CFO Zaf Mahomed is casting a new net at Oceana

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CFO Zaf Mahomed reveals why balance sheet management and cash flow are the only tools you need to make your organisation’s profits grow. He uses his recent experience at Oceana Group as an example.

In November 2022, Zaf Mahomed made the move from Joburg to Cape Town to join Oceana Group as the CFO-designate, and in February 2023, he became the fishing company’s CFO.

The move was prompted by the opportunity to join Oceana CEO Neville Brink in taking the business into the future by unlocking value and driving performance. A key part of this journey included embedding new values and a culture of innovation.

Zaf, who has past retail experience as the CFO of Cell C and McDonald’s, has learnt that driving performance depends on the people in the business, and creating an environment where these people can thrive is key. “Culture is about creating an environment where people can succeed first. We gave our people that space and freedom to deliver their best.”

As predicted, the profit followed and in June 2023 the company reported its best results in five years, seeing revenue growth of 48 percent to R4.5 billion and a 123 percent increase in headline earnings per share to 313.5 cents. “The results affirmed that the underlying Oceana business was strong and healthy,” Zaf explains.

On the back of a successful Visionary CFO Series in 2021 and 2022, A2X has once again partnered with CFO South Africa to bring you a series of interviews highlighting South Africa’s best and brightest CFOs, their insights and challenges. Find out how they help lead some of South Africa’s most successful companies in this bi-weekly interview series.

Read all about the Visionary CFOs here.

Managing capex

Oceana disposed of its commercial cold-storage business, CCS, in the second half of 2023 and used the net proceeds to reduce its South African debt by R500 million. In the United States, the excess cash generated was used to settle its Daybrook Fisheries debt by US$15 million (around R285 million). “Investors get nervous when they see a South African company that has offshore debt, so paying off the debt was a big deal for us,” Zaf says, adding that the company is now “reeling in the rewards” of lower debt and higher dollar-based earnings.

He explains that, because they created balance sheet capacity, the business was able to start growing again. “Everything worked itself out: Sell the business, use the proceeds to pay off debt and create balance sheet capacity, which means you can start looking at positioning your capital expenditure towards growth.”

As the CFO, Zaf is responsible for allocating resources to different parts of the business. “CFOs often get too caught up with the income statement, but the real magic happens in the balance sheet and cash flow,” he says. “If you can get those two right, the income statement follows.”

When he joined Oceana, Neville and Zaf sat down with the MDs of each of its businesses to learn more about their capex requirements and came up with the company’s long-term growth strategy.

“We’ve spent about R61 million to open a new canned meat facility on the West Coast of South Africa, employing over 100 people. This creates an opportunity for us to tap into that market again,” Zaf shares.

Although Oceana sold canned meats in the past, this is the first time the company will be producing the product from its own factory, under the Lucky Star brand. It will appear in stores later this year.

Oceana has also embarked on a programme to enhance throughput, especially in its Daybrook facility. “In fact, our significant investment into optimising the plant throughput and vessel utilisation in the United States was a major contributor to our ability to benefit from record fish-oil prices in the market. We invested R37 million before the 2023 fishing season, which enabled us to achieve production rates of over 120 tons per hour, with only 18 hours of downtime.”

Additionally, the company has invested in refurbishing its fleet.

“Some vessels are effectively a factory at sea. Although catch rates have been low, we expect it to start picking up again soon, and we want to be able to take advantage of that when it comes,” Zaf says.

He explains that, when they did the flagship Beatrice upgrade, Oceana expanded its production capacity by a further 25 percent.

Working the capital

All of this work has paid off, especially amid the loadshedding, supply chain, and food security concerns in South Africa. “Many of these circumstances have shown people that cans can be sexy. You don’t need a fridge, you can store it for long periods, you don’t need to cook it, and you can feed multiple people with it,” Zaf says.

“We also saw an increase in sales because of the bird flu that swept through the poultry industry. People substituted their regular chicken meals with fish meals.”

He adds that a large part of why Oceana can withstand these challenges is because the company is used to stretching its working capital. “We procure about 25 percent of the world’s pilchard production, because you can’t just go out tomorrow and catch them. Catching fish is largely dependent on seasonality, so you have to work around that.”

The company also relies on tomato paste for the production of its canned goods. “The recent droughts in the United States have turned the tables on supplying tomato paste, but we were able to switch our strategy to make sure there was no drop in our production,” Zaf says.

Oceana also recently completed a working capital initiative with Standard Bank for a R600 million sustainability-linked loan, and won the Bonds, Loans & ESG Capital Markets Africa 2024 Award for Corporate Treasury & Funding Team of the Year after introducing a supply chain finance solution in Namibia. The deal allowed suppliers of Erongo Marine Enterprises, one of Oceana’s businesses, to benefit from its cost of credit, and gain access to financing.

“The outlook at Oceana Group is positive,” Zaf says. Despite being faced with various challenges this year, including high inflation and interest rates, currency volatility, and a low-growth domestic economy, the company has reported a 22 percent increase in revenue for the year ended 30 September 2023 to R10 billion, as well as a 29 percent increase in headline earnings.

Embracing a quality life

Having been born in Durban, Zaf says it’s refreshing to be close to the ocean again. “It’s really nice being in Cape Town, the quality of life is very different,” he says.

He explains that, having lived in Gauteng throughout his career, the experience has been a welcome adjustment. “It’s not so easy to have that quality of life in Johannesburg. Being out in nature has been something special, and Cape Town is beautiful.”

One of Zaf’s favourite things about Cape Town is its food culture. “There’s good food everywhere, and it’s also so much easier to find Halal food, which means I can enjoy more food here.”

He has also gotten back into sport again, and regularly plays five-a-side soccer with some of his peers and friends in the area. “I always think of myself as the last Ronaldo, except that’s only in my mind… the physical ability deserted me quite some time ago. But it’s a good run-around.”

This Visionary CFO Series interview is sponsored by A2X. It was originally published in Edition One of the 2024 CFO South Africa Magazine, which you can download and read here!

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