Clearwater reports second quarter 2011 results
- EBITDA grew by 44% to $12 million in the second quarter of 2011 due to continued expansion of gross margins.
- Fourth consecutive quarter with growth in EBITDA
- Management expects positive gross margins and earnings momentum to continue
- CSLP committed to spend $22.9 million mainly on fleet capital including $6 million to acquire full ownership of a jointly owned scallop vessel.
- Board approved plan to convert from income trust to public corporate structure on schedule to be put before unitholders for approval on August 25, 2011
On 12 August 2011 Clearwater Seafoods Limited Partnership ("Clearwater") reported its results for the second quarter of 2011.
Clearwater reported 2011 second quarter EBITDA of $12.0 million on sales of $78.8 million versus 2010 comparative figures of $8.41 million and $70.81 million representing growth in EBITDA of 44%.
For the year-to-date period, Clearwater reported EBITDA of $21.9 million on sales of $148.8 million versus 2010 comparative figures of $16.21 million and $140.11 million representing growth in EBITDA of 33%.
The growth in second quarter and year-to-date 2011 EBITDA of $3.6 and $5.7 million came as a result of improved sales prices and a shift to higher margin species, partially offset by lower sales volumes, higher harvesting costs per pound and a strengthening Canadian dollar. Clearwater experienced lower volumes in the first half of 2011 due primarily to planned refit work done on its fleet which reduced time available to harvest. Clearwater expects that with its full fleet harvesting in the second half of the year, its results will benefit from both higher volumes and continued higher prices.
1 - Refer to consolidation of entity previously proportionately consolidated within the critical accounting policy section in the MD&A for changes to the 2010 comparatives.
Outlook for 2011
Ian Smith, Chief Executive Officer, commented, "Management are encouraged by the second quarter and year-to-date 2011 results and the increasing global consumer and customer demand for our premium, wild, sustainably harvested seafood. We will continue to execute with excellence against our overall business strategy as well as key cost-saving and productivity initiatives. Market demand for our products is strong across all major segments and we have every expectation that our business momentum will continue in 2011."
New agreement to increase and upgrade fleet harvesting processing capabilities
Subsequent to quarter-end, Clearwater signed an agreement to purchase the remaining 40% share in a scallop vessel bringing its ownership up to 100%. The purchase price was $4 million and Clearwater intends to invest up to an additional $2 million to install new processing equipment on the vessel to improve its efficiency.
Clearwater's 2011 plant and vessel upgrade program is on track with the majority of the investments completed in the first half of 2011. Clearwater invested $12.6 million in the first half of 2011 and plans to spend an additional $3.5 million in the remainder of the year plus the $6 million noted previously for the scallop vessel, for a total investment in 2011 of approximately $22.9 million.
Foreign Exchange Hedging Program
Clearwater has a targeted foreign exchange hedging program that is designed to reduce volatility in net cash flows. This program focuses on using forward contracts to lock in exchange rates for up to 75% of expected sales receipts in its key currencies for periods up to 18 months forward, with a focus on the next 12 months. As of July 2, 2011 Clearwater has covered 69% of its estimated net Euro and Yen exposure for the remainder of 2011 and approximately 72% and 71% of its estimated Yen and Euro exposure, respectively, for the first quarter of 2012. As a result, Clearwater expects that the impact of exchange rate volatility on 2011 cash flows will be largely mitigated. In addition, Clearwater has significant natural hedges against US dollar exposures through loans denominated in US dollars.
Capital Structure
On May 31, 2011 the Board of Trustees of Clearwater Seafoods Income Fund (the "Fund") announced that it had determined that the Fund should convert from an income trust to a public corporate structure effective December 31, 2011. The Management Information Circular with respect to the trust conversion and the Fund's annual general meeting was mailed on August 3, 2011 and the meeting date is set for August 25, 2011.
Business strategy
Clearwater's core strategies to enable winning results and provide sustainable competitive advantage and long term growth include.
- "Expanding access to supply;
- Targeting profitable and growing markets, channels and customers;
- Innovating and positioning our products to deliver superior customer satisfaction and value;
- Increasing margins by improving price realization and cost management;
- Preserving the long-term sustainability of our resources; and
- Improving our organizational capability and capacity, talent, diversity and engagement
Financial Statements and Management's Discussion and Analysis Documents
For a detailed analysis of the Fund's 2011 second quarter results, please see the Management's Discussion and Analysis and the financial statements. These documents can be found in the disclosure documents filed by the Fund with the securities regulatory authorities available at http://www.sedar.com/ or at its website http://www.clearwater.ca/.
Key Financial Figures ($000's except unit amounts)
| Clearwater | 13 weeks ended | 26 weeks ended | |||||
| July 2, 2011 | July 3, 2010 | July 2, 2011 | July 3, 2010 | ||||
| Sales 1 | $78,820 | $70,844 | $148,055 | $140,106 | |||
| Net earnings (loss) 1 | (332) | (4,990) | 1,495 | (14,570) | |||
| EBITDA 1 | $12,042 | $8,348 | $21,896 | $16,414 | |||
| Units outstanding, at period-end | |||||||
| Limited Partnership Units | 51,126,912 | 51,126,912 | 51,126,912 | 51,126,912 | |||
| Fully diluted | 72,496,625 | 62,323,941 | 72,496,625 | 62,323,941 | |||
1. Please see the Management's Discussion and Analysis for a reconciliation of these amounts to the financial statements.
Note: In the table above comparative sales for 2010 and EBITDA have been adjusted to reflect the full consolidation of an entity that was previously proportionately consolidated.
The Fund does not consolidate the results of Clearwater's operations but rather accounts for the investment using the equity method. Due to the limited amount of information that this would provide on the underlying operations of Clearwater, the financial highlights of Clearwater are included above.
COMMENTARY REGARDING FORWARD-LOOKING STATEMENTS
This news release may contain forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors outside management's control including, but not limited to, total allowable catch levels, selling prices, weather, exchange rates, fuel and other input costs that could cause actual results to differ materially from those expressed in the forward-looking statements. The Fund and Clearwater do not undertake any obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances other than as required under applicable securities laws.
About Clearwater
Clearwater is recognized for its consistent quality, wide diversity and reliable delivery of premium wild, eco-labeled seafood, including scallops, lobster, clams, coldwater shrimp, crab and groundfish.
Since its founding in 1976, Clearwater has invested in science, people, technology, resource ownership and resource management to preserve and grow its seafood resource. This commitment has allowed it to remain a leader in the global seafood market.
For further information:
Robert Wight, Chief Financial Officer, Clearwater, (902) 457-2369; Tyrone Cotie, Director of Corporate Finance and Investor Relations, Clearwater, (902) 457-8181