Sea Harvest ventures into dairy industry in R527m cash deal
FISHERIES group Sea Harvest through subsidiary Cape Harvest Food has branched into the dairy industry, with its acquisition of cheese, milk powder and dairy producer Ladismith Cheese for R527 million in cash.
Sea Harvest yesterday posted lacklustre results for the six months to June, reporting a revenue decline of 5 percent to R1 billion, compared with R1.1bn a year ago.
It attributed the decline to a 5 percent reduction in Total Allowable Catch in South Africa, the delayed start to the prawn fishing season in Australia as well as funding of acquisitions.
Group chief executive Felix Ratheb said the acquisition strategy they had adopted would hopefully deliver positive results. “The Harvest Mzansi joined our fleet in April 2018, and our factory optimisation project concludes in Q4 this year. These initiatives should assist us in delivering margin enhancement,” he said.
Of the diversification into the dairy industry through Ladismith Cheese, the group said it believed the industry was set for further prospects as growing demand for cheese and butter was in response to consumer dietary changes towards natural fat products.
“Ladismith Cheese exhibits strong fundamentals. It is a profitable, branded, fast-moving consumer goods food manufacturer of significant scale in the food and agricultural sector,” Ratheb said.
The acquisition provides Sea Harvest with an ideal platform from which to build on in the dairy sector through the development and acquisition of additional dairy and allied beverage products.
Senior agricultural economist at Absa, Wessel Lemmer, said the acquisition seemed to be based on the company’s strategy to grow their business in related sectors in the food market.
Fred Robertson, the chairperson of the group’s majority shareholder, Brimstone, said the acquisition of Ladismith Cheese would provide Sea Harvest with an ideal platform from which to build on in the dairy sector.
Established in 1999, Ladismith Cheese is a value-adding dairy processing company based in Ladismith in the Western Cape. Its primary business is the production, distribution, marketing and sale of cheese, butter and milk powders to the South African retail, wholesale and food service markets.
Transaction costs
Ladismith Cheese employs 350 people and produced 9 000 tons of cheese and butter and 7 500 tons of dairy and nondairy powder and generated revenues of R681m. Profit after tax was R57.7m for the financial year to January 31, 2018.
The Sea Harvest Group delivered headline earnings for the six months ended June 30, 2018, of R111.3m, an increase of 1 percent to R110.7m compared to the same period last year after absorbing transaction costs relating to the Viking acquisition.
Other operating income decreased to R26.9m compared with R30.2m at the same time last year, mainly due to lower foreign exchange hedge gains for the period, with the 2017 average hedge rates benefiting from the sharp devaluation of the rand in early 2016.
Sea Harvest closed unchanged on the JSE yesterday at R14.65.