/Not for distribution to United States or for dissemination in the
United States/
HALIFAX, May 2, 2014 /CNW/ - (TSX: CLR):
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Sales grew by 13.9% in the first quarter of 2014 driven by strong
demand and higher exchange rates
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Adjusted EBITDA was stable as compared to first quarter 2013 as
seasonally higher costs and foreign exchange hedging contracts offset
the positive impact of higher sales during the quarter
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Free cash flow grew by $13.5 million in the quarter due to a positive
contribution from working capital offset partially by higher net
capital investments
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The twelve month rolling adjusted EBITDA and free cash flow for the
first quarter of 2014 increased $6.4 million to $78.5 million and from
$30.5 million to $40.0 million, respectively.
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Management maintains a strong positive outlook for the remainder of
2014 and sees a more favorable overall economic environment for
Canadian seafood exporters
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Targets for 2014 include sales growth of 5% or greater; growth in free
cash flows of 5% or greater; and return on assets of 12% or greater
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Declares quarterly dividend of $0.025 per share payable on May 28, 2014
to shareholders of record as of May 14, 2014.
First quarter results
Clearwater reported sales of $77.8 million and adjusted EBITDA1 of $10.2 million for the first quarter of 2014 versus 2013 comparative
figures of $68.3 million and $10.8 million, reflecting growth of 13.9%
in sales and stable EBITDA levels. Free cash flows1 were ($0.9) million versus ($14.3) million in the first quarter of
2013, an increase of $13.5 million.
The 13.9% growth in sales was driven by strong market demand and pricing
as well as a $5.9 million positive impact due to a foreign exchange
rate environment that had average spots rates for major currencies such
as the US dollar, Euro and Yen at higher levels in 2014 than the first
quarter of 2013. This was partially offset by lower sales volumes, due
primarily to the timing of shipments.
Adjusted EBITDA was stable as the positive impact of higher sales was
offset by higher fuel costs per pound and seasonally higher harvest and
procurement costs as well as payments made on foreign exchange hedging
contracts.
Net earnings for the quarter decreased by $10.4 million. The primary
reason for this difference was unrealized foreign exchange of $13.3
million. This non-cash adjustment relates to the fact that we are
required to adjust our US dollar denominated long term debt and US
dollar, Euro and Yen foreign exchange hedging contracts using higher
period end exchange rates on these currencies.
Hedging contract payments relate to foreign exchange contracts that
matured during the first quarter of 2014. Clearwater's foreign
exchange hedging program is designed to enable Clearwater to complete
its annual planning cycle and remove uncertainty regarding exchange
rates by locking in up to 75% of annual net foreign exchange exposure.
Should the current environment of a stronger US dollar, Euro and Yen
versus the Canadian dollar persist it will have a net positive impact
on 2014 sales but the hedging program would offset a portion of these
gains. The net impact on Adjusted EBITDA would remain positive. Looking
forward to 2015, Clearwater will realize a greater benefit of such
higher rates as any future hedging contracts it enters into would be at
rates closer to current spot rates.
Free cash flows for the first quarter of 2014 grew by $13.5 million over
the same period in 2013 primarily due to a $13.7 million improvement in
working capital, higher operating cash flows before working capital and
higher dividends received. This was partially offset by a $4.1 million
increase in planned capital expenditures.
Rolling twelve month results
Adjusted EBITDA for the twelve month period to the first quarter of 2014
increased by $6.4 million, or 8.9%, to $78.5 million from $72.1 million
for the same period in 2013.
Rolling twelve month free cash flow for the first quarter of 2014 increased $30.5 million to $40.0 million
from $9.1 million in the same period in 2013.
Growth in adjusted EBITDA and free cash flows were due to a strong and
growing market demand that improved sales prices for the majority of
species and yielded strong sales volumes for scallops, both of which
increased margins. Improvements in free cash flows were partially
offset by higher capital expenditures including scheduled refits and
higher 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
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 first 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 market place 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, "With the exception of
the last six months, all of our growth and increased profitability over
the last 4 years has occurred during a period of:
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Significantly unfavorable FX relative to most of the major currencies we
sell in;
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Weak economic conditions in many/most of our major markets including
Europe, USA and Japan; and
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An overall weak environment for global trade.
To this point our largest tailwind has been global demand and increasing
per capita consumption in the face of limited supply (the scarcity
factor). We are now operating in a much more favorable economic
environment for Canadian exporters, providing further tailwinds."
Mr. Smith continued "We posted strong sales results across our portfolio
of sustainably harvested, wild caught seafood during the first quarter
of 2014 and are maintaining our annual financial targets. Also, during
the quarter we continued to invest and advance several major capital
projects that are key to sustaining our long term growth, profitability
and competitive advantage."
For 2014 Clearwater has the following annual targets:
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sales growth - 5% or greater,
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adjusted EBITDA margins - 18% or greater,
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Free cash flow growth - 5% or greater
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Leverage - 3x or lower
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return on assets - 12% or higher
Dividends
The Board of Directors approved a quarterly dividend of CAD$0.025 per
share payable on May 28, 2014 to shareholders of record on May 14,
2014.
In making the determination of dividend levels Clearwater's Board gives
consideration to a number of key principles including:
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the expected future earnings;
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the amount of free cash flows that should be retained to reinvest in the
business;
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the assurance that all obligations can be met with respect to existing
loan agreements; and
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the desire to provide room for the dividend to increase in the future as
the business continues to grow and expand.
The Board is satisfied with current dividend levels.
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.
Key Performance Indicators
Key Performance Indicators
In 000's of Canadian dollars
(unless otherwise indicated)
Rolling twelve months ended
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March 29
2014
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March 30
2013
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Target
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Profitability
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|
|
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Adjusted EBITDA
|
$
|
78,515
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$
|
72,109
|
|
|
|
|
|
|
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Adjusted EBITDA
(as a % of sales)
|
|
19.7%
|
|
20.7%
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18.0%
or greater
|
|
|
|
|
|
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Sales
|
|
398,132
|
|
347,721
|
|
Sales growth
|
|
14.5%
|
|
4.0%
|
5%
or greater
|
|
|
|
|
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Financial Performance
|
|
|
|
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Free cash flows
|
|
39,588
|
|
9,079
|
|
|
|
|
|
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Leverage (adjusted EBITDA multiple)
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2.8
|
|
3.2
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3.0
or lower
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|
|
|
|
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Returns
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|
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|
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Return on assets
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12.4%
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12.9%
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12%
or greater
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Note: Refer to definitions within the Management Discussion and
Analysis
Management believes that it has the correct strategies and focus to
provide sustainable competitive advantage and long-term growth. These
strategies include:
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Expanding access to supply;
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Targeting profitable and growing markets, channels and customers;
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Innovating and positioning our products to deliver superior customer
satisfaction and value;
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Increasing margins by improving price realization and cost management;
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Preserving the long-term sustainability of our resources; and
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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
$100 million in adjusted EBITDA by the end of 2016 (i.e. in 5 years) or
earlier.
1 - Refer to definitions within the Management discussion and Analysis
2 - Clearwater's business experiences a predictable seasonal pattern in
which sales, margins and adjusted EBITDA are lower in the first half of
the year while investments in capital expenditures and working capital
are higher. This normally results in negative cash flows in the first
half of the year. We refer to the negative cash flows as "a net use of
cash" in this document.
Financial Statements and Management's Discussion and Analysis Documents
For a detailed analysis of Clearwater's 2014 first quarter results
please see Clearwater's First Quarter Report for 2014, which includes
Management's Discussion and Analysis and the related financial
statements. These documents can be found in the disclosure documents
filed by the Corporation with the securities regulatory authorities
available at www.sedar.com or on Clearwater's website at www.clearwater.ca.
Key Financial Figures (In 000 of Canadian dollars except share amounts)
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13 weeks ended
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Rolling 12 months ended
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March 29, 2014
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March 30, 2013
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March 29, 2014
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March 30, 2013
|
|
|
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Sales
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$
|
77,771
|
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$
|
68,297
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$
|
398,132
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$
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347,721
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(Loss) Earnings
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(12,144)
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(1,762)
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4,916
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|
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23,869
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Basic Loss per share
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(0.27)
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(0.06)
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N/A
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N/A
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Diluted Loss per share1
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(0.27)
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(0.06)
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N/A
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N/A
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Adjusted EBITDA 2
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$
|
10,224
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$
|
10,812
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$
|
78,515
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$
|
72,109
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|
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Shares outstanding, at period-end3
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54,978,098
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50,948,698
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N/A
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N/A
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Weighted average shares on a fully diluted basis
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54,183,443
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50,948,698
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N/A
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N/A
|
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Diluted loss per share for the 13 weeks March 30, 2013 was
anti-dilutive.
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Please see the Management's Discussion and Analysis for a reconciliation
of adjusted EBITDA to the financial statements.
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On February 4, 2014, Clearwater completed the issuance to the public, on
a bought deal basis, of 4,029,400 common shares from the treasury of
the Company. The shares were offered at a price of $8.50 per Share, for
gross proceeds to Clearwater of approximately $34 million.
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
Robert Wight, Chief Financial Officer, Clearwater, (902) 457-2369; Tyrone Cotie, Treasurer, Clearwater, (902) 457-8181