Sea Harvest reports 10% growth in full-year profit

Despite ongoing market volatility.
The group’s SA fishing segment contributed R2.7bn in revenue, down 3% due to curtailment in total allowable catch and supply chain disruptions. Image: Supplied

Fishing group Sea Harvest posted 10% growth in profit to R691 million (2020: R629 million) for the year ended December 31, 2021, supported by the execution of its growth strategies and the gradual reopening of its food service market.

The group reported a 5% rise in revenue to R4.61 billion (2020: R4.37 billion), with headline earnings per share of 157 cents as it saw progress in its organic and acquisitive projects as well as the reopening of its hotels, restaurants, and catering markets during the year.

The group says it ordered a third (milk products) powder plant and a new butter factory at its Cape Harvest Foods segment, which includes Ladismith Cheese.

It also fully acquired Mooivallei – a producer and supplier of dairy products – to not only increase its cheese production capacity by 40% but also support its raw material supply as well as its asset base.

“As a result of the organic and acquisitive growth, revenue in the Cape Harvest Foods segment increased 28% to R1.3 billion (2020: R1.0 billion) for the year ended December 31, 2021,” the group said in a trading statement.

It also reported gains from its South African fishing segment, which contributed R2.7 billion in revenue, though it is down 3% due to the curtailment in total allowable catch (TAC) and disruptions in the supply chain.

Revenue in the group’s Australian operations increased 2% to R554 million (2020: R543 million) as it benefitted from good prawn and increased Spanish mackerel catches as well as firm pricing across the board.

“As a result of the higher proportion of wild-caught products in the basket, the gross profit margin in the Australian operations expanded to 25%,” the group said.

Sea Harvest also secured a 53.7% stake in BM Foods, a manufacturer of frozen food products to assist in the group’s diversification of the food sector in South Africa.

“The BM Foods Group acquisition is diversification into new food categories in the South African food industry, presenting synergies with the group’s dairy and fishing businesses and providing access to a platform business with good management and growth opportunities,” the group said.

Challenges, closures

The group experienced challenging operating conditions in its aquaculture segment due to the slow vaccination rate, reduced international air travel, and the subsequent inflated freight costs from South Africa.

The pressure led to the segment closing its mussel and trout businesses which resulted in a R6.2 million loss for the same period.

Ladismith Cheese also experienced a tough 2021, despite Mooivallei achieving progress with its turnaround plan and BM Foods Group benefitting from the reopening of foodservice markets.

“These challenges included the inability to fully pass on significant milk price increases during the year, absorbing a once-off R12 million write-down of stock, and absorbing additional costs related to the third powder plant and new butter factory that are not yet fully utilised,” the group said.

Further pressure

Sea Harvest expects to be impacted by a further 5% reduction in TAC in 2022, with revenue being potentially affected by a stronger rand.

“Cost inflation due to higher fuel prices and supply chain disruptions is also expected to place further pressure on margins in 2022,” the group said.

Read: How Russia-Ukraine conflict could influence Africa’s food supplies

“The effects of the currency and fuel factors will be mitigated with the hedges that are in place for the year ahead.”

Sea Harvest share price over five years

Palesa Mofokeng is a Moneyweb intern.

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