High Liner revenue drops due to product recalls
August 15, 2017 - Herald Business
Lunenburg-based seafood giant High Liner Foods swallowed US $9.3 million in product recalls during the first half of this year but is expecting to get that money back from suppliers later.
During the first three months of 2017, the company announced a voluntary recall of products sold in Canada that might contain a milk allergen not indicated on the products’ food labels.
High Liner estimates that recall cost is about US$700,000.
Then, in the second quarter, the company had to expand its initial recall to other products sold in the United States as well as Canada because of the possible presence of milk which was not declared on the food labels.
By the end of that quarter, on July 1, High Liner had been hit with another roughly US$8.6 million in losses from that recall.
“These estimated losses do not include any estimate of the reduction in earnings associated with the product recall as a result of lost sales opportunities due to limited product availability and customer shortages, or increased production costs related to the interruption of production at the company’s facilities,” High Liner management explained in a statement.
“The majority of the disruption to the company’s business associated with the product recall has subsided.
“We are receiving regular ingredient shipments from the ingredient supplier, rebuilding inventory of recalled products and have resumed shipment of these products to customers,” the company has noted.
High Liner’s sales nudged down 0.9 per cent during the first six months of this year compared to the same period in 2016, slumping to almost US$551 million from about US$556 million.
Sales for the latest quarter, though, are up by almost US$12.2 milllion to almost US$254.9 million from US$242.7 million.
Driving much of that boost in revenues is High Liner’s acquisition of U.S.-based Rubicon Resources in late May for US$100.6 million, including US$75 million in cash and the balance in common shares. That move boosted High Liner’s second-quarter sales by US$17.7 million.
The product recalls clearly dampened sales during that period. And the company’s sale of its New Bedford facility late last year also led to a reduction in its scallop sales.
The company’s adjusted earnings before interest, taxes, depreciation and amortization, commonly regarded as a barometer of a company’s operational performance, dipped for both the second quarter, by about 23.5 per cent, and for the year to date by 26.3 per cent.
High Liner stock, which trades on the Toronto Stock Exchange under the HLF ticker, dropped 6.87 per cent to $14.50 on light trading volume by the closing bell Tuesday.