Sea Harvest’s shares plunged 7% after it released its annual results, slicing its dividend to its shareholders as its profit tumbled 33% amid a storm of challenges.
The share fell to an intraday low of R9.90 on the JSE on Tuesday.
The group posted a dividend of 38c per share, a 32% reduction from 56c per share the prior year and said Sea Harvest had experienced a challenging year to December 31, 2022.
Despite volume losses from the Fishing Rights Allocation Process (FRAP), compounded by a reduction in the Total Allowable Catch (TAC), revenue was up in all segments with firm demand in all markets and strong pricing in all channels, it said.
However, Sea Harvest said this firm demand was offset by “unprecedented” cost inflation with cost of sales increasing 42% driven by a R257 million increase in the fuel price.
There were also supply chain disruptions with load shedding costing the group R20m in the last four months of 2022 and export freight rates up 34%, while fixed costs were impacted by R36m in one-off acquisition-related costs.
Headline earnings decreased 33% to R293m. Revenue for the year increased 27% to R5.9 billion, basic headline earnings per share (heps) of 105c was down 33%, while basic earnings per share fell 34% to 111c.
The results of Sea Harvest are in contrast to rival Oceana, which released a trading statement last week for the four months to January 29, saying it expected its interim heps to rise 20%.
Sea Harvest said the South African fishing segment was affected by lower available volumes (FRAP and TAC) and a 93% increase in the fuel price. Despite the 10% lower available volumes, revenue increased 3% to R2.74bn, driven by firm demand and price increases in both local and international markets.
However, Sea Harvest said benefiting from increased sales volumes and firmer pricing, revenue in the aquaculture segment increased 29% to R118m despite continued lockdown restrictions in China and Hong Kong and the curtailment of international travel for most of 2022.
The Cape Harvest Foods segment, which includes Ladismith and Mooivallei, BM Foods Group and Sea Harvest’s factory shops, delivered revenue of R2.1bn, up 59%, with Ladismith delivering top-line growth of 28% and the segment benefiting from the full-year effect of the Mooivallei and BM Foods Group acquisitions.
Revenue in the Australian segment increased 69% to R938m, benefiting from firm pricing, good growth in the trading division, and the inclusion of MG Kailis from May 23, 2023.
“The MG Kailis acquisition represents a significant step in the execution of the group’s investment strategy of acquisitive growth in the international seafood space that focuses on businesses of scale in high value seafood species,” it said.
Looking ahead, Sea Harvest said the long-term fundamentals of all the group’s segments remained attractive with firm demand for high value proteins both locally and internationally.
“The group will continue facing headwinds driven by load shedding, while fuel is expected to continue trading at elevated levels,” it said.
Anthony Clark, an independent analyst at Smalltalkdaily Research (@smalltalkdaily) tweeted, “Was rough year for $JSESHG Sea Harvest as losing 10% of their volume (TAC/FRAP related) high fuel costs hit the biz. Heps – (down) 33% to 105cps despite solid top line growth of 27% but GP slammed due to (above issues) FY23 looks better with strong fish demand, TAC +5% & weaker rand.”
Paul Whitburn, a director and portfolio manager at Rozendal Partners (@WhitburnPaul), tweeted, “Reading Sea Harvest and I&J poor results gives a perspective of just how good Oceana current trading is going. Sea Harvest increasing their offshore earnings at these levels also feels like there may be pain to come if the rand strengthens back to fair value purchasing parity.”
BUSINESS REPORT