Attention Business/Financial Editors
CLEARWATER REPORTS ANNUAL 2007 RESULTS
/Not for release over US newswire services/
HALIFAX, March 28/CNW/ - (TSX:CLR.UN):
Sales for 2007 were $302.7 million with a gross profit of $65.9 million compared
to $315.7 million and $87.3 million respectively in 2006.
2007 distributable cash generated was $13.1 million, $18.4 million less than
distributions paid.
Trustees continue work on strategic review.
Expectations for 2008 include an improved market for scallops and higher clam
earnings with the delivery of the converted Arctic Endurance.
Clearwater Seafoods Income Fund (the “Fund”) today reported fourth quarter and
annual 2007 results that demonstrate improved earnings for the second half of
2007 compared to the first half of the year. The quarterly and annual results,
however, were lower than the strong 2006 results due to a number of factors
including vessel disruptions and foreign exchange.
The results for the second half of 2007 demonstrated a continued improvement in
profit margin over the first half of the year, however distributable cash was
weaker than 2006 and managements expectations for 2007. A number of factors had
significant impacts on Clearwater's 2007 performance.
First, the significant depreciation of the US dollar during the year and
especially in the last two quarters, negatively impacted margins by $18.1
million when current effective rates are compared to those of 2006. The
fluctuating exchange rates also resulted in realized foreign exchange income of
$0.9 million in 2007 on Clearwater's economic hedging program, a reduction of
$12.1 million compared to 2006. While the Fund maintains a currency management
program to mitigate the risk of exchange fluctuations, during the year foreign
exchange had a $30.2 million impact on sales and distributable cash when
compared to 2006.
More than 80% of Clearwater's sales are denominated in currencies other than the
Canadian dollar, whereas the majority of its expenses and all of its cash
distributions are in Canadian dollars. As a result, foreign exchange
fluctuations can have a material impact on Clearwater's financial results and
the amount of cash available for distribution to unit holders.
Second, Clearwater's ability to harvest clams was limited by the loss of two
clam vessels, the Atlantic Pursuit in December 2006 and the Seahunter in July of
2007. There was also the need to perform maintenance on the vessels in
operation throughout the year. Clearwater is currently investing approximately
$16 million to convert a vessel from its shrimp fleet into a clam vessel, with
delivery expected in the second quarter of 2008. Once the vessel becomes
operational in the third quarter of 2008, this investment in new harvesting
capacity will result in growth in sales volumes and greater harvesting
efficiencies, which will serve to boost the profitability of the clam business.
The re-assignment of the vessel from the shrimp fleet is not expected to have
any material impact on the shrimp business, as Clearwater anticipates that the
quota will be included in a new joint venture.
And third, the scallop market in 2007 was weaker than anticipated. Clearwater
was able to partially mitigate the impacts of the softer market by increasing
its sales volumes by 18%, however the margins did not reflect this increased
volume. The scallop market rebounded in the second half of the year as compared
to the first half with increased sales volumes, however its growth was slower
than had been expected and there was no increase in selling prices when
converted to Canadian dollars. Nevertheless, Clearwater was able to decrease
its level of inventory, as the volume of scallops sold in the fourth quarter
increased significantly compared to the earlier quarters of 2007.
The factors listed above led to distributable cash generated in 2007 of $13.1
million, versus distributions declared of $31.5 million, an $18.4 million
shortfall. On January 21, 2008 the Trustees of the Fund decided to suspended
monthly distributions due to the financial results. “The Trustees will continue
to monitor the distribution policy with distributions to be determined quarterly
and paid in arrears after considering the traditional criteria in determining
the distribution policy.” said Tom Traves, Chairman of the Trustees.
Strategic Review
“The Trustees recognize the importance of ensuring the Fund offers the best
return for our investors. As a result, in the third quarter of 2007 we
initiated a strategic review to examine various opportunities that might exist
to improve unit holder value, from strategic partnerships to alternative
structures for the company. We are continuing to work together with our
financial advisor, BMO Nesbitt Burns, to determine the opportunities available
to Clearwater given the Company's 2007 performance and the Canadian government
income trust legislation that will impose a tax on all income trusts beginning
in 2011. There is, of course, no certainty that any transactions or fundamental
changes to Clearwater's business will result from this strategic review.
However, the Trustees and Directors felt that such a detailed review was
warranted given the challenges the Company faced in 2007. Regardless of the
direction in which this review may take us, our primary goal will remain, as
always, to maximize unit holder value,” stated Tom Traves.
Summary
In summary, Clearwater's 2007 gross profit was significantly impacted by a soft
scallop market, sudden and considerable depreciation in the US dollar, and
vessel disruptions in the clam business. The stronger earnings in the lobster
and shrimp businesses helped mitigate the impacts of restricted harvesting
capacity in the clam business and the negative impact from foreign exchange.
“Clearwater has built its reputation over more than three decades on its ability
to deliver a high quality product to its customers, regardless of what external
challenges might come its way from time to time,” said Colin MacDonald, Chief
Executive Officer of Clearwater. “Our performance in mitigating the impacts of
these factors, and continuing to supply our customers despite them, shows that
we are well-equipped to return our business to the level of performance we and
our customers and investors expect. We have leading-edge technology, strong
quota ownership, and the industry's most committed employees and we look
forward to working to deliver continuing improvements in performance for 2008.”
Outlook
Clearwater weathered a very challenging year and experienced a number of
negative external factors that impacted the business. Foreign exchange
negatively impacted sales and earnings by approximately $30.2 million. The clam
business was impacted by the loss of two vessels and the maintenance issues with
maintaining two older vessels. Finally, we experienced a slower scallop market
compared to the prior year. However, Clearwater remains well-positioned to
build on our three decades as a Canadian leader in the global seafood business.
Having suspended monthly distributions in January 2008 due to lower
distributable cash generated in 2007 and the strategic review in progress,
Clearwater will continue to monitor its financial position on a monthly basis.
At the same time, the Trustees and special committee are committed to thoroughly
examining all the options available, to maximize unit holder value and foster
long-term growth, through the strategic review that we announced in the fourth
quarter of 2007.
We hold significant quotas in our key species, we have leading-edge, innovative
harvesting and processing technologies and we are vertically integrated. Our
business strategies to deliver long-term value are sound. Management continues
to believe there is strong potential for growth in the clam business. With the
delivery of the new clam vessel in 2008, combined with the ocean bottom mapping
technology, the clam business will begin to realize the returns of these
investments in 2008 and beyond. In addition, in 2008 we anticipate a higher
Canadian scallop total allowable catch, improved profit in the lobster business
and reduced overhead costs. All of this provides the opportunity for improved
results in 2008.
We have an outstanding and dedicated workforce, excellent quota positioning,
global customer relationships that span decades and we look forward to taking up
the opportunities that 2008 will bring.
Colin MacDonald
Chief Executive Officer
Clearwater Seafoods Limited Partnership
March 28, 2008
2007 Fourth Quarter Conference Call and Webcast
Clearwater will review its fourth quarter financial results via conference call
on Friday, March 28, 2007 at 4:00 p.m. Eastern Time (5:00 p.m. Atlantic). The
call will be chaired by Colin MacDonald, Clearwater's Chief Executive Officer,
and he will be joined by Robert Wight, the Chief Financial Officer. You can
access the call by dialing 866-250-4877 or 416-646-3097. A replay will be
available through April 28, 2008 at 877-289-8525 or 416-640-1917 using pass code
21250964 (pound key). To listen to the web cast of this event, please enter
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2194280 in your web
browser.
Financial Statements and Management's Discussion and Analysis Documents
For an analysis of Clearwater and Clearwater Seafoods Income Fund's quarter and
annual results, please see management's discussion and analysis and annual 2007
financial statements. These documents can be found in the disclosure documents
filed by Clearwater Seafoods Income Fund with the securities regulatory
authorities available at www.sedar.com or at its website (www.clearwater.ca).
Financial Highlights and Significant Items
Key Financial Figures:
See attachment
1. Please refer to the Distributable Cash definition in the MD&A for detailed
reconciliations of these amounts. The Fund receives distributions from
Clearwater and in turn distributes them to its unitholders. As such,
distributable cash for the Fund is equal to the distributions received and
paid.
2. The Fund does not consolidate the results of Clearwater's operations but
rather accounts for the investment using the equity method. Due to the
limited amount of information that this would provide on the underlying
operations of Clearwater, the financial highlights of Clearwater are
included above.
About Clearwater
Clearwater is recognized for its consistent quality, wide diversity and reliable
delivery of premium seafood, including scallops, lobster, clams, coldwater
shrimp, crab and ground fish.
Since it's founding in 1976, Clearwater has invested in science, people,
technology, resource ownership and resource management to preserve and grow its
seafood resource. This commitment has allowed it to remain a leader in the
global seafood market.
For further information: Robert Wight, Chief Financial Officer, Clearwater,
(902) 457-2369; Tyrone Cotie, Director of Corporate Finance and Investor
Relations, Clearwater, (902) 457-8181.
