Clearwater has booked a mixed set of results for 2013, with higher sales and operating profit but a drop in net earnings.

Sales rose to C$388.7m (US$349m) in the 12 months to 31 December, up from C$350.3m in the comparable period of last year. Operating profit was also up, the Canadian seafood group revealed, with EBITDA rising to C$79.1m from C$72.2m.

However, Clearwater saw net earnings fall to $15.2m, down from a profit of $22.7m in 2012.

The bottom line was hit by higher financing costs. But Clearwater was upbeat on the outlook for 2014 having secured a refinancing deal that included the issuance of 3.5m common shares. In total the group raised new finance of A$34m.

In the coming year, Clearwater expects sales growth of 5% or greater and ddjusted EBITDA margins of 18% or greater, the company said.

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Clearwater reports strong growth in sales, adjusted EBITDA and free cash flows in 2013

/NOT FOR DISTRIBUTION TO UNITED STATES OR FOR DISSEMINATION IN THE UNITED STATES/

HALIFAXFeb. 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.

Dividends

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.

Seasonality

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.

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 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

Original source: Clearwater Seafoods