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Cape Town - Oceana Group [JSE:OCE] has lifted group revenue by 40% for the half year ended March 31 2016.
Excluding the impact of its Daybrook acquisition, group revenues were up 13%, primarily due to increased canned fish and hake volumes, higher occupancy levels in the Commercial Cold Storage Logistics business and a favourable exchange rate.
Operating profit (before abnormal items) increased by 67% to R587m, and without Daybrook by 13%.
Group headline earnings for the period increased by 19%. As a result of the diluting effect of the additional shares issued during September 2015, basic earnings per share and basic headline earnings per share increased by 7% and 6% respectively.
CEO Francois Kuttel told Fin24 that what has marked the business over last 12 months has been its two very important acquisitions.
“Validating our decision to invest in Daybrook, the US operation delivered revenue of R706m and operating profit before abnormal items of R191m. This was in line with the original investment expectations," he said.
“The Daybrook integration into the Oceana Group has progressed well and we have a very experienced team on the ground”. We are happy with it and are well down the line with getting efficiencies out of those acquisitions. At the same time we are proud of our African business as well."
Although he indicated that there are no current acquisitions planned, the group would always be interested in acquisitions that would make it very competitive.
Kuttel is especially satisfied with the performance of Lucky Star canned fish over the last 6 months, growing in a tough consumer market. In his view it is due to the good value proposition it offers.
“Despite challenging market conditions in Africa and considerable economic headwinds in SA, our performance has been good,” he said.
In South Africa, the precautionary maximum catch limit for targeted catch of horse mackerel decreased by 8% to 38 656 tonnes. The Desert Diamond did not fish in South Africa for the period under review.
The vessel was deployed in Namibia for the last two months of 2015 and was tied up for planned maintenance for the balance of the period under review. As a result sales volumes and profitability from horse mackerel in South Africa decreased materially for the period.
The 2015 Namibian horse mackerel Total Allowable Catch (TAC) decreased by 4% to 335 000 tonnes. The Ministry of Fisheries and Marine Resources made an initial allocation of 145 000 tonnes for the 2016 fishing season on the same basis as the prior year.
"Reduced owned quota and expensive purchased quota necessitated a critical review of the commercial performance of our third vessel. As a result the Desert Rose was sold in October 2015," he said.
"An oversupply of fish in the market and tough trading conditions in our traditional African markets put continued pressure on horse mackerel prices, although the favourable exchange rate partially offset the effect of weaker dollar prices. Despite weaker markets; margins and operating profit in Namibia improved following the sale of excess fishing capacity and the termination of experimental fishing efforts in Angola. Catch rates in Namibia remained consistent with prior periods."
Looking ahead, Kuttel said: “We expect pricing to improve in the fishmeal and fish oil sector based on consistent global demand and supply challenges in the Peruvian and European sectors. In Daybrook, early season landings have been positive with materially improved oil yields, and in South Africa we expect consistent landing patterns of pilchards, industrial fish, and hake."
In the rest of Africa, a weakening oil price is having an economic impact, he pointed out. In the canned fish sector we are exploring a possible duty benefit of ex-South Africa production and we have also signed a distribution partnership in Nigeria. We expect Horse Mackerel pricing to remain stable and are actively engaging the Namibian Ministry in respect of quota allocation for the remainder of 2016.
“In our drive for efficiency and focus, we will continue to evaluate non-core and underperforming assets in the period ahead,” he said.
Subsequent to the reporting period, the CCS fruit business in Maydon Wharf was sold to enable management to focus on core activities.
