Clearwater reports record third quarter results

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HALIFAX, Oct. 31, 2014 /CNW/ – (TSX: CLR): Today Clearwater Seafoods Incorporated reported its third quarter results for the period ended September 27, 2014:

• Record third quarter sales of $134.1 million and adjusted EBITDA of $30.9 million driven by strong demand and higher exchange rates
• Year-to-date growth of 17.1% and 8.4% in sales and adjusted EBITDA, respectively
• Rolling twelve month adjusted EBITDA increased by $8.3 million to $83.9 million and free cash flow by $7.2 million to $32.4 million
• Announces 20% increase in dividend – Declares quarterly dividend of $0.03 per share payable on December 15, 2014 to shareholders of record as of November  28, 2014.
• Announces the appointment of Ron van der Giesen as President, Global Supply Chain.

Third quarter results

Clearwater reported record sales of $134.1 million and adjusted EBITDA¹ of $30.9 million for the third quarter of 2014 versus 2013 comparative figures of $114.0 million and $28.9 million, reflecting growth of 17.6% and 7.1% in both sales and adjusted EBITDA, respectively. 

The growth in both sales and adjusted EBITDA was driven by strong market demand that increased sales volumes, in particular for turbot and clams, and higher prices in scallops, shrimp and lobster as well as a $5.3 million positive impact due to a foreign exchange rate environment that had average spots rates for currencies such as the US dollar and Euro at higher levels in 2014 than the third quarter of 2013. 

Margins declined 2.3 basis points in the third quarter of 2014 due to higher harvesting costs for scallops and shrimp, partially offsetting the growth in adjusted EBITDA.

Free cash flows¹ were $6.2 million versus $11.4 million in the third quarter of 2013, a decline of $5.2 million, due to higher capital expenditures.

Year to date results

Clearwater reported year to date sales of $325.2 million and adjusted EBITDA¹ of $61.5 million versus 2013 comparative figures of $277.6 million and $56.8 million, reflecting growth of 17.1% and 8.4%, respectively. 

The growth in both sales and adjusted EBITDA was driven by strong market demand that increased sales volumes for clams, higher prices for scallops, shrimp and lobster as well as a $17.9 million positive impact due to a foreign exchange rate environment that had average spots rates for currencies such as the US dollar and Euro at higher levels in 2014 than 2013. 

Free cash flows¹ improved $6.3 million from a use in cash of  $(12.6) million in 2013 to  $(6.4) million in 2014 due to higher adjusted EBITDA and a $11.2 million improvement in working capital, partially offset by higher capital expenditures (net of designated borrowings) from scheduled refits and vessel conversions, and the timing of payments to minority interest partners.  

Seasonality

Clearwater’s business experiences a seasonal pattern in which sales, margins and adjusted EBITDA are lower in the first half of the year while investments in capital expenditures and working capital are typically higher resulting in lower free cash flows in the first half of the year and higher free cash flows in the second half of the year.

Results for the third quarter of 2014 are consistent with Management’s expectations for the quarter and in-line with its expectations for fiscal 2014. 

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.

Ian Smith, Chief Executive Officer, commented, “We are delighted with the results in the third quarter in both harvesting and sales.

Mr. Smith continued “We posted strong sales results across our portfolio of sustainably harvested, wild caught seafood and are maintaining our annual financial targets.  Also, we have continued to invest and advance several major capital projects that are key to sustaining our long term growth, profitability and competitive advantage.”

Mr. Smith concluded “Looking to the longer-term, we are encouraged by a recent Agricultural Outlook published by the OECD-FAO that predicts growth in seafood pricing is expected to outpace other proteins by almost 3 times from now until 2020.”

For 2014 Clearwater has the following annual targets:

• sales growth – 5% or greater
• free cash flow – 5% or greater
• Leverage – 3x or lower
• return on assets – 12% or higher

Dividends

The Board of Directors approved a 20% increase in the dividend and declared a quarterly dividend of CAD$0.03 per share payable on December 15, 2014 to shareholders of record as of November  28, 2014.

In making the determination of dividend levels Clearwater’s Board gives consideration to a number of key principles including:

• the expected future earnings;
• the amount of free cash flows that should be retained to reinvest in the business;
• the assurance that all obligations can be met with respect to existing loan agreements; and
• the desire for the dividend to increase in the future as the business continues to grow and expand.

The Board reviews dividends quarterly with a view to revisiting the appropriate dividend amount annually.

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.

Appointment of Vice President, Global Supply Chain

Ian Smith, Chief Executive Officer, commented “I am pleased to announce the appointment of Ron van der Giesen to the position of President, Global Supply Chain.  A former Unilever Executive, Ron brings more than 25 years of Fast-moving consumer goods (“FMCG”) global supply chain management and leadership experience to Clearwater. His proven track record, diverse global experience and demonstrated leadership abilities made him the ideal candidate for the position.”

Key Performannce Indicators

Management believes that it has the correct strategies and focus to provide sustainable competitive advantage and long-term growth.  These strategies include:

1. Expanding access to supply;
2. Targeting profitable and growing markets, channels and customers;
3. Innovating and positioning our products to deliver superior customer satisfaction and value;
4. Increasing margins by improving price realization and cost management;
5. Preserving the long-term sustainability of our resources; and
6. Improving our organizational capability and capacity, talent, diversity and engagement.

Management also believes that it has the people, processes and financial resources to execute these strategies and create value for its shareholders. This includes the capacity to execute Clearwater’s five year strategic plan. This plan, developed and initiated in 2012, is entitled 5-1-5 and includes goals to achieve $500 million in sales and $100 million in adjusted EBITDA by the end of 2016 (i.e. in 5 years) or earlier.

Financial Statements and Management’s Discussion and Analysis Documents

For a detailed analysis of Clearwater’s 2014 third quarter results please see Clearwater’s Third Quarter 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