CANADA: Mixed 2012 results for Clearwater Seafoods
By Michelle Russell | 11 March 2013
- Net profit down 0.9%
- Adjusted EBITDA up 18%
- Net sales climb 5.3%
Clearwater Seafoods has booked a drop in full-year earnings but said it recorded the highest sales and adjusted EBITDA in its history.
In the 12 months to the end of December, earnings fell 0.9% to C$22.7m (US$22.1m), the company reported today (11 March). Adjusted EBITDA, however, was up 18% to C$72.2m as a result of higher sales volumes, particularly of coldwater shrimp.
Sales in the period amounted to C$350.4m, a 5.3% increase on the prior year.
CEO Ian Smith said: "In 2012 the company had the highest revenues and adjusted EBITDA in its history. Management is pleased with the progress made towards our financial targets for creating shareholder value and expects that earnings and free cash flow momentum will continue through 2013."
Clearwater reports strong 2012 annual and fourth quarter results
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HALIFAX, March 11, 2013 /CNW/ - (TSX: CLR, CLR.DB.A):
Clearwater continued to strengthen its financial position and create shareholder value in the fourth quarter of 2012 growing sales, adjusted EBITDA1 and generating strong free cash flows:
In 2012 Clearwater had the highest revenues and adjusted EBITDA in its history Annual results for 2012 include sales growth of 5.3% to $350.4 million and adjusted EBITDA growth of 18.1% to $72.2 million. Results for fourth quarter of 2012 include sales growth of 6.7% to $93.0 million and adjusted EBITDA1 growth of 16.7% to $18.8 million. Free cash flow $17.1 million in 2012. Today, Clearwater Seafoods Incorporated ("Clearwater") reported its results for the annual and fourth quarter of 2012.
Clearwater reported sales of $350.4 million and adjusted EBITDA1 of $72.2 million versus 2011 comparative figures of $332.8 million and $61.2 million representing growth rates of 5.3% in sales and 18.1% in adjusted EBITDA. This represents the fourth consecutive year of improved results.
For the year growth in sales and adjusted EBITDA came as a result of higher sales volumes, particularly of coldwater shrimp, as well as higher sales prices for most species. The impact of the growth in sales on adjusted EBITDA was partially offset by a shift to lower margin species and higher procurement costs in certain species.
Fourth quarter 2012 sales were $93.0 million and adjusted EBITDA was $18.8 million versus 2011 comparative figures of $87.1 million and $16.1 million, representing growth rates of 6.7% in sales and 16.7% in adjusted EBITDA.
Free cash flows grew in the fourth quarter of 2012 to $37.8 million versus $15.9 million in 2011. For the year, free cash flows grew to $17.1 million versus $2.2 million in 2011. The improvements to free cash flow in 2012 were driven by growth in adjusted EBITDA of 18.1%, lower capital expenditures and a reduction in investment in working capital.
Free cash flows were used to reduce debt during the quarter. This, combined with higher adjusted EBITDA has resulted in an improvement in leverage from 3.8x at the December 31, 2011 to 2.9x as at December 31, 2012.
1 - Refer to definitions within the Management discussion and Analysis
Global demand for seafood is outstripping supply, creating favorable market dynamics for vertically integrated producers such as Clearwater with 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 2012 the company had the highest revenues and adjusted EBITDA in its history. Management is pleased with the progress made towards our financial targets for creating shareholder value and expects that earnings and free cash flow momentum will continue through 2013."
Management's commitment to creating shareholder value
Building on the success achieved in 2012, management has set the following targets for 2013:
sales growth - 5% or greater, adjusted EBITDA margins - 18% or greater, leverage - 3.0x; and return on assets - 12% or higher on a sustained basis. The sales and adjusted EBITDA ratios are annual goals whereas the return on assets and leverage ratios will be accomplished over time.
Key Performance Indicators In 000's of Canadian dollars (unless otherwise indicated) Years Ended December 31 2012 2011 Target Profitability
Adjusted EBITDA* 72,243 61,188 N/A Adjusted EBITDA (as a % of sales) 20.6% 18.4% 18% Or Greater
Sales* 350,447 332,785 N/A Sales growth 5.3% 5.5% 5.0%
Free cash flows 17,053 2,197 N/A
Leverage 2.9 3.8 3.0 Or lower
Return on assets 12.1% 10.7% 12% Or Greater
- Supplemental information provided for target Note: Refer to definitions within the Management Discussion and Analysis
Management has undertaken six initiatives to create shareholder value.
Growing adjusted EBITDA and sales sustainably - Clearwater has experienced continued growth in adjusted EBITDA and sales by controlling costs and improving productivity, product mix and prices. Sales growth in 2012 of 5.3% exceeded Clearwater's 5% annual sales growth target. Annual adjusted EBITDA as expressed as a percentage of sales continues to be strong at 20.6% and exceeded 2011 rates of 18.4% by 12%.
Clearwater will continue to lever its vertical integration existing segments to capture a growing share of the seafood value chain through the introduction of value-added new products in certain core species.
Management expects that the trend of earnings growth will continue in 2013 however, lower available supply of inventories as of December 31, 2012 and poor weather conditions for harvesting early in the year may limit growth in the first quarter of 2013. However, continued strong results in the second half of the year will enable Clearwater to continue the trend of growth in annual results in 2013.
Generating strong free cash flows and improving leverage - Clearwater is focused on generating increasing free cash flows and improving leverage on an annualized basis through generating strong cash earnings, managing its working capital and carefully planning and managing its capital expenditure program. Clearwater's operations have a predictable seasonal pattern in which adjusted EBITDA is higher in the second half of the year and capital expenditures and inventories are higher in the first half of the year. This results in lower free cash flows, higher debt balances and higher leverage in the first half of the year and higher free cash flows, lower debt balances and lower leverage levels in the second half of the year.
Free cash flows grew in the fourth quarter of 2012 to $37.8 million versus $15.9 million in 2011. For the year, free cash flows grew to $17.1 million versus $2.2 million in 2011. The improvements to free cash flow in 2012 were driven by growth in adjusted EBITDA of 18.1%, lower capital expenditures and a reduction in investment in working capital. Reductions in working capital were primarily a result of a decline in inventory during the year.
Original source: Clearwater Seafood
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