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VENTURES: Premier Fishing The One to Catch

 



Recent Western Cape Business News

WITH local fish catches improving substantially in the past year there looks to be a good chance that the industry could undergo significant consolidation in 2009.

With fuel costs dropping and the rand weakening against hard currencies, the larger local fishings groups – notwithstanding the global economic turmoil – are in a strong position to generate bumper revenues.

The tough industry years between 2002 and 2006 have also seen fishing companies tighten up operational efficiencies, which means trading margins can be tweaked up considerably in buoyant trading conditions.

So any consolidation initiated by the so-called big four fishing groups – Oceana, Sea Harvest, I&J and Premier Fishing – will be from a position of strength.

Already the first tentative steps have been taken with Tiger Brands selling off its controlling 71% stake in hake catching specialist Sea Harvest to a Brimstone led consortium in a deal worth around R540 million.

The reason Tiger Brands sold its stake in Sea Harvest probably revolves around the food giant’s hostile bid for rival food group AVI.

If Tiger was successful in its endeavours to gain control at AVI there could be some unwanted attention from the competition authorities, and the one area of obvious dominance would be fishing.

Besides Sea Harvest, Tiger also owns the controlling stake in sprawling fishing business Oceana. AVI, on the other, hand controls fishing and frozen sea food specialist I&J.

A combined fishing entity comprising Oceana, Sea Harvest and I&J would simply create an entity too dominant in the local fishing sector, where smaller operators constantly (and perhaps justifiably) complain about skewed economies of scale in quota awards.

Naturally, putting Sea Harvest in the hands of astute empowerment operators like Brimstone could really cause some waves in the industry.

With Brimstone’s strong empowerment credentials behind it, Sea Harvest will have considerable scope to pursue joint ventures, partnerships and takeovers of smaller fishing operators.

Currently Sea Harvest’s main business is deep sea trawling for Cape Hake species, and then the processing of this catch into frozen and chilled seafood products for local and export markets.

While Brimstone is securing a well maintained fleet of 14 fresh fish trawlers and a factory freezer ship as well as the Saldanha factory and cold storage facility, there will undoubtedly be a desire to broaden the fishing business into new areas.

It’s not only that Sea Harvest’s factory and cold storage could accommodate other catches for processing and packaging, but also that branding new products (say pilchards or tuna) under the Sea Harvest label could mean big advantages in the local and offshore markets.

But it’s not only Brimstone/Sea Harvest that will be on the front foot.

Oceana – which has over R200 million in free cash - has also indicated a willingness to look for opportunities amongst small to medium sized enterprises.

If Tiger Brands does manage to takeover AVI then Oceana and I&J will no doubt be merged in order to effect sizeable cost savings.

Oceana is by far the most diversified fishing business, incorporating pilchards, horse mackerel, hake, squid and lobster.

Even without I&J on board, there may be a considerable attraction for smaller fishing enterprises – which are often experiencing feast or famine business cycles – to link up with Oceana.

That brings us to Premier Fishing, which is controlled by Cape-based empowerment group Sekunjalo Investments.

Premier also wants to take advantage of consolidation opportunities in the fishing sector – probably in order to lessen the group’s reliance on its lobster businesses.

Recently endeavours in the pelagic sector have not yielded great results for Premier, but fortunes could change if the group is able to bulk up this segment through partnerships, joint ventures or takeovers.

Premier itself has been a bit of surprise package, managing to push profits to close to the R38 million mark in the year to end August after a slow first half.

Sekunjalo has managed to take a chunk of costs out of the business, and there is talk that the medium term goal is to secure profits of between R60 million to R70 million at Premier.

Gut feel is that both Sea Harvest and Oceana might be keen to make a move on Premier.

Sekunjalo, however, would probably prefer to squeeze more profits out of Premier and bulk up operations with new fishing enterprises to ensure that the business can be sold at an attractive price.

If Sekunjalo’s abalone farming operations (see our “What’s in store for 09” article) are added to the mix then Premier really does become an asset worth fighting over.


 
 
 
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