High Liner Foods is watching to see how proposed tariffs from the U.S. could impact its bottom line.
"The proposed tariffs are currently open for public comment and could impact seafood purchased by the Company, and the industry overall, as a significant volume of seafood consumed in the U.S. is imported to meet U.S. consumer needs," the Lunenbug-based seafood processor and marketeer of frozen seafood noted in the release of its operating results for the second quarter of 2018.
"The Company will continue to monitor these developments closely, particularly as further information becomes available on what products could be impacted by these proposed tariffs and how these proposed tariffs would be implemented," High Liner said in a news release.
The tariffs would apply to certain seafood imported into the U.S. from China. High Liner currently purchases raw seafood from more than 20 countries globally, including from the U.S. to meet U.S. consumer demand. A portion of this raw material is imported into China, for primary processing and then exported to the U.S. for sale and secondary processing.
Rod Hepponstall, High Liner's President and CEO, reporting on financial results said the second quarter of 2018 reflected continued business challenges related to "soft sales volume, a shift in product mix from higher margin value-added products to lower margin commodity products, raw material cost increases not fully passed along to customers and inefficiencies in our supply chain,."
The challenges were most acute in High Liner's U.S. operations, according to Hepponstall.
"I believe significant opportunities exist for High Liner Foods, but after my first quarter as CEO, it is apparent to me that before we can fully take advantage of these opportunities, we need to operate more efficiently," he said in a message to investors.
With that goal in mind, the company has reorganized its structure by core function instead of geography, and "aligned" its executive leadership team to the new structure. The reorganization is expected to provide a minimum of $10-million in annualized cost savings.
High Liner also reported that Peter Brown, Chief Supply Chain Officer, has left the company. Mr. Brown previously held the position of President & Chief Operating Officer, U.S. Operations, which was eliminated as a result of the organizational realignment.
"Organizational priorities for the next 12 to 18 months are focused on creating a more efficient company and improving performance. Specifically, the North American structure will be completed in 2018 and while there will be costs incurred this year related to this activity, it is too early to quantify these," Hepponstall said.
Among the results, sales increased by $12.0 million to $245.3 million compared to $232.4 million. Gross profit increased by $5.5 million to 43.3 million compared to $37.8 million.
Adjusted net income decreased by $2.3 million to $3.8 million compared to $6.1 million.