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Exchange Rates Favour Clearwater Seafoods

by 5m Editor
17 May 2010, at 1:00am

CANADA - During the first quarter of 2010 strong sales volumes and selling prices as well as lower costs helped to partially offset the $8.9 million impact of a strong Canadian dollar compared to the same period in 2009, resulting in first quarter and rolling four quarter EBITDA of CA$9.4 million and CA$39.6 million, respectively, for Clearwater Seafoods Limited Partnership.

First quarter results for Clearwater Seafoods show a loss of $6,247 in 2010 compared to a profit of $16,600 in the first quarter 2009.

EBITDA also fell by $3,041 (33 per cent), this loss was lessened by a favourable exchange rate and market conditions.

Strong demand for its products allowed Clearwater to implement price increases in scallops and clams in the first quarter of 2010 and management expect to implement further increases in the second quarter.

Lower procurement costs in the second quarter of 2010 should continue to provide an opportunity for improved results in 2010. Several trends have negatively impacted year over year results, including a strong Canadian dollar relative to key foreign currencies and soft market conditions for live lobster, which reduced demand throughout the fourth quarter of 2009 and the first quarter of 2010.

Management and the Board are focused on reducing debt levels and leverage. During the first quarter of 2010, Clearwater reduced its net debt by $10.7 million to $194.6 million versus $205.3 million at December 31, 2009. Clearwater's strategy for maintaining liquidity and reducing leverage includes carefully managing its working capital and capital expenditures and liquidating assets which do not achieve an adequate return on capital. Over the next several years Clearwater will continue to focus on reducing its leverage by focusing on improving earnings levels and using the positive cash flow of the business to reduce debt. This should enable Clearwater to lower interest costs over time.

In December 2010 Clearwater Seafoods Income Fund has $45 million of convertible debentures that come due. These funds were invested by the Fund in Class C Units issued by Clearwater with similar terms and conditions, including maturity in December 2010. Clearwater also has approximately 1.3 billion in ISK denominated bonds (including CPI and accrued interest) that come due in September 2010 (approximately Canadian $10.5 million). Clearwater is currently investigating refinancing alternatives and is confident that the debentures and bonds will be refinanced before respective maturity dates.

Looking forward to the balance of 2010, Clearwater's management believes that there is potential to build on the 2009 results with improvements in earnings and cash flows. This is of course subject to any impact of weakened economic conditions in Asia, North America and Europe and a measure of stability in exchange rates. In addition, Clearwater expects continued soft market conditions in the first half of 2010 but expects that its efforts to improve results and reduce costs will show in the second half of 2010. Clearwater also believes that overall, as a food company, the business will continue to respond well in the current recessionary period as it has in 2009.

Colin MacDonald, Chairman and Chief Executive Officer, commented, "I am very pleased with the results for the first quarter of 2010 and am looking to continue to build on them."

5m Editor