Clearwater reports record fourth quarter results

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HALIFAX, Feb. 25, 2015 /CNW/ – (TSX: CLR): Today Clearwater Seafoods Incorporated reported its fourth quarter and annual results for the period ended December 31, 2014:

• Record annual sales of $445 million and record adjusted EBITDA of $87 million versus 2013 comparative figures of $389 million and $79 million reflecting growth of 14% and 10% in sales and adjusted EBITDA, respectively
• Annual free cash flow growth of 18% to $31 million driven by improvements in adjusted EBITDA and working capital
• Fourth quarter 2014 sales of $119 million and adjusted EBITDA of $26 million reflecting growth of 8% and 16%, respectively
• Announces 33% increase in dividend – Declares quarterly dividend of CAD $0.04 per share payable on March 24, 2015 to shareholders of record as of March 10, 2015

Fourth quarter results

Clearwater reported sales of  $119.5  million and adjusted EBITDA¹ of  $25.9  million for the fourth quarter of 2014 versus 2013 comparative figures of  $111.0  million and  $22.3  million, reflecting growth of 8% and 16% in sales and adjusted EBITDA, respectively. 

Gross margin improved by $4.2 million in the fourth quarter of 2014 to $29.9 million and gross margin as a percentage of sales improved to 25% in the fourth quarter of 2014 from 23% for the same period of 2013, due to higher sales prices and favourable exchange rates. 

Strong market demand has resulted in increased sales prices for the majority of species and a strengthening US dollar against the Canadian dollar in the fourth quarter of 2014 had a $2.9 million positive impact on sales and margins.

Free cash flows¹ were $37.2  million in the fourth quarter of 2014 versus  $38.7  million for the same period of 2013, a decline of  $1.5  million, due primarily to scheduled debt repayments.

2014 annual results

Clearwater reported record sales and adjusted EBITDA¹ of  $444.7  million of  $87.4  million respectively versus 2013 comparative figures of  $388.7  million and  $79.1  million.

The 14% and 10% growth in sales and adjusted EBITDA, respectively was driven by strong market demand that provided higher sales prices for the majority of species as well as strengthening foreign exchange rates for the US dollar and the Euro against the Canadian dollar.  These higher foreign exchange rates had a $20.7 million positive impact on sales and gross margin in 2014. 

The improvement in gross margin was partially offset by higher per pound harvesting and procurement costs, higher administrative and selling costs and realized foreign exchange losses.

Harvesting and procurement costs were higher due to an increase in harvest costs for scallops and shrimp and higher shore prices for procured inshore shrimp, lobster and snow crab.

Administrative and selling costs, excluding items not included in the determination of adjusted EBITDA, increased $2.2 million due primarily to increases in salaries and benefits.  

Realized foreign exchange losses on working capital and hedging contracts were higher in 2014 due primarily to a higher exchange rate on the USD in excess of the rates Clearwater had contracted for in its hedging contracts.

Free cash flows¹ improved by  $4.7  million to  $30.9  million in 2014 due to higher adjusted EBITDA and a  $9.4  million improvement in working capital, partially offset by higher capital expenditures from scheduled refits and vessel conversions (net of designated financing) and the timing of payments to minority interest partners.  

Dividends
The Board of Directors approved a 33% increase in the dividend and declared a quarterly dividend of CAD $0.04 per share payable on March 24, 2015 to shareholders of record as of March 10, 2015.

This increase reflects the extraordinary results achieved in 2014.  Going forward the Board will 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 begin 2015 with the expectation that the five-year strategic plan goals we set out to accomplish at the beginning of 2012 are now within our reach – 1 full year ahead of our original timetable!  2015 will also be the year in which we lay the foundation for our next five year strategic plan (2016 – 2020) which will continue to focus on executing with excellence against our six core strategies,” said Ian Smith, Chief Executive Officer.

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 fully 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 there 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 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.

Looking forward, we will no longer disclose future targets for sales growth, free cash flow growth, return on assets and leverage as we believe the track record we have achieved on these measures over the past four years provides a reasonable base for users of our financial reports to form educated estimates of possible future performance.

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

In 2014 adjusted EBITDA attributable to shareholders increased by $6.0 million or 9% to $71.1 million, in line with the 10% growth in total EBITDA,  primarily due to improvements in gross margin of $15.5 million, partially offset by an increase in selling and administrative expenses and realized foreign exchange losses on working capital and hedging contracts.

For those readers that 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. 

In 2014 adjusted earnings attributable to shareholders increased $6.9 million, or 44% to $22.6 million primarily as a result of improvements in gross margin of  $15.5  million and lower interest expense of  $1.6  million.  The improvements in adjusted earnings were partially offset by an increase in selling and administrative expenses and realized foreign exchange losses on working capital and foreign exchange contracts.

In 2014 adjusted earnings per share increased to $0.41 per share from $0.31 per share in 2013.  This increase was due to an improvement in adjusted earnings that was partially offset by an increase in the number of outstanding shares due to a share issue completed early in 2014. 

For those readers that 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.

Financial Statements and Management’s Discussion and Analysis Documents

For a detailed analysis of Clearwater’s 2014 annual results please see Clearwater’s Annual Report for 2014, 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.

SOURCE Clearwater Seafoods Incorporated