The Oceana Group more than doubled headline earnings per share to 313.5 cents (140.4 cents) after financially struggling consumers diversified their sources of protein to the more affordable canned pilchards.
Different fish species, geographies and currencies, and benefits of higher inventory levels of canned fish, fishmeal and fish oil also boosted earnings for the six months to March 31. The interim dividend was raised to 130 cents from 55 cents.
“While the weaker rand affected Lucky Star margins, despite record sales, this was more than offset by strong demand and price improvements for most of our products, with the benefits of the weaker currency on our US and export directed operations,” CEO Neville Brink said in a statement.
He said demand for affordable and shelf-stable protein, promotional activity and good opening stocks boosted Lucky Star sales by 21% to a record five-million cartons. Margins were affected mainly by the weaker rand which made importing frozen pilchards more expensive and above-inflation increases for other input costs.
Oceana is the world’s biggest procurer of pilchards. There is a moratorium on Namibian pilchard to let the biomass recover, while local pilchard catches are insufficient to meet demand.
The group said in response to questions by BR. that the average price increase for Lucky Star in 2022 was 8%. For the first half of 2023, this had risen to 12%, but still lower than food inflation of 14%.
“Lucky Star input costs such as tin cans, tomato paste and freight have seen above-inflation increases. This linked with the weaker rand, which drives up the cost of imported frozen fish, has resulted in margin pressure which is evident in our results. Oceana imports 90 percent of the fish used in Lucky Star.
Despite this, Oceana is extremely aware of the difficulties facing South African consumers. Oceana is focused on growing volumes by keeping prices as low as possible and staying affordable against competing protein. Again this is evident in the results with the record sales for the first half,” the group said.
There was also strong overseas demand for fish oil. Group revenue increased 48% to R4.5 billion from R3.04bn, while operating profit surged 87.8% to R648m from R345m.
Consumers face rising interest rates, lower disposable income, high inflation and the effects of increased load shedding in South Africa.
Revenue also benefited from improved pricing, particularly for fish oil, driven by constrained global supply and the effect of the weaker rand exchange rate on export and US-dollar translated revenue.
The gross margin from continuing operations was flat at 27.1% (27.2%) with strong fishmeal and fish oil pricing in dollar terms offset by the weaker currency on the cost of imported frozen fish for Lucky Star.
Sales and distribution expenditure from continuing operations increased year-on-year by R47 million in line with revenue growth.
As a percentage of revenue, these costs decreased to 4.5% (5.1%), which included savings in freight and container costs in dollar terms.
Overhead expenditure from continuing operations increased by 21.2% to R416m, mainly due to higher employment costs, which included provisions for variable pay and filling vacant positions,, partially offset by once off legal and audit fees.
Other income of R72m related to insurance proceeds from the 2021 Hurricane Ida insurance claim. The comparative period included insurance proceeds for Hurricane Ida of R63m and R9m from the Kwa-Zulu Natal civil unrest events.
Africa fishmeal and fish oil sales volumes were up 39% to 5 944 tons due to improved opening stock levels, higher landings and increased pilchard offcut volumes.
Group net debt was higher at R3bn (R2.2bn), mainly due to increased working capital requirements and the translation of US debt at a weaker rand exchange rate.