Sea Harvest bolsters Australian beachhead
SEA HARVEST’S acquisition of Viking Fishing, Viking Aquaculture and Ladismith Cheese saw its headline earnings boosted by 52 percent in the second half.
The fishing group, which listed on the JSE last year and is controlled by Brimstone Investment Corporation, in the six months to June increased its headline earning to R169 million compared with R111m a year earlier, while its operating profit was lifted 70 percent.
Revenue rose 86 percent to R1.87 billion, which it attributed to the recent acquisitions.
In January, Sea Harvest announced the acquisition of Ladismith Cheese and in May concluded the acquisition of the remaining 43.7 percent interest in Sea Harvest Australia (formerly Mareterram) it did not already own, strengthening Sea Harvest’s presence in Australia and providing a beachhead for growth in the region.
While the investments are expected to pay off in the medium term, it hit Sea Harvest’s net finance costs, which jumped more than 628 percent to R51m as funds were poured into expansion, while the group’s operating profit margin contracted 1.4 percentage points to 15 percent.
The group delivered operating profit, before net finance costs and taxation, of R281m for the period, 69 percent higher than last year’s R166m.
Sea Harvest said the integration of Viking Fishing into the group was
progressing well, with the alignment of Viking’s ERP and inventory management systems on track for implementation in the third quarter of 2019.
“Good progress has been made in addressing the teething issues experienced with the Marel fresh fish processing installation in Saldanha Bay,” the group said.
It said the construction of a third powder plant at Ladismith Cheese was proceeding well, with the plant expected to be operational during the first half of 2020.
The expansion of the Diamond Coast Aquaculture abalone facility in the Northern Cape was ongoing, while approval had been received for the completion of wind turbines at the Buffeljags abalone farm.
The period’s progress was capped by the award of water usage leases for sea trout farming in Saldanha Bay, supporting growth of the operation to commercial scale.
Sea Harvest said that within the S A fishing segment, continued global demand for high value, wild-caught, MSC certified seafood was expected to support growth and firm pricing in the export markets.
However, it warned that local retail volumes were expected to come under continued pressure as a result of the challenging economic environment and price inflation in the category.
The group welcomed Environment, Forestry and Fisheries Minister Barbara Creecy’s withdrawal of previously announced fishing allocation time lines to allow for greater engagement with stakeholders and the proper planning and execution of the process.
Sea Harvest’s JSE share price yesterday reversed Friday’s 5 percent gain, to close at R13.21. INVESTMENT group Brimstone has its subsidiary Sea Harvest to thank for stemming the haemorrhage of profits as it reported a loss of R84.3 million in the six months to end June 30, compared with a R227.1m loss in the prior period.
Chief executive Mustaq Brey said in an interview that the current loss was mainly due to the cost of the exit of the Clover transaction, increased financial costs, increases in valuation provision at Lion of Africa Insurance and an increase in the tax charge.
He said that he was “confident of the business we have got” when it came to the outlook for the rest of the year. “We expect to receive a dividend of approximately R105m from Phuthuma Nathi this month,” he added.
Offsetting the losses in the past six months were increased profit at Sea Harvest and fair value gains.
Intrinsic gross asset value increased by 20 percent to R8.9 billion from R7.4bn at December 31, 2018. Intrinsic net asset value decreased 5 percent to R3.7bn from R3.9bn. About half the intrinsic gross asset value comprises investments in the food sector.
Subsidiary Sea Harvest reported an 86 percent increase in revenue for the period to R1.87bn, compared to the comparative period, after acquisitions boosted turnover.
Sea Harvest’s profit after tax increased by 44 percent to R161m. Brimstone invested another R300m in Sea Harvest, and received R64m in dividends from Sea Harvest in the period, said Brey.
Sea Harvest acquired 100 percent of Ladismith Cheese Company, and it acquired the remaining shares of Australian subsidiary Mareterram.
The stake in Oceana Group was increased from 17 percent to 22.9 percent by acquiring 8 million shares for R581m. Brimstone now holds a 24 percent stake in Oceana. In the reporting period Brimstone received R108.1m in cash dividends from Oceana.
House of Monatic, a clothing company, endured extremely tough trading conditions and this, as well as a retrenchment process, made for a challenging first half.
“We are seeing positive effects of the right-sizing,” said Brey.
Brimstone’s 18 percent stake in Aon Re Africa, a leading reinsurance broker in Africa, delivered a R9.7m dividend. Brimstone recognised R8.3m as its share of profits of this associate during the period under review.
Equites performed particularly well over the period. This investment was revalued upwards by R73m and paid a dividend of R24.5m to Brimstone in the period.
Life Healthcare was revalued downwards by R196m to R1.1bn. Brimstone received dividends of R4.1m from Life Healthcare during the period.