Weak yen, bluefin tuna dog Japanese seafood

Published on
November 19, 2014

Japan’s major seafood companies earlier this month released their half-year results, covering the first two quarters of the fiscal year ending 31 March 2015. The yen weakened significantly in the period, raising import costs. While it was mostly in the range of JPY 91-97 per USD in the same period last year, this year it started at 102 and reached 109 in September. Meanwhile, Mexican-raised bluefin selling for JPY 1,700 to 1,800 (USD 14.62 to 15.48, EUR 11.70 to 12.39) per kilogram is gaining market acceptance and driving down domestically farmed tuna, by about 20 percent during the period, to around JPY 3,000 (USD 25.81, EUR 20.65) per kg.

Tokyo-based Maruha Nichiro Corp. is Japan’s largest seafood business, but it is hardly the most profitable, with a net profit of just 1.5 percent of its revenues. The company reported sales of JPY 416.6 billion (USD 3.6 billion, EUR 2.9 billion) and profit of JPY 6.5 billion (USD 55.9 million, EUR 44.7 million). Comparisons with the previous year for the consolidated results are not available because the company relisted on the Tokyo stock Exchange in April 2014 after a restructuring of the corporate group following a massive frozen-food recall. However, individual business sectors can be compared.

In the foreign fishery business, the company’s purse seiners suffered poor catches and low sales prices, but aquaculture business of amberjack and yellowtail was steady, giving combined revenues 2.8 percent lower and profit 32.1 percent down.

In the trading business, the weak yen caused Japanese prices for seafood to increase so demand slumped, leading to lower profits. However, consumers were more tolerant of price hikes for pork and chicken imports, so the company made a profit on these. Despite high raw material prices for shrimp and scallops, by improving processing efficiency and cutting unprofitable businesses, sales and profits improved. Overall, sales of the trading business fell 0.3 percent, but profits rose 19.4 percent.

Overseas units performed well, including sales in China and Thailand, surimi production in North America, and exports of Thai pet food to Europe and the United States. As a result, sales for the segment rose 32.5 percent, though profits were off about 4 percent.

The processed foods business declined despite efforts to introduce new products including canned fish sausage and chikuwa (tube-shaped surimi) pet snacks, because the frozen foods unit was dragged down by last year’s contamination and recall incident, and because material prices soared on the weak yen. As a result, processed sales fell 8.2 percent, and the segment lost JPY 9 million (USD 77,422, EUR 61,947).

In logistics, lower stocks of marine products stored in the company’s new cold storage facility led to a decrease of sales by 0.5 percent, while higher power costs due to the shutdown of nuclear plants lowered profit by 23.6 percent from the previous year.

Nippon Suisan Kaisha (Nissui), headquartered in Tokyo, reported sales of JPY 302 billion (USD 2.6 million, EUR 2.1 million), up 3.7 percent from the same period last year, and net income of JPY 5.8 billion (USD 49.9 million, EUR 39.9 million), up 85.3 percent.

In the marine business, inshore yellowtail catches were strong, but high fuel costs weighed on profits. Farmed yellowtail also did well, but farmed bluefin tuna prices have been pushed down by cheap imports from Mexico and Australia, which increasingly dominate this market. Though the company’s Chilean salmon operations suffered lower survival, short supply drove up both sales prices and the book valuation of fish still in pens, resulting in a “massive income increase.” Profit was up 459.2 percent.

In seafood processing and trading, pollock catches and roe production were strong, while sales prices of surimi were higher. Food product sales were nearly flat, but profit was 271.7 percent that of a year ago. The weaker yen increased the cost of imported products in Japan, but frozen foods for the HRI market in the United States sold well.

Though all segments were profitable for Nissui, chemicals was the biggest loser, sales were down 9.5 percent and profits declined by 27.8 percent. Japanese seafood processors make good use of byproducts for production of DHA/EPA and chondroitin, but pharmaceutical prices are set by the government in Japan. The national health insurance revised downward its price schedules for the company’s drugs, while also promoting the use of generics.

Kyokuyo Co., also based in Tokyo, reported sales of JPY 1.02 billion (USD 8.8 million, EUR 7 million), up nearly 9 percent over the same period last year. Net profit was JPY 200 million (USD 1.7 million, EUR 1,4 million), increased by 20.5 percent.

Seafood trading sales were up but higher material prices depressed profits. The frozen foods segment performed well in both sales and profit with the introduction of boneless cooked fish for lunchbox and hospital meals, a focus on sliced fish for sushi chains, and continued promotion of the Sea Marche frozen seafood for household-use. Convenient boneless fish products are finding increased favor in Japan, as busy women refuse to take time for preparation and children complain about bones.

For the company’s bluefin farming operations, securing sufficient juveniles was a challenge, despite progress in closed-cycle breeding systems. In overseas capture operations of bluefin tuna, though catches improved, prices were down, fuel costs were higher and access fees were higher. The profit of the segment declined.

Contributing Editor reporting from Osaka, Japan

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