Bedford, Nova Scotia, Canada-headquartered Clearwater Seafoods has reported robust second quarter results for the period which ended on July 2, 2016, with sales and adjusted EBITDA of C$140.2 million and $27.5 million representing respective growth rates of 20% and 24%. Year to date figures of $256.4 million and $46.3 million show even higher growth rates of 33% and 45%, respectively.
The increases were due primarily to higher sales volumes, improved margins and favorable exchange rates. Volume growth was largely attributable to sales of langoustine, whelk and clams. This was partially offset by lower scallop and shrimp volumes associated with the timing of landings late in the quarter. At the end of the quarter, inventories in all species were solid and support a bullish sales outlook for the third and fourth quarters of 2016.
Sales and gross margin were positively impacted by strong market demand in all regions as well as higher selling prices in home currencies and higher average exchange rates, partially offset by increased procurement costs and sales mix.
Gross margin as a percentage of sales improved to 26.3% versus 24.0% in 2015 due to strong sales prices for the majority of species as well as a strengthening US dollar and Japanese yen against the Canadian dollar, which had a $5.6 million net positive impact on sales and margins.
Adjusted earnings attributable to shareholders for the second quarter of 2016 decreased $3.3 million to $1.4 million, mainly as a result of higher interest expense due to an increase in loan facilities on October 30, 2015, related to financing the acquisition of Macduff Shellfish Group Limited, one of Europe’s leading wild shellfish companies. This was partially offset by higher sales volumes, strong sales prices and higher average foreign exchange rates.
The Macduff investment strengthens Clearwater’s global market position in complementary premium wild seafood through expanding access to supply by more than 15 million pounds, or 20%.
The company’s second quarter 2016 performance includes sales of $29.5 million and adjusted EBITDA of $3.8 million for Macduff, the second full quarter in which the shellfish specialist’s results are reported. Year to date, results include sales of $55.3 million and adjusted EBITDA of $5.8 million for Macduff.
Looking forward, Aberdeen, Scotland-based Macduff anticipates growth in 2016. In June of 2015 it acquired an additional four scallop trawlers and licenses (increasing the fleet to 13 mid-shore scallop harvesting vessels) along with additional preferred procurement access in whelk.
Global demand for seafood is outpacing supply, creating favorable market dynamics for vertically integrated producers with strong resource access, reported Clearwater. 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 imbalance has created a marketplace 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.
As a vertically integrated seafood company with a current market capitalization of over $900 million, Clearwater is prepared 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.
CEO Ian Smith commented: “Exceptional harvesting conditions – especially in May and June of the second quarter of the year, have positioned us well for a strong performance in the third and fourth quarters of 2016.”
