2014 intrafish seafood investor forum paul jewer cfo
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2014 intrafish seafood investor forum paul jewer cfo

2014 INTRAFISH SEAFOOD INVESTOR FORUMPaul Jewer, CFO

May 20, 2014 | New York


2014 intrafish seafood investor forum paul jewer cfo

  • Disclaimer

  • Certain statements made in this presentation are forward-looking and are subject to important risks, uncertainties and assumptions concerning future conditions that may ultimately prove to be inaccurate and may differ materially from actual future events or results. Actual results or events may differ materially from those predicted.  Certain material factors or assumptions were applied in drawing the conclusions as reflected in the forward-looking information.  Additional information about these material factors or assumptions is contained in High Liner Foods’ Annual available on SEDAR (www.sedar.com) and the Investor Information section of High Liner Foods’ website (www.highlinerfoods.com).

2


2014 intrafish seafood investor forum paul jewer cfo

CAD presentation:

  • High Liner Foods is traded on the Toronto Stock Exchange and references to stock price, dividends and market cap are presented in CAD

    USD presentation:

  • Beginning with the 2012 annual report, the Company began to present its financial statements in USD

  • 2010, 2011 and 2012 are fully converted and restated under IFRS rules to USD; previous years Canadian GAAP statements are converted from CAD at the annual period-end and average USD/CAD exchange rates and remain as originally reported in Canadian GAAP

  • Presentation Currency


2014 intrafish seafood investor forum paul jewer cfo

Company Overview


2014 intrafish seafood investor forum paul jewer cfo

  • TSX Listings Data

1 Public company since the 1960’s; listed on TSX in 1971

2 Source: TSX May 16th, 2014

3 Effective May 8th, 2014

HLF Three Year Share Price History2


2014 intrafish seafood investor forum paul jewer cfo

  • High Liner Foods Corporate History

1899

WC Smith founded (salt fish)

  • 1945

  • National Sea Products

  • created

1986

Fisher Boy acquisition

  • 1999

  • Name change to High Liner

  • Foods

2007

FPI acquisition1

2010

Viking

acquisition

2011

Icelandic USA

acquisition2

2013

American Pride Seafoods acquisition3

  • 1926

  • High Liner

  • brand created

1982

Commodore private label acquisition

  • 1992 Northern Cod moratorium

  • 2003/04 High Liner sells its fishing assets

  • 2014

  • Today’s High Liner Foods

1 Acquired FPI’s North American marketing & manufacturing businesses

2 In 2005, Icelandic & Samband of Iceland merged

3 Acquired on October 1st, 2013 (see Slide 22)


2014 intrafish seafood investor forum paul jewer cfo

  • Business Overview

* The charts above reflect the Company’s business profile based on sales and on a proforma basis including American Pride

  • We are the North American leader in value-added frozen seafood

  • In Canada, #1 market position in retail and largest foodservice player

  • In the U.S., estimated #2 in retail value-added (including private label) on a volume basis and the leading supplier of value-added products in foodservice

  • Our vision is to be the leading supplier of frozen seafood in North America


2014 intrafish seafood investor forum paul jewer cfo

Broadest Market

Reach in Industry

Market Leading

Brands

Diversified Global Procurement

Frozen Food Logistics Expertise

Innovative Product Development

  • Advantaged Business Model

  • with Market Breadth

  • 2X the size of largest competitor in retail & food service channels (100% ACV) in Canada

  • Largest grocery-chain supplier of private label value-added seafood in U.S. and Canada

  • The largest food service suppliers of value-added seafood in U.S.

  • Estimated #2 supplier of seafood by volume in U.S. retail channel including private label and niche brands

  • Strong global procurement built on long-term relationships with network of quality suppliers

  • Broad procurement activities in North America and strong footprint in Asia

  • Geographically diverse procurement territory mitigates changes in the cost of raw materials

  • State-of-the-art web-based IT system to manage logistics and quality for overseas suppliers

  • Logistics expertise allows timely delivery of raw materials and finished goods from over 20 countries to all key customers

  • Seamless logistics process approach tailored to be cost-effective and customer oriented

  • Scheduled deliveries to major customers on regular basis

8


2014 intrafish seafood investor forum paul jewer cfo

  • Low-cost and efficient

  • $18M in annual synergies related to Icelandic USA acquisition include cost savings from two plant closures:

    • Burin, NF (late 2012)

    • Danvers, MA (early 2013)

  • Scallop and value-added processing facility acquired as part of American Pride acquisition in Q4 2013

  • Optimized Manufacturing Footprint

  • Leased facility

HLF facility

Closed facility

Aggregate production capacity of ~350M lbs per annum

Ability to increase 25M lbs p.a. with minimal capital investment

9


2014 intrafish seafood investor forum paul jewer cfo

Financial Review


2014 intrafish seafood investor forum paul jewer cfo

Strategic:

  • Acquired American Pride Seafoods (“American Pride”) on October 1st

  • Achieved 99% of our strategic goal to sustainably source all of our seafood

    Financial:

  • Created value for shareholders – increased share price and dividends

  • Reported record sales and net earnings (although lower than expected)

  • Debt amendments in Feb 2013 resulted in significant interest savings

  • Significant deleveraging in Q1 – Q3 (prior to the American Pride acquisition)

    Operational:

  • Completed Icelandic USA integration and related plant consolidation and relocation of U.S. food service distribution center in Q1 2013

  • $18M in total annual synergies achieved related to the Icelandic USA acquisition

Fiscal 2013 Highlights


2014 intrafish seafood investor forum paul jewer cfo

  • Sales History

$947M

12


2014 intrafish seafood investor forum paul jewer cfo

  • Diluted EPS and ROE History

$2.65

Diluted EPS is net income as reported divided by the average diluted number of shares

Partially Adjusted Diluted EPS is based on Adjusted Net Income(1)except including non-cash stock compensation expense

Adjusted Diluted is based on Adjusted Net Income(1)

(1)Adjusted Net Income is net income as reported excluding the after-tax impact of: business acquisition, integration and other expenses; impairment of property, plant and equipment related to plant closures; additional depreciation on property to be disposed of as part of an acquisition; increased cost of goods sold relating to purchase price allocation to inventory acquired over its book value; non-cash expense from revaluing an embedded derivative associated with the long-term debt LIBOR floor and marking-to-market an interest rate swap related to the embedded derivative; the write-off or write down of deferred financing charges on the re-pricing of our term loan; withholding tax related to intercompany dividends; and stock compensation expense.

13


2014 intrafish seafood investor forum paul jewer cfo

  • Dividend History

$0.82*

$0.70

10-year CAGR (2003 to 2013): 31%

*Assumes Q3 and Q4 dividend at same rate approved for Q2 of CAD$0.21

Common shares up to September 15, 2007; Common and non-voting shares from

Dec 15, 2007 to Dec 17, 2012; Common shares from December 18, 2012 to present


2014 intrafish seafood investor forum paul jewer cfo

  • Financial Review – Q1 2014

Sales (USD millions)

$302.6

$275.2

  • Q1 sales in domestic currency were $310.1M in 2014 and $275.8 M in 2013

  • American Pride sales were $41.4M in Q1 2014

15


2014 intrafish seafood investor forum paul jewer cfo

  • Financial Review – Q1 2014

EBITDA (USD millions)

$27.2M

  • Strong operational performance in Q1 through the busy Lenten period

  • $6.0M improvement in Adjusted EBITDA reflects challenges encountered by our U.S. operations in 2013 are largely resolved

  • American Pride contributed $41.4M in sales and $2.2M in Adjusted EBITDA

$21.3M

16


2014 intrafish seafood investor forum paul jewer cfo

  • Financial Review – Q1 2014

Diluted EPS (USD)

$0.88

$0.63

17


2014 intrafish seafood investor forum paul jewer cfo

  • Deleveraging

Net interest-bearing debt / Adjusted EBITDA ratio


2014 intrafish seafood investor forum paul jewer cfo

  • Favourable amendments to the Company’s debt facilities – Term Loan and asset based loan (ABL) – announced late April

  • Term Loan and ABL:

  • Increased capacity and flexibility for acquisitions, investments, distributions, capital expenditures and operational matters

  • Extended terms (Term Loan from Dec 2017 to Apr 2021 and ABL from Dec 2016 to Apr 2019)

  • Reduced interest costs

  • Additionally, Term Loan facility increased from $250M to $300M and a number of covenants on this facility were improved or removed

  • Debt Amendments – Q1 2014


2014 intrafish seafood investor forum paul jewer cfo

Vision & Growth Strategy


2014 intrafish seafood investor forum paul jewer cfo

  • Steady Course

Following years of strong growth,

High Liner Foods remains on a steady course

to achieve its vision to be the leading supplier of frozen seafood in North America

21


2014 intrafish seafood investor forum paul jewer cfo

  • Industry Drivers

  • Fisheries recovering around the world largely due to the sustainability efforts over the last ten years

  • Growth from aquaculture species

  • Long-term demand growth still greater than supply

Long-term growth influenced by strong North American demographics

45+ years of age account for half of seafood consumption

Health benefits tied to eating fish

An aging, health-conscious population


2014 intrafish seafood investor forum paul jewer cfo

Profitable growth

  • Organic growth, acquisitions and supply chain optimization

    Supply chain optimization

  • Optimize our systems in procurement and purchasing, inventory management, product rationalization, and shipping and warehousing

    Succession planning

  • With a significant number of retirements expected in the next ten years, focus is required to both develop and hire talent to elevate the organization when retirement vacancies occur and to build the human capacity and expertise necessary to support our growth strategy and ensure the successful integration of acquired companies

  • 2014 Strategic Goals

$150M Adjusted EBITDA by 2016 (pro forma basis)


2014 intrafish seafood investor forum paul jewer cfo

Innovation

  • We are a recognized leader in our industry for introducing new and innovative products and we will continue to focus on developing innovative product offerings that both increase the overall demand for frozen seafood products and grow our market share

    Industry consolidation

  • Seafood category is highly fragmented due to global supply chain and high number of species

  • Substantial growth over the next several years must come from acquisitions that continue to consolidate the frozen seafood industry

  • Four acquisitions since 2007 have significantly consolidated the U.S. food service channel and High Liner Foods has built a reputation as a successful consolidator with the ability to achieve meaningful synergies through integration of its acquisitions

  • Growth Strategy


2014 intrafish seafood investor forum paul jewer cfo

  • Investment

  • Rationale


Questions

QUESTIONS?


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