Sea Harvest Group reported higher revenue and earnings before interest and tax (EBIT) in FY 2023, but lower operating profits as high costs hit the company’s bottom line.
The Cape Town, South Africa-based seafood company reported a 6 percent increase in revenue to ZAR 6.2 billion (USD 331.5 million, EUR 302.8 million) for the financial year ending 31 December 2023, up from ZAR 5.87 billion (USD 313.9 million, EUR 286.7 million) in FY 2022. The company’s EBIT also increased, rising 15 percent to ZAR 577 million (USD 30.8 million, EUR 28.2 million), up from ZAR 500 million (USD 26.7 million, EUR 24.4 million).
Sea Harvest's gross profit increased to ZAR 1.5 billion (USD 80 million, EUR 73 million), up 13 percent from the ZAR 1.3 billion (USD 69 million, EUR 63 million) the company posted last year.
However, its operating profit fell 2 percent to ZAR 462 million (USD 24 million, EUR 22 million), and its profit after tax fell 8 percent to ZAR 269 million (USD 14 million, EUR 13.1 million).
The company said it benefited from high demand for its goods across all markets and a weaker South African rand, but costs held back its profits.
“Performance … was constrained by lower volumes as a result of difficult fishing conditions, above-average inflation cost increases, load shedding, and significantly lower global prawn prices,” the company said. “The primary driver of softer earnings was a further 47 percent increase in average interest rates.”
Despite the lower profits, Sea Harvest Group CEO Felix Ratheb said the outcome was “pleasing” in the face of the challenges.
“Despite significantly lower volumes because of lower landings of hake and less availability of milk, revenue was up,” Ratheb said. “This was driven by strong price increases, compounded internationally by a weaker rand to the euro and Australian dollar.”
The company reported its South African fishing arm increased its revenue by 10 percent to ZAR 3.03 billion (USD 162 million, EUR 148 million), due to firm demand despite lower harvests caused by difficult fishing conditions. The company said it had an 8 percent lower hake catch rate per sea day and 7 percent lower sales volumes.
Despite the challenges, the sector saw its gross profit increase 29 percent to ZAR 924 million (USD 49 million, EUR 45 million), with a 31 percent gross profit margin.
Sea Harvest said it has completed an appeal of its deep-sea trawl-caught hake allocation under the country's recently completed Fishing Rights Allocation Process (FRAP), achieving an improvement so that its total will be just slightly lower than its previous allocation.
“The result gives the group certainty for the next 15 years,” the company said.
Sea Harvest's aquaculture arm saw its revenue increase by 15 percent to ZAR 136 million (USD 7.3 million, EUR 6.6 million), benefiting from the weaker rand, improved pricing, and a higher-value product mix, the company said. Much of the revenue was made up of its abalone business, which saw a 27 percent increase in revenue to ZAR 127 million (USD 6.8 million, EUR 6.2 million).
The company also managed to reduce operating losses to ZAR 23 million (USD 1.2 million, EUR 1.1 million), compared to losses of ZAR 40 million (USD 2.1 million, EUR 1.9 million) a year prior. Sea Harvest said if fair-value adjustments on biological assets are taken into account, along with a ZAR 93 million (USD 4.9 million, EUR 4.5 million) gain on purchased loans, the aquaculture division recorded a positive EBIT of ZAR 84 million (USD 4.4 million, EUR 4.1 million), compared to a negative EBIT of ZAR 37 million (USD 1.9 million, EUR 1.8 million) in 2022.
The company added that its acquisition of Terrasan Group-owned seafood businesses create an abalone business of scale, improving its bottom line.
The company’s Australian operations suffered from low prawn prices, Sea Harvest said. However, good catches in the Pilbara Fish Trawl and a weaker rand boosted revenue by 22 percent to ZAR 1.14 billion (USD 60 million, EUR 55 million). Despite the boost, decreases in prawn sales, expenses, and elevated selling and distribution costs caused it to record an operating profit of ZAR 15 million (USD 800,000, EUR 732,000), a drop from the ZAR 45 million (USD 2.4 million, EUR 2.2 million) it posted in 2022.
Ratheb said the company’s future is more certain in light of the conclusion of the FRAP process, but that high costs continue to be a concern.
“The constrained consumer, the impact of load shedding, and infrastructure impediments continue to provide challenges," he said. "We are completing our first solar PV installation at Ladismith to reduce the impact of loadshedding. This will be our third investment in sustainable infrastructure, following the wind farm in our abalone business and the investment in a desalination plant in our fishing business to reduce the cost of water and electricity.”
