Sea Harvest adds solar farm to its sustainable energy mix

Diversified seafood and milk producer Sea Harvest is setting up a solar farm at its Ladismith dairy as load-shedding continues to batter food producers, adding to the costs and complexity of the production process.

The company also has a wind farm to power its abalone business on the west coast.

The solar farm is its third investment in sustainable infrastructure as it also set up a desalination plant at its fishing business to reduce the cost of water and electricity. It uses a 1.5-million litres of water a day.

Sea Harvest had a tough year to end-December as it struggled to catch as much hake as it was permitted in the present climate conditions, which also battered competitor I&J. Sea Harvest also saw cattle producing less milk due to lower rainfall.

Global prawn prices were weak due to oversupply, affecting its fishing operation in Australia.

Load-shedding costs affecting its fishing and dairy operations rose 88% to R46m.

Even as local hake prices rose 24% in the past two years, demand for its fish product remains strong with it unable to meet demand abroad due to challenging fishing conditions.

CEO Felix Ratheb said wildcaught seafood was the last source of large quantities of hunted or nonfarmed product on the market. “Demand for seafood globally, particularly wild seafood, is increasing astronomically,” he said.

Shareholders on Wednesday approved its partial merger with Terrasan, a west coast fishing business that also has a large aquaculture operation. There is high demand for abalone from China, but it needs to be sufficiently sized to be profitable.

Sea Harvest is expanding, and will take over 63.07% of Terrasan’s abalone business, Aqunion, and 100% of its pelagic fishing business, Saldanha, which catches pilchards. The deal is, however, subject to competition authority approval.

Ratheb said that the existing Sea Harvest abalone business was already breaking even, but this is not reflected in its R24m operating loss as it includes figures from its oyster and muscle operation that it sold during the period.

The abalone segment reduced its operating loss from R40m in 2022.

The group will become profitable once the products have grown large enough. It is already showing an accounting profit on the books as the larger abalone on the farm have become more valuable.

After posting R275m in headline earnings, the group has R2.38bn in debt. Interest costs spiked 79% to R223m. This resulted in headline earnings per share dropping 5% to R1.

DEMAND FOR SEAFOOD GLOBALLY, PARTICULARLY WILD SEAFOOD, IS INCREASING ASTRONOMICALLY

Felix Ratheb Sea Harvest CEO

“With the interest cost almost doubling, we obviously have to either increase our earnings performance or reduce debt,” said Ratheb.

Its debt-to-ebidta ratio, a measure bankers user to see if earnings cover finance costs, sits at 2.7 times, which is higher than the two times ratio it would like.

Ratheb said the ratio was higher than it would prefer as earnings have been lower due to various factors outside its control, including climate and lower rainfall. He said that he did not think interest rates would come down quickly, and the group would probably consider paying down some debt.

Another high input cost is fuel for its fishing boats.

Nearly 50% of Sea Harvest’s sales were in foreign currency, making the group a strong rand hedge, said Ratheb.