Clearwater reports first quarter 2011 results

June 1, 2011 10:29

Clearwater reported 2011 first quarter EBITDA of $9.9 million on sales of $69.2 million versus 2010 comparative figures of $7.91 million and $69.31 million representing a growth in EBITDA of 25.1%, reports with reference to Clearwater.

 The growth in first quarter 2011 EBITDA of $2.0 million came as a result of improved sales prices and a shift to higher margin species, partially offset by lower sales volumes, higher harvesting costs per pound and a strengthening Canadian dollar.

1 - Refer to consolidation of entity previously proportionately consolidated within the critical accounting policy section in the MD&A for changes to the 2010 comparatives.

Outlook for 2011

 Management is encouraged by the first quarter 2011 results and the increasing global consumer and customer demand for its premium, wild, sustainably harvested seafood. Taken in combination with the successful execution of its' pricing strategy, cost savings and other productivity initiatives, management believes Clearwater is poised to deliver sales, operating margin and earnings growth through the balance of 2011.

 Included in these productivity initiatives are Clearwater's 2011 plant and vessel upgrade program and a restructuring of its Canadian Lobster operations. The plant and vessel upgrade program is on track with the majority of the investments to be completed in the first half of 2011. In total, Clearwater expects to invest up to $15 million to upgrade its fleet harvesting and plant processing capabilities in 2011.

 In addition, Clearwater has restructured its lobster operations. We have closed a surplus dry land storage facility for live lobster in Clark's Harbor, Nova Scotia and reinvested and expanded capacity in two of our newer and larger lobster holding facilities located in Arichat and Lockeport, Nova Scotia. With a net neutral impact to EBITDA in 2011, this restructuring positions Clearwater to improve profitability and productivity within a highly competitive segment of the seafood industry that has good long term growth prospects.

Foreign Exchange Hedging Program

 Clearwater has a targeted foreign exchange hedging program that is designed to reduce volatility in net cash flows. This program focuses on using forward contracts to lock in exchange rates for up to 75% of expected sales receipts in its key currencies for periods up to 18 months forward. As of May 31, 2011 Clearwater has covered 69% of its estimated net Euro and Yen exposure for the remainder of 2011. As a result, Clearwater expects that the impact of exchange rate volatility on 2011 cash flows will be largely mitigated. In addition, Clearwater has significant natural hedges against US dollar exposures through loans denominated in US dollars.

Capital Structure

In 2009 the Canadian Federal government announced tax changes for income trusts that allow trusts to convert to a corporation on a tax-free basis prior to 2013.

Clearwater has reviewed its corporate structure in light of this legislation and determined that a public corporate structure is more appropriate than a trust structure for the business. The business has the ability to defer income taxes and it plans to continue to retain earnings to reduce debt and provide for asset replacement and growth.

As a result, Clearwater's Board of Trustees has determined that the Fund should convert from an income trust to a public corporate structure effective January 1, 2012. The Fund is developing its conversion plan and further details will be announced in the second quarter of 2011. The Fund's annual general meeting will be deferred from its initially announced date of June 22, 2011 to August 25, 2011 so that this may be addressed at the same meeting as the annual general business.

Investment by Cooke Aquaculture

 On May 4th Cooke Aquaculture announced they had purchased an interest in Clearwater's trust units representing approximately 10% of Clearwater's voting units.

 Cooke Aquaculture, based in Blacks Harbour, New Brunswick is a well established leader in the high quality aquaculture of salmon and trout. Clearwater is pleased that an experienced and successful Canadian seafood company like Cooke sees the same value and growth opportunity in company that they do.

New Vice President Customer Relations

Effective April 26th, 2011, Greg Morency has joined Clearwater as Executive Vice President, Chief Commercial Officer responsible for Clearwater's global sales and marketing organization.

 "A veteran of the food and consumer products industry, Mr. Morency, has held senior leadership positions at Heinz, Unilever, International Paper and Tate & Lyle. Mr. Morency also has extensive industry experience in North America, Europe and Asia including his most recent position as Vice President and General Manager, Asia Pacific for Tate & Lyle. Greg's proven track record, international experience in sales and marketing as well as his knowledge of global consumer markets make him an ideal fit for this key position," said Ian Smith, Chief Executive Officer of Clearwater.

Leading the global sales and marketing organization, Mr. Morency will take responsibility and be the driving force behind the execution of two of Clearwater's core strategies: targeting profitable and growing markets, channels and customers; and, innovating and positioning products to deliver superior customer satisfaction and value.

Business strategy

Ian Smith, Chief Executive Officer, commented,

 "We will continue to execute with excellence against our overall business strategy as well as key cost saving and productivity initiatives. Market demand for our products is strong across all major segments and we have every expectation that our business momentum will continue in 2011. Furthermore, we believe that our six core strategies of:

  • 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

will enable winning results and provide Clearwater with sustainable competitive advantage and long term growth."

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