Premium Brands bolstering Clearwater Seafoods with additional acquisitions

Premium Brands Holdings Corporation said it expects a shift in business model and future acquisitions to benefit Clearwater Seafoods, which it purchased in 2020.

Premium Brands' Q1 2023 results revealed Clearwater recorded a net loss of CAD 24.1 million (USD 17.8 million, EUR 16.4 million) in the quarter. Its revenue was CAD 124.5 million (USD 92.4 million, EUR 84.9 million) in Q1 2023, up from CAD 121 million (USD 89.8 million, EUR 82.5 million) in Q1 2022, but it lost CAD 3 million (USD 2.2 million, EUR 2 million) before payments to shareholders in the quarter, compared to positive earnings before shareholder payments in Q1 2022 of CADS 11.4 million (USD 8.4 million, EUR 7.7 million).

According to Premium Brands, the increase in sales was related to multiple factors: The sale of excess crab inventory carried over from 2022, strong pricing for the company’s self-harvested species, and stronger exports of lobster and brown crab to China following the loosening of pandemic-related restrictions. 

“There was a variety of challenges in the quarter for Clearwater,” Premium Brands CFO Will Kalutycz said during a 15 May investor call.

Most of the challenges the company faced in the quarter were temporary, and related to the weather and the timing of inventory sales, Kalutycz said. Despite the difficult quarter, Kalutycz said the company expects Clearwater to make up the losses in the “back half of the year” as markets improve for the company’s products.

“We’re still very positive on the year for the business, and expect a decent cash flow coming in,” he said.

Premium Brands CEO George Paleologou said the company has been continuing to work with Clearwater Seafoods to shift its business model away from the commodity market to value-added products.

“We’ve worked with Clearwater’s management team for the last couple years to reconfigure the business plan,” he said. 

Premium Brands as a whole  is making a push in its seafood business to sell more value-added products across the category and Clearwater will be a part of that, Paleologou said.

“With Clearwater we’re working on a number of acquisitions which will move them into the value-added space,” he said. “There’s a lot going on in the pipeline with regards to value-added seafood initiatives.”

Paleologou said the company is “quite advanced” in announcing a “Clearwater west type of transaction” involving a business in British Columbia, Canada.

Premium Brands’ Q1 2023 results presentation indicates the company is poised to acquire a seafood business with CAD 40 million (USD 29.6 million, EUR 27.2 million) in sales, and that the acquisition has agreed to terms and is in the “due diligence” stage. Four other acquisitions for seafood companies are currently in the negotiations stage, the company said, with the companies in question having combined sales of CAD 361 million (USD 267 million, EUR 246 million).

Kaliutycz said a potential trade dispute between Canada and China would not heavily impact Premium Brands as a whole, due to its U.S.-based seafood businesses. 

“The big driver of our lobster business is Ready Seafood, which is actually a U.S. company,” he said. Any dispute between Canada and China would likely benefit Ready Seafood, he said.

Overall, Premium Brands posted CAD 1.43 billion (USD 1 billion, EUR 976 million) in revenue in Q1 2023, up from CAD 1.25 billion (USD 927 million, EUR 853 million) in Q1 2022. The company also posted adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of CAD 110 million (USD 81.6 million, EUR 75 million), up from CAD 95.8 million (USD 71.1 million, EUR 65.3 million) in 2022.

"As we emerge from the challenges of the past several years, we continue to gain momentum posting another quarter of record sales and adjusted EBITDA,” Paleologou said. “Looking forward, we expect the steady improvement in our performance to accelerate through the year as many of our businesses have recently completed or are near completing major capacity expansions that will support a variety of new product launches as well as expansion into additional markets and channels.”  

Photo courtesy of Premium Brands


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