Clearwater eliminates three executive positions after reporting weak third-quarter results
Unhappy with his company’s recent performance, Clearwater Seafoods CEO Ian Smith announced the elimination of three executive positions – a move designed to streamline the company’s management and save it money.
Smith announced in Clearwater’s Q3 earnings report that the company’s president of global markets, president of global supply chain, and chief information officer have all been let go with immediate effect.
“We expect challenging supply and market conditions related to TAC and procured raw material pricing across several species, as well as foreign exchange volatility to persist into 2018. To adjust appropriately for these potential conditions, we have undertaken a restructuring that will significantly reduce our cost structure and capital spending as well as streamline the company’s organization structure,” Smith said in the report.
The changes will save the company a minimum of CAD 10 million (USD 7.9 million, EUR 6.8 million), though they will cost the company a one-time charge of between CAD 6 and 8 million (USD 4.7 million to 6.3 million, EUR 4.1 million to 5.4 million) in the fourth quarter of 2017.
In the third quarter of 2017, Clearwater posted sales valued at CAD 163.6 million (USD 128.9 million, EUR 110.6 million) and EBITDA of CAD 32.8 million (USD 25.9 million, EUR 22.2 million). That compares to 2016 Q3 sales of CAD 189.5 million (USD 149.3 million, EUR 128.2 million) and EBITDA of CAD 45.2 million (USD 35.6 million, EUR 30.6 million).
So far in 2017, Clearwater’s sales have totaled CAD 446.3 million (USD 351.6 million, EUR 301.8 million) and its EBITDA has reached CAD 80.1 million (USD 63.1 million, EUR 54.2 million), versus comparative results in 2016 of CAD 445.9 million (USD 351.3 million, EUR 301.5 million) and CAD 91.5 million (USD 72.1 million, EUR 61.9 million).
“The third quarter of 2017 was challenging compared to the same period of 2016. Lower sales volumes of frozen-at-sea ("FAS") shrimp, Argentine scallops and langoustines when combined with a stronger Canadian dollar resulted in lower sales and gross margin,” Clearwater said in its Q3 report. “Third-quarter foreign exchange rates were lower as the Canadian dollar strengthened against the U.S. dollar, [U.K. pound] and the yen, negatively impacting sales and gross margin.”
Sales volumes for FAS shrimp for both year-to-date and in Q3 2017 declined 36 percent due to lower TAC levels, the fact that much of the company’s landings happened late in the quarter and the completion of a scheduled vessel refit, the company said. In addition, slower market conditions for langoustines in the European Union reduced sales volumes and price, while delays in landings and processing for Argentine scallops reduced available supply in the quarter.
Clearwater also struggled with prices being down in Canada for clams and turbot compared to the same period of 2016. However, it reported its clam sales have increased 56 percent in volume as pricing and promotional incentives that began late in the third quarter of 2016 “continue to bear fruit.”
“These programs have been effective in increasing our channel penetration as well as customer and geographic distribution but at lower prices and margins than prior year,” Clearwater said.
The company said its debt load had increased for the rolling twelve-month period ending September 30, 2017, with its leverage moving to five times its adjusted EBITDA, up from 4.2 times adjusted EBITDA on 1 October, 2016.
“[This was] a result of lower adjusted EBITDA due to lower sales volumes for FAS shrimp, langoustines and lower clam margins and higher debt balances related to our major capital expenditure program which will be completed by the end of the year,” the company said. “We expect leverage at the end of 2017 to be lower as we continue to generate cash and reduce inventory levels through our peak selling period.”
Also in Clearwater’s Q3 report, the company also detailed a plan to partner with 13 Mi’kmaq communities in Nova Scotia to pursue a newly available license in the commercial Arctic surf clam fishery. The license is for 25 percent of the fishery’s quota.
In mid-September, Dominic LeBlanc, Canada’s Minister of Fisheries and Ocean (DFO), announced that 25 percent of the Arctic surf clam quota was being re-allocated for an indigenous fishery to start in 2018.Clearwater previously controlled 100 percent of the quota