Stalwart Cape Town fishing companies are still reeling in the big profit catches – but the first attempts to angle for deals ahead of the new allocation of 2020 fishing rights have become evident.
A report in Business Day last month noted that the Silverman family controlled Saldanha Group – a well-known fish canning business on the West Coast – was set to be sold to low key marine and agri-products group TerraSan.
TerraSan is an investment group which holds investments in the pelagic fishing, mariculture, agriculture and property industries. In its 2015 financial year TerraSan reported revenue of R352m, of which 51% was generated by its pelagic fishing interests, 38% from abalone and 9% from mussels.
At operating profit level, the company reported R116m – dominated by a R90m contribution from the abalone operations and R20m from fishing interests. Reportedly TerraSan has offered to pay around R460m for Saldanha Group – although it is not clear at this juncture whether there were other bidders.
It will be interesting to see whether TerraSan, which has Cape Townbased investment group TBI Strategic Partners as an influential shareholder, makes more waves in the fishing sector by bidding for other operations.
Premier Fishing, which raised R526m when it listed on the JSE earlier this year, has so far not launched a raiding party to swoop on any opportunities in the fishing sector. The underlying message in Premier’s recent interim results to end February was that the company was content not to plunge headfirst into corporate activity. Premier’s interim numbers also suggest the company already has plenty of growth opportunities on its plate.
Revenue increased by 7% to R182 million with operating profit shifting up 12% to R18 million. The first half of trading is traditionally much slower that the second, which suggests Premier will comfortably deliver on its pre-listing profit forecasts.
Premier CEO Samir Saban said increased sales volumes in the export orientated lobster and squid businesses contributed significantly to the strong interim performance. He said the company experienced increased lobster landings due to good catch rates as well as a good size mix.
This resulted in increased revenue and operating profit for the segment increasing from R12 million last year to R16 million in 2017. On the pelagic side, Saban said industrial fish landings were up 20% - but pilchard landings for the interim period were down. Premier’s hake segment improved sales volumes.
Saban said profit for the period increased due to the combination of increased sales volumes and improved catch rates. The squid segment saw higher catch rates as well as higher sales volumes. Saban said this meant increased revenue and operating profit.
Sales volume in the abalone segment – which was not affected by the recent red tide on the west coast - were in line with expectations. But Saban expected sales volumes for the full year to be higher than the 2016 financial year. Saban said Premier – which has strong empowerment credentials - had submitted its fishing rights applications for west coast rock lobster, horse mackerel and hake inshore to the Department of Agriculture, Forest and Fisheries (DAFF) in February.
He said the company was successful in its application for horse mackerel and was awarded a quota equivalent to 1.8% of the Total Allowable Catch. He said Premier had not yet commenced with the catching of its horse mackerel quota.
“But we anticipate catching the full quota by year-end - which should result in increased revenue and profits for the 2017 financial year.”
Saban said the expansion of Premier’s abalone farm would commence shortly, and add markedly to the production output. Oceana Group – the most diverse local fishing company by catch and geography, took some strain in the half-year to end March with revenue down 13% to R3.1bn and operating profits decreasing 16% to R505m.
The key canned fish and fishmeal businesses saw the initial 2017 South African Total Allowable Catch for pilchard decreased drastically to 23 964 tons from 64 928 tons in 2016. Oceana CEO Francois Kuttel said the company’s strategy of importing frozen raw material for local processing continued during the interim period. He said the Lucky Star canned fish division experienced a challenging six months with sales volumes decreasing by 28% to 3.6 million cartons.
“This was driven primarily by the timing of buy-in effects ahead of price increases taken in April 2016 and October 2016, respectively.”
But he disclosed that canned fish realisations were on average 9.9% higher over the period due to the sales mix and the price increase in October 2016. Kuttel said costs in the canned fish division were well managed.
“Procurement efficiencies and improved US Dollar pricing for imported product contributed to an increase in gross profit margin.”
Unfortunately this gain was materially offset by Rand strength against the US Dollar - which resulted in foreign exchange losses for the division of R32.2 million. Kuttel said the fishmeal and fish oil division delivered a solid performance despite headwinds from export earnings and fishmeal pricing.
“Overall sales volumes improved following positive landings in Angola and improved opening inventory in South Africa. This was partially offset by fishmeal and fish oil pricing which softened during the period, caused by increased global production following higher quotas in Europe and Peru and improved landings in Chile.”
Oceana has hinted at possible acquisitions (should such opportunities arise) - but gut feel is that any deal-making will probably be focussed outside South African waters.