Despite negative impacts of climatic conditions, Sanford ended fiscal year 2018 with increased profits.

Sanford increases profits despite challenging climatic conditions

NEW ZEALAND
Friday, November 16, 2018, 00:30 (GMT + 9)

Sanford Limited has reported a 12.9 per cent growth in net profit after tax (NPAT) in its financial year 2018, to NZD 42.3 million (USD 28.7 million) thanks to non-trading items and, in particular, the insurance settlement relating to the Kaikoura earthquake damage caused to its Havelock mussel processing facility.

HAVELOCK - MUSSEL FARMING & PROCESSING: Large unpolluted deepwater Sounds, with a constant tidal flow of water, provide ideal growing conditions for Greenshell Mussels. Sanford largest area of farms are located in and around the beautiful Pelorus Sound in the Marlborough Sounds.(Photo: Sanford) ►

The firm’s adjusted earnings before interest and tax (adjusted EBIT) increased 1.5 per cent, to NZD 64.7 million (USD 43.8 million), a result that, according to the firm, falls short of its expectations, mainly due to challenging climatic conditions throughout the analysed year.

Sanford CEO Volker Kuntzsch said the climate had a greater impact than experienced before, with abnormally high water temperatures during the summer resulting in challenges across the aquaculture and fishing divisions.

Sales revenue increased by 7.7 per cent, to NZD 515 million (USD 349.4 million), favoured by improved pricing across farmed and wild caught species, an increase in its fresh sales, an improved product cascade, primarily for hoki, and the company’s investment in innovation starting to contribute to returns.

“Volumes were down in salmon, mussels and wildcatch, both inshore and deepwater, but our strategic focus enabled us to make progress on our goal of NZD 1 (USD 0.67) EBIT/kg greenweight, increasing our EBIT per kg from NZD 0.57 to NZD 0.63 – excluding the commodity volumes caught by Sanford’s fishing partners,” Kuntzsch said.

Source: Reuters

The firm’s Board pointed out that an autumn algal bloom in the Marlborough sounds produced biotoxins which interrupted harvesting and led to early spawning. The Havelock processing facility also closed earlier to enable earthquake repairs to be completed.

Although Sanford grows mussels at alternative sites in Coromandel and Stewart Island (to manage environmental risks), the overall mussel harvest volume, declined by 15.1 per cent year on year.

Photo: Sanford

The summer marine heatwave affected growth and mortality rates at the firm’s Big Glory Bay salmon farm at Stewart Island, with the company limiting sales for up to 10 weeks to enable fish stocks to reach desired weights.

Harvest volumes were 4.4 per cent down on the prior year, since climatic conditions also impacted total wild catch volumes, where deepwater and inshore landings were down by 2 per cent and almost 9 per cent, respectively on the prior year, partially mitigated by catches by fishing partners.

Source: Reuters

However, Kuntzsch said Sanford’s strategy of prioritising brand and channel development, innovation and product cascade improvements and getting closer to consumers, has delivered significant advantages.

In addition, the executive stated that the company was increasing the volumes of fillets versus block in its frozen-at-sea operations, while investments in branding, innovation and replacing third party distributors internationally with direct-to-customer sales was enabling higher margins and improved returns as the business built stronger relationships, especially in food service.

Photo: Sanford

“Our Big Glory Bay ocean farmed king salmon brand secures a meaningful premium over unbranded farmed salmon. While the brand’s launch has been contained to a handful of markets the reception the product has received reconfirms our confidence in our branding strategy,” the firm’s CEO explained.

Sanford has enhanced its investment in Enzaq, the Blenheim-based mussel powder manufacturer and exporter, with the addition of a second dryer, doubling production capacity.

Approximately 14 per cent of the raw material goes to nutraceutical processes. (Photo: Sanford)

The Board stressed they are preparing to launch a nutraceuticals brand, Sea to Me, creating a platform for more differentiation and improved returns. Further investments are planned to continue the diversification of Sanford’s Greenshell™ mussel portfolio and enable strong growth with this species.

Also due for launch in December is a revamped Auckland Fish Market with 10 eateries and an upscale fishmonger’s, aimed at encouraging consumers to try more and varied species.

“We are also pleased to announce the successful sale of our 50 per cent interest in a seafood processing plant in Weihai, China, to Plenus Co. Ltd, Japan, effective today,” the firm’s statement concludes.

Weihai Dong Won Foods Co. Limited, was a joint venture with Sanford’s long standing fishing partner, Dong Won Fisheries Co. Limited.
 

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