Clearwater reports strong growth in sales, adjusted EBITDA and free cash flows in 2013Wed, 26 Feb 2014
/NOT FOR DISTRIBUTION TO UNITED STATES OR FOR DISSEMINATION IN THE UNITED STATES/
HALIFAX, Feb. 26, 2014 /CNW/ – (TSX: CLR):
- Sales and adjusted EBITDA growth of 10.9% and 9.5% in 2013, respectively
- Fourth quarter 2013 sales and adjusted EBITDA growth of 19.4% and 18.8%
- Growth of 50.6% in free cash flows to $26.1 million in 2013
- Free cash flows for the fourth quarter increased 2.4% to $38.7 million
- Declares quarterly dividend of $0.025 per share payable on March 24, 2014 to shareholders of record as of March 10, 2014.
- Management updates outlook for 2014 – sales growth of 5% or greater; growth in free cash flows of 5% or greater; and return on assets of 12% or greater
- On track to achieve five year plan of $500 million in revenue and $100 million in adjusted EBITDA by 2016
Fourth quarter 2013 results
Clearwater reported sales of $111.0 million and adjusted EBITDA1 of $22.4 million for the fourth quarter of 2013 versus 2012 comparative figures of $93.0 million and $18.8 million, reflecting growth of 19.4% and 18.8%, respectively. Free cash flows1 were $38.7 million versus $37.8 million in the fourth quarter of 2012, an increase of 2.4%. Margins improved 3.1 percentage points from 19.9% in 2012 to 23.1% for 2013.
Adjusted EBITDA increased due to strong market demand that resulted in an increase in sales volumes for scallops and shrimp, and improved sales prices for several species. Margins were partially offset by higher harvesting costs per pound for scallops and shrimp.
Free cash flow from operations for the fourth quarter of 2013 grew 9.1% from the same period in 2012 as a result of strong sales prices and volumes which contributed to improved margins. Improvements in free cash flow from operations were partially offset by higher capital expenditures from scheduled refits and vessel conversions, and the timing of payments to minority interest partners. Refer to the Management discussion and analysis for further information on free cash flow.
Annual 2013 results
Clearwater reported sales of $388.7 million and adjusted EBITDA1 of $79.1 million for 2013 versus 2012 comparative figures of $350.3 million and $72.2 million, reflecting growth of 10.9% and 9.5%, respectively. Results for free cash flow were $26.1 million in 2013 versus $17.3 million in 2012 an increase of 50.6%. Gross margins improved 1.8 percentage points, to 22.5% as compared with the same period in 2012.
Growth in adjusted EBITDA and free cash flow from operations were due to a strong and growing market demand that improved sales prices for scallops, clams and snow crab and strong sales volumes for scallops. Margins were partially offset by higher clam, scallops and shrimp harvest costs. Improvements in free cash flow from operations were partially offset by higher capital expenditures from scheduled refits and vessel conversions, and the timing of payments to minority interest partners.
Clearwater successfully met its annual 2013 profitability and financial performance targets of sales growth of 5% or greater; adjusted EBITDA margins of 18% or greater; and return on assets of 12% or greater.
On November 1, 2013 Clearwater announced the initiation of an annual dividend of $0.10 per share, payable in quarterly installments of $0.025 per share and on December 13, 2013 it made the first quarterly dividend payment.
Consistent with that announcement, today the Board of Directors approved a quarterly dividend of CAD$0.025 per share payable on March 24, 2014 to shareholders of record on March 10, 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 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 favourable tax treatment applicable to such dividends.
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 fourth quarter and annual 2013 are consistent with Management’s expectations for the year and show strong sales, margins and free cash flows.
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, “In 2013 Clearwater surpassed all previous records for sales revenue and adjusted EBITDA.”
Mr. Smith continued “We posted strong results across our portfolio of sustainably harvested, wild caught seafood with six out of seven core species showing increased revenues, margins or both. We also made significant improvements to our capital structure and advanced several major capital projects – activities critical to sustaining our long term growth, profitability and competitive advantage.”
For 2014 Clearwater set the following targets:
- sales growth – 5% or greater,
- adjusted EBITDA margins – 18% or greater,
- Free cash flow growth – 5% or greater
- Leverage – 3x or lower
- return on assets – 12% or higher
Key Performance Indicators
|Key Performance Indicators
In 000’s of Canadian dollars (unless otherwise indicated)
Year Ended December 31
|Adjusted EBITDA (as a % of sales)||20.4%||20.6%||18%
|Free cash flows||26,121||17,347|
|Leverage (adjusted EBITDA multiple)||2.7||2.9||3.0
|Return on assets||13.3%||12.1%||12%
|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:
- 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
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 $100 million in adjusted EBITDA by the end of 2016 (i.e. in 5 years) or earlier.
1- Refer to definitions within the Management discussion and Analysis
2- Clearwater’s business experiences a predictable seasonal pattern in which sales, margins and adjusted EBITDA are lower in the first half of the year while investments in capital expenditures and working capital are higher. This normally results in negative cash flows in the first half of the year. We refer to the negative cash flows as “a net use of cash” in this document.
Financial Statements and Management’s Discussion and Analysis Documents
For a detailed analysis of Clearwater’s 2013 fourth quarter and Annual results, please see Clearwater’s Annual Report for 2013, which includes Management’s Discussion and Analysis and the related financial statements. These documents can be found in the disclosure documents filed by the Corporation with the securities regulatory authorities available at www.sedar.com or on Clearwater’s website at www.clearwater.ca.
|Key Financial Figures (In 000 of Canadian dollars except share amounts)|
|13 weeks ended||Year Ended|
|December 31, 2013||December 31, 2012||December 31, 2013||December 31, 2012|
|Basic Earnings per share||(0.06)||0.17||0.12||0.29|
|Diluted Earnings per share1||(0.06)||0.15||0.12||0.29|
|Adjusted EBITDA 2||$||22,347||$||18,812||$||79,103||$||72,243|
|Shares outstanding, at period-end3||50,948,698||50,948,698||50,948,698||50,948,698|
|Weighted average shares on a fully diluted basis||50,948,698||60,069,575||55,277,321||65,536,260|
1. Diluted earnings per share for the 13 weeks and year ended December 31, 2013 and the year ended December 31, 2012 were anti-dilutive.
2. Please see the Management’s Discussion and Analysis for a reconciliation of adjusted EBITDA to the financial statements.
3. 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’scontinuous 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.
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