fishing for better Q2 after stock plunges

Connors Bros. fishing for better Q2 after stock plunges on poor Q1 results

Maria Babbage Canadian Press
TORONTO (CP) – Connors Bros. Income Fund units sank as much as 20 per cent Tuesday after a first-quarter sales slump, but the major fish canner says sales should improve in the current quarter as product prices begin to stabilize.

“While these challenges are real, we are cautiously optimistic in our ability to manage through them over the balance of the year,” CEO Christopher Lischewski said in a conference call.

The fund’s units fell to a 52-week low of $14.75 following the news that profits had suffered from poor tuna sales, rising commodity costs and a stronger Canadian dollar. The units (TSX:CBF.UN) closed at $15.50, down $3.05 or 16.4 per cent.

Connors Bros., which now reports in U.S. dollars, said revenue fell to $221 million in the three months ended April 2, compared with $231.4 million in the year-ago period.

Net earnings of $7.2 million were down from $13.2 million.

Distributable cash, stated in Canadian funds, was $10.5 million, 24 cents per unit, down from $22.9 million, 52 cents per unit.

After adjusting for costs related to the takeover of U.S. tuna packer Bumble Bee on April 30, 2004, and the acquisitions of Castleberry’s and Sweet Sue/Bryan in January, the fund said pro forma distributable cash was 37 cents Cdn per unit in the latest quarter – rendering a payout ratio of 102 per cent.

Over the coming quarters, Connors said it must grapple with high commodity prices, resistance from retailers to higher selling prices, and the integration of its sardine and canned-meat operations.

Sales, marketing, logistics and administration of the Bumble Bee, Castleberry’s and Sweet Sue/Bryan acquisitions were integrated on May 2, Lischewski said Tuesday.

“The new news is that with the recent exit of Bumble Bee Holdings, the minority interest, we are now in the process of simplifying our corporate structure, which will allow us to eliminate related tax, audit and legal fees,” he added.

Connors also closed its Grand Manan, N.B., and Bath, Me., sardine plants and said it has found areas for improvement in the Blacks Harbour, N.B., and Prospect Harbour, Me., factories.

Quarterly volume was down by 1.4 million cases or 23 per cent, “due primarily to soft tuna consumption in the United States as retailers reduced merchandising efforts in response to higher prices,” the fund said.

Extreme weather patterns have caused surface temperatures in the western Pacific Ocean to rise, driving up tuna costs, Lischewski said.

“There are plenty of fish in the ocean for the canning grades of tuna that we buy, so it’s not a resource issue,” he said.

“The boats that are out there fishing, they can see the fish – the radars pick it up – but it’s swimming deep right now and the nets just can’t catch it.”

Lischewski added that high costs for steel, aluminum, fuel and other inputs create a “challenging” business climate, although “some softening is possible” by the fourth quarter – Canada

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