these sustained sources of new volume for High Liner or is this is any of this kind of payoff from promotional activity that’s not necessarily permanent or maybe channel stocking tailwinds for new listings? I’m just trying to figure out how much of this is going to show in the upcoming quarters.

Anthony Rosetta, Chief Commercial Officer, High Liner Foods: We feel good about the consistency of the listing base that we’ve gained in club and across the distribution in traditional channels as well. Some of them are limited edition items and rotations, but we feel good that we have a full calendar of them in 2025 to keep the momentum going.

Paul Jewer, Chief Executive Officer, High Liner Foods: And Kyle, as we highlighted, the bigger impact on, I’ll call it seasonality or quarter over quarter sales will be the shift in implant timing as we highlighted.

Kyle MacVay, Analyst, Cormark Securities: Yes, of course. Okay. And then last one on the moving parts on the top line here, the year foodservice channel was weak, the macro headwinds. Can you quantify just how weak it was year over year?

Anthony Rosetta, Chief Commercial Officer, High Liner Foods: So traffic was down in foodservice as an overall channel a couple of percentage points and we saw that decline kind of consistently across segments. That was new this quarter as well where we saw declines in even in some of the value segments within foodservice. So it was a couple of points down.

Kyle MacVay, Analyst, Cormark Securities: Got it. Okay. And then Paul, you mentioned you’re looking for volume gains year over year in 2025. Is any of that rooted in normalization of consumer demand post all the macro pressures from the trailing year? Or do you think High Liner is growing volume regardless of this, we see that more normalized demand pattern?

Paul Jewer, Chief Executive Officer, High Liner Foods: I think we have the opportunity to grow volume regardless because of the initiatives we have in place. The one thing I would highlight that we’ll certainly have to manage through is the potential impact of ongoing inflation, right? Particularly as you think of tariff impact in The U. S. And what impact that could have on consumer demand.

But barring that, we certainly think we have good plans in place to support volume growth in a category that really should have good volume growth as we look forward.

Kyle MacVay, Analyst, Cormark Securities: Okay. Thanks for the comments. I’ll pass the line.

Conference Operator: Thank you. Your next question is from Navane Youssef from BMO Capital Markets. Your line is now open.

Navane Youssef, Analyst, BMO Capital Markets: Yes, thank you. Good morning and congratulations on a strong finish to the year. Hoping we can start with the volumes in 2025 just with the lent in period delayed. Can you quantify what that revenue hit could be in Q1? And then would you get that all back into Q2?

Paul Jewer, Chief Executive Officer, High Liner Foods: Yes. It’s hard to quantify at this stage, Nevan, because we’re really just in the early stages, well, actually not even fully into lent yet. Because what it’s about a three week shift. And so more lent is really now in March instead of February and finishes in April instead of March. So it’s hard to quantify it from a dollar perspective yet, but we do think there’ll be some impact.

But yes, you’re right. Our view would be first half of the year, that’s a quarter over quarter impact that will think will make up in Q2 the recover from some of those clients in Q1. Yes.

Daryl Bergman, Chief Financial Officer, High Liner Foods: And what we’re focused on,

Anthony Rosetta, Chief Commercial Officer, High Liner Foods: Nevan, is obviously continuing to make sure we have strong promotional activity at the length period, so that we’re picking up steam in March and April, as well as some innovation that we have launching right around the same time in both retail and foodservice.

Paul Jewer, Chief Executive Officer, High Liner Foods: Okay, understood.

Navane Youssef, Analyst, BMO Capital Markets: And then maybe just higher level on the volume outlook for the full year. I know the H1 comp is a bit easier. It gets a little tougher into H2 given the 2024 cadence. Can you talk about your expectation for volume growth for the full year and then how that breaks down in H1 versus H2? Could we possibly see that like a low double digit volume growth into the first half?

Paul Jewer, Chief Executive Officer, High Liner Foods: Double digit would be high for sure. I mean, we typically would suggest we’d expect more low to mid single digit volume growth. And that with that leverage we have in our business, it presents an opportunity for us to obviously grow profitability at a rate that should be slightly above that.

Navane Youssef, Analyst, BMO Capital Markets: Okay. And is it fair to say that just given the year over year comp, you would expect volumes to be a bit stronger in the first half of the year relative to the second?

Paul Jewer, Chief Executive Officer, High Liner Foods: No, I wouldn’t say that. And part of the reason for that is some of the plans that we have in place to support volume growth materialize as the year unfolds, right? So I think despite what you’ve identified in terms of the year over year lapping, we still feel that we have an opportunity to drive volume growth in both the back half and the front half.

Navane Youssef, Analyst, BMO Capital Markets: Okay, understood. Thank you. And then maybe just moving on to price and mix. Can you talk about your expectations for raw material costs mix and then as well as say promotional activity going into 2025? And then particularly with respect to raw material costs given some of the talk around tariffs?

Paul Jewer, Chief Executive Officer, High Liner Foods: Yes. I mean, we will expect to see some higher raw material costs in 2025. That will materialize in particular a couple of species, cod and haddock would be two that I would point to because of of a shortage of pod supply in the market. You’re right, tariffs can have an impact on cost. And as we’ve demonstrated in the past, if necessary, we’ll pass on additional price to cover any tariff impact, particularly as it relates to raw material.

And we think, however, we’re focused on managing costs as efficiently as we can as well. So we’re going to work hard to try to offset some of that inflationary pressure on the raw materials side with good cost management across the rest of our business. We may to your point on promotional activity, we’re focused on delivering gross margin dollars and EBITDA dollars. So there may be situations where we’ll accept some decline and percentages of gross margin or EBITDA to support volume growth because the category has been more promotional and we want to make sure we’re doing what we can to maintain and grow share there as well.

Navane Youssef, Analyst, BMO Capital Markets: Okay, great. And then I guess naturally to your last point there, the EBITDA margin improvement we saw in 2024, it was partially due to a decline in contract manufacturing. As this comes back into 2025, is it possible for you to maintain margins at that 10.8% level?

Paul Jewer, Chief Executive Officer, High Liner Foods: We’re very pleased at 10.8%. That’s higher than we normally would actually guide people to. We often talk about 10% being a longer term target for EBITDA margins. We’re going to work hard to keep it above 10% obviously, but if it settles in the lower 10s because it’s supportive of volume growth and the generation of EBITDA dollars, then we’ll certainly accept that as well. And you’re right to point out the impact that mix can have in our business because as you know, there’s quite a variance in terms of profitability on parts of our portfolio.

So that can have, I would say, more of a temporary impact on margin performance, not as much of a longer term impact on margin performance.

Navane Youssef, Analyst, BMO Capital Markets: Okay. Thanks, Paul. I’ll pass the line under queue.

Conference Operator: Thank you. Your next question is from Kyle MacVie from Cormark Securities. Your line is now open.

Kyle MacVay, Analyst, Cormark Securities: Hi, again. I just wanted to touch on the M and A theme. You guys got a good balance sheet. You continue to print free cash flow. It seems like you have this building base of excess capital.

And I think part of your playbook is to deploy that in M and A. I’m curious if the macro and political uncertainty is delaying any of your timelines to deploy capital into M and A?

Paul Jewer, Chief Executive Officer, High Liner Foods: Not at all. And in fact, I would suggest it may create opportunity for us because as you point out, Kyle, we get to approach this from a position of strength. And as others may struggle in this environment, it may present even more opportunities for us. So we are still very focused on it. We think it’s a great opportunity for long term value creation and we’re very active in looking at those opportunities.

Navane Youssef, Analyst, BMO Capital Markets: Got it. And is the pipeline full

Kyle MacVay, Analyst, Cormark Securities: of more smaller types of investments like we’ve seen you do in the aquaculture space or are there kind of larger transactions that are you could qualify as advanced stage that you’re looking at?

Paul Jewer, Chief Executive Officer, High Liner Foods: Yes, it’s certainly a mix. And we’re willing, as we’ve shown, to invest on a minority basis for opportunities that can support us over the long term. But the greatest opportunity to support accelerated growth is to actually buy businesses. And we’re absolutely looking at those as well. And most of those opportunities are still going to be small to medium opportunities rather than really big ones.

But we would look forward to being able to string together a couple of those good small to medium opportunities.

Kyle MacVay, Analyst, Cormark Securities: Got it. Okay, great to hear. Thank you. That’s it for me.

Conference Operator: Thank you. There are no further questions at this time. Oh, sorry. We have a follow-up from Novonios from BMO Capital Markets. Please go ahead.

Navane Youssef, Analyst, BMO Capital Markets: Yes. Thank you. So just two more from me. On The U. S.

Tariffs, including on Canada as well as Chinese products, are you able to quantify or kind of put a number around the potential impact that these might have on your business. I know you previously called out about a $6,000,000 impact before mitigating measures if The U. S. Had reinstated 25% tariffs on China. Can you comment on whether that figure would still be in the ballpark?

Paul Jewer, Chief Executive Officer, High Liner Foods: Yes. In terms of the absolute impact, the number obviously as the tariffs are broader would be bigger than that, but we still feel very strongly about our mitigation plans. And what we’ve demonstrated in the past on the tariffs on China in particular is if it’s necessary to pass price, we will. And we really managed through those historically without any negative impact on the bottom line, and that’s our plan as we look at those. On the potential tariffs between Canada and The U.

S, I think what I should highlight there is we’re in a fortunate position of having production capacity in both The U. S. And in Canada. In fact, most of what we sell in The U. S.

Today is made in The U. S. Most of what we sell in Canada today is manufactured at our plant in Lunenburg. We do have some volume that’s produced in Canada that goes to The U. S, but it is less than 10% of our sales overall, and we have plans in place and capacity available to be able to mitigate impacts there as well.

Navane Youssef, Analyst, BMO Capital Markets: Okay. That’s great to hear. And then just the last one for me, pulling a little bit on the capital allocation theme. Wondering if you can talk about your pecking order for dividends, share buybacks, paying down debt and then investing in M and A?

Daryl Bergman, Chief Financial Officer, High Liner Foods: Again, it’s a balanced approach to each with respects. We’re always looking to see where we can maximize shareholder value. So from a standpoint of opportunity, again, we’re going to continue with the NCIB on the share buyback program throughout the year and be able to maximize the allowable under the NCIB to buyback. M and A opportunities again are going to they’re going to come not as predictable, but when they arise, we’re going to be able to address that. And with respect to capital allocation for internal growth, again, we’re going to look to that and continue to apply capital as we have planned through the budget in 2025.

Navane Youssef, Analyst, BMO Capital Markets: Yes, great to hear. Thanks again guys. Congratulations on the quarter.

Anthony Rosetta, Chief Commercial Officer, High Liner Foods: Thank you. Thanks.

Conference Operator: Thank you. There are no further questions at this time. I will now hand the call back over to Paul Jewer for the closing remarks.

Paul Jewer, Chief Executive Officer, High Liner Foods: Thank you, operator, and thank you all for joining us on this call today. We look forward to updating you on our results for the first quarter of twenty twenty five on our next conference call in May.

Conference Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may always connect your lines.

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