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High Liner posts 'disappointing' Q3 earnings drop

Trade war tariffs remain an ongoing concern for the company.

Canada's High Liner Foods on Thursday posted an 18 percent decline in third quarter adjusted earnings before interest taxes depreciation and amortization (EBIDTA) to $14.2 million (€12.4 million) as the company struggled to pass on higher raw material costs to customers.

Company profile: High Liner Foods

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This compared with $17.3 million (€15.1 million) in the same period of 2017.

The result came as third quarter sales dropped nearly 15 percent from a year earlier to $241.2 million (€211.1 million) from $282.7 million (€247.4 million) in the third quarter last year.

Sales volume for the third quarter of 2018 decreased by 9.4 million pounds to 64.2 million pounds compared to 73.6 million pounds in the same period in 2017.

High Liner attributes that decrease to lower sales volume in its US foodservice and retail businesses and Canadian retail business including lower sales volume from Rubicon (3.4 million pounds) due to the loss of a major customer. The weaker Canadian dollar also impacted sales, High Liner said.

Trade War tariffs remain challenging

High Liner is advising shareholders that "until it completes its critical initiatives over the next twelve to fifteen months, High Liner is likely to continue to face pressure on its financial results."

The company's financial pressure from rising raw material costs are being further aggravated by Trump's import tariffs imposed this year on the company's key species that are reprocessed in China that include haddock, tilapia and sole. High Liner estimates US import tariffs imposed on China could add $10 million (€8.8 million) to its costs.

The company said it has has begun implementing plans, including pricing actions and other supply chain initiatives, to mitigate the tariff impacts.

As part of this, subsequent to the end of the third quarter of 2018, High Liner completed its "organizational realignment", resulting in a reduction of 14 percent of its salaried workforce.

The full realignment will generate approximately $7 million in net annualized run rate cost savings.

"Our disappointing third quarter financial performance reflects challenges in both the external operating environment and our internal operations, and reinforces the need for action to realign the business and drive cost efficiencies," said Rod Hepponstall, CEO of High Liner Foods.

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