Clearwater reports first quarter results and positive outlook for 2015

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HALIFAX, May 1, 2015 /CNW/ – (TSX: CLR): Today Clearwater Seafoods Incorporated reported its first quarter results for the period ended April 4^th, 2015:

• Sales and adjusted EBITDA for the first quarter of 2015 were consistent at $75 million and $9.7 million versus 2014 comparative figures of $78 million and $10.2 million, respectively due to lower levels of available supply of product to sell
• Strong market demand in all regions for our core species continues to positively impact selling price
• Strong free cash flow¹ in the first quarter of 2015 of $6.6 million versus comparative figures of a use of cash of ($0.9) million primarily due to a larger contribution from working capital offset partially by higher capital expenditures (net of designated borrowings)
• Management maintains a positive outlook for fiscal 2015 due to expectations that strong market conditions in all key regions for core species shall continue for the balance of 2015, positively impacting both sales price and volumes with harvest conditions and volumes sold picking up in the latter half of the year
• Declares quarterly dividend of CAD $0.04 per share payable on May 28, 2015 to shareholders of record as of May 13, 2015

First quarter results

Clearwater reported sales of $75.4 million and adjusted EBITDA¹ of $9.7 million for the first quarter of 2015 versus 2014 comparative figures of $77.8 million and $10.2 million, respectively.

Difficult weather conditions both at sea and on land delayed harvesting opportunities and prolonged scheduled refits for scallops and clams in 2015.

The decline in sales of $2.4 million in the first quarter of 2015 primarily related to a reduction in available inventory for sale for both sea and Argentine scallops. For sea scallops, lower inventory levels from the end of 2014, poor weather conditions and one vessel that was on a planned refit in the first quarter of 2015 reduced the amount of inventory available for sale. Lower available inventory for Argentine scallops was a result of the timing of landings from a new vessel.

Gross margin as a percentage of sales of 19% remained consistent with the first quarter of 2014 as strong sales prices for the majority of species and a strengthening US dollar against the Canadian dollar that had a $1.7 million net positive impact on sales and margins were offset by higher harvesting costs for scallops and higher procurement costs for scallops and shrimp.

Earnings declined $16.2 million from a loss of $12.1 million in the first quarter of 2014 to a loss of $28.1 million for the same period in 2015. The loss for the first quarter of 2015 was primarily a result of an higher non-cash unrealized foreign exchange losses from the translation of the US dollar denominated debt of $20.3 million and non-cash mark-to-market adjustments on interest rate swaps and caps of $1.9 million as the US dollar strengthened against the Canadian dollar. In addition non-cash adjustments for share based compensation incentives of $3.3 million increased selling and administrative expense and impacted earnings.

As a result, adjusted earnings attributable to shareholders for the first quarter of 2015, which excludes non-cash and non-operational adjustments, was consistent at $1.3 million versus $1.2 million for the same period in 2014. Refer to the Management Discussion and Analysis for a breakdown of the impact.

Free cash flows¹ increased $7.5 million from a use of cash of ($0.9) million in the first quarter of 2014 to $6.6 million in the first quarter of 2015 due primarily to a larger contribution from working capital offset partially by higher capital expenditures (net of designated borrowings).

Dividends

The Board of Directors approved and declared a quarterly dividend of CAD $0.04 per share payable on May 28, 2015 to shareholders of record as of May 13, 2015.

Going forward the Board will continue to review the policy on a regular basis to ensure the dividend level remains consistent with Clearwater’s long term dividend policy.

These dividends are eligible dividends as defined for the purposes of the Income Tax Act (Canada) and applicable provincial legislation and, therefore, qualify for the favorable tax treatment applicable to such dividends.

Outlook

Global demand for seafood is outpacing supply, creating favorable market dynamics for vertically integrated producers such as Clearwater which have strong resource access.

Demand has been driven by growing worldwide population, shifting consumer tastes towards healthier diets, and rising purchasing power of middle class consumers in emerging economies.

The supply of wild seafood is limited and is expected to continue to lag behind the growing global demand. This supply-demand imbalance has created a marketplace in which purchasers of seafood are increasingly willing to pay a premium to suppliers that can provide consistent quality and food safety, wide diversity and reliable delivery of premium, wild, sustainably harvested seafood.

Clearwater, like other vertically integrated seafood companies, is well positioned to take advantage of this opportunity because of its licenses, premium product quality, diversity of species, global sales footprint, and year-round harvest and delivery capability.

We continue our progress through the first half of 2015 with the expectation that the five-year strategic plan goal of $100 million in adjusted EBITDA that we set out to accomplish at the beginning of 2012 is now within our reach – one full year ahead of our original timetable and that 2015 will be the year in which we lay the foundation for our next five year strategic plan (2016 – 2020), a plan which will see us continue to focus on executing with excellence against our core strategies.

“In the first quarter of 2015, challenging weather conditions at sea and on land delayed harvesting operations and scheduled vessel maintenance for our clam and scallop fleets. As a result, we experienced higher harvesting costs and lower inventory available for sale. This situation will carry over into early second quarter and while harvesting conditions have greatly improved, could prove difficult to completely offset within the quarter.” said Ian Smith, Chief Executive Officer.

Mr. Smith continued “However, we continue to experience strong global demand across virtually all markets and species and expect that we can recover lost ground as harvest conditions and available supply improve.”

Mr. Smith concluded “It has been a challenging start to 2015, but with our strongest sales periods still ahead of us, strong market conditions and a steadily improving supply position, we remain confident in our outlook for 2015.”

Our core strategies are:

• Expanding Access to Supply – In 2015, we will welcome a third vessel to our clam fleet and expand our harvest capacity by 60%. We will also continue to actively invest in access to supply including; acquisitions, joint ventures, as well as harvesting and royalty contracts.
• Target Profitable & Growing Markets, Channels & Customers – We continue to benefit from strong and increasing global demand for sustainably harvested, safe, traceable and premium wild seafood. In 2015, we will continue to advance our go-to-market approach in both traditional and new markets. This two—pronged approach takes advantage of our “on trend” health, sustainability, traceability, quality credentials in developed markets as well as the rapid urbanization, rising incomes and increased seafood consumption of emerging markets to increase our growth.
• Increase Margins by Improving Price Realization and Cost Management – In 2015 we will begin to implement our first “ocean to shelf” global supply chain. We have ambitious expectations to drive top and bottom line growth, capturing savings in global supply chain efficiencies and improved productivity.
• Pursue and Preserve the Long Term Sustainability of Resources on Land and Sea – As a leading global supplier of wild-harvested seafood – sustainability remains at the core of our business and our mission. Investing in the long-term health and the responsible harvesting of the oceans and the bounty is every harvester’s responsibility and the only proven way to ensure access to a reliable, stable and long-term supply of seafood. Sustainability is not just good business, like innovation it’s in our DNA. That’s why Clearwater has been recognized by the Marine Stewardship Council (“MSC”) and World Wildlife Fund (“WWF”) as a leader in sustainable harvesting for wild fisheries and how Clearwater can offer the widest selection of sustainably-certified species of any seafood harvester worldwide.
• Build Organizational Capability, Capacity & Engagement – This level of performance can only be achieved by a talented and engaged global workforce at sea and on land, employing well communicated strategies and plans with measurable objectives. It also requires an enduring commitment to invest in our people.

Other financial information

To assist readers in understanding the share of adjusted EBITDA attributable to shareholders of Clearwater and to assist users in understanding earnings we have included two additional measures – adjusted EBITDA attributable to Clearwater shareholders and adjusted earnings.

Adjusted EBITDA attributable to shareholders of Clearwater

Adjusted EBITDA attributable to shareholders decreased by $1.2 million or 18% to $5.3 million, primarily due to lower selling volumes and an increase in selling and administrative expenses.

For those readers who would like to understand the calculation of adjusted EBITDA please refer to the reconciliation of adjusted EBITDA within the non-IFRS measures, definitions and reconciliations section of the MD&A.

Adjusted earnings attributable to shareholders of Clearwater

To assist readers in estimating our earnings we have included a calculation of adjusted earnings.

Adjusted earnings attributable to shareholders were consistent at $1.3 million in the first quarter of 2015 versus $1.2 million in the first quarter of 2014.

For those readers who would like to understand the calculation of adjusted earnings please refer to the reconciliation of adjusted earnings within the non-IFRS measures, definitions and reconciliations section of the MD&A.

Key Performance Indicators

Financial Statements and Management’s Discussion and Analysis Documents

For a detailed analysis of Clearwater’s 2015 first quarter results please see Clearwater’s First Quarter Report for 2015, which includes Management’s Discussion and Analysis and the related financial statements. These documents can be found in the disclosure documents filed by the Corporation with the securities regulatory authorities available at www.sedar.com or on Clearwater’s website at www.clearwater.ca.

COMMENTARY REGARDING FORWARD-LOOKING STATEMENTS

This news release may contain “forward-looking information” as defined in applicable Canadian securities legislation. All statements other than statements of historical fact, included in this release, including, without limitation, statements regarding future plans and objectives of Clearwater, constitute forward-looking information that involve various known and unknown risks, uncertainties, and other factors outside management’s control. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect including, but not limited to, total allowable catch levels, selling prices, weather, exchange rates, fuel and other input costs. There can be no assurance that such information will prove to be accurate and actual results and future events could differ materially from those anticipated in such forward-looking information.

For additional information with respect to risk factors applicable to Clearwater, reference should be made to Clearwater’s continuous disclosure materials filed from time to time with securities regulators, including, but not limited to, Clearwater’s Annual Information Form. The forward-looking information contained in this release is made as of the date of this release and Clearwater does not undertake to update publicly or revise the forward-looking information contained in this release, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

No regulatory authority has approved or disapproved the adequacy or accuracy of this news release.

About Clearwater

Clearwater is one of North America’s largest vertically integrated seafood companies and the largest holder of shellfish licenses and quotas in Canada. It is recognized globally for its superior quality, food safety, diversity of species and reliable worldwide delivery of premium wild, eco-certified seafood, including scallops, lobster, clams, coldwater shrimp, crab and groundfish.

Since its founding in 1976, Clearwater has invested in science, people and technological innovation as well as resource ownership and management to sustain and grow its seafood resource. This commitment has allowed it to remain a leader in the global seafood market and in sustainable seafood excellence.

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1 – Refer to discussion on non-IFRS measures within the Management Discussion and Analysis

SOURCE Clearwater Seafoods Incorporated