Daybrook nets dividends for Oceana
The acquisition of Daybrook Fisheries by JSE-listed Oceana is opening up new opportunities for the company and has helped to hike its profits.
|||Johannesburg - The acquisition of Daybrook Fisheries by JSE-listed fisheries group, Oceana, is opening up new opportunities for the company and has helped to hike its profits.
Oceana acquired 100 percent of US-based fishmeal and oil specialist Daybrook Fisheries for R4.6 billion last May.
The acquisition has already delivered positive results in a term. The group on Friday in its interim results to end March reported operating profit of R587 million, while Daybrook reported operating profit of R191 million.
Following the release of the company results, the share price gained as much as 3.33 percent on the JSE on Friday morning before retreating and closing with a 2.92 percent gain at R123.50 a share.
Oceana chief director Imraan Soomra said the success of Daybrook had opened up new possibilities for the company overseas. “Yes, it certainly has increased our profile as a global player in the fishing industry and has resulted in a greater deal flow across our desks. However, in the medium term we are pretty focused on integrating Daybrook with our business and reducing our debt levels,” he said.
Operating a fishing business provides the group with its own set of challenges, but the group has managed to grow despite the risks involved.
Volatile
“Just as challenging as it would be in most countries, the business of fishing is inherently volatile and this poses a risk to continued sustainable earnings,” Soomra said.
“We have consistently delivered growth due to our strategy to diversify species and geographies. The acquisition of Daybrook was based on this strategy,” ha added.
The financial director also said South African fishing was highly regulated and well managed, much like in the US. “The US has citizenship requirements for fishing rights holders and so too does South Africa, which goes through periodic rights renewal cycles, whereas in the US the right to fish is much longer term,” he said.
Oceana produces Lucky Star canned fish, horse mackerel, hake, lobster, squid and French fries. The group caters for lower and high-end consumers. In South Africa, the precautionary maximum catch limit for targeted catch of horse mackerel decreased by 8 percent to 38 656 tons.
Oceana is also listed on the Namibian stock exchange.
The 2015 Namibian horse mackerel total allowable catch decreased by 4 percent to 335 000 tons. The Ministry of Fisheries and Marine Resources made an initial allocation of 145 000 tons for the 2016 fishing season on the same basis as the previous year.
Oceana chief executive Paul Kuttel said: “An oversupply of fish in the market and tough trading conditions in our traditional African markets put continued pressure on horse mackerel prices, although the favourable exchange rate partially offsets the effect of weaker dollar prices.
“Despite weaker markets, margins and operating profit in Namibia improved following the sale of excess fishing capacity and the termination of experimental fishing efforts in Angola.
“The weak rand has made doing business in the country very difficult. Despite challenging market conditions in Africa and considerable economic headwinds in the country, our performance has been good.”
The group said the fishing rights applications for horse mackerel, hake inshore and west coast rock lobster were submitted in February. The Department of Agriculture, Forestry and Fisheries has indicated that the outcome of the allocations is expected to be concluded in August.
Kuttel said they expected pricing to improve in the fishmeal and fish oil sector based on consistent global demand and supply challenges in the Peruvian and European sectors.
The group’s revenue for the period was up 40 percent to R3.6bn. Looking ahead the chief executive said in its drive for efficiency and focus, the group would continue to evaluate non-core and underperforming assets in the period ahead.
BUSINESS REPORT