Cost of sales increased 42%, driven by significantly higher fuel prices

Sea Harvest interim earnings slide on smaller fishing rights allocation

Fishing company Sea Harvest’s interim earnings declined 10 percent on both losses in hake volumes from the recently concluded Fishing Rights Allocation Process (Frap) and a material increase in the fuel price.

Headline earnings slid 10 percent to R182m, while profit after tax attributable to shareholders of Sea Harvest for the period decreased 14 percent to R187 million. Basic earnings per share decreased 14 percent to 67 cents.

The group did not declare a dividend.

Sea Harvest Group CEO, Felix Ratheb, said Sea Harvest had a challenging six months to June 30, 2022.

“We confronted tough macro-environmental factors driven by significant input cost pressures and supply chain disruptions. The South African Fishing operation, the bedrock of the Group, had to contend with a 10 percent decrease in available hake quota volumes due to losses associated with the Frap and a reduction in the Total Allowed Catch, compounded by significantly higher fuel prices and a stronger exchange rand, resulting in 25 percent lower operating profit for the period.”

The South African fishing segment’s revenue increased 8 percent to R1.42 billion, driven by firm export markets and strong pricing.

With cost of sales increasing 24 percent as a result of significantly higher fuel prices, which were up 83 percent, material input cost inflation and lower input volumes, gross profit in the segment decreased 20 percent to R423 m, with the gross profit margin diluting to 30 percent from 40 percent the corresponding reporting period last year.

Sea Harvest said the Australian subsidiary performed well, with revenue up 17 percent for the period.

The Cape Harvest Foods segment increased 85 percent to R956m as a result of the increased capacity at Ladismith Cheese, combined with the Mooivallei and BM Foods acquisitions.

Looking ahead, the group said while the fishing segment had to contend with 10 percent lower hake volumes, a stronger rand, increased freight costs and a high fuel price, demand was strong.

“The group continues to leverage price increases to recover cost push. The effects of the currency and fuel will be partially mitigated with the hedges in place for the second half of 2022,” it said.

Within the Cape Harvest Foods segment, Ladismith Cheese was expected to continue to leverage the investment in additional capacity and Mooivallei to increase performance, with the business weighted towards the second half due to the increase in milk flow.

Anthony Clark, an independent analyst at Small Talk Daily, said yesterday that for Sea Harvest, or for any company to suddenly lose 10 percent of its revenue stream, which was fishing, would be difficult to recover from.

“Then the Ukrainian war came along and international demand for fish prices went through the roof due to lack of availability from the Russian markets due to sanctions. So even though they had 10 percent less (fish) catch, the weaker rand and stronger price did offset some of the challenges all the fishing companies had in the past nine months, with higher fuel costs, logistic issues and elevated costs of distribution,” he said.

“To be down only 10 percent in headline earnings per share in a difficult period was an extremely commendable affair. I think the second half will be better as the oil price comes down, international fishing prices remain firm and ongoing global demand for fishing products remains robust.”

Author/Source: Philippa Larkin / iol.co.za

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