Oceana maintains growth trajectory in tough year

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Highlights for the six months ended 31 March 2021:

  • Revenue from Africa operations up 1%
  • Profit before tax up 5% to R489 million
  • Earnings per share up 13% to 284.0 cents
  • Headline earnings per share up 4% to 260.5 cents
  • Cash generated from operations R674 million
  • Total dividends at 110 cents per share up 10%

Africa’s largest fishing company has continued its growth trajectory started three years ago, reporting profit before tax up by 5%, headline earnings per share up 4%, and earnings per share up 13% at the interim stage.

Group CEO, Imraan Soomra said that demand has remained strong right across its product spectrum, and although Covid had disrupted its supply chain of canned fish in the latter half of the six months, the company’s close management of inventory and working capital had delivered results.

“I am particularly pleased that we have maintained our growth trajectory in this environment, delivering further earnings growth after a strong performance last year. Furthermore, we de-geared our balance sheet, cutting debt in South Africa by 6% and our US debt – in dollars – by 5%. This - together with a more favourable interest rate in South Africa - helped bring our net interest expense down significantly - by 32% to R94 million.”

While product demand was strong across the board, this was particularly the case with fresh fish. The company recorded good landings and strong demand for horse mackerel, while hake was affected by Covid-related disruptions to fishing days.

“Canned fish demand remained positive and we grew market share off a high base in the previous period. As consumers turned increasingly to staples, Lucky Star benefited from its positioning as an affordable protein.”

Frozen fish availability was impacted by Covid-related disruptions, including delays at the port in Cape Town, and this resulted in reduced production levels and canned fish inventory. Oceana had built up inventories in the prior period, which mitigated the shortage to some extent.”

“Although over the six months we lost 5% in canned pilchard volumes due to supply chain disruptions, we gained back 4% in a price increase – which was well received by consumers despite a very constrained environment.

“All in all, we estimate lost revenue due to Covid-related disruptions at R73 million and a corresponding operating profit reduction of some R34 million.”

As expected, group revenue for the period was weighed down by the performance of the fishmeal and fish oil segment in the US on the back of the significantly lower prior season catch, with Daybrook’s stock levels 36% down on last year.

However, fishmeal offtake volumes performed better than expected with continued demand from US pet food manufacturers, while overall pricing for both fishmeal and fish oil increased.

The US 2021 fishing season started on 19 April and will run until the end of October. Early season indicators are positive.

Looking ahead, Soomra said that while economic conditions are still uncertain, the outlook for Oceana included strong demand for its products, and strong pricing for fish meal and fish oil. The prospects for recovery in hake were good, and steady landings were anticipated for fish meal and oil, hake and horse mackerel.

Lucky Star is expected to continue to attract consumers given its relative affordability and will seek to maintain its popularity as a protein of choice for consumers.

All indications for a good season at Daybrook are positive. US operations are well positioned for strong fleet deployment and plant availability to meet anticipated growth in fishmeal and fish oil demand.

The 2021 FRAP process has commenced with the publishing of draft economic impact assessments and the appointment of service providers. The DFFE Ministry has committed itself to a transparent and accountable process that concludes by December 2021.

The second Oceana Empowerment Trust, with a R530 million transaction value, is significantly larger than the R220 million transaction value of the first Oceana Empowerment Trust, and will be open to all employees irrespective of race, grade or years of service.

“Importantly”, said Soomra, “shares are issued to the Trust at a 5% discount to the issue price, creating immediate value. Shares vest in three equal tranches in years 8, 9 and 10, while beneficiaries will participate in 25% of all dividends received by the Trust.

“This is another extraordinary opportunity for our people to share in the wealth of our company.”