- Third quarter sales and adjusted EBITDA1 were $175.2 million and $34.5 million, up 6.7% and 12.4% respectively versus the prior year.
- Year-to-date sales and adjusted EBITDA1 were $449.2 million and $84.8 million, up 3.9% and 5.6% respectively versus the prior year.
- Adjusted EBITDA and gross margin as a percentage of sales expanded to 18.9% and 20.2% respectively, in the first nine months of 2019 compared to 18.6% for both in the prior year.
- Cash from operations was $22.7 million in the third quarter, up 7.0% versus the prior year.
- The Board of Directors declared a dividend of $0.05 per share payable on December 2, 2019 to shareholders of record as of November 18, 2019.
Third Quarter Results
Clearwater achieved record year-to-date sales of $449.2 million. Year-over-year adjusted EBITDA growth was 5.6%.
Sales for third quarter and year-to-date grew 6.7% and 3.9% respectively, as compared to the same periods of 2018. Strong harvest conditions, landings and available supply in scallops, clam and langoustines were partially offset by competitive market conditions for scallops, particularly in smaller sizes and FAS shrimp.
Adjusted EBITDA for third quarter and year-to-date was $34.5 million and $84.8 million respectively, as compared to $30.7 million and $80.3 million in 2018. Gross margin as a percentage of sales increased in the third quarter and year-to-date due to strong harvest conditions and favourable mix for clam and scallops. Steady market demand for lobster was partially offset by increased competition in key markets. Overall, access to supply and customer demand in procured species remained strong as compared to the prior year.
Strong sales growth continued in Asia and Europe with year-to-date sales up 9.0% in Asia and third quarter sales up 16.3% in Europe.
Average foreign exchange rates realized on sales had a net negative impact on sales of $0.8 million in the third quarter and a net positive impact of $1.2 million year-to-date, as compared to the same periods of the prior year.
Cash from operations and free cash flow were $22.7 million and $18.3 million, respectively, in the third quarter versus $21.2 million and $18.9 million in the prior year reflecting higher inventory due to strong harvest conditions and increased access to supply of procured species partially offset by timing of sales and distributions to non-controlling interests.
Debt and Leverage
Leverage for the third quarter 2019 was 4.9x compared to 5.0x for the same period in 2018. Leverage improved compared to the third quarter of 2018 as adjusted EBITDA attributable to shareholders increased.
On November 5, 2019, the Board of Directors approved and declared a dividend of $0.05 per share payable on December 2, 2019 to shareholders of record as of November 18, 2019.
The Board reviews Clearwater’s dividends 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 favourable tax treatment applicable to such dividends.
Clearwater’s business experiences a predictable seasonal pattern in which sales, margins and adjusted EBITDA are lower in the first half of the year and higher in the second half. Investments in capital expenditures and working capital are typically higher in the first half of the year and lower in the second half. This normally results in lower cash flows, higher debt balances and higher leverage in the first half of the year and higher cash flows, lower debt balances and lower leverage in the second half.
For full year 2019, we expect top and bottom-line growth across multiple species and regions, led by Asia-Pacific. Growth will be driven by the strong harvest conditions and improved access to supply for procured species along with continued margin expansion and cost control.
Strong harvest conditions and improved access to supply for procured species enabled investment in high value inventory in the first nine months of the year. Clearwater benefited from this strong inventory position as third quarter sales volume, revenue, margins and adjusted EBITDA growth was consistent with seasonal expectations.
Adjusted EBITDA growth and margin expansion will drive cash flow in the final quarter of 2019. Consistent with third quarter performance, our high value inventory will continue to fuel distribution expansion into new markets and channels along with strengthening overall results.
Clearwater has access to the full clam total allowable catch for 2019. In the first quarter of 2019, Clearwater entered into a voluntary agreement forging a 50-year partnership with fourteen Indigenous communities. The partnership provides a mechanism for significant Indigenous participation and stable long-term access in the clam fishery, providing protection for existing jobs in the fishery while also creating meaningful economic, employment and capacity building benefits for First Nations. Importantly, the partnership expands Clearwater’s strategic business relationships with Indigenous partners and supports Clearwater’s commitment to diversity in the workplace while recognizing the value of Clearwater’s previous investments in science, technology and infrastructure.
This Landmark agreement provides millions of dollars in benefits to First Nations through annual revenue sharing, training, leadership, development, employment, as well as procurement of goods and services from Indigenous suppliers. Beyond this agreement, Clearwater will continue to advance working relationships with Indigenous partners to the benefit of all parties.
Clearwater’s core fisheries are managed for long-term sustainability. We have taken and will continue to pursue timely and carefully considered measures in response to near-term challenges including; adjustments to harvest plans, pricing and distribution strategies, technology innovation and cost and working capital reductions. These measures will generate strong cash flows from operations, reduce debt and leverage, yield a higher return on assets and generate positive returns in shareholder value.
Global demand for seafood is being driven by a 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 is well positioned to take advantage of this opportunity with its proprietary licences, premium product quality, diversity of species, global sales footprint and year-round harvest and delivery capability.
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 licences 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. 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 its 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 Management Discussion and Analysis.
Financial Statements and Management’s Discussion and Analysis Documents
For a detailed analysis of Clearwater’s 2019 third quarter results please see Clearwater’s Third Quarter Report for 2019, 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 contains “forward-looking information” as defined in applicable Canadian securities legislation, including but not limited to, statements regarding future plans and objectives of Clearwater. Forward-looking information typically, but not always, contains statements with words such as “anticipate”, “does not anticipate”, “believe”, “estimate”, “forecast”, “intend”, “expect”, “does not expect”, “may”, “will”, “should”, “plan”, or other similar terms that are predictive in nature.
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 due to various known and unknown risks, uncertainties, and other factors outside of managements’ control. Examples may include, but are not limited to, total allowable catch levels, resource supply, 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.
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, clam, coldwater shrimp, langoustine, whelk, 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
View original content: http://www.newswire.ca/en/releases/archive/November2019/05/c6990.html