Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the High Liner Foods Incorporated Conference Call for the Results of the Fourth Quarter of 2021. At this time, all participants are in listen-only mode. And following the management's prepared remarks, we will conduct the question-and-answer session. Instruction will be provided at the time for you to queue up for your questions. [Operator Instructions] This conference call is being recorded today, Wednesday, February, 23, 2022 at 2 o'clock Eastern Time for replay purposes. I would now like to turn the call over to Charlene Milner, Vice President of Finance, High Liner Foods. Please go ahead.

Thank you. Good afternoon, everyone. Thank you for joining the High Liner Foods conference call today to discuss our financial results for the fourth quarter of 2021. On the call from High Liner Foods are Rod Hepponstall, President and CEO; and Paul Jewer, Executive Vice President and CFO. I would like to remind listeners that we use certain non-IFRS measures and ratios when discussing our financial results as we believe these are useful in assessing the company's financial performance. These measures are fully described and reconciled to IFRS measures in our MD&A. Listeners are also reminded that certain statements made on today's call maybe forward-looking statements that are subject to risks and uncertainties. Management may use forward-looking statements when discussing the company's strategy and business in the future. Actual operating or financial results could differ materially from those anticipated in these forward-looking statements. High Liner Foods includes a thorough discussion of the risk factors that can cause its anticipated outcomes to differ from actual outcomes and its publicly available disclosure documents, particularly in its annual report and annual information form. Please note that High Liner Foods is under no obligation to update any forward-looking statements discussed today. Earlier today, High Liner Foods reported its financial results for the fourth quarter ended January 1, 2022. That news release, along with the company's MD&A and unaudited consolidated financial statements for fiscal 2021, have been filed on SEDAR and can also be found in the Investors section of the High Liner Foods' website. If you would like to receive our news releases in the future, please visit the company's website to register. Lastly, please note that the company reports its financial results in U.S. dollars and therefore the results to be discussed today are also stated in U.S. dollars unless otherwise noted. High Liner Foods common shares traded on the Toronto Stock Exchange that are quoted in Canadian dollars. I will now turn the call over to Rod for his opening remarks.

Hello, everyone. Thank you for joining us today to discuss our financial results for our year-end and the fourth quarter of 2021. I'm pleased to report that we delivered on our third consecutive year of adjusted EBITDA growth, along with increased sales and profitability for the year. We met our goal of delivering year-over-year adjusted EBITDA growth despite an extremely challenging operating environment. We also increased sales by 5.8%, improved our gross profit as a percentage of net sales by 120 basis points and preserves our strong balance sheet and leverage ratio. As a result, we are entering fiscal 2022 in a solid financial position and I’m confident that we can navigate through short-term headwinds to position ourselves for long-term growth and leadership in brand value added seafood. The short-term challenges primarily related to the global supply chain disruption like others in the industry, shipping delays, and raw material supply issues are affecting our ability to satisfy demand for our products. These challenges were exacerbated further in the fourth quarter by the shutdown of a major port. During the fourth quarter, our supply chain team worked closely with our sales and marketing teams and interacted directly with our customers to provide real time updates on the whereabouts of products and options to fill orders. I'm proud of the agility of our team who truly went above and beyond to get our products to our customers and consumers. We continue to benefit from our early work to integrate and optimize our supply chain and advanced diversification of supply. I cannot emphasize enough how much this is helping us manage the current supply chain challenges. In today's operating environment, our integrated global supply chain and diversified supplier base are major competitive advantages. Nonetheless, our fourth quarter results were negatively impacted as we were unable to satisfy demand for our products. The year-over-year volume decline was offset by new business wins and new product sales, which bodes well for the growth potential ahead once market conditions stabilized. Another positive is the rebound of our foodservice business. Last quarter we saw an increase in sales and volume as our institutional customers such as schools and hospitals reopened cafeterias and restaurants. We have yet to experience a full quarter of all segments of our foodservice industry fully operational, which gives me confidence that the full extent of the foodservice recovery in terms of sales revenue is yet to come. Furthermore, despite the impact of Omicron, we manage our business without any major interruptions and remain focused on health, safety and wellness of our people and the quality of our products. I'll now hand the call over to Paul to review our financial performance. I will speak to you again shortly to provide more color on our strategy and outlook for the year ahead.

Thank you, Rod, and good afternoon, everyone. Please note that all comparisons provided during my financial review of the fourth quarter of 2021 are relative to the fourth quarter of 2020 unless otherwise noted. Sales volume decreased in the fourth quarter by GBP 900,000 to GBP 58.7 million. In our retail business sales volume was consistent with the same period last year due to evolving consumer behavior during the COVID-19 pandemic. In our foodservice business sales volume was lower due to the impact of global supply chain challenges on raw materials supplied in North America. Overall, we estimate that our sales volume in the fourth quarter was approximately GBP 4 million lower as a result of the global supply chain challenges we faced. Sales volume was favorably impacted by new business and new product sales during the quarter. Sales increase in the fourth quarter by $29.5 million to $227.9 million, reflecting pricing actions related to inflationary increases on input costs and favorable changes in sales mix, partially offset by the lower sales volumes discussed above. In addition, the stronger Canadian dollar is in the fourth quarter of 2021 compared to the same quarter as 2020, increase the value of reported U.S. dollar sales from our Canadian dollar denominated operations by approximately $1.9 million relative to the conversion impact last year. Gross profit increased in the fourth quarter by $5.1 million to $48.6 million and gross profit as a percentage of sales decreased by 60 basis points to 21.3% as compared to 21.9% in the fourth quarter of 2020. The increase in gross profit reflects favorable changes in product mix, offset by higher than expected inflation and the lower sales volume discussed above. In addition, the stronger Canadian dollar increase the value of reported U.S. dollar gross profit from our Canadian operations in 2021 by approximately $400,000 relative to the conversion impact last year. Adjusted EBITDA decrease in the fourth quarter by $600,000 to $20.6 million and adjusted EBITDA as a percentage of sales decrease to 9% compared to 10.7%. The decrease in adjusted EBITDA as a result of the increase in gross profit more than offset by an increase in distribution expenses and net SG&A expenses. In addition, the stronger Canadian dollar increase the value of reported adjusted EBITDA in U.S. dollars from our Canadian operations in 2021 by approximately $300,000, relative to the conversion impact last year. Reported net income decreased in the fourth quarter by $200,000 to $7.2 million and diluted earnings per share are decreased by $0.01 to $0.20. The decrease in net income reflects the decrease in adjusted EBITDA and an increase in income tax expense partially offset by a decrease in share-based compensation expense and a decrease in finance costs. Excluding the impact of certain non-routine or noncash expenses that are explained in our MD&A, adjusted net income in the fourth quarter of 2021 decreased by $1.2 million, or 11.7% to $9.1 million, and correspondingly, adjusted diluted earnings per share decreased by $0.03 to $0.26. Turning now to cash flows from operations in the balance sheet. Net cash flows provided by operating activities in the fourth quarter of 2021 decreased by $30.3 million to an outflow of $8 million compared to an inflow of $22.3 million in the same period in 2020. Due to unfavorable changes in noncash working capital balances, partially offset by lower income taxes paid, lower interest paid, and higher cash flows provided by operations. Net debt at the end of the fourth quarter of 2021 increased by $3.1 million to $271 million, compared to $268 million at the end of fiscal 2020. Primarily reflecting higher bank loans, partially offset by lower cash and lease liabilities. Net debt to adjusted EBITDA was 3 times at January 1, 2022, compared to 2.8 times at the end of the third quarter and 3 times at the end of fiscal 2020. In the absence of any major acquisitions or unplanned capital expenditures in 2022 we expect this ratio to be below the company's long-term target of 3 times at the end of fiscal 2022. We did not have any impending debt maturities and we'll continue to utilize our $150 million working capital credit facility if required. And we remain confident in our liquidity position. I will now turn the call back over Rod for some final remarks before opening up the call to questions. Rod?

Thank you, Paul. Looking ahead, we believe that there is a significant runway for organic growth within our existing business. We are fortunate to have a strong business foundation, proven market leadership, successful products and a branded value-added offering that targets the evolving and diverse needs of our customers and consumers. And of course, these attributes are supported by the strength of our balance sheet and leverage ratio which gives us the financial flexibility required to grow even under the prolonged headwinds. Our strategy to generate top line growth is simple. Expand where we leap today and expand our market share where we know we can. We will do this by leveraging trusted customer relationships deepen during the pandemic, continuing to go-to-market differently through sharpening our execution and evolving our approach to anticipate customer needs and capitalizing on brand equity and recognition through targeted marketing. As I shared with you before, in 2021, we've become much more proactive in our consumer marketing, and we intend to build on this in the year ahead. We are now speaking directly to North American consumers via digital channels and marketing campaigns, and doing so in partnership with our customers. We have significantly stepped up our e-commerce profile over the past year and will continue to focus as we invest our brands and showcase the ease and convenience of preparing restaurant quality seafood at home. Sea Cuisine is a great example of how we are reimagining our products and how we go to market. Last year the skin pack line of chef inspired value added seafood generated double-digit growth for High Liner Foods in 2021 on both a volume and net sales basis, leading to U.S. market share gains in the fourth quarter for the Sea Cuisine Skin Pack line. From a food service perspective. The category continues to grow versus the prior year in the U.S. with 19% growth on a pound basis, and 37% on a net sales basis, building on the positive trends I shared with you in the third quarter. We grew our market share in the U.S. driven by gains in long-term care, school and casual dining segments. Our portfolio of branded value-added products remains well positioned to help operators who are experiencing a surge in demand with limited labor pool. All signs suggest that the labor shortages are here to stay, which provides more incentive for operators to save time in the kitchen with our branded value-added seafood products. For example, an operator in the Eastern U.S. who previously breaded our pollock in-house recently switched to our Brewers Choice Haddock to reduce labor requirements and provide consistent high quality meals. We are really excited about how we can continue to help our customers as we drive growth in targeted foodservice segments at a time of significant growth. The latest industry data paints a very positive picture of the opportunity ahead. For example, a recent report from the National Restaurant Association is predicting that the U.S. foodservice industry will grow 6% in sales as consumers returned to eating outside of the home. We are allocating more resources to the segments of the foodservice industry where seafood is underrepresented, such as U.S. quick service. We're working to shift the mindset around seafood in these segments. For example, we are working with our customers to develop year-round offerings that utilize new flavors and ways of enjoying seafood. We are focused on our distributor relationships by partnering with leading distributors. We can meet the evolving needs of our customers and gain market share together. As we advance our ambitious growth plans will also drive continuous improvement and efficiencies across our operations, including modernization of our asset base, exploration of automation opportunities, and further diversification of our supply chain. The work has served us well through the course of the pandemic, and we believe there is more to do here to ensure that we have the business efficiencies needed to successfully manage our growth ambitions. In addition to global supply chain challenges and ongoing pandemic related issues facing our business, we also need to contend with inflation by taking action on pricing. While current inflationary pressures don't appear to be having an impact on product demand, this may change under prolonged and increased pressure. However, we are fortunate that frozen seafood remains one of the most attractive center of the plate protein options for consumers in terms of costs, and that our retail and foodservice portfolios offer options across price points. And of course, we will seek to offset cost increases were possible in the business through ongoing and rigorous continuous improvement. To sum up, while there is no doubt that the challenges facing our industry are vast and complex. There is also no doubt in my mind, the High Liner Foods and its people will continue to rise to the challenge, evolve and grow. Despite the pandemic, our company is a stronger financial position today than at the end of 2019. Our supply chain is more diverse, our portfolio has more branded value-added offering. And I believe our opportunity to become the North American leader in this regard is greater than ever. In the year ahead, I look forward to executing on our industry leading -- leadership strategy, driving additional adjusted EBITDA growth, creating value for all our stakeholders and living our purpose of reimagining seafood to nourish lives. With that, I will hand the call over to the operator for the question-and-answer period. Operator, please go ahead.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] And your first question does come from George Doumet from Scotiabank.

Maybe to Paul's two-part question. In the team's level pricing that you took in the quarter. Just wondering if that's enough to offset the higher seafood prices or we need more price. And are you seeing at all the negative volume response from the higher pricing?

Certainly on the volume piece, I'll answer that first. We have not seen negative impacts on volume as a result of inflationary effects. And we attribute that really to a couple of things. One is there's inflation really across all proteins, all food categories. And so, in fact, seafood is not currently as much as some of the other alternatives are and also supplies still constrained. So we're certainly not at the point, where our supply is exceeding demand. And as a result, we have not seen an impact on demand thus far. The other thing as I will continue to monitor that, obviously George is, if we see persistent ongoing inflation, then that could have some impact on demand and if the factors around us change. Of course, we'll continue to monitor that as well. In terms of the cost and price piece, we've been very pleased at how we have been able to pass on price when necessary to cover our costs increases. That unfold a little differently depending on two servers or retail. There's some times the lag in some cases, in terms of being able to pass on the price, but very confident that our teams are on top of that, and that we will be able to protect margin in this inflationary environment.

Paul you may have to look at your crystal ball for my next question, but when would you expect the supply response? Or the supply side from the seafood to maybe come back at all? Just wondering when to come back? Maybe see some stabilization and some of our inputs?

Yes, we think we'll still face some challenges in the first part of 2022, as a result of primarily processing capacity that we see around the world, but we expect it, that should start to look better as we move into the best the back half of 2022 at the stage. The other fees illustrate that one last time, it's not specifically related diseases that everyone is facing is distribution. And for us that the international freight and now domestic transportation. So again, we expect that that should start to get better as we move through the year, but certainly is still a challenge to that.

And just one last one for me on the commentary around inventory. Can you give us a sense of working capital requirements? It seems like maybe going up, but for this year, what would you expect us to commit there?

Yes, so certainly, in 2021, you saw invest in working capital, we did that consciously to support what we believe was a good position for us relative into the industry in terms of our supply. And we are going to continue to support our customers by indexing inventory at particular, in the near-term. Also, obviously, working capital is impacted by inflation. So we've seen that inflation in our inventory. We have been able to offset that to some degree with an increase in payables that he was seeing as well, but not fully. So we believe as we move through 2022, we should start to see less of a drain on our cash flow as a result of working capital requirements. And see us get back some more historical levels. And by historical levels, I mean, pre pandemic, because, obviously, with the volume declines, particularly our on-process business, we started during the pandemic, we didn't need as much investment and working capital to support our business.

Next question comes from Kyle McPhee from Cormark Securities.

Just a follow-up on the topic of pricing. Can you give some color on the actual level of pricing you took during Q4, maybe at least on a ballpark basis? Just trying to understand the components making up that gap between volume and price?

Yes, sure. So it would be in the low single digit roughly in terms of what we had to pass on in terms of pricing. And the cost increase would have been slightly higher than that, which reflects the lag that I referred to in my response to the earlier question.

Yes, Kyle, if I can add on to that, one of the things as far as our ability to pass through price, given the amount of shortages we had in the fourth quarter, pricing at this point in time, it's not affecting our ability to sell our great products into the marketplace. As I mentioned, prolonged impact may have some challenges consumption, but without as impacted our fourth quarter with the pricing we took.

And I guess it's based on what I know about what's going on with seafood pricing. Is it fair to say that your pricing gains, the rate of pricing gains is going to accelerate in the immediate term quarter?

I mean, there still are some increases in seafood, raw material costs that we'll experience in our first quarter. As you know, we carry for the quarter's worth of inventory. So what you see in the spot market today, hasn't fully made its way through our cost just yet.

And then, on your gross margin percentage that you delivered in Q4. Can you just help me understand how much of that change versus last year? What was that timing leg versus other maybe permanent or structural changes to your sales base? Or was that entire gross margin dynamic just the timing like?

It wasn't just the timing lag, a couple of other factors to keep in mind. One is obviously, there's a bit of a mix, change continuing to happen in our business. We're getting some of our unprocessed volume back as a result of the recovery from the pandemic, particularly in food service. So that comes at lower margin, so affects gross margin as a percentage of sales. The other piece is, keep in mind that when you see inflation on the top-line and in COGS, even if you're fully covering the inflation, it has just it's just the math, it has the negative impact on margin as a percentage of sales. So those two pieces along with the temporary I would say, gross margin impact from a pricing and inflation impact would be what really drove the results.

And last one for me. Just on yourself into the foodservice channel. Rod, you mentioned still had a quarter with foodservice fully back to the pre-COVID levels. I think last quarter, you said the drag was still 9% versus pre-COVID. What did that look like in Q4?

I don't have the specific numbers to Q4. But what I can reference is why we saw the category up by 19% in pounds. That's still not back to pre-pandemic levels. So Paul, if you have a number handy, right on that, I mean on volume Q4 2020 and Q4 2021 were actually relatively flat, even with the challenges of supply.

That's right. So it would be similar in Q4 as it was for the last quarter.

[Operator Instructions] And your next question comes from Jonathan Lamers from BMO Capital Markets.

I'll just following up on the earlier discussion and your estimate of £4 million impact to sales volumes from supply constraints. Is that based only on the challenges that you've had with the processors? Can you just explain how you develop that estimate? Just in terms of thinking about how it will benefit the following quarters?

So, it is driven by the supply constraints. But what we do is we don't necessarily assume that, because there was a shortage, it was a shortage cost just by the supply. In some cases, what you see, as you can imagine, is customers over order in order to try to build inventory. And so one of the things that we do in that case, is ensure that we're serving all of our customers appropriately, and will not meet some of those orders to avoid shortages with other customers across the board. So we don't assume that the full demand is necessarily driving a shortage number. And so the number that we've reported here would actually be below what the flex the demand versus the supply was in the quarter.

And just to clarify, earlier, you said that auctions would be taken to protect margins going forward. When you make that comment, is that to protect both the gross margin and the EBITDA margin. I'm just trying to get a sense of whether those price increases are sufficient to cover raw material inflation, increasing ocean shipping rates, increasing freight rates, if you could just clarify that?

No, absolutely. When we have price, it's focused on protecting our bottom-line. So that would cover all the components of COGS and price increases that we may face, a below costs. In particular, a bunch of our distribution expenses are in the domestic freight, being the best example. So we believe that we will be able to cover the cost increases that we've experienced in our business, through our price increases to protect margin dollars, as I mentioned earlier, not necessarily margin percentage, because of the fact that sales dollars will be off, but also costs will be up.

And the increases that were taken in Q4, there was a bit of a lag in the foodservice, but you are confident that the price increases are going through. There's no strong resistance to always thinking about?

Well, there's always strong resistance to price increases. I mean, the reality is no one wants to pay more. But we've gotten very good at identifying with asset is unnecessary costs increase to cover costs. But in many cases customers understand are affecting, certainly others in the industry, not just High Liner and not just seafood. In terms of the lag just to be clear, the lag is typically a little more in retail, than it is foodservice. It can be, we can have lead times across both foodservice and retail. But retail tends to be the one that lags.

There are no further questions at this time. I'm sorry, we do have a next question and it's coming from Sabahat Khan from RBC Capital Markets.

I guess this big victory on some of the commentary around pricing. And noticed there wasn't really a big fall off in demand. I guess or more from a retailer perspective, are this still open to kind of adding more products and kind of the frozen category in those categories. It's phenomenally well during the pandemic. And obviously, there's inflation kind of how are they thinking about your category and you're offering kind of another you're noticing a different across your brands at all in the retail?

I would say the reception to our products, specifically. Obviously in the frozen seafood categories and very, very well received. While there has been an emphasis by retailers to ensure product is in stock versus potentially bringing on new products, particularly during the fourth quarter, they have seen the fact that one sort of consumers have identified that they want to eat more seafood, we have seen that seafood sales have really normalized in 2021, from the increase we've seen in 2022. So well, what while they don't have any consumption data for them, my assumption would be that consumption is up. So we're getting strong receptivity to the products. And I would say the work that we're doing to drive consumers into the category is also providing our retailers with some confidence in what we do. And as an example, as we really focus on our digital approach, our sequencing impact line was actually up 13.7% over the last 13-week period. So we're seeing great performance there. Our Canadian retail share was up 2% in the fourth quarter. So there is significant demand for frozen seafood. And we expect that to continue in the future.

And then I guess on the foodservice side you notice, you know, there's obviously the expectation that folks get out more and get to restaurants and they should see some growth. In terms of your product offering or kind of portfolio mix at this point in the cycle. Do you think kind of the offering there is kind of well suited for the word consumption turns around the food service channel? Do you have kind of new innovation focused on maybe meeting some of that demand, just want to kind understand how you're thinking about the food service offering totally have versus where the industry is going?

Yes, I would say High Liner is absolutely ideally positioned to meet the ever-changing needs of the food service customer, for a whole host of reasons. The first of which is we have a variety of different price points and product offerings to meet everything from quick service to your family, casual dining, and even white tablecloth for some white tablecloth restaurants. The other aspect of it is as we talked about labor continuing to be short, our product offering from a value-added perspective, eliminates the need for back of house prep. And we are seeing more and more operators shift from in-house prep to our pre prepared value added products. Not to mention our product is frozen. So when we have spikes in demand and or malls, depending on whatever new regulations come into the area, there's not a food waste issue associated with our particular product versus even some fresh products. So ideally, we are, I see that we are ideally situated to meet those changing demands. And we're going to continue to launch new and innovative products that are targeted to of course, continue to easy prepare, but also across the evolving flavor profiles and trends of the consumer across North America.

And I guess as we look at that sort of mix of food service demand, yes, I think he said it's very, very price point to serve institutions, restaurants. And are you rethinking kind of that mix at all? Or do you feel like it's in a good place? I know there's a focus on margins as well, like, how do you feel about the mix of customers across that base, and even just the different price points that you're offering?

Yes, so we believe there's ample opportunity where seafood is under penetrated. Now we have a very nice mix of customers. We are well represented across most major segments, but an area where there is significant opportunity not only around consumption and exposure for seafood to the North American consumer, but around High Liner continues to expand its sales is in the quick service area. And we're working with many of those customers now to deliver year-round product offerings that are either permanent menu based or LTO based really around seasonal flavors and a variety of other things. So we will continue to expand our market segments so that we have a much more whether it'd be a diverse product portfolio, a customer portfolio and segment portfolio to weather, whatever dynamic may come our way in feature.

And then just one last layer from the balance sheet right about three times right now you're targeting taking that a little bit lower. How should we think about sort of capital allocation, obviously? M&A has historically been a focus for you guys, kind of where are you guys in the cycle right now? Is it more about focusing on the kind of core business making sure there's enough product out there? How should we think about it, as you're moving to leverage, was it kind of within the range that you're targeting?

Yes, sure. On capital allocation priorities, you're right, absolutely. Our first priority is the organic growth in our business, because we still see lots of opportunity there. And you've seen that we've made the decision to invest in CapEx to support that. We've invested in marketing to support the brand as well. And that will continue. Of course, we recognize the importance I'm sorry, I should also add, as I mentioned earlier, the investment of working capital for business that that will continue. Of course, we recognize the importance of the dividends. And we were pleased last quarter that we announced a dividend increase once again. And as we continue to grow our earnings, we will continue to support the dividend. We believe we have gotten to a point from a leverage perspective that we can support accelerated growth opportunities, we've got the capacity to do that. And we believe we have the capability to execute on that as well. So we'll continue to look for those opportunities. But we will be prudent, we'll make sure that they are truly strategic opportunities, we'll make sure that we have the capacity to integrate them well, and that they're accretive to our financial profile going forward. And at this point we haven't identified anything, obviously to move forward with but we will certainly be continuing to look for those opportunities.

No further questions at this time. You may please proceed.

I want to thank you for joining the call today and look forward to updating you with our results for the first quarter of 2022 on our next conference call in May. Please stay safe and well. Thank you.

Ladies and gentlemen, this concludes our conference call for today, we thank you very much for participating. And ask that you please disconnect your lines.