Sea Harvest rides out Covid-19 storm

● Fishing group proves resilient in face of pandemic with modest 1% profit rise

Sea Harvest Group, the deepsea fishing and aquaculture group, delivered a modest profit increase in its 2020 fiscal year, proving its resilience in the face of the Covid-19 pandemic, which disrupted global supply chains and curbed access to the lucrative Far East market.

The Cape Town-based company said profit for the year to end-December last year rose 1% from the previous year to R397.85m while headline earnings climbed 3% to R420.9m, according to yesterday’s stock exchange filing.

Revenue rose 10% to R4.38bn in the fiscal year thanks to solid performances from Sea Harvest’s South African fishing business, its Cape Harvest food unit as well as the group’s Australian operations.

However, this was offset by challenges at its Viking Aquaculture business, which had to contend with severely restricted access to the Asian markets where it sells its farmed perlemoen due to Covid-19.

“While local and international retail markets have benefited as a result of an increase in in-home consumption, local and international food service markets have seen a slowdown as a result of various lockdown levels being implemented worldwide,” Sea Harvest said of its results.

“This, together with supply chain disruptions, has resulted in a softening of operating margins.”

Revenue from Sea Harvest’s SA fishing business rose 12% in the year to R2.76bn, while the unit also delivered an 8% increase in operating profit to R570m.

The group’s Cape Harvest foods segment, which produces Ladismith cheese and butter, delivered a 3% increase in revenue to R1.02bn, though operating profit dropped 2% to R94m.

Sea Harvest Australia saw revenue jump 24% to R543m for the year, while operating profit rose an impressive 443% to R38m.

Operating profit margins in the Australian business also rose to 7% during the year, from 2% the previous year.

However, Sea Harvest’s aquaculture business saw revenues slump 23% to R53m due to the effect of Covid-19 lockdowns, which closed off its main export markets and significantly reduced average selling prices.

Operating losses at the aquaculture business widened 143% to R73m, though the reduced sales, combined with good growth on its farms, saw the biological asset valuation of the business increase 15% to R160m.

“The aquaculture segment has been a major casualty of Covid-19 as a direct result of the inability to access markets in the Far East due to various levels of lockdown in the region, the curtailment of air freight from SA and the marked slowdown in local and export food service markets,” Sea Harvest said in its results statement.

“Likewise, the oyster and mussel operations, which supply almost exclusively into food service, have been severely affected by Covid-19.

“The depreciation in the rand was insufficient to counter the significant decrease in average selling prices during the period.”

Sea Harvest had to absorb R24m in Covid-19-related costs during the year and also suffered foreign exchange hedging losses of R68m, vs R45m in gains the previous year, due to its export and fuel hedging measures being “out of the money”, it said.

The group declared an ordinary dividend of 45c a share, prompting a 7.8% rally in Sea Harvest’s shares to R16.16.