FISHING: The Fortunes Of Our Fishing Firms
Recent Western Cape Business News
THE reporting seasons for Cape Town’s big four fishing companies once again shows that diversity pays off – especially in times of tough trading and rand strength.
On the face of it Oceana – which is controlled by food giant Tiger Brands – probably fared best. But the results from the three smaller fishing groups are perhaps more intriguing, especially the efforts to negate effects of the stronger rand and countering weak offshore markets.
Oceana reported a 2% decrease in headline earnings to R110 million for the six months ended March 2010 despite generating 6% less in revenue of R1.5 billion.
On a divisional basis Oceana’s Midwater and Deep Sea fishing operations were in fine fettle, posting a profit of R99 million from turnover of R249 million.
The larger inshore operations generated R68 million in profits from turnover of R1 billion.
Reviewing the inshore fishing sector Oceana CEO Francois Kuttel says overall profit from canned fish was above that of the same period last year.
He says pilchard landings and processing yields at the St Helena Bay cannery were good.
“Canned fish sales volumes increased due to a more robust supply chain with imported product continuing to supplement local supplies.”
Kuttel says margins showed some improvement and Lucky Star’s market share recovered further as a result of higher sales.
In the fishmeal division, Kuttel says turnover declined due to lower volumes mainly as a result of low opening stock and poor landings at the end of last season.
He explains that the lack of volume and high maintenance costs incurred during the annual shut down period resulted in a loss at the half year.
But it does look more promising going forward. Kuttel believes that higher landings will continue into the winter. “In addition, fishmeal selling prices increased substantially in recent months due to concerns of an international market shortage, the benefits of which should be seen in the second half.”
Profits were also recorded in the squid division despite selling prices in European markets remaining under pressure.
In the midwater and deep-sea fishing sector, Oceana’s profit from horse mackerel was slightly up. Kuttel reports that catch rates in Namibia were ‘very good’. But in SA, less favourable fishing conditions resulted in lower catches.
Irvin & Johnson (I&J) the fishing group controlled by AVI, claimed a better operational performance in the six months to end December 2009 – although the profit figures don’t make for pretty reading.
The operating performance from the company that was until recently headed by current Oceana CEO Francois Kuttel was better than last year thanks to improved catch rates and size mix as well as lower fuel prices.
But I&J’s export revenues were materially reduced by lower prices in key European markets due to reduced demand and increased supply from other fish resources (not to mention the effect of the strong rand).
So the numbers showed I&J‘s revenue down by a hefty R138.5 million with operating plunging R66 million to R60 million.
AVI has already warned that I&J‘s results for the second half of the year will be much lower than last year if weak prices for seafood products and the strong rand prevailed.
AVI notes that the ongoing pressure on I&J‘s margins has prompted a number of new cost saving initiatives being implemented. But these efforts will not have much impact on the current financial year.
The poor profit performance has once again sparked rumours that AVI might look at selling off I&J – although such talk does tend to surface everytime I&J brings in a poor profit catch.
Sea Harvest, now controlled by empowerment company Brimstone, seemed to have come through the year to end December 2009 in fairly good shape.
Brimstone argued that Sea Harvest – which generates annual revenue of around R1 billion – performed satisfactorily in restricting a decline in operating profits to just 3%.
The performance is contextualised by the fact that Oceana’s (much smaller) small hake division made a loss for the period - although this division did incur extra costs when one of its vessels broke down.
Brimstone CEO Mustaq Brey notes that while some prices came under pressure Sea Harvest – a hake specialist – managed to maintain pricing and volume in most markets.
He says Sea Harvest further increased its market share in the local market and is now the leading frozen white fish brand.
Speaking at the recent Brimstone AGM, Brey also noted that Sea Harvest – which has a good chance of gaining in its Total Allowable Catch this year - had fished responsibly. “We did not, like some other operators, catch all our fish at once, We slowed down our catch rate to ensure Sea Harvest could provide fresh fish all year round. This enhanced our credibility, especially on international markets.”
More importantly, Brey said actions taken to improve the management of SA’s hake resource appear to be bearing fruit – which “bodes well for the resource and potential quota increases over the medium term”.
He said Sea Harvest maintained a relentless focus on efficiencies and containing costs. “Extracting maximum value from every kilo of fish caught will be the key in driving future revenues.”
Perhaps the biggest surprise in the local fishing sector was profitable interim performance from Sekunjalo controlled Premier Fishing in the six months to end February.
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