JSE-listed seafood, aquaculture and agroprocessing company Sea Harvest says last year was its toughest financial year since listing on the JSE in 2017, with its performance having been impacted on by poor hake catch rates in South Africa, as well as poor prawn catch rates in Australia.

The company also cited weak market conditions in abalone, continued soft global prawn pricing and high interest rates as challenges experienced during the reporting year.

The company was nonetheless able to weather these conditions and achieve a 6% year-on-year increase in earnings before interest, taxes, depreciation and amortisation to R609-million for the year ended December 31.

Headline earnings decreased by 37% year-on-year to R174-million, while the basic headline earnings a share decreased by 45% year-on-year to 55c.

Since 2017, the group's HEPS grew by 45% in total and by an average 10% every year.

The acquisition of certain subsidiaries of Terrasan Group, including its pelagic business and the majority of its abalone business, had contributed to a 16% year-on-year increase in group revenue to R7.2-billion in the year under review.

A final ordinary cash dividend of 22c apiece compares with a final ordinary cash dividend of 40c declared in the prior financial year.

Sea Harvest’s profit attributable to shareholders amounted to R226-million, marking a 20% decrease in its prior financial year’s attributable profit of R282-million.

The group owns and operates 49 vessels, seven fish operating facilities and eight aquaculture operations. Its primary fish species are hake, small pelagic fish such as sardines and anchovies, horse mackerel, prawns, Spanish mackerel and abalone.

Sea Harvest’s catch rates in South Africa currently trail 25% below 2021 levels, leaving the group significantly behind in catching its quota and resulting in 7% lower total catch volumes. The company attributes the lower catch rates to environmental conditions at sea, including heat waves, water temperature and heavy rainfall, as well as the loss of two vessels.

The group's uncaught hake quota for the reporting year amounted to R121-million worth of fish as well as higher costs per kilogram to process.

The South African fishing segment's Ebitda ultimately reduced by 51% year-on-year to R329-million, which Sea Harvest helped to offset by using price and product mix factors.

This while catch volumes of prawns in Australia trend 28% below the company’s ten-year average, again owing to environmental conditions resulting in lower biomass for fish to consume.

The lower catch rates for both fish and shellfish resulted in lower volumes and higher costs, which was compounded by 23% lower prawn prices compared with 2022 – owing to oversupply in the market.

Abalone prices were also 35% lower compared with pre-2020 levels, mostly owing to economic conditions in Hong Kong and China.

Sea Harvest noted a R110-million impact on the back of lower prawn prices and volumes, which contributes to its ultimate R534-million impact on Ebitda in the year under review. 

Sea Harvest CEO Felix Ratheb confirms that the group is focused on addressing the low catch rates, having added four additional hake trawlers to its fleet during 2024 and early this year. This will allow the group to capitalise on a 5% increase in the 2025 total allowable catch (TAC).

The additional fishing capacity in South Africa, coupled with effort reduction strategies in Australia, are expected to significantly counter low catch rates and support the recovery of prawn, crab and scallop resources, respectively.

Ratheb says fishing conditions have already started improving in the first two months of this year, showing positive signs of catch rate recovery. He adds that it is normal for catch rates to be cyclical; he believes Sea Harvest has reached the bottom of a cycle that will certainly improve going forward.

While abalone and prawn pricing lags owing to their respective market conditions, Sea Harvest continues to experience strong market conditions and demand for hake and pelagic fish.

Sea Harvest also operates a Cape Harvest Foods division, which includes BM Foods and the Ladismith and Mooivallei Suiwel dairy products brands, which delivered a firm performance despite some impacts from a foot-and-mouth disease outbreak.

The segment delivered a revenue increase of 4% to R1.7-billion on a like-for-like basis, with good milk flow growth having driven higher sales volumes despite lower average pricing.

The dairy segment delivered an operating profit of R92-million in the year under review, compared with an operating profit of R81-million in the prior year.

The group’s net finance costs, which include investment income and interest expense, increased by 24% in the year under review to R276-million as a result of higher levels of debt during the year.

OUTLOOK

Looking ahead, Ratheb says the group will drive enhanced efficiencies, cost containment, cash generation and debt reduction to strengthen its financial position. This forms part of a three-year strategy to 2027.

The strategy includes modernisation of the pelagic fleet and increasing pelagic factory throughput and reducing debt by 50% over the period.

Within Sea Harvest Pelagic, softer global fishmeal and fish oil pricing may be offset by the increased availability of local industrial fish and pilchards, with an increased initial TAC announced this year.

The business is focused on increasing fishmeal factory capacity, thereby increasing sales volumes and efficiencies.

Within Aquaculture, determined cost containment measures, complemented by an integration project, will result in step change benefits to Viking Aquaculture, which will assist in mitigating the impact of the slowing Far East economies and intense competition.

Within the Cape Harvest Foods segment, the Ladismith business is expected to continue with its firm performance, benefiting from increased milk volumes and the investment in the roller dryer powder plant, solar PV plant and a new cheese slicer line.

The Australian segment is expected to improve performance, driven by improved catch volumes as prawn stocks recover, further increases in the scallop and crab quotas, market and channel diversification and determined cost containment measures.

As the group enters a consolidation phase focused on noncore asset disposals, efficiencies, cost containment, cash generation and debt reduction, Ratheb is confident in Sea Harvest’s ability to continue capitalising on strong demand for sustainable, wild-caught seafood and products.