High Liner Foods Q2 Earnings Call Highlights

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...