Sanford posts higher revenue but FY23 earnings still lag behind pre-Covid levels
Sanford Limited continued a streak of positive performance in H2 2023, but higher revenue and earnings still haven’t returned the company to pre-Covid levels.
For the financial year ending 30 September 2023, the Auckland, New Zealand-based seafood company posted revenue of NZD 553.4 million (USD 333.2 million, EUR 307.2 million), the highest total in the last five years. Its adjusted earnings before interest and taxes (EBIT) reached NZD 49.4 million (USD 29.8 million, EUR 27.4 million), a 23 percent increase compared to the NZD 40.1 million (USD 29.8 million, EUR 22.3 million) it posted in FY2022.
Sanford's net profit after tax dropped to NZD 10 million (USD 6 million, EUR 5.6 million) compared to NZD 55.8 million (USD 33.6 million, EUR 31 million) in FY 2022, but it cautioned that reported net profit after tax includes “non-trading adjustments and unusual transactions.” A significant portion of the profit posted in 2022, for example, came from the one-off sale of crayfish quota worth NZD 43.7 million (USD 26.3 million, EUR 24.3 million).
The company's positive performance denotes continued improvement, which was hit hard by the Covid-19 pandemic. In 2020, the company reported its profit was cut by almost half, and the company’s adjusted EBIT has not returned to the NZD 64.8 million (USD 39 million, EUR 36 million) it posted in 2019. Despite that, Sanford Limited Board Chair Rob McLeod said the FY2023 results were promising.
“We have a clear view of the commercial pathways for our business and are seeing positive benefits from our strategy, which was refreshed in 2023. Many of the headwinds seen over the past few years are now easing and we expect the trend of annual improvement to be repeated in FY24,” he said.
McLeod said Sanford's profitability levels have arrived ahead of schedule, thanks to improved branding and efficiency. Growing its farmed volumes within regulatory limits, coupled with strong pricing for salmon and mussels, helped the company increase its earnings, he said.
McLeod said that despite strong pricing and growing demand, Sanford's mussel-farming segment has been slow to recover from the pandemic, with labor issues “particularly with processing staff” posing problems. This kept it from fully taking advantage of the favorable pricing, but since then “teams have been now rebuilt to full strength, positioning the business well to maximise the season ahead," the company said, adding that it has invested in expanding its mussel production.
Another thing that held the company back in FY2023, it said, was a lack of squid catch. The volume of the company’s squid catch was down 58 percent compared to FY2022, and margins for the business were hit by increasing fuel costs and labor shortages.
“The focus is on improving operational efficiencies and maximizing customer demand,” it said.
Sanford also recently confirmed that its sale of most of its quota for North Island inshore species to Moana New Zealand has become “unconditional” and was settled in late October. Sanford said it has been winding down its Auckland factory operations. The move to sell its inshore quota came after an internal review to turnaround the division identified selling the quota as a way to simplify operations and establish a “lower-risk annuity-like revenue stream” for the company’s North Island inshore quotas.
Looking forward, McLeod and Sanford Acting CEO Craig Ellison said there’s the company has a “clear view of the commercial goals” for the business, and that the plan it presented to recover from the pandemic is progressing.
“We anticipate a stronger year in FY24 as we continue to focus our efforts on our commercial businesses – salmon, mussels, and wild catch,” McLeod and Ellison said. “Sanford still has some way to go in achieving its commercial and profitability goals, which are conducive to achieving other important goals. Sanford is capable of this and FY24 will be an important year in that journey.”
Photo courtesy of Sanford Limited