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Oceana delivered on investor promise - CEO

Nov 21 2016 18:11
Carin Smith


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Last traded 72
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Cumulative volume 1594
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town - For the year ended 30 September, group revenue of Oceana grew by 34% to R8.2bn, operating profit increased by 69% to R1.7bn and headline earnings increased by 34%.

As a result of the diluting effect of the additional shares issued in September 2015, headline earnings per share (Heps) increased by 20%, resulting in a five-year compound annual growth rate in Heps of 12%.

CEO Francois Kuttel told Fin24 he is very pleased with the results, despite it having been a demanding year.

"We have again delivered significant value growth for shareholders. This positive growth was driven by the inclusion of Daybrook and Amawandle (Foodcorp) assets for a full period, supported by 13% revenue growth in our African operations as a result of strong volumes in canned fish, fishmeal and hake, higher occupancy levels in the CCS Logistics business and favourable pricing in most markets," said Kuttel.

"We delivered on our investment case and it is pleasing for me that the rest of the business performed very well."

He said the exchange rate was challenge.

The company’s resultant strategy to increase importation of frozen rather than canned pilchards and to double production in its canneries in South Africa and Namibia, however, resulted in reduced foreign currency exposure and had a positive impact on overhead recoveries.

"We have a large component of imported products to service our Lucky Star brand and we brought a large part of the production to SA in reaction to the choppy exchange rate," said Kuttel.

"The result we got by increased labour hours, job creation and food security from bringing the frozen raw material to SA should not be underestimated. We are providing affordable protein food security from our point of view and bringing the work to SA increased labour opportunities on the West Coast and in Namibia."


To Kuttel successes over the financial year included improving on the integration of its big investments like Daybrook.

"It was pleasing in the past year to see cross-polination between our SA and American businesses and learning from it," he said.

As for future plans, the company uncovered material upside potential in its US operations.

"We think from a volume point of view, we can extract more over the next year or two. Now that we have a robust and secure supply chain we will look to grow our presence in the rest of Africa and in SA," said Kuttel.

Production and product innovation is one focus area going forward.

"Once again we are happy with fact that we delivered to our investors what we said we would. And, while fishing remains a cyclical business, we are happy to continue to de-risk our business by means of strategies," he continued.


Kuttel added that sustainability is key to operations and making sure the fisheries the company is involved in are sustainable.

The Lucky Star canned fish and fishmeal division continues to be a star performer, contributing 52% to group revenue despite adverse fishing conditions and reduced quota allocation in South Africa and Namibia. The 13% increase in sales volumes reflects competitive pricing against other proteins, a strong marketing strategy, and the introduction of new products and flavours, with Lucky Star Pilchards maintaining market share of approximately 80%.

The industrial fishmeal business recorded a 19% increase in landings of anchovy and redeye herring in South Africa, with a further 13 000 tonnes landed and processed in the newly-commissioned fishmeal plant in Angola through the Oceana Boa Pesca joint venture.

This resulted in a significant increase in sales volumes of fishmeal and fish oil. Pricing has been impacted by Peruvian quota announcements, but positively offset by a favourable exchange rate.

Daybrook’s first full year as an Oceana Group company saw effective integration within the Oceana group. The improved landings of 687 million fish and the increase in fish oil yields and fishmeal production reflected both a robust gulf menhaden resource, as well as enhanced efficiencies and additions to the facility’s capacity.

Improved operational efficiencies made up for the softening in fishmeal prices following reasonable landings in its first 2016 Peruvian fishing season, and slightly slower than expected volume uptake in China.
“Now representing around 40% in value of Oceana’s market capitalisation, this acquisition has thus far delivered exactly what we wanted it to, and more. Our investment in Daybrook is a critical component of our commitment to securing long-term opportunities for value growth. With performance in line with what we had said to the investment community 18 months ago, we have seen significant returns being brought home to southern Africa, with Daybrook delivering revenue of R1.9bn and operating profit before other operating items of R668m," said Kuttel.

"Given the challenges many South African companies have faced in seeking to expand internationally, it has been pleasing to see how well Oceana has executed and delivered on this investment.”

Hake and lobster

Hake profitability improved significantly as a result of increased volumes following the Amawandle (Foodcorp) acquisition, firmer Euro prices combined with a favourable exchange rate, and lower fuel prices. Oceana’s own and contracted quota now represents 12.4% of the Hake Deep Sea Trawl TAC, up from 1.1% five years ago.

The west coast rock lobster business showed a decline in profitability, following lower catch rates experienced by the industry and a lower live mix due to poorer fish quality, both of which negated a favourable exchange rate. Continuing uncertainties remain regarding quota allocations and the implementation of the small-scale fisheries policy.

CCS Logistics continued to deliver revenue growth, driven by record occupancy levels in its 11 cold stores and supported by a strong focus on cost efficiencies. The relatively new transport services business doubled its profits in 2016, accounting for approximately 10% of total revenue.

“Looking to immediate future, we’re going to continue  bedding down the integration of our Daybrook acquisition, consolidating the business to pay down the debt, and driving ambitious cost saving and efficiency targets. In Africa, we will be working to further extend the market for our Lucky Star products, while seeking new opportunities to increase diversification in species, geography and currency," said Kuttel.

"As a larger player in the sector, we will continue to seek to play a leadership role in supporting small-scale fishers, working with them and other parties to drive fishing practices that are economically, socially and environmentally sustainable. Doing so is clearly in our collective interest.

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