Excessive Liner Meals, Inc. (OTCPK:HLNFF) This fall 2022 Earnings Convention Name February 23, 2023 10:00 AM ET
Firm Individuals
Kimberly Stephens – VP, Finance
Rodney Hepponstall – President, CEO & Director
Anthony Rasetta – Chief Industrial Officer
Paul Jewer – EVP & CFO
Convention Name Individuals
Kyle McPhee – Cormark Securities
Sabahat Khan – RBC Capital Markets
Operator
Good morning, girls and gents. Thanks for standing by. Welcome to the Excessive Liner Meals Integrated Convention Name for outcomes of the Fourth Quarter and 2022. [Operator Instructions]. This convention is being recorded in the present day, Thursday, February 23, 2023, at 10:00 a.m. Japanese Time for replay functions.
I’d now like to show the decision over to Kimberly Stephens, Vice President of Finance for Excessive Liner Meals. Please go forward.
Kimberly Stephens
Good morning, everybody. Thanks for becoming a member of the Excessive Liner Meals convention name in the present day to debate our monetary outcomes for the fourth quarter of 2022. On the decision from Excessive Liner Meals are Rod Hepponstall, President and Chief Govt Officer; Anthony Rasetta, Chief Industrial Officer; and Paul Jewer, Govt Vice President and Chief Monetary Officer.
I wish to remind listeners that we use sure non-IFRS measures and ratios when discussing our monetary outcomes as we consider these are helpful in assessing the corporate’s monetary efficiency. These measures are absolutely described and reconciled to IFRS measures in our MD&A. Listeners are additionally reminded that sure statements made on in the present day’s name could also be forward-looking statements which are topic to dangers and uncertainties. Administration could use forward-looking statements when discussing the corporate’s technique and enterprise sooner or later. Precise working or monetary outcomes may differ materially from these anticipated in these forward-looking statements.
Excessive Liner Meals features a thorough dialogue of the chance components that may trigger its anticipated outcomes to vary from precise outcomes in its publicly out there disclosure paperwork, significantly in its MD&A and annual data kind. Please notice that Excessive Liner Meals is underneath no obligation to replace any forward-looking statements mentioned in the present day.
After markets closed yesterday, February 22, Excessive Liner Meals reported its monetary outcomes for the fourth quarter ended December 31, 2022. That information launch, together with the corporate’s MD&A and audited consolidated monetary statements for fiscal 2022 have been filed on SEDAR and it may also be discovered within the Investor Heart — Part of the Excessive Liner Meals web site. If you need to obtain our information releases sooner or later, please go to the corporate’s web site to register.
Lastly, please notice that the corporate experiences its monetary leads to U.S. {dollars}. And due to this fact, the outcomes to be mentioned in the present day are additionally said in U.S. {dollars}, except in any other case famous. Excessive Liner Meals frequent shares commerce on the Toronto Inventory Trade and are quoted in Canadian {dollars}.
I’ll now flip the decision over to Rod for his opening remarks.
Rodney Hepponstall
Hey, and welcome to our convention name to debate our monetary outcomes for the fourth quarter and full yr of 2022. Like final yr, I am joined on the decision in the present day by our Chief Industrial Officer, Anthony Rasetta; and our Govt Vice President and Chief Monetary Officer, Paul Jewer. Anthony and Paul will share extra particulars on our achievements over the previous Three and 12 months and supply their views on the outlook for our enterprise in 2023.
First, I’ve the pleasure of reporting the highlights for the fiscal yr of 2022 and the fourth quarter. I am very proud that now we have delivered our fourth yr of consecutive adjusted EBITDA progress with a 14.9% achieve over prior yr for a document adjusted EBITDA of $103.9 million. Our seventh consecutive quarter of adjusted EBITDA progress was a 23.3% achieve over the fourth quarter of final yr. Document gross sales of $1.0697 billion or 222.2% enhance over — year-over-year and document gross revenue of $229.9 million or 15.8% enhance year-over-year. The work behind these numbers started in earnest Four years in the past after I joined the corporate, and we initiated a collection of 5 essential initiatives to reposition Excessive Liner Meals for worthwhile natural progress over the long run.
We built-in our enterprise throughout the border, enhanced the effectivity of our world provide chain and optimize our product portfolio to ship worth to our clients. A spirit of steady enchancment and excessive efficiency held true quarter after quarter and yr after yr. It introduced us to the purpose final yr the place we gained market share and outperformed the class on either side of the border and in each our foodservice and retail companies, and efficiently expanded the attain of our most profitable product choices into new channels and markets.
Along with the numerous groundwork that I simply talked about, Three components stand out as enjoying a essential function in our success final yr. The dedication and dedication of our proficient world group. Our group continues to rise to the problem and go the additional mile for our clients and one another, and it reveals in our numbers and within the working momentum now we have in the present day.
The diversification of our provide chain and our portfolio in a yr of great world macroeconomic problem, the flexibleness and optionality inside our provide chain allowed us to fulfill demand and assist our clients. Our funding in stock allowed us to capitalize on all our work behind the scenes to be available in the market with compelling options for our clients, whereas the funding required inevitably impacted money circulate, it was instrumental in our success final yr and places us in a powerful place heading into the seasonal peak in demand for seafood in the course of the Lenten interval.
Regardless of the various headwinds from the pandemic, provide and ongoing affect of inflation, now we have not veered course from our technique of providing selection and value-added options to our clients and customers. Whether or not our clients are designing menus and working kitchens for giant hospitals or colleges, QSRs or informal eating or stocking the freezer aisles of grocery shops throughout Canada and the U.S., our method stays the identical. We offer a tailor-made answer throughout value factors and the peace of mind of high-quality, wholesome and sustainable supply of chef-inspired sources of protein.
Within the yr forward, we’ll pursue progress by persevering with to execute in opposition to our North American branded and value-added management technique by working to develop the place we lead in the present day and to develop our market share in underdeveloped and excessive potential channels and species.
We can even encourage extra seafood consumption by showcasing versatility and potential to operators, well being and comfort to customers and sustainable enterprise practices throughout the board.
Within the upcoming yr, we plan to develop and launch revolutionary and scrumptious new merchandise tailor-made to clients and shopper developments. General, I’m pleased with our sturdy efficiency and important progress, and I am assured within the outlook for our enterprise. Now we have demonstrated the relevance of our technique and the resilience of our enterprise by market cycles. And within the yr forward, I’m assured within the resilience of our enterprise and consider we’re poised as soon as once more to ship year-over-year gross sales and adjusted EBITDA progress, which mixed with sturdy enhancements in working capital will permit us to generate important money circulate from operations and create worth for all shareholders.
On the finish of the decision, I’ll develop on the outlook for our enterprise, together with our method to progress within the close to time period in addition to strategic issues underway to discover accelerated progress that can form Excessive Liner Meals for future generations.
With that, I will hand the decision over to Anthony to talk to particular achievements and plans in our foodservice and retail companies. Anthony, over to you.
Anthony Rasetta
Thanks, Rod, and howdy, everybody. I will share operational highlights in our foodservice and retail companies, our progress executing in opposition to our branded and value-added management technique. Our fourth quarter efficiency efficiently leveraged our portfolio to supply options tailor-made to buyer and shopper wants. We delivered a powerful end to an excellent yr in our foodservice enterprise. Operators proceed to hunt out reliability of provide, coupled with the power to innovate and simplify their menus and operational efficiencies in a difficult labor market. Our worth-added portfolio continues to ship these options and drive elevated gross sales and share beneficial properties.
We additionally drove gross sales progress throughout our core noncommercial segments and proceed to encourage innovation and adoption of seafood in our precedence progress areas of fast service eating places and informal eating. For instance, amongst different new enterprise wins, we secured in the course of the fourth quarter, we had been thrilled to safe new enterprise that can see our value-added salmon prominently featured on the menu and in advertising and marketing supplies in a number one household and value-oriented informal eating restaurant chain within the U.S.
Informal eating is an enormous progress alternative for us and information reveals that seafood servings on this setting continued to extend, pushed by progress in salmon and shrimp.
We proceed to see operators change from commodity purchases to value-added merchandise and join restricted time affords to check out new ideas after which transfer with confidence to turn out to be strategic companions with us.
We achieved this with one in every of our most profitable value-added restricted time affords final yr, and we now have an thrilling street map of innovation collectively.
Wanting forward in foodservice, we anticipate that in 2023, restaurant operators will proceed to regulate their enterprise mannequin with a purpose to offset rising labor prices as operators search to do extra with much less, they’re on the lookout for extra than simply provide.
In in the present day’s difficult setting, we are able to achieve share and win new enterprise as a result of we’re not merely promoting seafood, we’re delivering options which are interesting to their shopper whereas additionally offering versatility and margin beneficial properties for operators. We see this as an ongoing alternative for our value-added providing in foodservice, and we’re working carefully with distributors and brokers to make sure that the well timed advantages of our value-added portfolio are effectively understood and out there throughout the trade.
Our group is doing an distinctive job of serving to operators to see how our merchandise can strengthen their aggressive providing. We’re more and more utilizing customer-specific information to tell this facet of our technique, and it’s permitting us to pitch ideas and menu objects that can lead class progress and encourage customers to decide on seafood extra typically.
Now turning to Retail. We had been additionally happy with our fourth quarter efficiency, particularly given the rising challenges of the working setting, which was markedly totally different than the identical interval final yr.
As headlines proceed to remind us each day, inflation is main to cost sensitivity throughout the whole grocery sector. And whereas frozen seafood has not been impacted by value will increase to the identical extent as different proteins and grocery objects, we skilled a redistribution of quantity from premium branded value-added merchandise. The diversification of our portfolio serves the enterprise and the buyer very effectively on this regard. Towards this backdrop, we’re happy to have nonetheless grown market share in U.S. Retail, by the breadth of our portfolio with our premium sea delicacies line and our worth choices in Fisher Boy.
Fisher Boy stays very effectively positioned to be a well-liked selection for customers on the lookout for high quality protein at an inexpensive value level. To capitalize on this chance and meet demand, now we have expanded distribution at key retailers and are investing in focused advertising and marketing and promotional actions. We noticed some large outcomes from advertising and marketing activation and promotions round Fisher Boy within the fourth quarter, together with incentivizing customers to buy the product for the primary time. We are going to proceed to leverage innovation, omnichannel and shopper advertising and marketing to assist enhance visibility of our Fisher Boy worth proposition.
Funding in advertising and marketing activation additionally offers us the good thing about information and shopper insights, which, as I discussed, is more and more directing our technique and can affect product improvements in retail within the yr forward.
Given the tempo of change in our post-pandemic world, these insights are essential to making sure we’re growing the menu objects and dinner dishes that North People will depend on, order and crave within the years to return. Knowledge can even assist our work to encourage extra seafood consumption, which, as Rod will communicate to later within the name, represents a major progress alternative for us over the long run. Within the close to time period, we’re targeted on sturdy execution as we’re simply kicking off our peak size season.
With that, I will now hand over to Paul for an outline of our monetary efficiency.
Paul Jewer
Thanks, Anthony, and good morning, everybody. Please notice that each one comparisons offered throughout my monetary overview of the fourth quarter of 2022 are relative to the fourth quarter of 2021, except in any other case famous.
Gross sales quantity decreased within the fourth quarter by 300,000 kilos to 58.Four million kilos. In our retail enterprise, gross sales quantity was decrease, primarily as a result of customers changing into extra value aware, leading to softer demand for seafood merchandise as customers change to lower-cost meal options, together with to our worth portfolio.
In our foodservice enterprise, gross sales quantity was increased as a result of diminished COVID-19 restrictions on the corporate’s foodservice clients within the fourth quarter of 2022 as in comparison with the fourth quarter of 2021, resulting in elevated demand in addition to elevated new enterprise within the present quarter in comparison with the identical interval within the prior yr. The decrease gross sales quantity was additionally partially as a result of continued affect of world provide chain challenges on uncooked materials provide in North America. That impacted the corporate’s gross sales volumes by an estimated 1.Eight million kilos within the fourth quarter. This provide scarcity, nonetheless, is a major enchancment in comparison with the affect within the first Three quarters of fiscal 2022 as the corporate invested in working capital to handle the provision chain challenges.
Gross sales elevated within the fourth quarter by $22.Four million or 9.8% to $250.Three million, as a result of pricing actions associated to inflationary will increase on enter prices, partially offset by the lower in gross sales quantity in addition to a change in gross sales combine.
The weaker Canadian greenback within the fourth quarter of 2022 in comparison with the identical quarter of 2021, decreased the worth of reported U.S. greenback gross sales from our Canadian dollar-denominated operations by roughly $4.7 million relative to the conversion affect final yr.
Gross revenue elevated within the fourth quarter by $6.2 million or 12.8% to $54.Eight million. And gross revenue as a proportion of gross sales elevated by 60 foundation factors to 21.9% as in comparison with 21.3% within the fourth quarter of 2021.
The rise in gross revenue {dollars} displays pricing actions and a few enchancment within the working efficiencies in our crops, which was partially offset by the lower in gross sales quantity as talked about beforehand and the change in product combine. The weaker Canadian greenback decreased the worth of reported U.S. greenback gross revenue from our Canadian operations in 2022 by roughly $1.1 million relative to the conversion affect final yr.
Adjusted EBITDA elevated within the fourth quarter by $4.Eight million or 23.3% to $25.Four million. And adjusted EBITDA as a proportion of gross sales elevated to 10.1% in comparison with 9%. The rise in adjusted EBITDA is a results of the rise in gross revenue and a lower in distribution bills, partially offset by the rise in web SG&A bills. The weaker Canadian greenback decreased the worth of reported adjusted EBITDA in U.S. {dollars} from Canadian operations in 2022 by roughly $400,000 relative to the conversion affect final yr.
Reported web earnings elevated within the fourth quarter by $3.9 million or 54.2% to $11.1 million, and diluted earnings per share elevated by $0.12 to $0.32. The rise in web earnings was largely as a result of enhance in adjusted EBITDA, a lower in share-based compensation expense and a lower in earnings tax expense. This was partially offset by a rise in finance prices, on account of carrying increased stock ranges and better rates of interest and a rise in enterprise acquisition, integration and different expense.
Excluding the affect of sure nonroutine and noncash bills which are defined in our MD&A, adjusted web earnings within the fourth quarter of 2022 elevated by $3.2 million or 35.2% to $12.Three million. And correspondingly, adjusted diluted earnings per share elevated $0.09 to $0.35 in comparison with $0.26 in 2021.
Turning now to money circulate from operations within the stability sheet. Web money flows from working actions within the fourth quarter of 2022 decreased by $47.Eight million to an outflow of $55.Eight million, in comparison with an outflow of $Eight million in the identical interval in 2021, as a result of a major funding in noncash working capital, with a purpose to mitigate the affect of the provision chain challenges and put together for the upcoming 2023 Lenten interval.
Web debt on the finish of fourth quarter of 2022 elevated by $114.5 million to $385.5 million in comparison with $271 million on the finish of fiscal 2022, reflecting increased financial institution loans as a result of elevated funding in stock, which was partially offset by decrease lease liabilities.
Web debt to adjusted EBITDA was 3.7x at December 31, 2022, in comparison with 3x on the finish of fiscal 2021. Within the absence of any main acquisitions or unplanned capital expenditures in 2023, we anticipate this ratio to be again to the corporate’s long-term goal of 3x earlier than the tip of fiscal 2023.
As a reminder, in the course of the fourth quarter, we elevated the restrict on our secured asset-backed credit score facility from $150 million to $200 million. All different materials phrases of the working capital facility stay unchanged. We are going to proceed to make the most of our $200 million working capital credit score facility as required, and we stay assured in our liquidity place.
I’ll now flip the decision again to Rod for some closing remarks earlier than opening up the decision to questions. Rod?
Rodney Hepponstall
Thanks, Paul and Anthony. As you’ve got heard, our efforts in This fall wrapped up a powerful business and monetary efficiency in 2022. And because of this, we’re effectively positioned to proceed to drive business success within the yr forward. Whereas world provide challenges will not be utterly resolved, we’re effectively positioned with our stock ranges and anticipate returning to normalized service ranges for patrons and stock ranges by the course of the yr. Because of our numerous portfolio, world built-in aggressive provide chain, buyer focus and forward-looking technique, Excessive Liner Meals is effectively positioned to ship in opposition to shopper wants and be resilient in opposition to recessionary market dynamics.
We’re assured that however the potential for an financial slowdown in North America, we are able to proceed to efficiently develop the highest and backside line of our enterprise by executing in opposition to our North American branded and value-added management technique. We are going to use data-driven insights to encourage, innovate and develop and over time, rework the class. We’re working to develop our market share the place we lead in the present day in an underdeveloped, excessive potential channels and species.
As Anthony mentioned, we consider frozen seafood has monumental untapped potential. Throughout a time of great progress in protein consumption over the previous 2 a long time, seafood consumption has remained largely flat. There’s an more and more — rising consciousness of the significance of seafood to mind improvement and due to this fact, the necessity for youngsters to devour extra seafood and more and more shopper need to devour sustainable protein sources. These have the potential to create important tailwinds for our class, and we intend to maximise this affect.
I’ll communicate extra to the work we’re doing to encourage seafood consumption over the course of the yr. Within the close to time period, we’re doubling down on our efforts to showcase versatility and potential to operators, well being and comfort to customers and sustainable enterprise practices throughout the board.
Within the upcoming yr, we’re additionally planning to develop and launch revolutionary and scrumptious new merchandise and anticipate rolling out between 10 and 12 new merchandise throughout the foodservice and retail in 2023. Our product improvements might be tailor-made to progress species and classes and be designed to develop our attain by focused distribution. We’re already within the means of launching 7 new value-added shrimp in foodservice and we consider that this might be a really compelling answer for operators who will have the ability to provide a well-liked, wholesome, digital protein on the menu whereas decreasing preparation time within the kitchen. I sit up for updating you on the 7 new merchandise launched within the subsequent quarter.
We’re additionally strategizing on the perfect methods to rework the class and develop the upside of our enterprise. We’re casting a large web and contemplating alternatives associated to the longer term procurement, consumption and advertising and marketing of seafood. In fact, there aren’t any assurances {that a} potential transformation initiative will emerge from this course of. And we’ll solely proceed if we see the worth creation potential is superior to the established order.
We consider now we have so much to supply as a possible associate or acquirer and are effectively positioned to be affected person to seek out the fitting match for us. We are going to proceed with a powerful sense of monetary self-discipline and direct the suitable time and sources to the strategic consideration that can form Excessive Liner Meals for future generations.
As we direct enhance time and sources to exploring doubtlessly transformational initiatives, it won’t detract from our precedence focus of delivering branded and value-added options to our clients and executing in opposition to our natural progress technique.
We’re assured that we are going to ship year-over-year gross sales and adjusted EBITDA progress, which mixed with sturdy enhancements in working capital will permit us to generate important money circulate from operations, additional dividend progress and create ongoing worth for all stakeholders. As we achieve this, we’ll proceed to work with our companions and suppliers world wide to make sure finest practices and accountable and sustainable sourcing of seafood that serves us to encourage consumption and nourish life.
General, I am very pleased with the progress now we have made to have the ability to chart our personal course for the longer term and reward shareholders with stability of sturdy and secure dividends supported by upside from a confirmed natural progress technique.
With that, I will open the road for questions. Operator, please go forward.
Query-and-Reply Session
Operator
[Operator Instructions]. First query comes from Kyle McPhee of Cormark Securities.
Kyle McPhee
I simply needed to start out by digging into the amount efficiency a bit. You stated foodservice channel was up, retail channel was down. Are you able to quantify these transferring components all for us? I am primarily curious how significant that shopper affect is in retail channels.
Paul Jewer
Sure. So Kyle, as we stated, foodservice was up. Retail was down. I would say not important by way of both channel. However to your level, we did see the affect on the buyer in retail, significantly as they selected merchandise throughout the class. And in some circumstances, traded out of the class to different lower-priced options. Nonetheless, we’re very targeted on persevering with to develop each foodservice and retail by 2023 and consider now we have the chance to take action.
Kyle McPhee
Obtained it. Okay. And may you remark particularly in any respect on the worth manufacturers that commerce down pattern? I imply how significant was that for quantity efficiency in This fall for these worth manufacturers?
Anthony Rasetta
Sure, Kyle, that is Anthony. Thanks for the query. Positively, we noticed a shift in stronger efficiency in U.S. retail, particularly, in with Fisher Boy that I discussed earlier. In order that’s undoubtedly serving to us by way of the breadth of the portfolio. We’re seeing a transfer to low cost channels inside retail. We’re seeing a transfer to worth. We additionally provide and assist non-public label, which is seeing extra of a rise by way of efficiency in retail. I feel the excellent news for us truly is that the majority of our enterprise sits in foodservice truly and that foodservice is remaining very resilient. Although we thought we had been coming into the yr with potential recessionary pressures, we’re nonetheless seeing site visitors up, and we’re nonetheless seeing some actually good progress in our progress channels in QSR and informal eating.
Kyle McPhee
Obtained it. Okay. Simply concerning the speed of buyer shorting as a result of provide chain, it was good to see the massive enchancment in This fall. I am questioning now given your huge funding in stock in This fall, does that remaining charge of buyer shorting absolutely go away as you get into 2023, like Q1 that we’re in now? Or is that This fall charge of shorting, a great illustration of the brand new regular for the subsequent effectively?
Paul Jewer
Properly, we do hope we are able to overachieve the efficiency that we achieved in This fall. It is early within the quarter. January was a great month in that regard for us. So we’ll work exhausting within the stability of February and March to proceed to fulfill shopper demand. And also you’re proper, we did spend money on stock to place ourselves in that place, significantly essential for us, as you recognize, main into a major promoting interval for us in Lent.
Kyle McPhee
Okay. After which transferring over to gross margin proportion. Nice efficiency in This fall. You known as out plant efficiencies as one of many transferring components. Are you able to get extra particular on what you imply? Like what’s occurring on the plant degree to assist margins on the gross margin degree? And is there much more runway for enchancment going ahead?
Rodney Hepponstall
Sure. Kyle, that is Rod. I’d say the advance in gross margin is actually supported by the continual enchancment mindset now we have in our crops. We’re all the time looking for methods to get extra environment friendly as we proceed to refine the portfolio and assist the required efficiencies. I’d say whereas there’s not important leaps in margin enlargement as a result of efficiencies within the plant, we’ll proceed to do our greatest to offset inflation and quite a lot of different issues by steady enchancment initiatives within the crops and the whole provide chain.
Paul Jewer
And Kyle, I’d additionally spotlight, as we talked about constructing stock for Lent, actually helped shopper efficiency as effectively from an absorption perspective. We ran some good quantity in our crops in This fall.
Kyle McPhee
Obtained it. Okay. Simply once more on gross margin, what is the affect of that shopper habits commerce down into your worth manufacturers? Does that affect your margin combine in a significant means?
Paul Jewer
It would not affect it in a significant means as a result of our margin combine, as you recognize, varies throughout clients, varies throughout the class, fluctuate throughout the channel, varies throughout species. So we’re comfy that we are able to stability out gross margin within the setting that we’re at the moment in and as now we have performed in numerous environments over the course of the final couple of years.
Kyle McPhee
Okay. After which simply concerning your steerage commentary for 2023, you are calling for the income progress, the EBITDA progress. However questioning what you anticipate on the quantity degree? Do you anticipate quantity progress year-over-year in 2023, given what’s occurring in your numerous channels?
Rodney Hepponstall
Sure. Kyle, I feel it is a fantastic level given numerous channels. As Paul talked about, we have been resilient over the past a number of years in having the ability to flex our gross sales method to the retailer foodservice channel. So we’re absolutely anticipating each prime and backside line progress supported by quantity progress in 2023.
Kyle McPhee
Obtained it. Okay. After which simply final one for me. Relating to your commodity inputs, the seafood species we purchase, is that value beginning to deflate in any respect? Is {that a} theme for 2023? And in that case, will your pricing cost to your purchasers deflate as effectively?
Paul Jewer
Sure. No, general, we’re not seeing any important inflation or deflation throughout species that may fluctuate somewhat bit, as you recognize. However general, pretty secure from a pricing perspective. And that enables us the chance to handle our enterprise and our profitability as we glance by the stability of 2023.
Operator
The subsequent query comes from Sabahat Khan of RBC Capital Markets.
Sabahat Khan
Simply type of following up on the commentary earlier round a number of the commerce down dynamics you are seeing available in the market. Simply questioning by way of the outlook for ’23, what are a number of the levers you may have the ability to pull if there may be some affect on margins or volumes as a result of macro? I do know you talked about type of revisiting operations and one thing makes from that. However I used to be simply questioning what are a number of the levers that you simply may pull on over the course of this yr to type of drive that EBITDA progress no matter type of the place the macro goes?
Anthony Rasetta
Sure. I feel, Saba, to start out with, we really feel actually assured in our investments in our plans. So like Rod talked about, the very first thing we wish to do is proceed to drive quantity progress and market share progress by innovation. So now we have some nice new innovation popping out throughout the portfolio. In the beginning, in foodservice because the bigger a part of our enterprise in species in areas the place we’re underdeveloped. So even when the market is barely softer, we nonetheless are underdeveloped in species like shrimps and salmon. We’re underdeveloped in QSR and informal eating. We’re underdeveloped in U.S. retail. And our means to construct market share and achieve with the methods that now we have in place on innovation and shopper activation, I feel, will proceed to serve us effectively by 2023.
Paul Jewer
And I feel, in fact, Saba, on the fee aspect, as we talked about, we consider we proceed to have steady enchancment alternatives throughout our provide chain, significantly in what we hope might be a interval of extra stability in our provide chain in comparison with what we have been by for the final couple of years. So we’ll proceed to deal with driving value down, proceed to deal with driving margins and progress, as Anthony talked about.
Sabahat Khan
Okay. And I suppose by way of the portfolio, I do know there’s been fairly a little bit of rationalization and optimization over the previous few years. Do you suppose there’s nonetheless some room even the macro aspect for some fine-tuning? Or do you suppose your rely and product portfolio are in the best way, please?
Rodney Hepponstall
So — Sabahat, no, I feel there’s all the time alternatives as we’re targeted on shopper and buyer demand developments and future outlook. We are going to proceed to optimize our portfolio to make sure that we’re hitting all of these and maximizing efficiencies all through the plant. So I’d say for us, that might be all the time underneath the places of work of steady enchancment, and we’ll make these acceptable changes yr after yr.
Sabahat Khan
After which by way of the type of exercise or the suggestions you are seeing out of your purchasers throughout all of the U.S. or Canada retail foodservice. Are you able to perhaps discuss any noticeable variations throughout a few of these channels, one sort of a restaurant buyer being extra, I suppose, aggressive a method or one other. Simply attempting to grasp perhaps a number of the dynamics you are seeing and type of what persons are positioning for in 2023 climate it is throughout the areas or a number of the subsegments throughout the two markets?
Anthony Rasetta
Sure. I feel the areas the place we’re targeted for progress the place we occur to be underdeveloped and are gaining plenty of share and a few good headwinds are the areas which are poised to proceed to achieve a recessionary setting in locations which are doubling down, particularly QSR and informal eating from a foodservice perspective. So we’re having nice conversations with a few of our QSR companions about persevering with to innovate the incrementality that seafood supplies on their menu as a result of it’s underdeveloped as a protein on a lot of their menus. They usually proceed to anticipate to see actually sturdy site visitors coming by their shops. In order that’s on the foodservice aspect.
On the retail aspect, we have performed a fantastic job with our worth model particularly, and moving into the worth channel, particularly within the U.S. Our technique is absolutely targeted on profitable with the winners. And the concept that customers, which we’re already seeing are shifting much more to worth channels to low cost channels is, I feel, a pattern that can proceed to play out going ahead. And in each the U.S. and Canada, now we have nice product choices in our portfolio by Fisher Boy within the U.S. and thru Excessive Liner in Canada to have the ability to service these channels. And that is the place I feel we’ll proceed to see the expansion by 2023.
Sabahat Khan
Okay. Simply a few fast ones. If we simply get the EBITDA margin aspect, EBITDA greenback is unquestionably rising, EBITDA margin has been within the type of, name it, 10% to 10.5% vary. In the event you look out 2, 3, Four years type of past the present macro, can you directionally touch upon what do you see as type of the medium-term potential margin right here if you will get the enterprise to type of the fitting place with the combo and buyer and so forth? Simply curious, not on the lookout for steerage, however only a directional perspective on there.
Paul Jewer
Sure. No, I feel directionally, as we have stated earlier than, 10% is what our goal has been. And we consider that enables us to have the fitting stability of profitability and supporting progress. And a part of our job is to ensure we combine that out appropriately to maintain that over the medium to long run. And now that we have gotten there and been there various instances over the past couple of years, we’re targeted on staying there.
Sabahat Khan
Okay. After which simply final one on the stability sheet and type of type of use of capital. There’s clearly been some enchancment type of on the leverage aspect. However simply curious how your priorities could fluctuate simply given the macro is a main focus nonetheless on type of this leverage discount progress. At what level do you begin to take a look at perhaps even issues like return of capital in different kinds? Or I imply simply — how a lot of that’s type of set in stone versus how versatile chances are you’ll be relying on how the working setting evolves?
Paul Jewer
Sure. No, actually, our main focus proper now could be debt discount as a result of we’re targeted on transferring by the stock place that we have constructed to assist the expansion in our enterprise in 2023. We’re assured we’ll do this, and that can generate important free money circulate in 2023. In order that’s focus primary. .
We’ll proceed to spend money on our plans, related degree in 2023 is what we have focused in 2022 as a result of we consider natural progress of our enterprise deserves our assist from an funding perspective. And as we talked about earlier, we’ll proceed to assist the expansion within the dividend. Now we have alternative to try this to get nearer to our payout targets. And it’s best to anticipate us to proceed to try this.
Above and past that, we’re — as we talked about, on the lookout for alternatives from a strategic perspective, and so we wish to have a powerful stability sheet to assist that. And at this stage, meaning we’re not targeted on return of capital in different methods. However after now we have success and some of these different priorities that we — that I spoke about, then we’ll take into account that as effectively.
Operator
There aren’t any additional questions at the moment. I’ll flip the decision again to Rod Hepponstall for closing remarks.
Rodney Hepponstall
Thanks. To shut, I wish to thanks for becoming a member of our name in the present day. We sit up for updating you with our outcomes for the primary quarter of 2023 on our subsequent convention name in Might. Please keep secure and effectively.
Operator
Thanks. Women and gents, this does conclude the convention name for in the present day. We thanks to your participation and ask that you simply please disconnect your strains.