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There’s always a catch

There’s always a catch

Local fishing group’s Oceana, Group and Premier Fishing, endured very different fortunes in their respective first six months of trading in the 2014 financial years. Ranked as South Africa’s biggest and most diversified fishing enterprise, Oceana endured a choppy six months to end June with turnover dropping 4% to R2,36bn. Fortunately, Oceana’s ability to run a tight ship paid off - with profit before tax edging up 5% to R272m.

The most heartening aspect of Oceana’s interim performance was the better than expected performance from the canned fish division – which incorporates the best selling Lucky Star canned pilchards brand. Oceana CEO Francois Kuttel said canned fish volumes of 4,7 million cartons (2013: 4,8 million cartons) represented a good performance off a high base in the prior period. He said customers should see the performance in context of heightened stock build during February and March last year.

“With volume stability, revenue growth for canned fish has been achieved through price adjustments necessitated by the impact of the weaker rand exchange rate on the landed cost of imported product.” In 2014 the South African Total Allowable Catch (TAC) for pilchard remained the same as 2013 at 90,000 tons. Kuttel said pilchard landings at the St Helena Bay cannery had been good and were currently higher than at the same stage last season. But the 2014 initial South Africa anchovy season TAC was 404,251 tons (TAC for 2013: 450,000 tons.) Kuttel continued that current season landings of anchovy and redeye herring to Oceana’s fishmeal plants were significantly higher than in the previous season. This meant improved production efficiencies and lower costs per ton of manufactured product. He said selling prices were also high due to firm international market prices and the weaker rand exchange rate. Oceana’s hake operations continued to benefit from the Lusitania integration, and revenue growth stemmed from improved catch rates and a favourable exchange rate. Kuttel said profit from hake operations showed a substantial improvement as a consequence of revenue growth and operating efficiencies.

Oceana also made the most of its available 288 tons west coast lobster allotment. Kuttel confirmed that catch rates were in line with those of last year. He also pointed out that improved pricing and a favourable exchange rate positively impacted revenue growth, which saw profits from lobster “significantly higher” than the prior year. The squid business, however, ran at a loss due to the continued decline in Landings – although Kuttel said the lower sales volumes was partly offset by higher prices. Potentially the biggest setback in Oceana’s interim period was not being able to land the proposed acquisition of Foodcorp’s fishing business. Basically the Competition Tribunal approved Oceana’s acquisition – but subject to conditions (relating to the key pelagic part of the business) that are not acceptable to Oceana and Foodcorp.

At this juncture the Foodcorp deal looks doubtful, which is a blow to Oceana’s pilchard canning business, but also its expansionary and growth ambitions. In all likelihood Oceana might now have to seek acquisitions outside SA. Still, Kuttel appears bullish for trading period ahead. He said that in light of improved industrial fish landings to date, Oceana was positioned to take advantage of opportunities for export revenue growth in the second half of the financial year. “We are mindful that the pressure faced by domestic consumers will continue to impact canned fish volume growth for the remainder of the year.” Sekunjalo Investments controlled Premier Fishing – which has lucrative west coast and south coast lobster quota – put in a rather impressive first half showing. Sekunjalo CEO Khalid Abdullah said the re-investment in the organic growth Premier Fishing’s operations were showing the anticipated benefits with operating profits of R38,9m being reeled in for the half-year to end February 2014. He said Premier Fishing had steadily improved its performance with the major contribution coming from the south coast rock lobster and Abalone divisions.

What is worth noting is that traditionally Premier Fishing performs markedly stronger in the second half of the financial year – which seems to suggest that there could be bumper profits landed in the full year to end August 2014. Abdullah said the fishing division had built a strong platform for further organic growth and was well positioned to increase its investments further through acquisition. CBN wonders whether Premier Fishing might look at the Foodcorp fishing assets if Oceana opts to walk away from the deal, due to conditions imposed by the competition authorities. Premier Fishing has to date shied away from making big acquisitions in the fishing sector, preferring to look for partnerships or joint ventures with smaller fishing entities. With parent company Sekunjalo enjoying a much more stable financial position, might there be some willingness at Premier Fishing to dangle a line to catch reasonably priced new operational assets?


 

By Jenni McCann

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