Clearwater reports record first half 2017 results supporting positive outlook for second half of 2017
HALIFAX, Aug. 3, 2017 CNW/ - (TSX: CLR):
Today Clearwater Seafoods Incorporated reported its second quarter results for the period ended July 1, 2017:
- Record sales and adjusted EBITDA1 of $282.7 million and $47.3 million for the first half of 2017 versus 2016 comparative results of $256.4 million and $46.3 million. This represents growth rates of 10.2% for sales and 2.2% for adjusted EBITDA.
- Sales and adjusted EBITDA of $154.3 million and $27.5 million for the second quarter of 2017 versus 2016 comparative results of $140.2 million and $27.5 million. This represents sales growth of 10.1% and consistent adjusted EBITDA.
- Strong sales volumes for clams and scallops were partially offset by lower Frozen-at-sea shrimp volumes available for sale related to a planned vessel refit.
- The Board declared a quarterly dividend of $0.05 per share payable on September 1, 2017 to shareholders of record as of August 12, 2017.
- After quarter end the Total Allowable Catch ("TAC") for sea scallops increased by 500 MT and the Company acquired a crab vessel and license in Scotland, expanding access to supply through vertical integration in the crab species.
Clearwater's business experiences a seasonal pattern in which sales, margins and adjusted EBITDA are lower in the first half of the year and higher in the second half, while investments in capital expenditures and working capital are typically higher in the first half of the year and lower in the second half. This results in lower cash flows in the first half of the year and higher cash flows in the second half.
Ian Smith, Chief Executive Officer, commented, "Record results for sales and adjusted EBITDA from strong global market demand for many of our core species in combination with strong catch rates that increased available supply (excluding shrimp) positions Clearwater for a positive outlook for the second half of 2017."
Ian Smith continued, "Sales volumes for clams has significantly increased by 59% versus the comparative period of 2016 as programs to expand our channel, customer and geographic distribution continue to bear fruit. Clam inventory volumes have declined 15% since the fourth quarter of 2016 as seasonably favorable harvest conditions have resulted in excellent catch rates and landings."
Mr. Smith further commented, "We anticipate solid results in the second half of 2017. Margins are expected to increase with favorable changes in sales mix, higher selling prices for select species, increasing sea scallop TAC and shrimp volumes as well as the benefits associated with CETA implementation late in the third quarter of 2017. As we move into our peak selling period, we also expect continued double-digit growth in clam sales with improving margins and significant reductions in clam inventory."
Quarter and First half 2017 results
Clearwater reported sales and adjusted EBITDA1 of $282.7 million and $47.3 million for the first half of 2017 versus 2016 comparative figures of $256.4 million and $46.3 million, respectively representing growth rates for sales of 10.2% and adjusted EBITDA of 2.2%. Gross margin as a percentage of sales was 18.7% compared to 24.8% in the first half of 2016.
For the second quarter of 2017, Clearwater reported sales and adjusted EBITDA of $154.3 million and $27.5 million, respectively, versus 2016 comparative figures of $140.2 million and $27.5 million. Gross margin as a percentage of sales was 19.2% compared to 26.3% in the second quarter of 2016 representing sales growth of 10.1% and consistent adjusted EBITDA.
Strong market demand for clams, and high catch rates for sea and Argentine scallops and whelk, increased available supply and resulted in sales growth of 10% for both the first half and the second quarter of 2017, partially offset by lower available supply of frozen-at-sea shrimp.
Sales volumes for clams significantly increased by 59% versus the comparative period of 2016. Programs to expand our channel, customer and geographic distribution introduced in the third quarter of 2016, have been effective in expanding clam sales, and reducing clam inventory volumes by 15% since the fourth quarter of 2016. Catch rates continue to be strong although lower than the first half of 2016 due primarily to difficult harvesting conditions in the first quarter of 2017.
Lower available supply for Frozen-at-sea shrimp resulted from a scheduled vessel refit that reduced the number of landings in the second quarter and for the first half of 2017. Sales for shrimp for the first half of 2017 were also negatively impacted by difficult harvesting conditions earlier in the year and reductions in Total Allowable Catch ("TAC").
Gross margin improvements from strong sales prices and volumes were offset by a sales mix weighted towards procured products, smaller clam sizes and formats and lower available supply for Coldwater shrimp due to a planned vessel refit.
Lower average foreign exchange rates on sales for the first half of 2017 resulted in a negative impact of approximately $4.2 million2, as the Canadian dollar strengthened against the US dollar, GBP, and Euro, partially offsetting the increase in sales and contributed to the decline in margins.
Cash flows from operations were $34.4 million and consistent for the first half of 2017 to the same period of 2016 as higher inventory for clams and scallops were offset by changes in accounts payable related to capital expenditures and higher procurement prices for lobster.
Free cash flow for the first half of 2017 was a use of cash of $65.6 million versus a use of cash of $61.5 million for the same period in 2016 driven by $7.7 million in additional capital expenditures (net of designated borrowings/funds), partially offset by timing in distributions to minority interest partners. 2017 will mark the end of Clearwater's extensive vessel refit program in addition to the completion of the replacement of the Ocean Concord.
Leverage
Leverage for the rolling twelve month period ending July 1, 2017 increased to 4.9 x adjusted EBITDA from 4.2 on July 2, 2016 primarily as a result of higher debt balances at the end of the second quarter of 2017 that resulted from an increase in capital expenditures and working capital. Inventory for clams and scallops were higher in the first half of 2017 versus the same period in 2016. As we move into our peak selling period, we expect continued growth in sales with improving margins and significant reductions in inventory that will reduce leverage by the end of 2017.
Dividends
The Board declared a quarterly dividend of $0.05 per share payable on September 1, 2017 to shareholders of record as of August 12, 2017.
The Board reviews dividends quarterly with a view to setting the appropriate dividend amount annually.
The Board continues to review the policy on a regular basis to ensure the dividend level remains consistent with Clearwater's 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.
Core Strategies
Expanding Access to Supply - Expanding access to supply of core species and other complementary, high demand, premium, wild and sustainably harvested seafood through improved utilization and productivity of core licenses as well as acquisitions, partnerships, joint ventures and commercial agreements.
Target Profitable and Growing Markets, Channels and Customers - Clearwater targets growing markets, consumers, channels and customers on the basis of size, profitability, demand for eco-label seafood and ability to win. Our focus is to win in key channels and with customers that are winning with consumers.
Innovate and Position Products to Deliver Superior Customer Satisfaction and Value - We continue to work with customers on new products and formats as we innovate and position our premium seafood to deliver superior satisfaction and value that is differentiated by relevant dimensions such as taste, quality, safety, sustainability, wellness, convenience and fair labour practices.
Increase Margins by Improving Price Realization and Cost Management - Leverage the scarcity of seafood supply and increasing global demand, in addition to continuing to invest in, innovate and adopt state-of-the-art technology, systems and processes.
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, renewable and long-term supply of seafood. Sustainability is not just good business, like innovation it's in our DNA.
Build Organizational Capability, Capacity and Engagement - We attract, train and retain the best talent to build business system and process excellence company-wide.
For those readers who would like to understand the calculation of adjusted earnings and adjusted earnings attributable to shareholders please refer to the reconciliation of adjusted earnings within the non-IFRS measures, definitions and reconciliations section of the MD&A.
| Key Performance Indicators and Financial Measures |
||||||||||||
| 13 weeks ended |
26 weeks ended |
Rolling twelve months ended |
||||||||||
| In 000's of Canadian dollars |
July 1 |
July 2 |
July 1 |
July 2 |
July 1 |
July 2 |
||||||
| Profitability |
||||||||||||
| Sales |
$ |
154,302 |
$ |
140,180 |
$ |
282,669 |
$ |
256,405 |
$ |
637,815 |
$ |
569,240 |
| Sales growth |
10.1% |
16.7% |
10.2% |
33.5% |
12.0% |
11.9% |
||||||
| Gross margin1 |
$ |
29,690 |
$ |
36,813 |
$ |
52,812 |
$ |
63,679 |
$ |
133,758 |
$ |
155,742 |
| Gross margin1 (as a % of sales) |
19.2% |
26.3% |
18.7% |
24.8% |
21.0% |
27.4% |
||||||
| Adjusted EBITDA1 |
27,542 |
27,454 |
47,310 |
46,319 |
121,929 |
124,129 |
||||||
| Adjusted EBITDA attributable to shareholders1 |
$ |
23,551 |
$ |
21,811 |
$ |
39,349 |
$ |
36,573 |
$ |
101,223 |
$ |
101,248 |
| Adjusted EBITDA attributable to shareholders (as a % of sales)1 |
15.3% |
15.6% |
13.9% |
14.3% |
15.9% |
17.8% |
||||||
| Earnings attributable to shareholders |
$ |
9,489 |
$ |
9,962 |
$ |
11,661 |
$ |
24,470 |
$ |
31,120 |
$ |
12,643 |
| Basic earnings (loss) per share |
$ |
0.15 |
$ |
0.16 |
$ |
0.18 |
$ |
0.41 |
$ |
0.49 |
$ |
0.21 |
| Diluted earnings (loss) per share1 |
$ |
0.15 |
$ |
0.16 |
$ |
0.18 |
$ |
0.41 |
N/A |
N/A |
||
| Adjusted Earnings attributable to shareholders1 |
$ |
72 |
$ |
1,378 |
$ |
2,065 |
$ |
5,159 |
$ |
21,265 |
$ |
42,810 |
| Adjusted earnings (loss) per share |
$ |
0.00 |
$ |
0.02 |
$ |
0.03 |
$ |
0.09 |
$ |
0.33 |
$ |
0.70 |
| Cash Flows and Leverage |
||||||||||||
| Cash from operations |
$ |
(16,432) |
$ |
(25,729) |
$ |
(34,388) |
$ |
(33,910) |
$ |
63,152 |
$ |
43,634 |
| Free cash flows1 |
$ |
(31,599) |
$ |
(34,111) |
$ |
(65,486) |
$ |
(61,464) |
$ |
(4 015) |
$ |
7,748 |
| Leverage1 |
N/A |
N/A |
N/A |
N/A |
4.9 |
4.2 |
||||||
| Returns |
||||||||||||
| Return on assets1 |
N/A |
N/A |
N/A |
N/A |
10.5% |
12.6% |
||||||
Financial Statements and Management's Discussion and Analysis Documents
For a detailed analysis of Clearwater's 2017 second quarter results please see Clearwater's Second Quarter Report for 2017, 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.
______________________________________________________________________________________
1 – Refer to discussion on non-IFRS measures within the Management Discussion and Analysis
2 – Foreign exchange impact on sales relative to 2016 and realized forward contracts in first half of 2017.
SOURCE Clearwater Seafoods Incorporated
Investor relations, (902) 443-0550, [email protected]
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