Great (s)hakes

Fishing boat offloading at I&J, Cape Town. Fishing boat offloading at I&J, Cape Town.

It’s tough times in the food sector but it looks like Cape Town’s big frozen hake specialists, I&J and Sea Harvest, are set to land bigger profits – thanks largely to the weak rand driving export revenues and offsetting a competitive domestic market.

In the six months to end December, AVI controlled I&J increased revenue 15% to R824m, but managed to pump up operating profits by 60% to R74m with the trading margin fattening from 6,5% to a more sumptuous 9%. While there’s no doubt I&J benefited from the weaker rand, the company – according to an AVI investment presentation – also had to cope with higher operating costs and below plan volumes due to unusually bad weather.

A detailed breakdown of the operational cost impact included around R8m from inclement weather (which translates into lower catch rates and processing inefficiency), around R10m for the timing and cost of freezer vessel planned maintenance and another R6m from seeing the benefits of production upgrades at the Marel facility in Woodstock only being partially achieved.

AVI said I&J’s domestic revenue growth of 4%, volume growth of 1,8% and average selling price increase of 2,1% were constrained by aggressive competition.

I&J estimated its market share at 42,2% against 43,8% in first half trading in 2012. Fortunately I&J’s export revenue grew a nifty 22% with volume up 8% as the company saw increased catch volume from improved freezer vessel catch rates and wet fleet availability. Average selling prices were almost 13% better – thanks obviously to the weaker rand exchange rate.

Sea Harvest, which is controlled by Cape-based empowerment icon Brimstone, also reported stronger results – although the company, like I&J, also suffered from lower catch rates.

Brimstone reported that overall catch rates were down 16%, but that sales volumes were 16% higher and revenue up 20% to R1.2bn in the year to end December as Sea Harvest maintained its market leader position in the local market.

Brimstone noted that Sea Harvest saw a recovery in US and European export markets with export revenue jumping 20% over last year. Profits came in around 20% higher at R147m. Brimstone did not give a forward looking statement for Sea harvest, but – judging by comments made by AVI over I&J’s prospects – it seems reasonable to assume the hake producers are set to remain on a profitable tide.

AVI reckoned I&J would see an increasing benefit from weaker rand and higher hake catch volumes.

Significantly I&J is putting its money where its mouth is by ordering a new wet vessel for delivery in 2016 – at a not insubstantial cost of R150m. The company is also evaluating third freezer vessel after spending R34m on vessel dry docks and upgrades and another R30m on a new wet vessel.

By Jenni McCann

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