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Clearwater Continues Strong Results Trend in Q2 2012

Salmonids Economics +2 more

CANADA - Clearwater Seafoods continues to strengthen its financial position and create shareholder value. Second quarter sales grew by 7.8 per cent.

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  • Delivering another quarter of strong sales and EBITDA growth following successful refinancing of debt facilities

Second quarter sales, gross margins and EBITDA

  • Sales grew by 7.8 per cent to $85.0 million
  • Gross margins increased to 21.6 per cent versus 16.0 per cent
  • EBITDA grew by 37.1 per cent to $16.5 million

First half of 2012 sales, gross margins and EBITDA

Sales grew by 5.3 per cent to $155.9 million Gross margin increased to 19.4 per cent versus 16.1 per cent EBITDA grew by 24.7 per cent to $27.5 million

Clearwater Seafoods Incorporated reported its results for the second quarter of 2012.

Clearwater reported sales of C$85.0 million and EBITDA of C$16.5 million in the second quarter of 2012 versus 2011 comparative figures of C$78.8 million and C$12.0 million representing growth of 7.8% in sales and growth of 37.1% in EBITDA.

Clearwater reported year-to-date sales of C$155.9 million and EBITDA of C$27.5 million versus 2011 comparative figures of C$148.1 million and C$22.0 million representing growth of 5.3 per cent in sales and growth of 24.7 per cent in EBITDA.

The growth in EBITDA came as a result of higher sales prices and higher sales volumes, partially offset by a shift to lower margin species and higher harvesting and procurement costs per pound in certain species. This resulted in quarterly gross margins of 21.6% versus 16.0% percent and year to date gross margins of 19.4% versus 16.1%

Year to date Clearwater experienced higher sales volumes due mostly to the timing of offshore coldwater shrimp landings and strong market response in China.

On June 6, 2012 Clearwater reported that it had successfully completed a series of capital market transactions that will substantially improve its capital structure. These refinancings provide a number of benefits including:

  1. Further strengthening of Clearwater's liquidity position - At closing there was in excess of C$20 million in availability on the asset based revolving credit facility which, when combined with expected strong cash flows in the last half of the year, is expected to result in an ongoing strong liquidity position.
  2. Reduction in Clearwater's cost of capital - Clearwater's weighted average cost of debt is expected to decrease by approximately two per cent per annum yielding a reduction of annual interest costs that, based on the debt facilities outstanding at close, approximates C$4.6 million per annum.
  3. Provides a solid and more flexible capital structure to allow management to continue to build shareholder value. The Company recorded a one-time charge of C$5.9M to Q2 and 2012 YTD earnings due to break fees and financing fees that were expensed in relation to the refinancing and the paying out of existing debt facilities.


Management expects earnings to remain strong in the second half of the year as inventory levels decline and margin improvements from better catch rates are realized in gross margins.

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 incomes and purchasing power of middle class consumers in emerging economies.

The supply of wild seafood is limited and is expected to lag 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.

Vertically integrated seafood company's like Clearwater are 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: "Management is satisfied with the progress made in the second quarter and year-to-date towards our 2012 long term financial targets."

Mr Smith continued "The Company's continuing strong earnings momentum, the C$450 million independent valuation of our quotas by TriNav Fisheries Consultants Inc. and the positive ratings issued by Moody's and Standard and Poors all contributed to Clearwater's ability to refinance its debt facilities on favourable terms in the second quarter, thereby providing the Company with the capital structure necessary to execute our growth plans while further reducing overall leverage."

Mr Smith expanded further "The MSC certification of our Arctic surf clams and Nova Scotia snow crab fisheries in July 2012 further supports our leadership position in sustainable seafood and our aspiration to be the world's most extraordinary, wild seafood company".

Mr Smith concluded "We will continue to execute with excellence against our overall business strategy as well as key cost-saving and productivity initiatives and we have every expectation that our earnings momentum will continue through the balance of fiscal 2012."