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Sea Harvest interim revenue up despite catch decline

‘Covid and the fact that there’s a huge demand in retail have meant that our prices have increased quite nicely everywhere’: CEO Felix Ratheb.

SIMON BROWN: I’m chatting now with a Felix Ratheb, Sea Harvest CEO. Results for six months ending June [are out}: revenue up 5%, headline earnings per share up 18%.

Felix, I appreciate the time again around your results. Your local operations – we’ll kick off with that. Your revenue was up at 2%, even as allowable catch was down 5%. There are two parts to that question. What was the issue with the allowable catch and that being contracted down? And obviously you managed to eke efficiencies out by getting more revenue for less fish landed?

FELIX RATHEB: Morning, Simon. That’s quite correct. The way we manage the resource in South Africa or the government (does), is to make sure that the allowed catch reduces – so the hike in its abundance. With that in mind, we’ve had an abundant resource. So fishing has been very, very good in the first six months, way above last year. At the same time we’ve had improved vessel utilisation. So there’s been an efficiency increase on the cost side which has more than made up the reduction in the volume which has affected revenue.

The second part of the equation is obviously that the rand has strengthened by 5% over the year and that affects our international business, because about 53% of our fishing business is exported to the developed world. So that has affected us. But at the same time Covid and the fact that there’s a huge demand in retail have meant that our prices have increased quite nicely everywhere. We’ve pushed price to recover the reduction in volume and the loss in the exchange rate.

So we’ve had a very good performance in our fishing business. Our throughputs in our factories have been good, and that’s on top of – we can discuss it at a later stage – all the chaos with Covid variants that have affected our operations.

SIMON BROWN: I love your point there. What you’re essentially saying is that the tonnage that you can catch has pulled back; but that effectively means that nature then does what it does best. It means more fish in the sea, and therefore it makes your life a little bit easier in sending the boats out to catch them. Is that essentially the balancing act which we are seeing from government?

FELIX RATHEB: Correct, that’s quite right. You want to manage a resource where you can optimise the catch and you have efficiency which reduces the cost. And at the same time you’ve got less product in the market when you’ve got Covid. We are completely different from other proteins. We’ve got less supply and more demand globally. So you’ve got that equilibrium where price is the balancing factor, and both locally and globally we’ve managed to get good increases in our fishing business, which is the bulk of our business still.

Demand has also increased, Simon, globally.

We’ve had a good summer in Europe, as with the rate of vaccinations people are more confident to go out. And our out-of-home consumption in our business has grown by 18% versus this time last year.

So it’s been very, very positive from a market perspective that you’ve got a little more confidence. It’s not quite to pre-Covid levels, but we’ve seen confidence in markets that have been vaccinated; particularly in southern Europe, Spain, Italy, Greece and Portugal with people going out.

Tourism wasn’t too bad; it wasn’t at record level, it was good. And we seeing high-value products like Kingklip and Monk – people going out and eating those at restaurants – have done particularly well. So generally good on the demand side, good on the supply side. Just Covid has been a bit chaotic.

SIMON BROWN: And out of home – we chatted about it, I imagine, six months ago with your year-end it really hurt. For example, your aquaculture segment’s picking up (but) still hurting. When we chatted the last time it was supply chain and the Covid disruptions around getting it to the market, which is in Asia. Is that still your challenge?

Listen/Read: Sea Harvest weathers the pandemic, sees annual revenue surge 10% (March 2021)

FELIX RATHEB: All the challenge. We are struggling. International air travel hasn’t picked up. It’s very much that you’ve got very little capacity going to the Far East from Johannesburg or Cape Town. It’s very difficult to get product in the market.

We’ve changed product format, so we’ve actually doubled revenue versus this time last year, but at the same time freight rates – I’ll give you an example – pre-Covid we were paying $4 a kilo to get product to Hong Kong. We’re paying $8 now. So it has doubled.

And what we’re seeing is that those disruptions now have manifested themselves in sea freight too, so it’s very difficult for us, for the pre-producers in Cape Town to get containers out of the ports, even before the hack that Transnet had. Generally freight has been impacted globally. Freight rates have gone up. The aquaculture business fortunately is a small part of our business, but still it has been affected with just logistics chaos with Covid.

SIMON BROWN: We are seeing that across the board, even as you say with aquaculture – the logistics of the supply chains and therefore the costs when you can move it.

Felix Ratheb, Sea Harvest CEO, I appreciate the time this morning.

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