Sea Harvest profits are rolling in from the deep
Investors splash out on the share, pushing it up 7%
Sea Harvest, the recently listed fishing enterprise controlled by Brimstone Investment Corporation, netted a sizeable profit haul in the year to end December.
Results released on Tuesday showed Sea Harvest managing to more than double profit after tax to R276-million despite a more pedestrian 10% gain in revenue to R2.13-billion. A dividend of 31c per share was declared.
The market warmed to the result, with Sea Harvest’s share price gaining as much as 7.82% to reach an intraday high of R12.40. The share price closed 6.96% higher at R12.30.
The R1.2-billion in proceeds raised in Sea Harvest’s listing in April last year helped boost profits with interest expenses almost halved to R39-million.A portion of the fresh capital raised at listing was mobilised to repay preference share capital (including accrued dividends), third party debt and shareholder loans. It is also clear that Sea Harvest executives are running a tight ship with the gross profit and operating profit margins fattening to 33.6% (2016: 31.3%) and 15.6% (10.2%) respectively.
Most encouraging was that Sea Harvest generated R430-million in operational cash flow. The company invested R369-million in investing activities during the financial year – including spending on an additional factory freezer vessel and upgrading the fish processing factory in Saldanha Bay.
Sea Harvest – which is in negotiations to acquire Viking Fishing – still had R383-million in the kitty at the end of the year.
Sea Harvest CEO Felix Ratheb said the core South African hake fishing and processing operations benefited from the significant capital investments in the fleet and factories over the past few years. “This has driven considerable growth in the higher margin export business. Demand for Cape hake remains firm, particularly in the EU and Australia.”Looking ahead, Ratheb believed Sea Harvest’s margins could be further enhanced in the new financial year.
He noted that a second freezer trawler would come into production in April and that phase two of the re-engineering of the Saldanha production plant would be completed in August.
Ratheb also pencilled in an improved performance from Sea Harvest’s Australian seafood subsidiary, Mareterram, where a new management team was taking out costs.
He said Mareterram had recently acquired two mackerel packages with fishing licences. “The diversification into mackerel fishing provides scale and a complementary revenue stream to the existing prawn, scallop and crab fishing business and a further extension of the basket of high-value offerings.”
In South Africa, Ratheb expected a continued increase in the global demand for Cape hake. “This will drive continued export growth and price inflation, which, together with a consistent hedging policy, will seek to partially limit the impact of continued rand strength.”
He said local hake volumes would continue to be under pressure in the challenging economic environment but the impact on revenue would be partially offset by continued price inflation in the category.
Ratheb said Sea Harvest had a clear strategy and was focused on driving earnings growth through investments within existing operations as well as through strategic acquisitions in South Africa and Australia.
Late last year Sea Harvest – along with a broad-based empowerment consortium – announced it was in advanced negotiations to acquire the assets of Viking Fishing.
Ratheb said the Viking deal – which includes buying 51% of the Viking aquaculture venture – would be transformational for Sea Harvest.