HALIFAX (Canadian Press) — Frugal Americans who buy more frozen seafood for home cooking will bring about "modest increases" in U.S. sales for High Liner Foods Inc. this year, the Lunenburg, N.S.-based firm's chief executive predicts.
The United States accounted for slightly more than half of the company's sales last year, with the remainder coming from mostly in Canada. Sales in both countries were down from the previous year, but the decline in U.S. sales was bigger.
The trend in the recession-battered United States consists of aging baby boomers who are eating in and seeking to reduce calories by eating fish, High Liner CEO Henry Demone said Tuesday after the company's annual meeting.
"I use the term 'the new normal' in the U.S. because the U.S. consumer was really over leveraged in terms of credit cards and mortgages and now people are saving money and paying down debt," Demone said.
"Compared to 2007, we see more retail (grocery) business and less service (restaurant) business because the consumer has cut back."
"The volume growth will be modest," he predicted.
The shift to home cooking has been good news for the owners of the Captain High Liner brand, which bills itself as "recession resistant" in its annual report.
Last year, the U.S. business had earnings before interest, tax, depreciation and amortization of $23 million, a jump of 25 per cent over the year before.
Overall, profits rose from $14.2 million in 2008, or 88 cents per share, to $19.7 million, or $1.07 per share in 2009.
Demone, the son of a sea captain who fished the Grand Banks, said he's also still trolling the United States for potential acquisitions, after not finding any willing sellers in 2009.
"We certainly tried," he said of attempts to make purchases last year.
"There will be continued consolidation in the seafood business and there are some opportunities out there."
The upward trend in the Canadian dollar has benefited High Liner, as it sources most of the roughly 30 kinds of fish and shellfish it purchases in U.S. dollars. The company earned $297 million of its 2009 revenues in rising Canadian dollars.
Jonathon Norwood, vice president of investment at Louisburg Investments, notes that High Liner has also benefited from an increasing interest in lower calorie foods from aging baby boomers looking to maintain their health.
"The trend is health and well being, and High Liner will have to be adapting their menu accordingly, particularly the Fisher Boy brand and the bread and battered products," said Norwood in an email.
Demone said he'll be introducing more oven-baked seafood products in 2010, aimed at the health conscious consumer.
At the annual meeting he emphasized the success of pan-seared groundfish, and predicted more products like it will be launched in 2010.
"We're looking for more applications... that will be done in the oven," he said.
Norwood said the biggest risk a company like High Liner could face is a food safety crisis similar to the one that Maple Leaf Foods experienced when listeriosis bacteria contaminated some its products in 2008.
Demone emphasized food safety during the annual meeting, and noted that was a large part of the rationale behind High Liner's joint venture with a Danish company in a China-based primary processing plant.
"We want to do it under our control with our Danish partner," he said of the leased plant, which handles Russian and Norwegian fish.
"We are very conscious...of quality assurance. This helps us have better control on quality."
During the meeting, shareholders passed a resolution that will permit High Liner to purchase non-voting equity shares at $8 per share.
Demone said he expects that will result in his firm spending about $20 million purchasing 2,500,000 shares.
"That's an acquisition...of the business we know best. The remaining shareholders will see higher earnings per share even if nothing else changes," he said.