Sanford lifts first-half profit 25% as higher value product offsets lower prices for frozen fish

Thursday 25th May 2017

Sanford, New Zealand's largest listed seafood company, lifted first-half profit 25 percent as the benefits from selling more higher value fresh seafood offset the impact of lower prices for frozen commodity products and disruption from adverse weather.

Profit rose to $19 million, or 20.4 cents per share, in the six months ended March 31, from $15.3 million, or 16.3 cents, a year earlier, the Auckland-based company said in a statement. Revenue from continuing operations advanced 5 percent to $230.4 million.

Sanford is turning its focus to extracting more value from the seafood it harvests through its inshore and deepwater fishing boats, and salmon and mussel aquaculture units. It is investing in new fishing boats, developing higher value brands for its products, and selling more fresh produce to top local restaurants. In the latest period it benefited from increased pricing of higher value, non-commodity products such as toothfish, scampi and salmon and a production shift towards higher value items such as fillets.

"Sanford continues its journey towards becoming a company more focused on fresh and chilled product," chair Paul Norling and chief executive Volker Kuntzsch said in its interim report titled 'Making Waves'. "This work is progressing well, but is not a rapid transformation and a large share of our volume will continue to be processed into frozen product and remains susceptible to fluctuations in global commodity prices for the time being."

The company will pay a 9 cents per share dividend on June 16, unchanged from the year earlier.

In the last 12 months, Sanford has invested in consumer marketing and domestic sales teams, developed new packaging for its mainstream Sanford Blue brand, is about to roll out its premium grade brand Sanford Black and is trialling the Tiaki brand with its partners. It has launched its super premium provenance brand Big Glory Bay with prominent local chefs and expects the brand to appear soon on restaurant menus. After Big Glory Bay is established with domestic high end food service customers, it will be launched in the retail domestic market before expanding into the export food service sector.

Sanford said its new strategy has seen it go from servicing no restaurants in Auckland to supplying about a third of the top 50 restaurants.

In the first half, storms and heavy rains interrupted mussel harvesting operations, while strong winds meant smaller fishing vessels had to seek shelter and cooler water temperatures resulted in highly migratory species like skipjack tuna and jack mackerel being harder to catch. The Kaikoura earthquake in November 2016 also disrupted operations.

In its aquaculture unit the mussel harvest volume was impacted by a limited spat supply from previous years while frozen half shell mussel prices were weaker, although Sanford said it expected prices to lift in the second half due to supply constraints. Meanwhile, the salmon harvest volume was in line with expectations and levels from the prior year while strong domestic demand for fresh salmon and international demand for frozen product improved pricing.

Sanford said its deepwater catch volumes improved but inshore catches were negatively impacted by weather events and vessel refits, resulting in reduced supplies of fresh fish.

The company's shares last traded at $6.98, and have gained 27 percent the past year.

(BusinessDesk)

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