High Liner Foods Incorporated (HLF) Earnings Call Transcript & Summary

Good morning, everyone. My name is James Bishop, I'm Executive Vice President, General Counsel and Corporate Secretary of High Liner Foods Incorporated. Welcome to our Annual General Meeting, and thank you for joining us today. Before our Chair calls the meeting to order, I would like to remind everyone that similar to previous years, our Annual General Meeting is being broadcast live over the Internet, allowing those with Internet access to view and listen to the meeting online and allowing registered shareholders with a control number to participate online. We are also pleased to be able to offer a toll-free conference call number as a way for those shareholders without internet access to listen to the webcast and ask questions. For those unable to join us this morning, the recorded proceedings will be available on our corporate website at www.highlinerfoods.com. Before we begin, please note that our presentations this morning include forward-looking statements with respect to High Liner Foods, which are subject to important risks and uncertainties and based on information and assumptions, believed to be reasonable at the time they were made. Actual results or events could differ materially from those described in the forward-looking statements. Please take a moment to review our full position regarding forward-looking statements displayed on the slide. The company reports its consolidated financial information in U.S. dollars, and the results to be discussed today are stated in U.S. dollars, unless otherwise noted. The common shares of High Liner Foods trade on the Toronto Stock Exchange and are quoted in Canadian dollars. Investors are reminded for purposes of calculating financial ratios, including dividend payout and share price to earnings ratios, they should take into consideration that the company's share price and dividend rate are reported in Canadian dollars, while its earnings and financial statements are reported in U.S. dollars. The company reports its financial results in accordance with International Financial Reporting Standards, or IFRS, but we also use measures that are not defined under IFRS, including adjusted EBITDA. Management believes that these non-IFRS measures provide useful information to both management and investors in measuring the financial performance and financial condition of the company. These measures do not have any standardized meaning as prescribed by IFRS and therefore, may not be comparable to similarly titled measures presented by other publicly traded companies. Thank you for your attention. I would now like to call upon our Chair, and Mr. Robert Pace to open the meeting.

Good morning, everyone. I'm Robert Pace, Chair of the Board of Directors. Welcome to the 2024 Annual General Meeting of High Liner Foods Inc. Thank you, James, for your introduction. And on behalf of the Board of Directors, we welcome you to your first AGM as Executive Vice President, General Counsel and Corporate Secretary. I'm joined today by Paul Jewer, our President and CEO; and Deepak Bhandari, our Interim Chief Financial Officer and the rest of the executive team. I would also like to welcome my fellow Board members this morning and offer a special welcome to Pam Kohn Paco is standing for election today and will bring the benefit of her diverse experience to the Board. Before calling the meeting to order, I'd like to share some brief remarks on our journey here today and more importantly, the exciting vision that Paul and the executive leadership team have for our future. First, I want to take the opportunity to congratulate Paul on his recent appointment as President and CEO and reinforce the confidence the Board of Directors has in Paul and the entire management team as they continue to execute against our branded and value-added strategy to ensure we are competitively positioned in a dynamic market, creating value for all stakeholders. Paul has the breadth and depth of experience the company needs for this next chapter in our history and has my full support as he brings his vision to life. High Liner Foods is celebrating the 125th anniversary this year. And as I reflect on the company's journey, it's amazing to consider where we came from and where we are today. Shortly after the company was first incorporated in December 1899, 11 shareholders, including 7 members of the Lunenburg Smith family founded WC, Smith & Company. At the time, the company's mission was to provision fishing vessels with every conceivable supply from cooking spices to fishing lines and baked tugs. For over a century, the company has repeatedly adapted and responded to consumer demands and in 1964 opened the world's largest, most modern seafood processing plant based in Lunenburg. Each and every day, the company faced episodes of adversity and responded with resilience, innovation and determination. In the early 1980s, the Atlantic fishery was in a crisis because of the extremely high interest rates and energy costs, coupled with price competition and declining U.S. markets. Under the leadership of David Hennigar, the company was able to work with the Canadian government to restructure the sector and stabilize the company. Several years later, during the 1992 Northern cod moratorium when it emerged as one of the biggest challenges to the company, which it had ever faced, in order to survive the company led by Henry Demone had to completely transform its business model, including the disposition of a 66-vessel fleet and become a pure food processor and marketer. And in response to this incredible challenge, management successfully steered the company through a period of significant change. Following the moratorium, management contemplated ways to grow our business in the seafood industry, relying on our strengths, which still exists today, including strong relationships with retail and food service customers throughout North America, expertise in production and distribution of frozen products and superior product development. It is this unique ability to play to the company's strength and adjust and reimagine the business that has served the company for well over 125 years. In the face of the global headwinds that persisted throughout 2023 and continue today, the company continues to demonstrate resilience. These strengths will guide us through these near-term challenges and position the business for continued success. The Board continues to guide management in responding to the challenges and opportunities in the market today, while at the same time, taking a broader view of how the industry is evolving. During the past fiscal year, this approach helped the company effectively navigate the complexities of the operating environment in which inflationary impacts took a toll, and the industry managed elevated levels of inventory. While these market conditions impact our annual 2023 adjusted EBITDA, our cumulative total shareholder return of 10.6% since 2019 continues to overperform the S&P and TSX Composite Index for food products, which delivered a 3% loss during that same time frame. We also generated value for shareholders through the fourth increase to our dividend, representing an increase of over 200% over the last 4 years and have repurchased over 600,000 shares through our normal course issuer bid since June 2023. Our long-term perspective on our business is also evident in our approach to the environmental, social and governance factors as we drive continuous improvement across the business to mitigate our environmental footprint, ensuring we make a meaningful impact on the people and the communities we work with, and adhere to the highest standards of corporate governance. Along with my fellow directors who serve on the numerous Board committees, including corporate governance and audit, we are driving towards the ambitious targets of a 30% reduction in Scope 1 and 2 greenhouse gas emissions and a 50% reduction in food waste by 2030. Among many other ESG achievements last year, we reduced admissions by 30% compared to 2021 and food waste by 13% compared to 2018 while also embedding further controls and processes within our supply chain to strengthen our zero-tolerance approach to human rights abuses anywhere in the High Liner Foods seafood supply chain. Our purpose-driven approach to our business helps reinforce our position as a trusted partner to our stakeholders, and I believe strengthens our ability to create long-term sustainable value for years to come. This will guide our approach in the year ahead. As we support management in driving improved performance and taking the necessary steps to ensure that we remain competitively positioned for decades to come. In conclusion, I want to extend my appreciation to my fellow members of the Board of Directors and our shareholders for your continued support and confidence in High Liner Foods, as we continue on this journey together. With that, I will now turn to the business of today's meeting, starting with procedural guidelines. Many of our shareholders have cast their votes electronically in advance of the meeting. If you have already cast your vote or submitted your completed proxy form, there is no need for you to vote again, unless you wish to change your vote. Voting for today's meeting will take place through the virtual online platform. Only registered shareholders who held shares in their name as of March 25, 2024, the record date of this meeting or their valid appointed proxy holder, will be eligible to vote or ask questions at this meeting by logging into the webcast. The link can be found on our website at highlinerfoods.com, where registered shareholders can use their 13-digit control number to access the meeting. When we are ready to present the first item of business for voting, you will see voting options appear on your screen. The polls will open for all resolutions at the same time. This will allow you to choose to vote on each resolution immediately or wait until the conclusion of discussion on each resolution prior to casting your vote. Please ensure you scroll down on your screen to be able to see and vote on all resolutions. Once discussion on all items of business have concluded, I'll give you an additional minute to enter your votes and then declare voting closed on all resolutions. The [ previse ] vote counts for each resolution will be made public via a news release when available following the meeting. If you were a shareholder participating on the toll-free conference call line, I would like to remind you that you will not be able to vote using this line. Voting can only be done through the virtual online platform. Questions for the meeting will be accepted through the virtual platform and telephone. To submit a question, please click the messaging icon that appears at the top of your screen. If you are participating through the toll-free conference call line, shareholders will be able to ask questions by pressing Star 1 at any time during the meeting. An operator will speak to you and forward your questions in written format through the virtual platform. When submitting a question, please identify your name and note if the question relates to the motion being considered as part of the formal business of the meeting, or whether it is general in nature. We will address questions directly related to a particular motion at the appropriate time of the meeting and save general questions following Paul's annual address to shareholders. Questions with common themes may be grouped together. James Bishop, our Corporate Secretary, will read questions aloud when requested, and either I or one of the members of the management team with me today will respond. Subject to the rules of conduct and time permitting, we'll make every effort to respond to your relevant questions during the question-and-answer period today. We will address any unanswered questions by e-mail in a timely manner following the meeting. I will now call the meeting to order. Notice of this meeting has been duly given, and a copy will be filed with the records of the meeting. I will ask James Bishop, Executive Vice President, General Counsel and Corporate Secretary, to act as Secretary of the meeting. TSX Trust Company represented by Emma McKenzie and the [indiscernible] will act as scrutineers. The scrutineers' report has been received, and it shows a quorum is present. To make the best use of our time, shareholders of the company have been asked to move and second motions of the meeting as described in the Management Information Circular dated March 25, 2024, which accompanied the notice of meeting. I will take the notice of meeting as read. The first item of business is the consideration of the minutes of the Annual General Meeting of Shareholders held on May 16, (sic) [ 13 ], 2023. The minutes, of course, are available for inspection by shareholders by e-mailing investors at highlinerfoods.com. But in order to expedite the business of this meeting, we'll dispense with reading them and take them as read and adopted. We will run through each of the items on the agenda in turn, responding to questions on that item of business while it is before the meeting. I now declare the polls open on all resolutions. The first item of business is the election of directors. As stated in the 2024 Management Information Circular accompanying the notice of this meeting, it is proposed that 12 persons be nominated as directors at this meeting to hold office until the next annual meeting or until their respective successors are elected or appointed. As mentioned, I've taken the liberty of asking certain shareholders to make the motions for the election of directors and other motions today. Could I please have a nomination for the election of directors.

My name is Peggy Falkenham-Boutilier, and I am a shareholder of High Liner Foods. Mr. Chair, I nominate the following people as directors of the company to hold office until the 2025 Annual General Meeting or until their respective successors are elected or appointed. Scott Brison, Joan Chow; Robert Dexter, Andrew Hennigar, David Hennigar, Shelly Jamieson, Paul Jewer, Pamela Kohn, Jolene Mahody, Andy Miller, Robert Pace, Frank van Schaayk.

Mr. Chair, I am Naomi Jewers, a shareholder of High Liner Foods, and I second the motion.

James, were there any questions with respect to this motion?

No, Mr. Chair, there are no questions with respect to this motion.

Thank you. I declare the nominations closed. Please cast your votes. [Voting]

The second item of business is the appointment of auditors. Ernst & Young, LLP, the current auditors of the company is proposed as auditor of the company to hold office until the next Annual General Meeting of Shareholders.

My name is Naomi Jewers, and I'm a shareholder of High Liner Foods. Mr. Chair, I move that the firm of Ernst & Young, LLP be appointed as auditors of the company until the close of the next Annual General Meeting and that the Board of Directors be authorized to fix their remuneration.

Mr. Chair, I am Peggy Falkenham-Boutilier, a shareholder of High Liner Foods and my second motion.

James, are there any questions with respect to this motion?

No, Mr. Chair, there are no questions with respect to this motion.

Thank you. I declare the motion closed. Please cast your votes. [Voting]

The third item of business deals with the advisory resolution to accept the company's approach to executive compensation as described in the 2024 Management Information Circular. The Board of Directors recommends that shareholders vote for the resolution approving the advisory resolution. I will now ask for a motion.