FISHING: Oceana Enjoying The Deep
Recent Western Cape Business News
CAPE TOWN-based fishing group Oceana has cruised through the first six months of its 2011 financial year despite being burdened with significantly higher fuel costs during the interim period.
Oceana, the most diverse of SA’s fishing companies, managed a solid 16% rise in revenue to R1.76 billion with gross profit coming in 16% higher at R628 million.
The effect of the higher fuel prices can be clearly seen in Oceana’s overhead costs, which rose 20% to R234 million. This mean operating profit growth was restricted to 11% at R212 million.
The divisional breakdown makes for interesting reading with the Mid-Water and Deep Sea Fishing segment putting in the strongest performance. This division managed operating profits of R156 million from turnover of R553 million – a trading margin of nearly 30%.
Year-on-year the Mid-Water and Deep Sea Fishing segment grew operating profits by nearly 60%, and suggests the full year contribution of R197 million from financial 2010 will easily be surpassed in financial 2011.
Oceana chairman Mustaq Brey says the horse mackerel and canned fish business units were the main areas contributing to the improvement in the Mid-Water and Deep Sea segment.
Oceana CEO Francois Kuttel says catches increased in Namibia and South Africa as a result of technology and efficiency improvements made to vessels in the previous and current year. This had the effect of reducing the catch cost per ton.
He says trading conditions in Oceana’s major markets remain firm and operating margins improved.
Kuttel says volumes procured from external fleets increased due to favourable market opportunities.
Inshore fishing – Oceana’s largest division by turnover – managed turnover of R1.1 billion but trading margins dropped from around 6.5% to 4% and left less than R45 million at operating profit level.
The Commercial Cold Storage division put in a disappointing performance with a marked drop in turnover to R86 million translating into a more than halving of operating profits to R11.7 million (R24 million previously).
While the inshore fishing performance looks underwhelming Kuttel points out that overall, profit from canned fish operations was above that for the same period last year.
Oceana owns the popular Lucky Star canned pilchards brand.
Kuttel says canned fish sales volumes on the domestic market were higher in response to significant promotional activity in the initial months of the financial year. CBN notes that Oceana’s marketing expenditure was up a hefty 46% to R22 million.
Kuttel adds that pilchard landings to date to the cannery at St Helena Bay were reasonable with fishing expected to commence in Namibia later in May.
But he says landings of anchovy and red-eye herring for the season to date were poor resulting in lower fishmeal production.
Kuttel admits the low volumes together with high maintenance and refurbishment costs resulted in a material loss at the half year.
After recently reviewing Premier Fishing’s results CBN is not surprised to hear that Oceana’s profit from lobster declined (mainly due to lower sales volumes). Kuttel says lobster catch rates were good and landings in line with those of last year with less catch effort. “Selling prices on average were higher in foreign currency terms. However, turnover was adversely affected by a 6% stronger rand exchange rate.”
Kuttel says squid catches from Ocean’s own vessels were in line with those of last year whilst volumes handled on an agency basis were lower.
He says Euro prices improved slightly for squid, but – like the lobster sales – the strong rand muted the benefit.
Looking ahead, it looks like Oceana is steaming confidently towards higher profits.
Brey says fishing conditions generally are expected to remain stable with the anchovy catch set to improve in the winter months (weather permitting, of course).
But he cautions that higher fuel prices may impact fishing costs in the second half, particularly the mid-water and deep-sea trawling sectors.
Brey also expects further volume increases in the local market for canned fish (presumably as the Lucky Star marketing effort referred to earlier in the article takes further effect).
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