Cooke Omega considers asset sale, books 1Q earnings growth despite retaliatory tariffs

Cooke Omega is considering the strategic sale of its human nutrition segment, which management views as non-core, within the next few years, according to two sources following the company.

The privately-owned fish products and aquaculture company’s human nutrition segment has experienced revenue declines recently, with 2018 sales of USD 109m down 20% year-over-year, the two sources said.

Meanwhile, overall 1Q19 earnings showed YoY growth, even as retaliatory 25% trade tariffs imposed by China cut Cooke off from some of its customers, according to the two sources and an additional source following the company.

As of 3Q18, Cooke had roughly 20,000 tons of extra inventory, and earlier this year the company managed to offload around 8,000 tons at a discount to non-China clients, one of the sources said.

“They are offering discounts since the product is aging and quality decreasing, but should still be moderately profitable if they can get it out at a reasonable pace, which would mean during Q2 or early Q3. Any longer than that and they’ll take a loss,” the same source added.

Cooke generated 1Q19 EBITDA of USD 16.3m, up 10% from USD 14.8m in 1Q18, and flat sequentially versus 4Q. Revenue for the quarter totaled USD 81m, up 14% from USD 71m in 1Q18.

Cooke’s animal nutrition segment offset the declines in the human nutrition segment during 1Q, with fish oil sales up 150% and fish meal up 17% YoY, one of the sources said.

Cooke is 5.3x levered based on about USD 352m of total debt and USD 66m of LTM adjusted EBITDA. As of 31 March, the company’s liquidity stood at USD 81.5m, comprising USD 3.4m of cash and USD 78.1m of revolver availability.

Cooke’s USD 330m 8.5% senior secured notes due 2022 were last quoted today at 98.5 to yield 9.12%, according to a sellsider. The notes last traded in size on 29 April at 98.875 to yield 8.864%, according to MarketAxess.

Cooke Omega did not respond to a request for comment.

2019 Debtwire

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