Analyst cuts High Liner US sales forecast on lost business, competitive market

An analyst has shifted his 2013 US sales forecast for High Liner Foods from an increase of 2.5% to a drop of 1.1%, partly as a result of the company losing a large foodservice contract in 2012.

The company reported strong sales and profits for 2012, particularly from its Canadian and Icelandic USA businesses.

However, its non-Icelandic USA business in the US, where it sells into foodservice and retail, has not fared so well.

“The US business appears to be very competitive. A large foodservice customer was lost last year and will impact High Liner in the first half of 2013,” wrote Robert Gibson, an analyst with Octagon Capital.

For 2013, Gibson is modeling High Liner’s US sales to be $622.90 million, down 1.1% in total, compared to $629.70m for 2012.

“The loss [from the foodservice contract] really didn’t show up in the results until Q3/12. The US business appears to be very competitive,” he said.

Octagon is maintaining a target price of $33.40 and a hold recommendation.

Gibson is modeling for a 0.5% increase in total sales to $947.1m, with sales in Canada forecast to grow 3.6% to $324.2m.

Michael Mills, an analyst with brokerage Beacon Securities, has a buy recommendation and a target price of $42.

“For the full year we are forecasting topline sales growth of 1.3%, led by Canada, with relatively flat results in the US,” said Mills.

His sales forecast for 2013 is $955.8m. Mills feels the company needs to make "at least" two acquisitions to hit its EBITDA target of $150m in 2015.

Gibson has also increased High Liner’s distribution expenses, on increased costs of shipping, something reported by Undercurrent News.

“As we noted in our Jan. 15 report, freight rates on refrigerated shipping is up about $1,500 per 40‐foot full container load. That works out to about $0.035 per pound or about $9.6 million if all products were shipped from China,” he said.

“We have increased High Liner’s distribution expense by half this amount. This will be offset by continued improvement in the Company’s supply chain, which is expected to contribute to the $25.0 million in EBITDA improvement by 2015.”

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