CFO Zaf Mahomed explains that Oceana’s recent record half-year results affirms the business’s health and strength.
Oceana has seen its best performance in five years, reporting revenue growth of 48 percent to R4.5 billion and a 123 percent increase in headline earnings per share to 313.5 cents for the company’s first-half results. The board also increased the interim dividend by 136 percent to 130 cents per share, compared to the 55 cents per share for the comparative period.
“This was a strong first-half performance for Oceana in tough operating conditions that were characterised by distressed consumers grappling with lower disposable income,” says CFO Zaf Mahomed.
Improved opening inventory levels, strong demand for affordable, shelf-stable protein and record fish oil prices have enabled the food processing group to counter the effects of rising interest rates, high inflation and intensified loadshedding on consumers’ disposable income.
From strength to strength
Zaf, who joined the company in the first half of the year, explains that he is very pleased with the record performance.
“The results affirm that the underlying Oceana business is strong and healthy and that the management team, under Neville Brink’s leadership, is motivated and focused on delivering a strong second half to match the first half performance and growing the business for the benefit of all its stakeholders.”
He adds that it also speaks to the strength of the company’s portfolio, which is diversified across species, geographies and currencies in order to reduce risk and volatility over the long term. “We have the ability to absorb some of the impact of input costs in a high-inflation environment and counter the effects of tough operating conditions.”
A better half-year, not without challenge
According to the company, Oceana’s wild-caught seafood business benefited from increased export demand, which drove up prices. This, and a favourable exchange rate, improved export returns.
Operationally, improved catch rates in the Namibian horse mackerel business were offset by poorer catch rates for the South African hake and horse mackerel fisheries and sub-optimal vessel utilisation in the hake business.
Demand for affordable and shelf-stable protein, promotional activity and good opening stocks boosted Lucky Star sales by 21 percent to a record five million cartons. Margins were affected mainly by the weaker rand, which made importing frozen pilchards more expensive and above-inflation increases for other input costs.
African fishmeal and fish oil sales volumes were up 39 percent due to better opening stock levels and a 76 percent increase in anchovy and red-eye landings. Firm US-dollar market prices off the back of firm demand contributed further to the performance. Loadshedding added R12 million to operating costs as a result of increased reliance on generators.
Daybrook’s fishing season in the US began in mid-April, but good stock levels from the prior season resulted in fishmeal sales increasing by 78 percent to 21,895 tons and fish oil sales by over 100 percent to 4,852 tons.
Global supply and demand dynamics drove strong US-dollar pricing, with fishmeal up by 11 percent and fish oil by 60 percent.
Operating margins were at 36 percent, the best they have been since Oceana acquired Daybrook in 2015. This, and the weaker exchange rate on the conversion of US-
dollar earnings to rands contributed to the group’s strong performance.
“The group’s strong financial performances in both the second half of last year and this year’s first half indicate that we are moving in the right direction,” Zaf says.
Eyes on growth
Already focused on the next thing, he has turned his attention to further strengthening the company’s balance sheet by reducing debt and ensuring capital is allocated to maximise return. “The consistent ability to generate cash will allow us to continue to allocate capital to maintain inventory levels across the business, enhance our fleet and production capability and invest in energy solutions. It also means that we can focus on debt reduction across both South Africa and the United States, especially given the current high interest rate environment, and to create balance sheet capacity for growth.”
Zaf says that he is excited about the opportunities that are available to grow the Oceana business, to create value for its stakeholders and to ensure that Oceana continues to positively impact lives for the next 100 years.
“Personally, I am very pleased to be part of the Oceana team and I am excited about future opportunities to grow Oceana and create value for all our stakeholders,” Zaf concludes.
