Seafood titan Pescanova recovering after scandal, analysts say

By

Pilar Caride, SeafoodSourcecontributing editor, reporting from Vigo, Spain

Published on
March 19, 2015

More than two years after the investigation that sent Spanish seafood giant Pescanova into bankruptcy began, the company has lost plenty but remains solvent, and for the company and its employees, according to two financial experts who spoke with SeafoodSource, life will go on.

Earlier this year, the Spanish fishery sent a consolidated summary of half-yearly financial statements of 2014 to the Spanish Commission of the Stock Market. According to these data, Pescanova registered a profit of EUR 1.6 billion (USD 1.9 billion) between January and November 2014. The sales revenues added up to EUR 901 million (USD 1 billion) and the net worth is maintained at a negative level, but it must be pointed out its evolution: The EBITDA (Earnings before Interests, Depreciations and Amortizations) was EUR 63.4 million (USD 72 million) between January and November 2014, and in the communication from Pescanova added that in the whole year they reached EUR 70 million (USD 74.9 million), almost twice as in the year 2013 (EUR 36.86 million, USD 39.4 million).

But is Pescanova really on the road to recovery, as the numbers appear to show? Francisco Rodríguez de Prado, Economics and Business professor at the University of Vigo (Spain), as a result of the news and after finding out the economic results, analyzed the situation: “The financial health is precarious. It is in a bankruptcy proceeding outlining an important discharge of the debt that does not affect only the one company, but a mix of more than 100 subsidiaries and they have to restructure their debt individually. Therefore, the overall result depends on the sum of the individual results, as well as most of these companies being financially viable, and if they are able to restructure their debts from the discharge of the debt and the recapitalization. All is going to depend on the viability of the businesses, and if they make enough operating profit and EBITDA for supporting the company, and make the sufficient treasury to face the financial expenses after the discharge of the debt and give a positive result to the shareholders and to the group,” said Rodríguez del Prado.

Pescanova is following the steps approved by the creditors’ agreement last year and it filed between last July and November the express bankruptcy proceedings for ten Spanish subsidiaries. Nevertheless, the proceedings are delayed. Rodríguez Prado considered that “(To) analyze each one is a very difficult process because there are a lot of internal transfers in the total turnover, relating to suppliers and clients, and debits and credits.”

Jorge González Gurriarán, who holds a doctorate in Economics and Business, is a former business organizations professor at the University of Vigo and director of a number of research projects and monographs about business strategy, agreed with Rodríguez Prado in the difficulty of analyzing each subsidiary due to the exchanges between them. Regarding the restructure process of the subsidiaries, Gurriarán thinks that not all of them will be saved: “There will be breaking connections with subsidiaries, but if the parent company keeps going, and after this cleaning process the healthiest subsidiaries were to survive, it would be savable. The whole group will lose fingers, a hand, a foot… but it is not dying,” he said.

Rodríguez points out the EUR 900 million in sales revenues in 2014 as a good thing and explained the reasons for this data: “Given that it is a product for immediate consumption and from the food sector, the consumer does not make his purchasing decisions for the situation of Pescanova, and that is good because it continues preserving the sales revenues,” he said.

Currently, Pescanova is working with a negative net worth, a situation that is possible due to the creditor’s agreement approved and the capitalization of banks. Rodríguez Prado explained: “It is a transitional situation that could be maintained as long as is transitional and the company keeps still working with this situation and, overall, because the creditor banks are still maintaining the liquidity of the company.”

Regarding the future viability of the group, Gurriarán thinks that “they have cleaned the Board of Directors, the banks have assumed the situation, and they have benefits… So, it’s not getting worse, they are going better and with the benefits from the discharge of the debt they will get a positive net patrimony. What is happening is not worse than what has already happened, this is the key,” he said. “I have a feeling of positive expectation.”

Will Pescanova still be a giant in the Spanish seafood industry or if it will be a shadow of what it once was? “Life goes on, if they effectively change their shareholders, change the board of directors, the company has a future. If the solution is suitable for the creditors and for the shareholders, the future of the company and the name of the company will continue as a leader brand of the sector,” said Rodríguez de Prado.

On the other hand, Gurriarán considers that “they are following the creditors’ agreement, and as far as I know there was no any significant reduction in employment, except for the board of directors. So, I think that they have controlled the situation. That is my impression.”

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