Fighting inflation woes, Sea Harvest buys further into Viking Aquaculture

Shem Oirere

Published on

March 22, 2023

Cape Town, South Africa-based Sea Harvest Group posted higher sales and revenue for the year ending 31 December, 2022, but its gross and operating profit figures dropped due to higher costs.

The group’s total revenue rose 27 percent to ZAR 5.9 billion (USD 321 million, EUR 301 million) from ZAR 4.6 billion (USD 250 million, EUR 235 million) in 2021. Despite the higher revenue, the company saw a 25 percent decline in its earnings before interest and taxes (EBIT) to ZAR 500 million (USD 27 million, EUR 25.5 million) down from the ZAR 670 million (USD 36.4 million EUR 34.2 million) in 2021.

Sea Harvest Group’s gross and operating profit figures also dropped in 2022 compared to 2021. The company’s gross profit dropped 6 percent to ZAR 1.34 billion (USD 72.8 million, EUR 68.5 million), and its operating profit dropped 32 percent to to ZAR 472 million (USD 25.6 million, EUR 24 million).

The company reported its costs rose 42 percent, driven by a 90 percent rise in fuel prices, a 35 percent spike in the cost of ingredients and packaging, and energy load-shedding in South Africa that saw the company spend ZAR 20 million (USD 1.08 million, EUR 1.02 million) on related power costs and associated mitigation from September through December 2022 alone.

Sea Harvest’s profit after taxes dropped 32 percent to ZAR 294 million (USD 16 million, EUR 15 million) from ZAR 434 million (USD 23.58 million, EUR 22.18 million) in 2021.

Sea Harvests's South Africa operations upped revenues by 3 percent to ZAR 2.74 billion (USD 148.8 million, EUR 140 million) compared to ZAR 2.66 billion (USD 144.5 million, EUR 135.9 million) in 2021, “benefiting from firm demand and price increase in both local and international markets.”

The surge in revenue defied a 10 percent decrease in available hake volumes in 2022, driven by quota losses from the fishing rights allocation process (FRAP), a decrease in the total allowable catches, and material input cost inflation.

Sea Harvest’s Australia operations posted a 69 percent increase in revenue to ZAR 938 million (USD 50.9 million, EUR 47.9 million) from ZAR 554 million (USD 30 million, EUR 28.3 million) in 2021, a feat company management attributes to “firm pricing, good growth in trading division, and inclusion of MG Kailis from 23 May, 2022.” MG Kailis contributed ZAR 340 million (USD 18.4 million, EUR 17.37 million) to the top line.

Sea Harvest Group acquired 100 percent of Western Australia-based MG Kailis, which included its fishing assets and related businesses, at a cost of ZAR 770 million (USD 41.83 million, EUR 39.34 million) through its wholly-owned Australian subsidiaries Sea Harvest Proprietary Limited and Sea Harvest Marine Proprietary Limited.

“The acquisition represents a significant step in the execution of the group’s investment strategy of acquisitive growth in the international seafood space that focuses on businesses of scale in high-value seafood species,” it said.

The release of the 2022 financial results coincided with the group’s acquisition of additional shares in Viking Aquaculture, a company that produces abalone, oysters, mussel, tune fish, and seafood products; with its main farms in South Africa's Western Cape and the Northern Cape producing 500 metric tons of abalone annually. Viking Aquaculture also has two vertically integrated oyster-farming operations in South Africa and Namibia, and it said these high-value, high-margin aquaculture species sell well in Far East markets in live, dried, canned, and frozen formats.

Sea Harvest Group, through its wholly-owned subsidiary Sea Harvest Aquaculture, initially acquired a 54 percent controlling stake in Viking Aquaculture, and the new acquisition ups its share to 82 percent.

The additional 28 percent share in Viking Aquaculture was acquired at a cost of ZAR 210 million (USD 11.3 million, EUR 10.7 million), largely from minority shareholders – including Viking Fishing Group and Odin Investments, which respectively held an 18 percent and a 10 percent interest in Viking.