Interim headline earnings per share in Oceana Group jumped 84.6% to 578.8 cents for the six months ended March 31, driven by a 57.1% surge in operating profits which amounted to R1 billion for the same period.
The fishing and food processing company also lifted half-year after tax profits from total operations by 86.1 % to R716 million, mainly driven by record half-yearly earnings from the company’s US-based Daybrook Fisheries.
A stronger performance during the period by the Lucky Star brand, following improved second-quarter canned food sales volumes, also provided growth impetus.
“Daybrook’s exceptional performance was due to higher opening inventory levels which enabled the business to capitalise on higher fish oil sales volumes at record US-dollar prices during the period,” said Oceana.
Across its operations, Oceana said revenues from continuing operations had strengthened by 12.1% to R5bn on the back of “strong pricing across all products”, especially fish oil.
The impact of a weaker average rand exchange rate on export and US-dollar translated revenue of R19/$1 compared to R17.91/$1 in the prior year contrasting period had been offset by lower sales volumes in wild caught seafood.
Resultantly, gross margins from continuing operations increased by 700 basis points to 34.1%. This has been attributed to higher fish oil pricing as well as the higher proportion of fish oil sales volumes.
“Margins were moderated by lower wild caught volumes and the impact of the weaker rand exchange rate on the cost of frozen fish imports,” the company explained.
“The growth in overhead expenditure from continuing operations was contained below inflation, increasing by 3.5% to R445m.”
In terms of cash generation, Oceana was 12.6% stronger at R634m, attributable to the improved operating performance in the US, mitigated by higher working capital requirements in the South Africa operations.
The company bumped up its capital expenditure for the period by 44.9% to R297m.
This included R132m related to the upgrade of the West Coast canned foods and fishmeal plants as well as completion and commissioning of the new boilers and canned meat facilities.
With consumers under pressure from elevated inflation and higher interest rates, Lucky Star had a stronger inclination towards value offerings during the half-year period under review.
This resulted in improved sales volumes in the second quarter, with a total of 4.8 million cartons sold during the half-year period to the end of March.
Oceana said Lucky Star will continue with its strategy of driving volumes through relative affordability and availability in the constrained consumer spending environment.
The total allowable catch for pilchards in South Africa was increased by 67% to 65 000 tons for the season, a positive sign for the resource which is expected to further enhance margins.
However, canned fish volumes declined by 3.3%, dragging down overall canned food volumes by 20.8%. This decline has been attributed to a shortage of canned meat during the transition from outsourced to in-house manufacturing.
The company’s canned fish inventory levels closed the period 29.5% lower than the prior period largely due to the reduction in in-house volumes produced.
Oceana’s Africa fishmeal and fish oil sales volumes reduced by 15.1% to 5 044 tons due to lower opening inventory levels.
However, volumes produced were in line with the prior period, although there was a reduction in pilchard trimmings from the cannery, linked to the longer factory closure being offset by a 21.8% improvement in red eye and anchovy landings to 30 156 tons.
Upgrades to the St Helena Bay fishmeal facility were completed earlier this year, while a major upgrade to the Laaiplek fishmeal facility resulted in the plant being closed for the entire period.
Oceana CEO Neville Brink said prudent cash and capital management had allowed the group to invest in its business, including upgrades to factories and vessels to improve efficiencies, expand the Lucky Star brand and take advantage of bolt-on acquisition opportunities.
“We are already seeing the benefits of factory and vessel upgrades through efficiencies and enhanced product quality. The R100m Lucky Star canned meat plant is the first investment of its kind on the West Coast in at least 20 years and will enable us to meet increasing demand for affordable protein, Brink said.
“We have also acquired majority stakes in a canned chicken liver and a squid business. These investments strengthen and complement the group’s existing strategic pillars, diversified across canned food, fishmeal and fish oil and wild caught seafood, and will contribute to its medium-term growth.”
The group’s net debt as at the end of the period under review lowered by 16.7% to R2.4bn due to term debt settlement, partially offset by an increase in SA borrowings to fund capital expenditure and working capital requirements.
Net interest expense from continuing operations decreased to R93m. In the US, net interest expenses in dollar terms decreased by 56.1% due to term debt repayments and higher interest income received on money market investments.
Oceana’s South African net interest expenses increased by 16.3% during the interim period, driven by higher borrowings.
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