High Liner Foods Inc

TSX:HLF

Earnings Call Transcript

[Operator]

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the High Liner Foods Incorporated Conference Call for the Results of Third Quarter of 2021. [Operator Instructions] This conference call is being recorded today, Wednesday, November 17, 2021, at 2 p.m. Eastern Standard Time for replay purposes.I would now like to turn the call over to Ms. Milner, Vice President of Finance for High Liner Foods. Please go ahead.

[Charlene Kristen Milner, Vice President of Finance]

Good afternoon, everyone. Thank you for joining the High Liner Foods conference call today to discuss our financial results for the third 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 may be 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 in 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 third quarter ended October 2, 2021. That news release along with the company's MD&A and unaudited condensed interim consolidated financial statements for the third quarter of 2021 have been filed on SEDAR and can also be found in the Investor Center 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 therefore, the results to be discussed today are also stated in U.S. dollars, unless otherwise noted. High Liner Foods' common shares trade on the Toronto Stock Exchange and are quoted in Canadian dollars.I will now turn the call over to Rod for his opening remarks.

[Rodney W. Hepponstall, President, CEO & Director]

Good afternoon, everyone, and thank you for joining us today to discuss our results for the third quarter of 2021. We delivered improved financial performance during the third quarter versus a year ago. We increased volume by 100,000 pounds and net sales by 10.1%, generating further profitability gains with a 240 basis point increase in gross profit as a percent of net sales and delivered higher adjusted EBITDA in the third quarter of 2021 versus a year ago. We also executed on our strategy to become the North American leader in branded value-added seafood during the third quarter.We grew our branded value-added volume by approximately 8% versus the same period last year and shifted our product portfolio even further towards higher-margin branded products, which now represent 62% of our portfolio compared to 54% a year ago. As Paul will discuss shortly, our branded value-added growth had a favorable impact on our gross profit as a percentage of net sales. It also continues to strategically position us in the market, especially in foodservice as operators continue to look for greater convenience as pandemic related challenges persist. Our results this quarter demonstrate that our business is trending in the right direction. This is particularly apparent when you look at the year-over-year comparisons and compare our performance to 2019, we achieved a 2-year compounded annual growth rate of 6.2% on gross profit and 16.8% on adjusted EBITDA. These achievements are more significant when considered in the context of our operating environment.Like other global manufacturers, our supply chain continues to be impacted by shipping container availability issues, labor shortages, material supply issues, port and land congestion and inflationary cost pressures. We are experiencing supply chain disruptions and inflationary pressures at -- pressure at levels we haven't experienced in the recent past. Most notably, we are seeing container freight rates that are up to 10x higher than pre-pandemic levels. We benefited in the third quarter from our early action on pricing and further supply chain diversification. This together with the benefit of our integrated supply chain allowed us to mitigate much of the negative headwinds facing our business. It also enabled us to capitalize on the resurgence in foodservice we saw during the quarter as consumers started to return to eating outside of the home.Our customers were telling us that they appreciate our fill rate at the time of supply challenges and that we stand out from the competition in this regard. This is helping strengthen our relationships with foodservice operators who know that they can rely on us for products and that our branded value-added offering is well suited to their needs. We are confident that there is more upside for us as foodservice continues to recover. It was also a solid quarter as it relates to our retail business. We sustained retail performance versus the prior year despite shifting consumer behavior back to eating out and had some significant new business wins.Sales in the category have stabilized at levels that are higher than both 2020 and 2019 as consumers work and eat at home more than they did before the pandemic. Overall, our performance this quarter demonstrates the improvements we are making across the board on our business and the hard work of our team. We remain extremely mindful of the ongoing pressures of the pandemic and continue to focus on supporting our people. We were recently a recipient of the 2021 Cigna Well-Being Award in recognition of our programs to support health and wellness in the workplace. I'm proud of the culture we are building and it's playing a critical role in driving our success. Before I hand the call over to Paul, I can reaffirm that we remain on track to deliver adjusted EBITDA growth for 2021 and that the $0.03 dividend increase announced today preserves our ability to invest in growth, while bringing us closer to our targeted payout ratio.Paul, over to you to walk us through the financial performance of the third quarter.

[Paul A. Jewer, Executive VP & CFO]

Thank you, Rod, and good afternoon, everyone. Please note that all comparisons provided during my financial review of the third quarter of 2021 are relative to the third quarter of 2020, unless otherwise noted. Sales volume increased in the third quarter by 100,000 pounds to 54.8 million pounds. In our foodservice business, sales volume was higher due to the impact of significantly reduced COVID-19 restrictions on the company's foodservice customers as compared to the third quarter of 2020. This increase was partially offset by our retail business, where sales volume was lower compared to the same period last year due to evolving consumer behavior during the COVID-19 pandemic.Sales volume in the third quarter was also negatively impacted by the global supply challenges that have resulted in shipping container shortages and reduced raw material supply. Sales volume was favorably impacted by new business and new product sales. Sales increased in the third quarter by $19.7 million to $214.3 million due to the higher sales volumes. Pricing actions related to inflationary increases on input costs and favorable changes in sales mix. In addition, the stronger Canadian dollar in the third quarter of 2021 compared to the same quarter in 2020 increased the value of reported U.S. dollar sales from our Canadian dollar-denominated operations by approximately $3.2 million relative to the conversion impact last year.Gross profit increased in the third quarter by $9 million to $47.9 million, and gross profit as a percentage of sales increased by 240 basis points to 22.4% as compared to 20% in the third quarter of 2020. The increase in gross profit reflects the higher sales volume discussed above in combination with favorable changes in product mix reflected in the improved gross profit as a percentage of sales. In addition, the stronger Canadian dollar increased the value of reported U.S. dollar gross profit from our Canadian operations in 2021 by approximately $800,000 relative to the conversion impact last year.Adjusted EBITDA increased in the third quarter by $3.3 million to $22.4 million, and adjusted EBITDA as a percentage of sales increased to 10.5% compared to 9.8%. The increase in adjusted EBITDA is a result of the increase in gross profit, partially offset by the increase in distribution expenses and net SG&A expenses. In addition, the stronger Canadian dollar increased the value of reported adjusted EBITDA in U.S. dollars from our Canadian operations in 2021 by approximately $400,000 relative to the conversion impact last year. Reported net income increased in the third quarter by $5.4 million to $9.2 million, and diluted earnings per share increased by $0.15 to $0.26. The increase in net income reflects a decrease in finance costs and a decrease in income tax expense.The higher net income was also due to the increase in adjusted EBITDA and a decrease in share-based compensation expense. Excluding the impact of certain non-routine or non-cash expenses that are explained in our MD&A, adjusted net income in the third quarter of 2021 increased by $5.4 million or 91.5% to $11.3 million. And accordingly -- sorry, correspondingly, adjusted diluted earnings per share increased by $0.14 to $0.32.Turning now to cash flow from operations and the balance sheet, net cash flows provided by operating activities in the third quarter of 2021 decreased by $42.1 million to an inflow of $4.2 million compared to an inflow of $46.3 million in the same period in 2020 due to less favorable changes in non-cash working capital balances, partially offset by lower income taxes paid, lower interest paid and higher cash flows provided by operations. Our cash flow position is allowing us to increase inventory to help mitigate the supply chain challenges we are facing. Net debt at the end of the third quarter of 2021 increased by $4.4 million to $252.6 million compared to $248.2 million at the end of the second quarter, primarily reflecting a lower cash balance, partially offset by lower lease liabilities.Net debt to adjusted EBITDA was 2.8x at October 2, 2021 compared to 2.8x at the end of the second quarter of 2021 and 3x at the end of fiscal 2020. In the absence of any major acquisitions or unplanned capital expenditures in 2021, we expect this ratio to remain below the company's long-term target of 3x at the end of fiscal 2021. As a result of our strong balance sheet and cash flow, we remain confident in our liquidity position. We do not have any impending debt maturities and we'll continue to utilize our $150 million working capital credit facility that is currently undrawn. The $0.03 per share dividend increase announced by the Board this morning reflects our improving financial and operating performance and represents a 42.9% increase. This decision was made with great care by the Board with due consideration to the ongoing impact of COVID-19 on our business. As Rod mentioned earlier, the increase moves us closer to our traditional trailing EPS payout ratio, while still allowing for investment in growth.I will now turn the call back over to Rod for some final remarks before opening up the call to questions. Rod?

[Rodney W. Hepponstall, President, CEO & Director]

Thanks, Paul. I would now like to touch on how we are driving commercial growth and continuing to improve our sales execution. Overall, we grew our U.S. foodservice frozen value-added category by over 36% from a net sales perspective versus the third quarter of 2020. Compared to the 2 years ago, the category grew on a net sales basis by approximately 12% as a result of price increases and growth in private label and premium species, but remained down by approximately 9% on volume basis as a result of supply and labor shortages stemming from the pandemic.High Liner's strong foodservice performance in the third quarter was driven by the return of highly developed segments, growing share in Long-Term Care and K-12 and seeing positive momentum in casual dining -- in the casual dining segment. Our volumes were inevitably impacted by the supply chain challenges I mentioned earlier, but had we not taken preemptive measures that would have been even more pronounced. I'm most encouraged however by how our foodservice business in the quarter is recovering faster than the category did overall, and that in the process, we are growing share in all of our key species and across most operator segments. This has contributed to our improved performance this quarter and has created a strong baseline of customer loyalty that we can continue to build upon as the industry recovers and supply chain issues are resolved.Our portfolio continues to be well suited to the challenges of our foodservice operators are facing. In the third quarter, our foodservice operators have become increasingly challenged by labor availability and cost, which adds to the appeal of our branded value-added offering across all price points. We continue to take pricing action in both retail and foodservice in response to the inflationary pressures in raw material, ingredient and freight. Our price increases have been passed on, and we are well positioned vis-a-vis other protein sources that are seeing much more pronounced cost increases. As we've talked about in prior quarters, we are going to market much more aggressively in putting marketing dollars behind this approach. In the U.S., we continued our Sea Cuisine marketing campaign specifically aimed at accelerating the momentum in our skin pack product that we have seen this year.Our plan to drive awareness and penetration gains through TV and print resulted in increased brand awareness and buyers this quarter. We look forward to further gains as this campaign continues through the fourth quarter with shopper marketing activation with key retailers to drive conversion to purchase. In Canada, we are continuing our marketing efforts on our Pan-Sear products with a focus on the 2 Packs. Through digital media and shopper marketing activation, in the third quarter, brand awareness was up 4 points, and ad recall was at 30% in line with our target. We also made good progress this quarter from a sales execution perspective, securing new retail business in the third quarter of approximately 1.3 million pounds or $8 million of sales across several retailers and products with the majority in the United States.In foodservice, we secured new business wins representing 4 million pounds in foodservice or $10 million of sales. Once again, these examples demonstrate how we are going to market differently and the opportunity that is out there for us. Our financial performance demonstrates our ability to maintain bottom line improvement in the face of challenging market conditions. As we look ahead, we will continue our proactive efforts designed to help mitigate the impact of ongoing supply challenges on our business and remain focused on serving the evolving needs of our customers to satisfy consumer demand for healthy and affordable seafood.Given the strength of our business today and the market opportunity in front of us, we believe that it is an opportunity for us to start to explore additional growth opportunities that together with the ongoing organic commercial growth will accelerate our path to North American leadership in branded value-added seafood and long-term sustainable value creation for our shareholders. We are prepared to hit the ground running in 2022 in this regard, and I look forward to updating you more on our plans on our next earnings call.With that, I'll hand the call over to the operator for question-and-answer period. Operator, Please go ahead.

[Operator]

[Operator Instructions] Your first question comes from George Doumet from Scotiabank.

[George Doumet, Analyst]

Yes. Congrats on a strong quarter. Paul, I wanted to ask you about the top line, I think you gave some color on the FX benefit, can you maybe talk to how much of that growth was also related to pricing versus the positive impacts from mix?

[Paul A. Jewer, Executive VP & CFO]

Yes. So I think in terms of the growth on the top line in dollars, you can see how much inflation is included in that number when you compare it to volume, for sure. And I would say, overall, George, most of it was inflation. There was some favorable impact due to mix because we did see our branded business, in particular, grow compared to the prior year, but inflation would be more of it than mix.

[George Doumet, Analyst]

Okay. And on that point, would you expect the level of pricing, I guess, call it, mid-to-high single digits, would you expect that to continue as the next couple of quarters as we're faced with the higher input costs or would you expect that to increase even further? I'm just trying to get a sense of how pricing reacts to, I guess, the much higher levels of input costs that we're seeing kind of roll through the P&L in the next couple of quarters?

[Paul A. Jewer, Executive VP & CFO]

Sure. Yes. I mean, we have had to pass on increased prices because of the increased costs we've seen in the business. In 2021, that was primarily driven by increases in transportation and logistics costs, international shipping, those kinds of things. You're right, there will be some increase in seafood raw material costs as we look to 2022. And our view is we will need to take price to cover some of those as well. The reality is, all categories are up in terms of cost and pricing. So we believe it's an environment where -- when necessary, the price increases will come through, and we're focused on maintaining the profitability in the business that we've been able to build over the last couple of years.

[George Doumet, Analyst]

Okay. Fair enough. And just one more, if I may, on -- on the -- on leverage, it's been coming down to a level where historically we've been pretty quick to deploy capital towards M&A, should this time around should there be any different? I'm just wondering to what extent you view our valuation may be prohibitive to doing some of these M&A deals out there?

[Paul A. Jewer, Executive VP & CFO]

Yes. So from a capital allocation perspective, as we mentioned in our prepared remarks, certainly, our first priority is the growth in our business. So we're investing more CapEx than we have historically. We're investing in marketing initiatives to support our sales and marketing execution, and we'll continue to do that as a first priority. Obviously, we increased our dividend because of our improving cash flow. So we recognize that returning capital to shareholders is also important. But for sure, we strengthened our foundation overall as a business, we strengthened our financial position as a business, so it does put us in a better position to evaluate M&A opportunities. We will be disciplined in doing that. We will make sure that there are strategic opportunities that fit well with our business. To your point on valuation, we're intending not to overpay. So you'll see us be more active in evaluating opportunities, whether or not any of those come forward will depend on how value-accretive we see them.

[Operator]

Your next question comes from Kyle McPhee from Cormark.

[Kyle McPhee, Analyst of Institutional Equity Research]

On the supply chain constraints impacting revenue, can you quantify how much the lost sales opportunities were similar to the color you gave us last quarter?

[Paul A. Jewer, Executive VP & CFO]

Yes. So I'll give you a perspective in volume. As you know, Kyle, it's always a bit of an estimate because you're not sure how much is true shortages versus how much maybe customers over-ordering because of the environment that they're in. But our estimate in the quarter is that it would have been at least 4 million pounds of volume that we would have liked to have been able to fulfill demand on, but the supply chain challenges were constrained. Having said that, our ability to diversify our supply chain, the robustness of our supply chain, the efforts of our people internally, we're able to manage it down to that number. Otherwise, given the environment out there, it would have been more challenging.

[Kyle McPhee, Analyst of Institutional Equity Research]

Got it. And are you seeing any alleviation of these issues into Q4, and curious if it's still skewed to the commodity type stuff that's getting shortage?

[Paul A. Jewer, Executive VP & CFO]

Well, I think it's 2 things there. We tend to see alleviation and then we tend to see challenges come again. It's been that kind of an environment really through COVID and particularly more recently for us. So at this point, we do believe we'll still face some shortages in Q4, but we're working hard to try to minimize the impact that they'll have on our business and to meet the strong demand that's out there for our product right now.

[Kyle McPhee, Analyst of Institutional Equity Research]

Got it. Okay. And is it fair to say that it's skewed to the commodity though, these issues versus value-add?

[Paul A. Jewer, Executive VP & CFO]

You're right. Yes, it impacts us more significantly on our commodity business than our value-added business. Our ability to produce our plant capacity is very strong. And so we have not -- if we can get the raw material, then we have not seen disruptions there. And where there are some disruptions, in many cases, it's a disruption in terms of the length of time to get the raw material because of the supply chain distortion. It's less about whether or not the raw material is actually being [ cut ].

[Rodney W. Hepponstall, President, CEO & Director]

Yes, Kyle, we've talked in the past about the diversification we've done to quite frankly put us in this strong position. The significant challenges we face today are very, very consistent with what we see in other consumer packages companies and that is certainly Ocean Freight. While we're seeing some relief there kind of to Paul's point, we're seeing other challenges get created as a result of product getting off of the ships and on to shore, on to chassis and into the market. So we're managing those as closely as we possibly can, but they would be consistent with what we're seeing across the industry. Now the positive side is our scale, and again, diversification has mitigated many other situations that are impacting the industry.

[Kyle McPhee, Analyst of Institutional Equity Research]

Got it. Okay. That's helpful color. The next question, I apologize if you talked about them, and I think Rod might have addressed it in your final prepared remarks, and my audio kind of -- can -- on the foodservice channel, last quarter, you're thinking that the drag from COVID was still kind of 15%, 20%, what do you think that drag was like in Q3, like how much improvement it will be?

[Rodney W. Hepponstall, President, CEO & Director]

Yes. I would say the improvement in our foodservice business in Q3 was significant, right, on a net sales basis. I believe the number was – were up 36%, while volume still compared to 2019 was down around 9 million pounds, but the momentum in our foodservice business is absolutely substantial. We're seeing significant gains in shares across -- or shares, I should say, share gains across all of our core species. We're seeing growth in segments that are extremely important to our business, Long-Term Care, K-12, casual dining. So we're exceptionally well positioned from my perspective. And not to mention the customer loyalty that we've been developing as a result of our service levels to bring the pandemic here.

[Kyle McPhee, Analyst of Institutional Equity Research]

Got it. Okay. And then on gross margin, you put up the big year-over-year gain, 250 basis points, great to see. It seems like all the species and pricing that I think you would have been hit by though wasn't necessarily all offset by pricing. So what am I missing here that inflation should have been a drag on your gross margin, but you posted this huge gross margin outperformance or am I wrong and pricing more than offset the volume...

[Paul A. Jewer, Executive VP & CFO]

Yes, no, I think overall, we're pleased with our pricing in order to deal with rising costs. But the other thing you have to remember, our gross margin number doesn't include distribution costs. They're below the gross margin line. So when you factor the distribution costs in, then you would see, I think a more realistic picture in terms of what the net performance was. But overall, we're happy with what we were able to do from a pricing perspective that we needed to do. And the mix in our business has continued to improve, which is beneficial to gross margin. Rod talked about in the script, the fact that our branded volume increased from the mid-50s to...

[Rodney W. Hepponstall, President, CEO & Director]

62%.

[Paul A. Jewer, Executive VP & CFO]

62%. So that is beneficial to margins for us.

[Kyle McPhee, Analyst of Institutional Equity Research]

Got it. Okay. So you are -- is it fair to say that you are passing on the species inflation kind of such that it's margin neutral or are you -- do you think your pricing has been margin-enhancing?

[Paul A. Jewer, Executive VP & CFO]

I would say overall, when you look at it over a reasonable period, it's more margin neutral because what it may be is in some areas, it may be margin-enhancing and in other areas because of the delay in passing price, it actually is not margin accretive and it's actually margin negative. So overall, I would say, we're pleased with what we've been able to do from a pricing perspective out of necessity. And as we look forward, we may have to do more as we see rising costs, because the one thing I just want to highlight there, Kyle, it's not just raw material costs that are going up, right, in particular, in the past, it has been more about distribution, international freight costs that have gone up.

[Rodney W. Hepponstall, President, CEO & Director]

Yes. Kyle, maybe if I could add some additional color. The journey we've been on has been heavily focused historically on cost efficiency, and we're certainly in a continuous improvement environment. So that aspect has certainly supported what has been, quite frankly, several quarters of margin -- slight margin enhancement. So there's a lot to unpack in this discussion, but I think it's a combination of multiple things, certainly, Paul's discussion on pricing, but also the efficiency that we're driving on our business.

[Operator]

[Operator Instructions] Your next question comes from Sabahat Khan from RBC Capital Market.

[Sabahat Khan, Analyst]

Great. Just wanted to get some additional color on the commentary you shared earlier around the branded value-added offering. You talked about the progress to-date. Can you maybe share some thoughts on the potential for that business in terms of increased penetration or more of your new product offerings focused on that area, kind of the thought process and strategy for that business going forward?

[Rodney W. Hepponstall, President, CEO & Director]

Yes. I think you have to take a look at it, maybe it's a multiple question. As we think about our branded value-added product in Canada versus retail -- our U.S. retail, so 2 very different things. I can speak to foodservice in a second. There's ample opportunity to continue to leverage our strength in Canada. We're 99% ACV, high 40s share, great brand awareness, opportunities for us to continue to engage in the consumer, expand our product offering, think about how we drive the right freight activity to deliver marketing to the product conversion or product purchase. So great opportunity for us to get in the Canadian marketplace. I would say if you take a look at the U.S. marketplace, it is certainly a significant growth opportunity for us. We have single-digit share in the United States.As I mentioned, we're not prepared to talk about the actual customer name, but we've secured several new customers in the U.S. at this point, which we believe are going to continue to drive branded value-added product awareness in the states for us, and we are doing the right things from a direct-to-consumer communication, which is driving again increased frequency of purchase, as well as increased brand awareness, and we'll continue to build off it. So for me to give you an exact number of what we think the opportunity is in retail on a North American basis, it's certainly significant when you consider, again, maybe the single-digit share we have in the United States versus the opportunity, we're going to continue to execute against that.In foodservice, it's very, very similar. We are the branded value leader in Canadian marketplace, and we'll continue to drive and leverage the strength of our brand in foodservice in Canada. And as we continue to work with the industry-leading distributors as we've talked about in previous calls, we're the partner -- strategic partner for certainly 4 of the largest national distributors with strong positions in both branded value-added and complementary their brand private label. So again, I can't give you a hard statistics, but rather can give you order of magnitude, significant opportunity for growth on both sides.

[Paul A. Jewer, Executive VP & CFO]

And Sabahat, what I would add to that is in the current environment, we believe value-added product is really well positioned to meet consumer and customer demand. On the retail side, obviously, with elevated consumption at home, we saw an increase in value-added opportunity for us. While that has come down as foodservice has improved, it hasn't gone all the way back to previous levels. There is still elevated demand for eating at home in terms of seafood. And in foodservice, what we continue to see is challenges with labor in our operator environments, and we believe our branded value-added products are well suited to address that.

[Sabahat Khan, Analyst]

Okay. And then I guess, just following up on the last comment there, the gains you had with the retailer though mentioned just a few minutes ago, are these just a function of kind of market share capture, is that kind of share you are going after, how much of it is just maybe retailers allocating a bit more shelf space or freezer space to this category given the broader consumption trends towards at home? Just want to get an idea of how the market is doing and also it sounds like you're maybe capturing some additional share within that as well?

[Rodney W. Hepponstall, President, CEO & Director]

Yes. Particularly in the retail, as we talked, retail has maintained their levels of 2020 and 2019. So that's very good for the overall category, and we're certainly going to take advantage of that. I would say our gains in the U.S. are further penetration into existing customers, which is certainly continue to strengthen our position and value proposition not only with the customer, but the consumer. And it's also around new customer acquisition, which we're very, very pleased with, and we're looking forward to really talking about some of this as we can as those products begin to roll out more likely early second to mid second quarter of next year just due to MOD changes or shelf changes and so on.

[Sabahat Khan, Analyst]

Okay. And then just one last one there, I guess. So when you talk about the new customer acquisition, should we think about future progress with this category or this sort of business line being doing more with what you have, kind of getting more efficient with trade, getting more listings or should we also look forward to more targeted product launches to get some of the shelf space?

[Rodney W. Hepponstall, President, CEO & Director]

Well, I think it's a combination of both. The white space for us on existing products is immense, right, not only with the new customers, and we have an opportunity given the scale of the business in the U.S. and in some cases, the fragmentation of retailers to secure new customer growth that will certainly drive and deliver on the growth aspirations we have, but we also have ample opportunity as we continue to evaluate the right innovation and product offering to meet the consumers' needs.

[Operator]

Your last question comes from Jonathan Lamers from BMO Capital Markets.

[Jonathan Lamers, Analyst]

Rod, the commentary on foodservice revenue versus Q3 2019 was very helpful. I believe you said foodservice revenue overall is up 12% versus Q3 '19, but still down 9% on a volume basis, is that correct?

[Rodney W. Hepponstall, President, CEO & Director]

Let me get that exact number for you. I think the volume number was down 9%, and it was up approximately 12% over -- yes, 12% and then about 9% -- down 9% of volume, that's compared to 2019, right. When we look at our value-added category this quarter over 2020, it was up 36%.

[Jonathan Lamers, Analyst]

So would you have the same figures for retail?

[Rodney W. Hepponstall, President, CEO & Director]

Let's look out that data here right now. If we look at retail, I'm not sure.

[Paul A. Jewer, Executive VP & CFO]

Retail versus 2020 in terms of volume is relatively flat, in terms of dollars, it would be up because of inflation. Retail compared to 2019 would be down, but it would be down because of a particular customer loss we had in -- that we had in 2019 that we lost in early 2020.

[Jonathan Lamers, Analyst]

Right. And another detail, on the new customer wins, Rod, you mentioned, which should add, I believe was 3 million pounds and 4 million pounds, are those figures net of customer losses?

[Paul A. Jewer, Executive VP & CFO]

Yes, the customer -- yes, the customer loss number this quarter was actually quite insignificant, thankfully, Jonathan. So the -- both the innovation and the new business distribution gains were in excess of a small amount of lost business.

[Jonathan Lamers, Analyst]

And one more thing to circle up, during the quarter, it was widely reported that there was a large amount of Alaskan pollock being held at the U.S. Canada border for one of your competitors. Was this an issue that either benefited or hurt operations in Q3 in any meaningful way for High Liner?

[Rodney W. Hepponstall, President, CEO & Director]

No. I would say we continue to watch that as that may have continued to evolve, but it was relatively insignificant in the quarter for us. But it does certainly support our position as the only North American supplier with plants on both sides of the border to be in a position to help the industry should that arise.

[Jonathan Lamers, Analyst]

Okay. Now Rod, I know you said that you'll give us more comments on the 2022 outlook in the next release. This press release highlights the gross profit dollars have increased at a 6% CAGR since 2019, and year-to-date, that would be up about 3% -- at a 3% CAGR. Would you highlight that as a reasonable organic growth target for the business going forward?

[Paul A. Jewer, Executive VP & CFO]

Yes. I think it's probably premature for us to give a perspective on 2022. We're in the process now of building those plants and dealing with what we know is going to be some additional inflation. I mean, we've said our view is we can continue to grow adjusted EBITDA, that would continue to be the case as we look forward. We may see some shift in mix that will have some impact on gross profit as we continue to see some of the commodity business come back that was down in foodservice. And you may see gross profit dollars go up, but you may see rate not go up just because of the fact when you're passing out a lot of inflation, that is part of the reality as well.

[Jonathan Lamers, Analyst]

Can you comment at all on the level of investments you're contemplating for fixed costs and CapEx? I know you haven't finalized, but I'm just trying to get a -- put some brackets around maybe a high end and a low end?

[Paul A. Jewer, Executive VP & CFO]

Yes. No, sure. On the CapEx side, I mean, this year we're expecting we'll spend roughly $20 million in CapEx. Next year, I would expect that to be at least as a planned position closer to $25 million, but that will be subject to the ability to execute well on it. One of the challenges in the CapEx environment like every other environment is there's inflation and there's delays in terms of getting material and labor. But our desire is to continue to invest heavily in our existing infrastructure. So that's on the CapEx side. And on the marketing side, which we talked about as well, that investment is reflected in our numbers in 2021, and we anticipate we'll continue with a similar level of investment in 2022.

[Jonathan Lamers, Analyst]

So not a similar rate of increase, but just a similar level...

[Paul A. Jewer, Executive VP & CFO]

Similar level of investment, yes.

[Jonathan Lamers, Analyst]

Last question, on the dividend, following the increase this quarter, could you comment on how the Board is thinking about the dividend? I believe prior messaging was around payout ratio in the range of 30% to 35% of adjusted EPS and gradual increases as earnings recover?

[Paul A. Jewer, Executive VP & CFO]

Yes, no change to that. That would still be our long-term desired payout ratio. We will continue to support the dividend as we continue to grow the profitability in our business. And -- but we're not all the way up to our payout ratio yet. And one of the reasons for that is we continue to see opportunity to invest in the growth of our business, and that will remain our top capital allocation priority.

[Jonathan Lamers, Analyst]

Paul, the adjusted tax rate has been very low in some quarters, what type of tax rate would you use to assess a reasonable -- assess the payout ratio?

[Paul A. Jewer, Executive VP & CFO]

Yes. So for 2021, we have been lower than we anticipated. Normally, we would typically guide to the low-20s. We've been more like the mid-teens. And for now, I would say we expect to stay in that range. And that's just reflective of some of the mix in our business geographically and also some of the tax planning that we have in place.

[Operator]

There are no further questions at this time. You may please proceed.

[Rodney W. Hepponstall, President, CEO & Director]

To close, I want to thank you for joining the call today. We look forward to updating you with the results for the fourth quarter of 2021 on our next conference call in February. Please stay safe and well.

[Operator]

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