Sea Harvest profit surges after two acquisitions
Sales jumped 86% to R1.87bn in the six months to end-June, following the acquisitions of Viking Fishing and Ladismith Cheese
Sea Harvest, the recently listed fishing enterprise controlled by Brimstone Investment Corporation, said on Monday the recent acquisitions of Ladismith Cheese and Viking Fishing resulted in a 70% jump in operating profit for the year to end-June.
Headline earnings per share rose 32% to 61.1c in the period, while operating expenses jumped 60% to R367m as a result of the new acquisitions. Operating expenses, as a percentage of revenue, decreased to 19.3% from 21.7% in the prior comparative period.
Net finance costs, however, jumped 628% to R51m as the company funded its expansion, while the group's operating profit margin contracted 1.4 percentage points to 15%.
Revenue rose 86% to R1.87bn, and operating profit 70% to R281m.
Sea Harvest acquired Ladismith Cheese in January 2019 for R527m, saying at the time it was seeking to diversify earnings and benefit from growing consumers in natural-fat products.
The deal follows on the heels of Sea Harvest’s R885m acquisition of the Viking fishing Group and 50% of Viking Aquaculture, which was completed in June 2018.
Sea Harvest listed on the JSE in April 2017, and has said it is seeking further expansion. In May 2019, it completed its 100% acquisition of Mareterram in Australia — now Sea Harvest Australia.
Although the new acquisitions made the results difficult to compare on a like-for-like basis, it was a good set of results with Sea Harvest's new acquisitions performing reasonably well, said Protea Capital Management CEO Jean Pierre Verster.
Sea Harvest's plans to diversify in order to mitigate risks of relying solely on revenue from SA fisheries was therefore seemingly paying off, especially in the light of the recent delay of the Fishing Rights Allocation Process (FRAC) for 2020, said Verster.
Environment, forestry and fisheries minister Barbara Creecy suspended the allocation process for quotas across 12 commercial fisheries on August 2, a move that would allow good engagement with stakeholders. The move to suspend the process has been welcomed by Sea Harvest, and could have seen new entrants to the market being favoured during quota allocations.
“That was the sword hanging over Sea Harvest's head as well as the whole industry,” said Verster.