HIGH LINER FOODS CIBC 2017 RETAIL AND CONSUMER SMALL CAP FORUM June 14, 2017 Keith Decker, President & CEO
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 Report available on SEDAR (www.sedar.com) and the Investor Center section of High Liner Foods website (www.highlinerfoods.com). 2
PRESENTATION NOTES Presentation Currency High Liner Foods ( the Company ) began reporting its financial statements in USD in 2012, however its common shares trade on the TSX and are quoted in CAD and therefore any references in this presentation to share price, dividends and market cap are in CAD. Investors are reminded to take into consideration the USD/CAD exchange rate when calculating financial ratios, including dividend payout and share price-toearnings ratios. Non-IFRS Measures This document includes certain non-ifrs financial measures which the Company uses as supplemental indicators of its operating performance and financial position, as well as for internal planning purposes. These non-ifrs 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, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS. Non- IFRS financial measures are defined and reconciled to the most directly comparable IFRS measures in the Company s MD&A. 3
HIGH LINER FOODS Canadian public company since the 1960 s, TSX-listed in 1971 Ticker symbol Current price (1) Shares outstanding (1)(2) Market capitalization (1) CAD$19.54 ~33.3 million ~CAD$651 million 52-week range (1) CAD$17.01 - $27.62 Annual dividend (3) CAD$0.56 per share Current yield ~2.9% (1) Source: TSX June 12, 2017 (2) Acquisition of Rubicon Resources for $107 million completed May 30, 2017, settled 30% in HLF common shares, increasing HLF s outstanding shares by 2.4 million to 33.3 million (3) Effective December 15, 2016 4
INVESTMENT THESIS Why Seafood? Healthy protein for humans and the planet North Americans, on average, consume substantially less seafood than suggested in recommended dietary guidelines Long-term growth influenced by North America s demographics a growing and aging population, with an increasing focus on eating healthier Industry focus has primarily been on supply of seafood and not on increasing consumer demand Versatility 100+ commercial species and multiple eating formats make for endless possibilities when it comes to preparing and enjoying seafood Seafood industry in North America is highly-fragmented 6
INVESTMENT THESIS Why High Liner Foods? North American leader in value-added frozen seafood, with 115+ years of seafood expertise Broad market reach and market-leading brands Customer-focused, innovative and responsible Global seafood procurement and frozen food logistics expertise Consolidated manufacturing footprint Strong free cash flow from operations support dividends and market consolidation Track record of growth through acquisitions and adaptability 7
BUSINESS OVERVIEW Focused on the frozen seafood market in North America Geography Branding Channel Product Form 22% 30% 42% 50% 50% 58% 78% 70% US (incl. Mexico) Canada HLF Brands Other Foodservice Retail Value-added Other Based on 2016 sales (in USD) and shown on a proforma basis to include the impact of acquiring Rubicon The North American leader in value-added frozen seafood In Canada, #1 market position in retail and largest foodservice supplier In the US, estimated #2 in retail value-added (including private label) on a volume basis and the leading supplier of value-added products in foodservice 8
SEAFOOD IS COMPLEX We simplify the seafood category for our customers Global supply chain with 100+ commercial species People believe preparing seafood is difficult and time consuming By leveraging the full extent of our seafood expertise, from procurement through to preparation, our customers can be confident in serving quality, delicious seafood 9
ORGANIC GROWTH STRATEGY Customer-focused, innovative seafood solutions Product development efforts are focused on what today s seafood consumer wants when selecting seafood products and appealing to Millennials in a more meaningful way Innovation must be a core competency and an ingrained part of our culture Adopted Innovation Engineering in 2016 to help align innovation strategy across all departments Core Offerings Types of products that already exist in our portfolio today Innovate Improve Change perceptions Innovation Engineering Methodology that allows us to speed up innovation efforts, while reducing risk New Products Products that don t exist in our portfolio today or the marketplace Innovate Align with customer trends Expand and diversify our portfolio, including through species diversification 10
ORGANIC GROWTH STRATEGY Focused on species diversification to aquaculture species experiencing stronger growth rates in North America 7% 8% 7% 24% Alaska Pollock Cod Shrimp Other 16% 21% Salmon Haddock Tilapia 17% Based on 2016 sales (in Lbs) and shown on a proforma basis to include the impact of acquiring Rubicon Procure 30+ species of seafood from 20+ different countries 11
ORGANIC GROWTH STRATEGY Commercial excellence also a key factor for organic sales growth Working more closely with customers to gain better insight into how to leverage the full extent of our seafood expertise to help customers win in seafood Demonstrations by our highly trained chefs that focus on ease of preparation and other product benefits Making it easier to do business with us through an Enterprise Resource Planning (ERP) system upgrade and streamlining work practices 12
CONSOLIDATED OPERATIONS Three value-added seafood manufacturing facilities in North America New Bedford facility closed in Q3 2016 marking the last significant initiative planned as part of a multi-year supply chain optimization project which removed $20+ million in annual cost savings on a run rate basis Lunenburg, NS (Can) Capacity p.a.: 50M lbs Utilization: 73% Lower demand for traditional breaded and battered products reduces plant efficiency Portsmouth, NH (US) Capacity p.a.: 84M lbs Utilization: 71% Current manufacturing footprint: aggregate production capacity of ~228 million lbs Ideal capacity ~ 85% to allow for seasonal demand surge Newport News, VA (US) Capacity p.a.: 94M lbs Utilization: 71% 13
CORPORATE SOCIAL RESPONSIBILITY The Company s first CSR report will be released in 2017 Committed to sourcing all our seafood from certified sustainable or responsible fisheries and aquaculture Recognized as a global leader in driving best practice improvements in wild fisheries and aquaculture 14
ROLE OF ACQUISITIONS Acquisition of Rubicon supports our organic growth strategy through expediting species diversification Acquisition of Rubicon Resources, LLC completed on May 30, 2017 for $107 million Primary business is the import and distribution of sustainably sourced frozen shrimp products in the private-label US retail market 2016 sales of $234 million and pro forma EBITDA of $16 million Transaction settled 70% cash, 30% HLF common shares; cash settlement at closing financed with Company s asset-based revolving credit facility ( ABL ), with $70 million of these borrowings being termed out via an add-on to the Company s senior secured term loan on June 6 th. 15
DEBT LEVERAGE RATIO Net Interest-Bearing Debt to Adjusted EBITDA Ratio 5.0x 4.0x 4.4x 4.0x 4.4x 4.0x 3.7x 3.0x 3.2x 3.1x 3.0x 2.0x 1.0x 0.0x Dec 31/11 Pro forma Icelandic Acquisition Sep 28/13 Pre-American Pride Acquisition Sep 28/14 Pre-Atlantic Trading Acquisition Jan 3/15 End of Fiscal 2014 Jan 2/16 End of Fiscal 2015 Dec 31/16 End of Fiscal 2016 Apr 1/17 End of Q1 2017 Target $61M Reduction in Net Interest-Bearing Debt in 2016 16
Annual Dividend Paid per Share ($CAD) DIVIDEND HISTORY $0.60 $0.55 $0.50 14-year CAGR: 25% $0.520 $0.560 $0.45 $0.465 $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* * Annual dividends to be paid in 2017 estimated at CAD$0.56 per share based on the current quarterly dividend rate of CAD$0.14 per share 17
2017 OUTLOOK Trend of lower demand for traditional breaded and battered products is expected to continue in 2017, but optimistic that sales from new and improved product offerings can offset this decline by the end of 2017 This improvement in sales trend and a return to typical plant production levels (following the busy Lenten period) are expected to return the Company to year-over-year earnings growth in the second half of 2017 18
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GREAT TASTING SEAFOOD FOR A BETTER LIFE