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Current profits buoyed

THE tide still favours the local fishing sector with all four major companies based in the Western Cape once again netting impressive profit hauls.

‘Big fish’ Oceana reported a whopping 76% growth in operating profits to R269m in the half year to end March. The top-line was skewed with the recent acquisition of US-based fish oil and fish meal specialist Daybrook Fisheries, which pushed revenue up 40% to R3,6bn. Gross profits were up 38% to R1,34bn with the gross margin reassuringly steady at 36%.  

If Daybrook was excluded, then Oceana’s revenue – anchored by its Lucky Star canned pilchards’ operation – would have been up 13% to R2,9bn and operating profit would have increased 16% to R437m.

Oceana CEO Francois Kuttel said local sales volumes for Lucky Star were up 13% and overall volumes up 10% with the brand gaining market share in key regions. The Lucky Star improved its market share in the ‘inland regions’ by 7% to a commanding 80,9%, while the market share in the Eastern Cape shifted up 3,5% to 83,6%.

Kuttel said the pilchard canning effort was greatly helped by a significant increase in frozen volumes to local factories. He said Lucky Star increased local canned production from 2,5 million to 5,2 million cartons thanks to the increase in frozen imported pilchards. Kuttel said there was also a material improvement in pilchard landing due to a quota rollover from 2015 season.

Looking ahead, Kuttel said Lucky Star’s prospects were bright as fish was becoming more affordable compared to total food and non-alcoholic beverages. He said Lucky Star had managed to pass a price increase of 6% effective from April, and that an October price increase was under review depending on the Rand exchange rate. Kuttell said there was a strong promotional campaign undertaken by the company to draw market share from the chicken industry – which is still perceived as the cheapest form of protein by consumers.

Premier Fishing, which is controlled by empowerment company (African Empowerment Equity Investments (AEEI) reported revenue up 22% to R170m and operating profits up 21% to R22,5m in the half year to end February. More impressive was that Premier’s cash generated from operations was up almost fourfold to R24m. Premier has a dominant 60% share of the South Coast rock lobster market – but also catches West Coast rock lobster, anchovy, pilchards, squid and hake as well as operating abalone farms.

AEEI CEO Khalid Abdullah said the fishing business was being positioned for growth over the next three years to unlock shareholder value and raise capital to invest into the future growth of the business.

He said key deliverables to grow the business includes the acquisition of small to medium fishing businesses and the expansion of the abalone aquaculture farm in Gansbaai to over 250 tons. Abdullah said Premier Fishing’s target was to grow annual turnover to at least R500m.

Cape Town’s hake fishing stalwarts I&J and Sea Harvest also enjoyed sizeable profit catches despite facing some operational headwinds. I&J, controlled by consumer brands conglomerate AVI, reported a 1,9% increase in revenue to just over R1bn in the half year to end December. But operating profit was up 63% to R160m with the profit margin fattening markedly to 16%.

AVI directors said I&J’s revenue growth reflected the benefit of the weaker Rand on export sales and selling price increases. Profits were helped by the lower fuel price, improved fishing recoveries, additional fishing days (after commissioning new vessels recently) and improved fishing recovery. I& J said it had increased its market share from 44,2% to 46,1%.

I&J said its project to expand its abalone aquaculture to 500 tons was proceeding well.

Sea Harvest, which is controlled by Brimstone Investment Corporation, saw operating profit before interest increasing by 11% to R122m in the year to end December. Revenue was 1% higher than prior year despite a 5% reduction in catch volumes. Sea Harvest noted fishing conditions were very challenging – especially in the second half of the year. But prices for hake remained strong and there was a 10% volume growth in the export market where demand was high.

Sea Harvest continued with its capital investment programme by converting an existing trawler to a freezer trawler as well as upgrading its fresh fish plant. The company pointed out that in the last two years over R200m has been invested in vessels and plant upgrades.

Oceana’s hake business – much enlarged after the Lusitania and Foodcorp – also looked in fine fettle with good volumes reported and revenue boosted by the weaker exchange rate. Kuttel said profit “materially improved” on the prior year and anticipated continued product demand with exchange rate weakness further contributing to revenue growth.

He said Oceana was exploring Asian markets for its hake.

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