We bring you highlights from our marketing visit in western Canada with (TSE:HLF)’s Keith Decker (President & CEO) and Paul Jewer (EVP & CFO). Company anticipates input costs to decrease during 2015. Our input cost index, which has already declined 3.5% since its peak in March 2015, is expected to further decrease due, in part, by the current gain in haddock TAC. Given persevered innovation and a lower pricing environment, we believe an uptick in organic growth as early as second half of 2015.
“Our strategic goal to optimize our supply chain continues to be a top priority for the organization and while delays were experienced in the first quarter in certain areas, our overall expectation to achieve $20 to $25 million in annual cost savings related to this goal by the end of 2016 has not changed,” stated Mr. Demone .
“Organic growth in our business remained challenging in the first quarter of 2015 and we continue to believe that focusing efforts on the development of innovative product offerings is key to driving organic growth across our business.” Mr. Demone concluded, “Over the last year, we have experienced significant increases in raw material costs on certain species, and while we have passed a significant portion of these increases on to our customers, these higher prices may impact sales volume in the near term.”
“We are satisfied with the Company’s performance in the first quarter of 2015, and in particular with the increases in Adjusted EBITDA and Adjusted Net Income compared to the first quarter of last year,” stated Henry Demone , Chief Executive Officer. “Our latest acquisition, Atlantic Trading, bolstered sales and partially offset the impact of volume declines in other areas of our business. A weaker Canadian dollar year-over-year continues to negatively impact the results reported by our Canadian business, both in terms of its impact on the translation of these operations from CAD to USD and its impact on the cost of raw materials, which are largely purchased in USD.”
Sales volume decreased in the first quarter of 2015 by 4.7 million pounds, or 5.0%, to 89.5 million pounds, compared to 94.2 million pounds in the same period last year primarily reflecting lower sales volume from our U.S. and Canadian operations, partially offset by the Atlantic Trading Acquisition.
Sales increased in the first quarter of 2015 by $7.6 million , or 2.5%, to $310.2 million , compared to $302.6 million in the same period in 2014. Approximately 70% of the Company’s operations, including sales, are denominated in USD. The weaker Canadian dollar in the first quarter of 2015 compared to the same quarter in 2014 decreased the value of reported USD sales of the Company’s CAD-denominated operations approximately $8.7 million relative to the conversion impact last year.
Sales in domestic currency increased in the first quarter of 2015by $16.8 million , or 5.4%, to $326.9 million , compared to $310.1 million in 2014 reflecting price increases, partially offset by lower sales volume.
Adjusted EBITDA increased in the first quarter of 2015 by $3.4 million , or 12.6%, to $30.7 million compared to $27.2 million in the same period in 2014. The weaker CAD in the first quarter of 2015 compared to the same period in 2014 decreased the value of Adjusted EBITDA in USD from our CAD-denominated operations by $1.0 million relative to the conversion impact in 2014.
In domestic currency, Adjusted EBITDA increased in the first quarter of 2015 by $3.7 million , or 13.2%, to $31.6 million compared to $28.0 million in 2014. As a percentage of sales, Adjusted EBITDA in domestic currency was 9.7% in 2015 compared to 9.0% in 2014. This increase was due to lower SG&A and distribution expenses, partially offset by lower overall sales volume and lower overall gross profit margin as a percentage of sales.
Net income increased in the first quarter of 2015 by $0.6 million , or 5.3%, to $12.5 million ( $0.40 per diluted share) compared to $11.9 million ( $0.38 per diluted share) in the first quarter last year. The $0.6 million increase in net income reflects higher Adjusted EBITDA as explained above and lower financing costs primarily due to costs recognized in the first quarter of 2014 resulting from amendments to our credit facilities.