After a challenging year for Oceana, the company is reporting improved revenues and headline earnings, which group CFO Zaf Mahomed says is largely due to the company’s diversification strategy.
The outlook at Oceana Group is positive, says group CFO Zaf Mahomed. Despite being faced with various challenges this year, including high inflation and interest rates, currency volatility, a low-growth domestic economy and increased loadshedding, the company has reported a 22 percent increase in revenue for the year ended 30 September 2023 to R10 billion, as well as a 28.9 percent increase in headline earnings.
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He explains that these improved results are largely due to a solid performance from Daybrook, which was able to capitalise on demand and record fish oil prices by building and holding higher inventory levels, as well as volume sales from Lucky Star, which was made possible by absorbing some inflationary costs.
“Keeping Lucky Star affordable will continue to grow volumes, particularly given the price pressure facing other popular protein sources, particularly eggs and chicken,” Zaf says.
He adds that Daybrook’s higher closing inventory will allow it to benefit from continued strong demand and pricing until the new fishing season starts, while the shift from La Niña to the El Niño effect should improve wild-caught catch rates.
“The results reflect the benefit of our diversification across species, geographies and currencies, which enabled the group to absorb the impact of increasing input costs and remain resilient in a challenging operating environment in South Africa.”
Zaf adds that investing in the business to maintain appropriate inventory levels and active working capital throughout the year has also helped. “Following the post-Covid-19 supply chain disruptions and the KwaZulu-Natal civil unrest, we embarked on a programme to build inventory. In some areas, like Lucky Star, we were better positioned to negotiate terms with our suppliers, with creditors’ days increasing from 55 to 67 days.”
He explains that Daybrook was able to continue its strategy of building stock during the fishing season to meet off-season contract commitments until May 2024. “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 prices. 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.”
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Also as a result of this work, the group’s net debt to EBITDA ratio also improved significantly from 1.7 times to 1.2 times. “We will continue with our strategy of creating balance sheet capacity for organic and acquisitive growth,” he says.
This includes:
- Leveraging Lucky Star’s brand strength and depth of distribution by commissioning a new canned meat factory in St Helena Bay.
- With the conclusion of the Fishing Rights Allocation Process (FRAP), Oceana is now able to upgrade and enhance its hake fishing fleet.
- Oceana has allocated incremental capex of R600 million, which will be phased over the next three years to upgrade its plants and fleet
“Each business pillar is on track to deliver, underpinned by an experienced management team and highlight motivated support teams from across the group,” Zaf explains.
Reflecting on the past year he has been CFO, he says it’s been “nothing short of amazing. I am supported by a great finance team, and we’ve completed many exciting projects already.”
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He concludes that: “Based on all of this, I believe that Oceana is well-positioned for the future.”
