Fish and poultry firms lift profits
• Sea Harvest says in trading update earnings will increase while Quantum forecasts improved performance for rest of financial year
Two white-meat producers have beefed up profits, with recently listed fishing group Sea Harvest and poultry producer Quantum issuing upbeat trading statements on Monday.
The share price of Sea Harvest, controlled by empowerment company Brimstone, firmed markedly on Monday after the release of its trading statement for the year to December. The group said the maiden financials, due for release in early March, would show basic headline earnings coming in at 99c-113c a share, an increase of 74%-98% compared with the previous financial year.
Sea Harvest attributed the improved performance to robust South African operations, which are mainly centred on the hake industry.
The group noted strong market demand for Cape hake globally as well as a “significantly enhanced performance” from investments in processing plants at Saldanha Bay.
The strong performance by Sea Harvest contrasts with the difficulties faced by market leader Oceana, which is much larger and more diversified.
Although still mainly centred on hake, Sea Harvest has ventured offshore via a majority stake in Australian seafood specialist Mareterram.
The group also recently proposed acquiring unlisted Viking Fishing, one of the largest family-owned fishing ventures in the country.
In a trading update covering the first four months of the year to end-September, Quantum Foods, which has PSG-aligned agribusiness Zeder as a shareholder of reference, pencilled in an improved performance for the rest of the financial year.
Quantum said the improved showing would be driven by a stable performance in the feed and farming businesses and higher profitability in the egg business. The company said the poultry operations benefited from favourable feed raw material costs in the first four months of the 2018 financial year.
This was partially offset by further avian influenza losses in the company’s Western Cape layer farming operations.
Quantum said the feeds business performed satisfactorily with stable rand per tonne margins on the back of a nearly 12% gain in external feed sales.
There was, however, a decline in feed in Quantum’s layer farming operations, caused by the lower hen numbers due to avian influenza as well as lower feed consumption in the broiler operations. Quantum said the egg business received significant tailwinds during the four-month trading period.
The company said average selling prices per dozen eggs rose 32% compared with those of the same four months in 2017, with production costs lower due to feed costs falling.
Although egg sale volumes fell 5.6% due to avian influenza production losses, Quantum said the profit effect of the improved margins was expected to be “substantial” for the first half of the financial year.
Vunani Securities analyst Anthony Clark said the Sea Harvest and Quantum trading updates were extremely good.
He said a key factor in the Sea Harvest performance was the extinguishing of debt by the capital raised at the company’s listing in early 2017.
Clark said that Quantum’s cracking update signalled a strong 2018 financial performance and raised the possibility of a special dividend.