Clearwater reports 2016 full year results and positive outlook for 2017

/Not for distribution to United States or for dissemination in the United States/

HALIFAX, March 8, 2017 /CNW/ - (TSX: CLR):

Today Clearwater Seafoods Incorporated reported its full year results for the period, ended December 31st 2016.

  • Sales and adjusted EBITDA1 of $611.6 million and $120.9 million, respectively for 2016 versus 2015 comparative results of $504.9 million and $109.7 million.  This represents growth rates of 21.1% for sales and 10.2% for adjusted EBITDA marking Clearwater's seventh consecutive year of top and bottom line growth.
  • Sales and adjusted EBITDA of $165.7 million and $29.5 million for the fourth quarter of 2016 versus 2015 comparative figures of $165.5 million and $39.0 million, respectively. 
  • Management maintains its positive outlook for fiscal 2017 and expects strong market conditions in global seafood demand to continue. Management also anticipates prices and volumes for all scallop species to strengthen, clam pricing and margins to respond positively to investments in marketing, promotion and distribution expansion and continued momentum in our UK business.
  • The Board declared a quarterly dividend of CAD $0.05 per share payable on April 3, 2017 to shareholders of record as of March 17, 2017.

Ian Smith, Chief Executive Officer, commented, "2016 will be recorded as the seventh consecutive year of record top and bottom line results for Clearwater. The single largest contributor to year over year growth was the addition of Macduff Shellfish, acquired in October 2015. Excluding Macduff, Clearwater's core business financial performance was below expectations as the company felt the combined effects of shortages of supply in northern shrimp and sea scallops. The addition of the Belle Carnell combined with our proprietary advancements in harvesting technology across the clam fleet resulted in the complete harvest of the Arctic surf clam Total Allowable Catch ("TAC") for the first time in the history of the fishery. While this bodes well for a strong 2017, the rapid increase in supply was not anticipated and outstripped the near term capacity of our existing channels and customers to the detriment of prices, margins and year-end inventory levels."

"In 2017, we expect to deliver another year of record sales and adjusted EBITDA with growth in virtually every market, channel and species."  

Mr. Smith concluded, "Harvest conditions challenged us in 2016 but our access to supply, advanced harvesting and processing technology, diversity of species and breadth of markets channels and customers positions us well for sustainable and profitable growth in 2017 and beyond."

Annual results

Clearwater reported record sales and adjusted EBITDA1 of $611.6 million and $120.9 million respectively for 2016 versus 2015 comparative results of $504.9 million and $109.7 million.  This represents growth rates of 21.1% for sales and 10.2% for adjusted EBITDA marking Clearwater's seventh consecutive year of top and bottom line growth.

Sales and adjusted EBITDA were positively impacted by strong sales prices for scallops and higher sales volumes for clams, lobster, langoustine, whelks and crab.  Higher average foreign exchange rates for the US dollar, Yen and the Euro had a net positive impact of $7.0 million, contributing to the improvement in sales.

The cash flows used in working capital increased against 2015 by $2.3 million to a use of $21.1 million for 2016.  The increased level of working capital resulted primarily from high inventory levels for clams and certain procured species, partially offset by timing of collections of accounts receivable.

Inventory levels increased during the third and fourth quarters of 2016 to higher than anticipated levels following successful harvesting in our clam fleet.  With the addition of the third vessel into the fishery in the latter part of 2015 combined with improved efficiency through the implementation of advanced harvesting technology and equipment, harvesting volumes increased significantly and therefore the company was able to catch the full clam quota for the first time in 2016.  Overall inventory levels increased through the second half of 2016 resulting in year end clam inventories closing $23.9 million higher than 2015.  Clam sales volumes increased 22.7% over the prior year with pricing adjustments, investments in marketing, promotion and distribution expansion initiated to increase sales.  The benefits of these investments were not fully realized in 2016 as it will take time to effect expanded distribution of clams.  Management anticipates the benefits will be realized through 2017 and inventories will return to normal levels by the end of the year.

Free cash flows1 were $10.2 million in 2016 as compared to $39.1 million in 2015.  Higher adjusted EBITDA was offset by higher working capital balances from inventory.  Other contributing factors included higher interest expense that resulted from higher inventory balances and timing of payments to non-controlling interests, that reduced free cash flow balances by approximately $12.7 million in 2016.  Cash taxes were also higher by $5.2 million as a result of a full year of Macduff operations. 

Leverage1 decreased to 4.2x adjusted EBITDA as at December 31, 2016 compared to 4.4x at the end of 2015.  Clearwater's long-term target for leverage 3.0x and Clearwater plans to be in line with this target within the next two years or less.

Earnings for the year increased $80.3 million to $59.6 million in 2016 primarily as a result of improvements in gross margin from strong sales prices for the majority of core species and the impact of lower average foreign exchange rates. The changes in foreign exchange resulted in non-cash unrealized foreign exchange gains on long term debt and forward contracts as the Canadian dollar strengthened against the US dollar and the GBP. 

Adjusted earnings1 attributable to shareholders declined $19.7 million to $23.8 million in 2016 primarily as a result of higher interest expense resulting from higher working capital balances and income tax expense.  Please refer to the Management Discussion and Analysis for a definition of adjusted earnings. 

Fourth quarter results

Clearwater reported sales and adjusted EBITDA1 of $165.7 million and $29.5 million for the fourth quarter of 2016 versus 2015 comparative figures of $165.5 million and $39.0 million, respectively. 

Reductions in coldwater shrimp and sea scallop Total Allowable Catch ("TAC") and poor live lobster quality, from the inshore fishery, combined with high shore prices resulted in lower margins.  Lower average foreign exchange rates as the Canadian dollar strengthened against the US dollar, Euro and GBP resulted in a negative impact to sales of $5.2 million.

Cash flows from working capital improved in the fourth quarter of 2016, by $31.3 million to $64.7 million compared to the same period in 2015, as Clearwater finished harvesting its quota of several species earlier in the year and these inventories were sold in the normal course of business.

Earnings for the fourth quarter of 2016 increased $16.2 million to earnings of $12.4 million primarily as a result of non-cash unrealized foreign exchange gains on long term debt and forward contracts as the Canadian dollar strengthened against the US dollar and the GBP. 

Adjusted earnings attributable1 to shareholders declined $18.2 million to $0.8 million primarily a result of species sales and size mix at lower gross margins and lower average foreign exchange rates.  Refer to the Management Discussion and Analysis for a breakdown of the non-IFRS measure and the related earnings attributable to shareholders. 

Dividends

The Board of Directors approved and declared a quarterly dividend of CAD $0.05 per share payable on April 3, 2017 to shareholders of record as of March 17, 2017.

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

The Board will continue 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.

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 shareholders of Clearwater and adjusted earnings attributable to shareholders of Clearwater. 

Adjusted EBITDA attributable to shareholders of Clearwater1

Adjusted EBITDA attributable to shareholders increased $11.5 million to $98.4 million as a result of strong sales prices for scallops and higher sales volumes for clams, lobster, langoustine, whelks and crab.  Higher average foreign exchange rates for the US dollar, Yen and the Euro had a net positive impact of $7.0 million, contributing to the improvement in sales.

For those readers who 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 Clearwater1

Adjusted earnings attributable to shareholders declined $19.7 million to $23.8 million in 2016 primarily as a result of higher interest resulting from higher working capital balances and income tax expense. 

For those readers who 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.

 

______________________________________

1 – Refer to discussion on non-IFRS measures within the Management Discussion and Analysis

 

Key Performance Indicators


Key Performance Indicators





In 000's of Canadian dollars

(unless otherwise indicated)
Year ended


December 31
2016


December 31
2015

Profitability





Adjusted EBITDA1

$

120,937

$

109,734






Adjusted EBITDA1(as a % of sales)


19.8%


21.7%






Sales

$

611,551

$

504,945

Sales growth


21.1%


13.5%






Financial Performance





Free cash flows1

$

10,242

$

39,089






Leverage (adjusted EBITDA multiple)1


4.2


4.4






Returns





Return on assets1


11.0%


13.8%






 

Financial Statements and Management's Discussion and Analysis Documents

For a detailed analysis of Clearwater's 2016 annual results please see Clearwater's 2016 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.

 

Selected Information











13 weeks ended



Year ended




December 31,
2016


December 31,
2015



December 31,
2016


December 31,
2015


Sales

$

165,690

$

165,503


$

611,551

$

504,945


Earnings (loss) attributable to shareholders


8,611


(7,060)



43,928


(37,608)


Basic earnings (loss) per share


0.13


(0.07)



0.71


(0.65)


Diluted earnings (loss) per share1


0.13


(0.07)



0.71


(0.65)













Adjusted earnings2 attributable to shareholders

$

793

$

18,970


$

23,766

$

43,457


Adjusted earnings per share2


0.01


0.32



0.38


0.76













Adjusted EBITDA 2

$

29,460

$

39,000


$

120,937

$

109,734


Adjusted EBITDA 2 attributable to shareholders


25,078


33,424



98,446


86,905













Shares outstanding, at period-end3


63,934,698


54,978,098



63,934,698


54,978,098


Weighted average shares on a fully diluted basis


63,934,698


54,978,098



62,050,325


57,489,017





1. Diluted earnings (loss) per share for the 13 weeks ended December 31, 2016 and 2015, and year ended December 31, 2015  was anti-dilutive.




2.  Please see the Management's Discussion and Analysis for a reconciliation of adjusted earnings and adjusted EBITDA to the financial statements.




3. On June 30, 2016, Clearwater issued 2,895,700 shares for $13.90 per share yielding gross proceeds of approximately $40.3 million.  Concurrently in June, Clearwater completed a non-broker private placement with certain existing shareholders for 1,080,000 shares at $13.90 per share for approximate gross proceeds of $15.0 million.  The total approximate gross proceeds from the offering were $55.3 million and the approximate proceeds net of expenses were $53.1 million.  Transaction costs net of deferred taxes of $0.7 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 the World'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

For further information: Investor relations, (902) 443-0550, Investorinquiries@clearwater.ca

RELATED LINKS
http://www.clearwater.ca

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