Oceana Group posts losses it partially attributes to COVID-19, riots

Cape Town, South Africa-based seafood company Oceana Group has issued a voluntary trading update for the 12 months ended 30 September, 2021, indicating losses for the full year – but a partial recovery in the second half of 2021.

The update comes after the company alerted shareholders and its customers of a potential delay in the publication of its financial results for the 12 months ended 30 September, 2021. The update is yet to be reviewed or reported on by Oceana’s external auditors.

Oceana’s management advised shareholders that a company probe into dealings in its U.S. business – announced on 29 October 2021 – which forced a delay in the publication of its financial results, is making “good progress.” It said it would provide an update on the findings of the investigation will be provided on or before 10 December, 2021.

“The investigation is not complete but progress to date does not indicate any material impact on the results or the financial statements,” Oceana said.

In its unaudited earnings report, Oceana said strong demand for the company’s core canned fish products and improved procurement costs boosted its performance in the second half of 2021, but that the demand was partially offset by supply chain issues related to COVID-19 and political riots in Kwazulu Natal Province.

The company reported a 2 percent decline in net revenue “driven by a 6 percent overall decline in sales volumes, particularly due to tough trading conditions in the first half of the year.”

“This was mitigated by a recovery in volumes in the second half of the year, notwithstanding the reduced inventory levels resulting from the Kwazulu Natal riots, and further bolstered by a 5 percent price increase,” the company said.

Oceana’s procurement of frozen fish declined by 32 percent, “due to global supply-chain impediments and COVID-19 impact on fishing in West Africa early in the calendar year.”

The supply chain issues were partially offset by a 93 percent increase in fresh pilchard catches. In addition, production efficiencies and cost savings, coupled with a favorable exchange rate, contributed to “margin improvement of 20 percent.”

Elsewhere, despite good pricing and demand for Africa’s fishmeal and fish oil in the Asian market, Oceana says “performance material was impacted by lower industry landings.”

“Increased feed production in China for both the aquaculture and pig-farming sectors contributed to improved pricing in the global market, resulting in average fishmeal price growth of 9 percent in USD terms,” Oceana said.

The opportunity of improved demand and pricing was partially missed as Oceana reported a 40 percent decline in Africa anchovy and redeye landings due to bycatch limitations and weather.

In the U.S., Oceana reported poor performance of its supply of fishmeal and fish oil due to the overall lower opening stock levels, the challenges of COVID-19, and bad weather conditions. The challenges resulted in a 12 percent drop in volumes sold in its U.S. business compared to the previous period, despite healthy demand for the products and steady pricing.

“Increased aquaculture activity in Europe and China had a positive effect on fish oil pricing,” Oceana said.

Oceana said it saw average price growth of 2 percent and 5 percent in fishmeal and fish oil, respectively, in the North American market.

“As a result of the significant decrease in volumes, overall revenue was down 10 percent while margins in the U.S. [fishmeal and oil] business reduced by 11 percent compared to the prior period,” Oceana said.

The company reported strong performances in its horse mackerel, hake, lobster, and squid segment “underpinned by good demand for fresh fish products in key geographies.”

“Horse mackerel operating performance was exceptional, driven by strong demand across traditional African markets coupled with general protein supply shortages which contributed to very favourable pricing,” Oceana said.

Overall revenue growth of 9 percent in the segment was supported by steady supply, but partly offset by a stronger SAR/USD exchange rate, overall resulting in a 23 percent improvement in margins.

“This has been a challenging period for our hake business, with operating performance negatively impacted by lower sea days for the period, brought upon primarily by unplanned maintenance and extended COVID-19 protocols, resulting in an 8 percent reduction in landings,” Oceana said.

Decreased consumption in the European market exerted short-term pressure on the hake business, negatively impacting revenue “although pricing was restored to normalized levels during the latter part of the financial year.”

“Overall revenue decline of 6 percent contributed to a 25 percent decrease in margin for the hake business,” Oceana said.

The company’s lobster and squid businesses “delivered solid performances supported by improved lobster pricing and good squid landings” the update said. The segment’s revenues grew by 14 percent, and margins by 6 percent, for the 12-month period.  

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