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Edited Transcript of HLF.TO earnings conference call or presentation 12-May-20 6:00pm GMT

·27 mins read

Q1 2020 High Liner Foods Inc Earnings Call Lunenburg May 28, 2020 (Thomson StreetEvents) -- Edited Transcript of High Liner Foods Inc earnings conference call or presentation Tuesday, May 12, 2020 at 6:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Heather Keeler-Hurshman High Liner Foods Incorporated - VP of IR & Communications * Paul A. Jewer High Liner Foods Incorporated - Executive VP & CFO * Rodney W. Hepponstall High Liner Foods Incorporated - President, CEO & Director ================================================================================ Conference Call Participants ================================================================================ * Christopher Emilio Carril RBC Capital Markets, Research Division - Analyst * Jonathan Garfinkle Scotiabank Global Banking and Markets, Research Division - Research Analyst * Jonathan Lamers BMO Capital Markets Equity Research - Analyst * Kyle McPhee Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the High Liner Foods Inc. conference call for results of the first quarter of 2020. (Operator Instructions) Following management's prepared remarks, we will conduct a question-and-answer session. (Operator Instructions) This conference call is being recorded today, Tuesday, May 12, 2020, at 2:00 p.m. Eastern Time for replay purposes. I would now like to turn the call over to Heather Keeler-Hurshman, Vice President of Investor Relations and Communications for High Liner Foods. Ms. Keeler-Hurshman, please go ahead. -------------------------------------------------------------------------------- Heather Keeler-Hurshman, High Liner Foods Incorporated - VP of IR & Communications [2] -------------------------------------------------------------------------------- Good afternoon, everyone. Thanks for joining High Liner Foods conference call to discuss our financial results for the first quarter of 2020. On the call today from High Liner Foods are Rod Hepponstall, President and Chief Executive Officer; and Paul Jewer, Executive Vice President and Chief Financial Officer. To adhere with current social distancing measures resulting from COVID-19 and High Liner Foods-related work-from-home policy, Rod, Paul and I have each dialed in from a remote location. While we've taken additional precautions to minimize potential technical disruptions, we ask for your patience and understanding should there be any disruptions in this regard. In a moment, I'll pass the call over to Rod for some remarks on our performance in the first quarter and the impact of COVID-19 on our business before handing over to Paul, who will review the financial performance for the first quarter. Rod will then make some final remarks before opening the call up to questions. 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 in today's call may be forward-looking statements that are subject to risks and uncertainty. Management may use forward-looking statements when they discuss 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 outcome to differ from actual outcome in its publicly available disclosure documents, particularly in its annual report and its 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 first quarter ended March 28, 2020. That news release, along with the company's MD&A and unaudited condensed interim consolidated financial statements for the first quarter of 2020, has been filed on SEDAR and can also be found in the Investor Information section of the High Liner Foods website. If you'd 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 the results to be discussed today are stated in U.S. dollars unless otherwise noted. High Liner Foods common shares trade on the Toronto Stock Exchange and are reported in Canadian dollars. I will now turn the call over to Rod. Rod, please go ahead. -------------------------------------------------------------------------------- Rodney W. Hepponstall, High Liner Foods Incorporated - President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you. Good afternoon, everyone. Thank you for joining us today. As you've seen in our Q1 news release, we had a strong start to the year in both our retail and foodservice businesses. Our sales volume was higher year-over-year despite the impact of known lost business previously disclosed. The market is continuing to respond positively to our product innovations and enhanced sales and marketing customer engagement processes. We are gaining traction with consumers as we seek to expand seafood-eating occasions. And in Q1, we expanded these beyond Lent to also include healthy resolutions and snacking. We are driving profitability and continued improvement across the business. Overall, we were fortunate that the bulk of our strongest first quarter sales period was behind us but was prior to the impact of COVID-19. We're also fortunate that our critical initiative work of 2019 strengthened and aligned our business to better manage through these unprecedented times. Our best (inaudible) in North America and a flexible and efficient supply chain. These 2 factors are making a huge difference in our ability to respond rapidly and effectively to the evolving needs of our customers. The evolving customer needs started mid-March when social distancing restrictions took hold in North America. Segments of the foodservice industry, in essence, closed and consumers began to stockpile groceries. We met this with increased -- this increased demand with -- on the retail side with excellent fill rates and quickly began working with our restaurant customers to pivot to takeout and delivery options. Like other companies in the food industry, providing essential services at this time -- at this critical time, our COVID response is focused on the health and safety of our employees and business partners. We moved quickly to implement additional precautionary measures and protocols in mid-March when the World Health Organization declared COVID-19 a global pandemic. Our new protocols are aligned with recommendations from the U.S. Center for Disease Control and Health Canada as well as evolving best practices in the food industry. As the pandemic evolve, we will continue to implement measures designed to protect the health and safety of our employees, including, when the time comes, ensuring a careful transition of our salaried workforce back to the office environment. As we disclosed previously, unfortunately, we have had positive cases of COVID-19 amongst frontline team members at our Portsmouth facility. From an operational perspective, I was very proud of how well our team executed against -- executed our COVID-19 response plan to quickly take the necessary and responsible actions and also how well we are able to minimize the impact on our customers. As a case in point, when we temporarily suspended production at our Portsmouth plant on April 20 for 1 week, we transferred approximately half of the volume normally produced at that facility to our other 2 plants in record timing of a matter of days to keep products flowing to our customers and families across North America. Overall, our supply chain has operated with minimal disruption during COVID-19. There have been limited interruptions in production, transportation and warehousing activities and no significant issues related to procurement of raw materials and ingredients. From a financial management point of view, we are operating with a careful eye on cost. Like other food processors, the cost of doing business has increased due to COVID-19 as a result of necessity of extraordinary recognition paid for our frontline employees, personal protective equipment, safety enhancements and increased sanitation. To help minimize the net impact of COVID-19, where we are taking all of the necessary steps to manage spending and preserve cash at this time, including adjustments to our workforce and deferring approximately $6 million of the $15 million we previously planned to spend on capital expenditures in 2020. Despite the current challenges, we remain focused on driving continuous improvement across our business to further optimize our end-to-end supply chain and rolling out more new product innovation when our customers are ready. In many respects, it is a time of opportunity for us as consumers try our products for the first time. We are focused on retaining these customers and are aligning our strategies with evolving shopping habits and consumer preferences. For example, we know that customers are shopping less frequently and are doing so with larger basket sizes, increasingly online purchases and in search of value offerings and healthy protein. In response to these trends, we are ensuring that our branded offerings are listed on retailer sites to support growing online sales. We have increased production of products sold under all of our key consumer brands, including High Liner, Sea Cuisine and Fisher Boy. We're also working to transfer some of our foodservice product to the retail channel to help support the increased demand and offset challenges being experienced with other proteins. This is a win-win as it puts excess product to good use while supporting consumer demand for bulk purchasing. In addition to our value offerings, we are seeing good uptick in our latest product innovations, including haddock bites, fish wings and miso cod. With the summer approaching, we're also preparing to capitalize on a time frame that is somewhat underdeveloped for seafood. We've launched our power-packed burgers to give consumers a healthy alternative for the grilling season and have more products like this in the pipeline. In terms of what lies ahead, our business will continue to be directly impacted by the duration of government-imposed social distancing measures related to COVID-19, specifically timing for reopening of current shuttered segments of the foodservice industry and related consumer behaviors at which -- at this point both remain uncertain. Despite the strength of our retail business, we anticipate the declines in the foodservice side of our business may limit our ability to deliver year-over-year EBITDA growth for 2020. During this time of unprecedented uncertainty, we are focused on the factors that are within our control, which include leveraging our product -- our portfolio, brands and manufacturing network to meet increased consumer demands for our products, partnering with our foodservice industry customers as they pivot to takeout and delivery options and to ensure readiness for a quick ramp-up as and when social distancing restrictions are lifted across North America and consumer demand returns, carefully managing costs and capital expenditures and driving ahead with continuous improvements to increase our resilience, reduce risk and achieve cost savings. I will turn the call over to Paul to discuss our first quarter financial performance. -------------------------------------------------------------------------------- Paul A. Jewer, High Liner Foods Incorporated - Executive VP & CFO [4] -------------------------------------------------------------------------------- Thank you, Rod, and good afternoon, everyone. Please note that all comparisons provided during my financial review of the first quarter of 2020 are relative to the first quarter of 2019 unless otherwise noted. Sales volume decreased in the first quarter by 1.2 million pounds to 77.3 million pounds. In our retail business, sales volume was lower overall due to previously disclosed lost business in the fourth quarter of fiscal 2019 partially offset by a surge in demand in late March related to COVID-19. In our foodservice business, sales volume was lower overall due to the impact of COVID-19 on our foodservice customers in late March. Prior to the net unfavorable impact of COVID-19, sales volume increased in the first quarter of 2020 compared to the first quarter of 2019 due to new business and new product sales. Sales in U.S. dollars decreased in the first quarter by $8.8 million to $268.6 million due to the lower volume and changes in sales mix. Gross profit increased in the first quarter by $2.7 million to $58.8 million, and gross profit as a percentage of sales increased by 170 basis points to 21.9% compared to 20.2%. These increases reflect favorable changes in product mix and improved supply chain efficiencies related to the critical initiatives completed in fiscal 2019. Adjusted EBITDA decreased in the first quarter by $1.5 million to $30.7 million, and adjusted EBITDA as a percentage of sales decreased by 20 basis points to 11.4% compared to 11.6%. This decrease, however, reflects the inclusion of $5.5 million of the $8.5 million recovery received from the ingredient supplier in the first quarter of 2019 associated with our 2017 product recall. Excluding the $5.5 million recovery from the first quarter of 2019, adjusted EBITDA increased by $4 million due to the increase in gross profit discussed previously and a decrease in distribution and net SG&A expenses. The impact of converting our Canadian dollar-denominated operations and corporate activities to our U.S. dollar presentation currency decreased the value of reported adjusted EBITDA in U.S. dollars by $3.2 million in the first quarter of 2020 compared to $2.1 million in 2019. Reported net income decreased in the first quarter by $600,000 to $14.2 million, and diluted earnings per share decreased by $0.02 to $0.41. The decrease in net income reflects the decrease in adjusted EBITDA discussed previously but was partially offset by a decrease in share-based compensation expenses, finance costs and income tax expense. Turning now to cash flows from operations in the balance sheet. Net cash flows from operating activities decreased by $25 million to $2 million in the first quarter of 2020 primarily reflecting changes in net -- in noncash working capital and lower cash flows from operations partially offset by lower interest and income tax payments. The changes in net noncash working capital are the result of increases in inventories and reductions in accounts payable partially offset by favorable changes in accounts receivable and provisions. Net debt increased by $9.1 to $355.7 million at the end of the first quarter of 2020 compared to $346.6 million at the end of fiscal 2019, reflecting increased working capital requirements, an increase in short-term borrowings to support operations as a result of COVID-19 and higher lease liabilities partially offset by debt repayments in the first quarter of 2020 due to cash flows from operations in 2019 and a higher cash on hand balance at March 28, 2020, as compared to the end of fiscal 2019. Net debt to adjusted EBITDA was 4.2x at March 28, 2020, compared to 4.1x at the end of fiscal 2019. This ratio may not improve or may be higher by the end of fiscal 2020 as a result of the anticipated potential negative impact of COVID-19 on adjusted EBITDA. However, we continue to expect that the company will be in compliance with all covenants in terms of our banking facilities during fiscal 2020. We are confident in our liquidity position as a result of prudent cash management and the early refinancing of our debt in Q4 of 2019. We do not have any impending debt maturities. And we'll continue to utilize our $150 million working capital credit facility if required. Borrowings on this facility, net of cash on hand, are currently only approximately $29 million. That concludes my financial review. And I will now turn the call back over to Rod for some final remarks before opening the call up to questions. -------------------------------------------------------------------------------- Rodney W. Hepponstall, High Liner Foods Incorporated - President, CEO & Director [5] -------------------------------------------------------------------------------- Thank you, Paul. Before we move into our Q&A period, I'd like to quickly recap the key takeaways from the call. We are well positioned to navigate through the current economic uncertainty and fluctuating customer demand. We have robust COVID-19 and business continuity plans in place, and they are standing up to the test. We are maximizing our resources to support increased retail demand and support our customers with excellent fill rates. Our foodservice business has been negatively impacted due to the various closures or stay-in-place restrictions across North America. However, we are helping our foodservice customers pivot to takeout and delivery options and are ensuring readiness as and when social distancing restrictions are lifted. The health and safety of our employees and business partners is our top priority, and we are doing all we can to safeguard them and our operations at this critical time. Overall, while I recognize the significant uncertainty we all face, I remain confident in the resilience of our operations, thanks to our solid balance sheet, early debt refinancing and significant liquidity. I also believe in our potential to deepen our customer relationships by satisfying their evolving needs as a result of our flexible and integrated supply chain and responsive sales teams. While our ability to generate year-over-year EBITDA growth in 2020 may be impacted by COVID-19 pandemic, we are doing all we can to drive towards that goal. I look forward to your questions. Operator, please start the Q&A period. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from the line of George Doumet with Scotiabank. -------------------------------------------------------------------------------- Jonathan Garfinkle, Scotiabank Global Banking and Markets, Research Division - Research Analyst [2] -------------------------------------------------------------------------------- This is Jonathan Garfinkle calling in for George. I'm just wondering if you could provide an update how inventory levels are now looking. I believe last call, you mentioned there was enough inventory through late May or early June as you had bought ahead of the Chinese New Year. -------------------------------------------------------------------------------- Paul A. Jewer, High Liner Foods Incorporated - Executive VP & CFO [3] -------------------------------------------------------------------------------- So certainly, at this stage, we feel very comfortable with our inventory position. We were fortunate, you're correct, as we identified on our last call that we had strong inventory levels going into Chinese New Year, and that allowed us to position ourselves very well with our customers in terms of service levels and fill rates as China moved through its period of COVID-19. Fortunately, they have moved through that period. And we are getting steady supply of product from our processors and remain in good position to meet our demand, and I would say, our increasing demand particularly on the retail side of our business for our products. -------------------------------------------------------------------------------- Jonathan Garfinkle, Scotiabank Global Banking and Markets, Research Division - Research Analyst [4] -------------------------------------------------------------------------------- Okay. Great. And just -- I was wondering how much additional cost do you anticipate in Q2 from extra sanitation expenses or bonuses and other COVID-related expenses? -------------------------------------------------------------------------------- Paul A. Jewer, High Liner Foods Incorporated - Executive VP & CFO [5] -------------------------------------------------------------------------------- Yes. Nothing at this point that I'd give full disclosure on as we're still working on a number of those initiatives. As Rod said, as we identify further opportunities to do anything to help protect the safety and health of our employees and to ensure the resiliency of our operations, we'll continue to look at those. So there will be some expense associated with that, but that's expense that we're very comfortable managing in our overall operations and the right thing to do for the long-term health of our business. -------------------------------------------------------------------------------- Jonathan Garfinkle, Scotiabank Global Banking and Markets, Research Division - Research Analyst [6] -------------------------------------------------------------------------------- Okay. Great. And just one more for me. I was wondering if you could discuss the steps in getting the Portsmouth plant back online. And just what drop in production levels are you currently experiencing in that plant and the other plants compared to a more normal environment? -------------------------------------------------------------------------------- Rodney W. Hepponstall, High Liner Foods Incorporated - President, CEO & Director [7] -------------------------------------------------------------------------------- Yes. Jonathan, as I mentioned, I was very, very pleased with the team's reaction and decisive action to suspend production when we had identified the situation. The steps that we've taken to reopen that plant are at the leading edge of the CDC and Health Canada requirements in conjunction with any of the industry best practices. And they include things such as enhanced PPE, social distancing measures, increased sanitation, all the way through to, quite frankly, complete repositioning of walkways and other measures taken within the plant. So as it relates to production impact, quite frankly, that plant is back up and running at full production, and we anticipate it remaining so with the extraordinary measures we've taken in that plant as well as others. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Your next question comes from the line of Saba Khan with RBC Capital Markets. -------------------------------------------------------------------------------- Christopher Emilio Carril, RBC Capital Markets, Research Division - Analyst [9] -------------------------------------------------------------------------------- It's Chris on for Saba. I was wondering if you could talk a little bit about the shift in production or product mix from foodservice to retail and how that's expected to impact margins going forward, and what the relative margin differential is between the 2 channels. -------------------------------------------------------------------------------- Rodney W. Hepponstall, High Liner Foods Incorporated - President, CEO & Director [10] -------------------------------------------------------------------------------- Yes. So let me -- maybe I'll take the question on the shift in mix and so on, and Paul can certainly take any of the questions on margin. But actually, the -- we're extremely well positioned to take advantage of the shift in consumer demand and buying more products at home with the flexibility of our network to make retail product, quite frankly, in all 3 of our facilities at this point. So we have seen that shift as we've outlined. But as far as the product makeup, there is some opportunity, as mentioned earlier, for us to sell across channel, and we're taking advantage of that as well. -------------------------------------------------------------------------------- Paul A. Jewer, High Liner Foods Incorporated - Executive VP & CFO [11] -------------------------------------------------------------------------------- Yes. And just to add to what Rod said, in terms of margin, there really isn't a meaningful difference in margin between our foodservice channel or our retail channel overall. The nature of our margin tends to differ by the nature of the product. So where we have seen some benefit in terms of margin mix is the fact that we have seen an increase in value-added product sales as we've moved through this crisis. And our branded value-added product sales typically carry higher margins than our pure commodity sales. -------------------------------------------------------------------------------- Christopher Emilio Carril, RBC Capital Markets, Research Division - Analyst [12] -------------------------------------------------------------------------------- Okay. Great. And then on the CapEx reduction for 2020, can you elaborate on the types of projects that have been put on hold versus what you will continue with through the year? -------------------------------------------------------------------------------- Paul A. Jewer, High Liner Foods Incorporated - Executive VP & CFO [13] -------------------------------------------------------------------------------- Yes. It is primarily repairs and maintenance projects that we've just looked at reprioritizing in the circumstances. There were no projects put on hold that were projects that we would identify as what I'll call profit improvement projects, where we would be making investments to improve our overall performance. Any of those would still be included. And we may reprioritize and pursue some of those other repairs and maintenance projects that we currently put on hold as we see how the COVID-19 situation unfolds through the balance of the year. -------------------------------------------------------------------------------- Christopher Emilio Carril, RBC Capital Markets, Research Division - Analyst [14] -------------------------------------------------------------------------------- Okay. Great. And then just one last one for me. On the COVID-19 impact, can you talk about some of the cost reduction initiatives that you're looking at, and what that might mean on a run rate basis for the rest of the year? -------------------------------------------------------------------------------- Paul A. Jewer, High Liner Foods Incorporated - Executive VP & CFO [15] -------------------------------------------------------------------------------- Yes. I won't give any guidance looking forward in terms of what it will mean on a run rate basis. But we've got a number of areas where we've looked at opportunities on the cost side. Obviously, SG&A is one area where costs are naturally lower. As you can imagine, travel budgets are lower than they would otherwise be in the circumstances. You see some change in the way product is promoted or sales and marketing spend on the SG&A side. And we're also very carefully looking at expenditures on the plant side and how we make sure we make the most of our capacity utilization across our 3-plant network. And of course, the most important area for us on the cost side is raw material costs. And one thing we believe we may see, still too early to tell with any certainty, is some opportunity on seafood costs as we look forward. And we will continue to do our best to manage raw material costs through this crisis through the balance of the year. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- Your next question comes from the line of Jonathan Lamers with BMO Capital Markets. -------------------------------------------------------------------------------- Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [17] -------------------------------------------------------------------------------- Within your foodservice business, what portion would typically be to the restaurant channel? And what portion would typically be institutional? -------------------------------------------------------------------------------- Rodney W. Hepponstall, High Liner Foods Incorporated - President, CEO & Director [18] -------------------------------------------------------------------------------- So that's -- we actually have a great segment makeup, I would say, Jonathan. Without getting into specifics, what I can tell you is this is -- typically, the restaurant industry is made up of 10 segments. And if we look at the segments that's most impacted, fine dining, as an example, is down roughly 82%, and health care is down roughly 17%. Those are the latest published information. Seafood -- frozen seafood typically does not index very high in fine dining and well over-indexes in areas such as health care and other segments of the industry that haven't been hit nearly as hard as the fine dining segment. So I think the fact that we have great diversification across the restaurant channel is certainly helping us as we navigate through the uncertainty. -------------------------------------------------------------------------------- Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [19] -------------------------------------------------------------------------------- Okay. That's helpful. And can you comment on April sales or sales since the end of Q1, how demand has been trending to each of the foodservice and retail channels? -------------------------------------------------------------------------------- Paul A. Jewer, High Liner Foods Incorporated - Executive VP & CFO [20] -------------------------------------------------------------------------------- Yes. I can't comment specifically on the sales in the current quarter we're in for obvious reasons. But I would say that we have seen some improvement in foodservice sales as we've moved through the month of April into May, perhaps not surprisingly, as you start to see some sectors of the economy start to reopen and you see some of our customers start to prepare their inventory levels as they see that activity starting to pick up. So that's obviously the key thing that we're watching is what will occur over the course of the next number of weeks and months in terms of reactivity in those sectors of foodservice that Rod referred to. -------------------------------------------------------------------------------- Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [21] -------------------------------------------------------------------------------- Okay. I mean Rod referred to some metrics for the fine dining and for the health channel. Are you able to provide any sort of industry metrics that we should be thinking about as we think about High Liner's exposure to the foodservice channel just in terms of how much industry sales would be down for the areas that foodservice is most relevant. -------------------------------------------------------------------------------- Paul A. Jewer, High Liner Foods Incorporated - Executive VP & CFO [22] -------------------------------------------------------------------------------- Yes. I think it probably depends on the mix of business that either the company that's doing the selling of the product like us or the distributor has. Some distributors over-index to health care versus schools versus full service restaurants. So I would in that case, I think, refer you to in particular a couple of the public companies that are distributors, who have given some perspective on what their business overall looks like. And what I can tell you is we're pleased with our mix of business on average compared to the industry overall given the fact that we had the indexing to some of the sectors that Rod referred to. -------------------------------------------------------------------------------- Operator [23] -------------------------------------------------------------------------------- (Operator Instructions) Your next question comes from the line of Kyle McPhee with Cormark Securities. -------------------------------------------------------------------------------- Kyle McPhee, Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research [24] -------------------------------------------------------------------------------- You mentioned that volume growth was positive in Q1 prior to the COVID impact that started in the back half of March. Can you maybe quantify how positive that growth was or maybe just comment on the contributors to that growth? I know you had a contract loss in Q4 that hasn't been left. So what exactly were those positive contributors offsetting that? -------------------------------------------------------------------------------- Paul A. Jewer, High Liner Foods Incorporated - Executive VP & CFO [25] -------------------------------------------------------------------------------- Yes. So the 2 key contributors to the growth were -- and almost on, I would say, equal footing were new product sales, so the launch of new products from an innovation perspective which we're very pleased with, and also new customer acquisition. So the volume of business in both of those areas was sufficient to offset the known customer losses that we've talked about in the past. And that -- we wanted to highlight that because that's the first quarter in some time where we've been able to get to that position where new product and new customer growth has offset some of that lost business. And it was positive is all I'll say at this stage prior to the impact of COVID-19. But remember, the impact of COVID-19 really was in the last 12 to 15 days of the quarter. So it was for the highest majority of the quarter that we did experience that growth. -------------------------------------------------------------------------------- Kyle McPhee, Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research [26] -------------------------------------------------------------------------------- Got it. And the new product sales, I think last quarter, you said that contributed 2% volume growth year-over-year. I think that worked out to about $5 million. Is it still -- are those new product sales still rolling in at about that rate? Or has it accelerated? -------------------------------------------------------------------------------- Paul A. Jewer, High Liner Foods Incorporated - Executive VP & CFO [27] -------------------------------------------------------------------------------- Yes. Actually, it's a very similar rate, I would say, in the first quarter in terms of a percentage of growth. So we were pleased to see that trend continue. -------------------------------------------------------------------------------- Kyle McPhee, Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research [28] -------------------------------------------------------------------------------- Got it. Okay. And just when you referred to the volume growth for COVID, it was a little bit confusing in your prepared remarks. Was that for the total company or just for foodservice? -------------------------------------------------------------------------------- Paul A. Jewer, High Liner Foods Incorporated - Executive VP & CFO [29] -------------------------------------------------------------------------------- That was for the total company but was driven predominantly by foodservice. -------------------------------------------------------------------------------- Kyle McPhee, Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research [30] -------------------------------------------------------------------------------- Got it. Okay. And then last question for me. Just COVID aside and what that's doing to your business mix, is your gross margin kind of at the new steady state now? I know you guys have already lapped a lot of other sales mix shifts on the top line that happened last year, cutting out low-margin business. So should we expect -- again, COVID aside, should we expect gross margin to stay around here? Or is there still room for expansion? -------------------------------------------------------------------------------- Paul A. Jewer, High Liner Foods Incorporated - Executive VP & CFO [31] -------------------------------------------------------------------------------- Well, I'd say, first of all, putting COVID aside is a hard thing to do in the current circumstances, but we'll stay with you on that. In terms of gross margin, I would say, clearly, you'll see some changes quarter-to-quarter just based on the seasonality in our business. But overall, if you look at it on an annual perspective, we do believe there's still some room to improve from a gross margin perspective. We've got a number of critical initiatives that we executed in 2019 that are continuing to deliver benefit. That benefit in Q1 was higher than it was in the previous quarters in 2019. So that does give us confidence that we can continue to improve gross margin in our business over time obviously once we get through this COVID-impacted period. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- There are no further questions. I will now turn the call back over to Rod Hepponstall for closing remarks. -------------------------------------------------------------------------------- Rodney W. Hepponstall, High Liner Foods Incorporated - President, CEO & Director [33] -------------------------------------------------------------------------------- Thank you. To close, I want to thank you for joining our call today. And we look forward to updating you with results from our second quarter of 2020 and our next conference call in August. Please stay safe and well. -------------------------------------------------------------------------------- Operator [34] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.