The Sea Harvest Group reports a resilient set of interim results for the first six months of this year, a period described by the company as being characterised by significant cost inflation and the continued impact of load shedding.
‘Strong demand for our products, both locally and internationally, resulting in higher selling prices in all markets and channels and the weaker rand against our basket of trading currencies mitigated the material cost inflation the Group experienced compared to the same period last year,’ said Sea Harvest Group CEO Felix Ratheb, commenting that the the Group’s revenue increased by 18% to R3.2 billion, driven by strong demand and higher selling prices across all four business segments, while earnings before interest and tax (EBIT) was 23% ahead of the same period in 2022, and headline earnings per share (HEPS) 19% ahead.
In terms of the Group’s South African fishing business, he said that they are continuing to recover from the FRAP volume losses, compounded by challenging fishing conditions, due to the erratic weather and lower catch rates in the first half of the year.
‘The team did well to mitigate the lower volumes through higher selling prices and a higher value market mix, buoyed by strong demand and a weaker rand, and, with a relentless focus on cost containment, we achieved a pleasing 15% operating profit margin in a difficult environment,’ he said.
Sea Harvest’s Australian operations performed ahead of expectations during the first half of 2023, despite having to absorb six months of fixed costs associated with the MG Kailis acquisition.
‘With prawn fishing only starting in April, the Australian business is very much weighted to H2. The Group’s other seafood oriented business in aquaculture also remains on target with regard to its improved performance where it benefitted from a recovering Asian market, a higher value product mix, and a weaker rand, resulting in the abalone business turning profitable in the first half of 2023. We successfully acquired most of the minority shareholders in Viking Aquaculture during the period, increasing our shareholding to 82%, and we are confident on the future of the abalone business and its continued recovery,’ Felix Ratheb said.
Aside from seafood, the Group’s Cape Harvest Foods segment faced a perfect storm from a supply chain perspective, challenged with lower countrywide milk flow, significant cost inflation, including a double digit increase in the milk price, load shedding and a load shedding related fire at Ladismith Cheese.
‘Despite these challenges and a constrained consumer, higher selling prices resulted in a 9% increase in revenue. However, the disruptions in the period weighed heavily on profitability, particularly at BM Foods, our convenience foods business, which was unable to fully recover the significant cost inflation,’ he said.
However, Felix Ratheb explained that the R22 million direct impact due to load shedding was exacerbated by the indirect costs associated with the significant disruption caused to the entire supply chain.
‘With load shedding forecasted to continue into the near future, the team is now at an advanced stage investing in renewable solutions to mitigate costs and disruptions,’ he added.
With central banks both in South African and Australia hiking rates, average interest rates have increased by 47%, doubling the interest burden of the Group. ‘While local and international markets are firm and demand for our products remain strong, the trading environment remains challenging with consumers under pressure and cost increases not showing any signs of easing,’ Felix Ratheb stated.
