Sanford, New Zealand’s largest seafood company, reported a significant fall in earnings for the first half of its 2020 financial year, as weather impacted toothfish catches and the coronavirus pandemic hit prices in key markets.

Earnings before interest and tax fell 29 percent to NZD23.2 million ($14.3 million/€13 million), a result softened to 16 percent when excluding the pelagic business that Sanford sold in March last year.

Total revenue held up better, falling 7 percent to NZD 245.5 million (€138 million/$152 million), with net profit after tax down 17 percent to NZD 19 million (€10.7 million/$11.8 million).

The company’s first half results in its fishing division were impacted by a shortfall in catch volumes for toothfish, caused in part by weather factors. Pricing for this species was also softer globally following the impact of Covid-19.

Coronavirus impacts were also felt in other areas of the business, particularly toward the end of the reporting period.

Despite the challenges, the company noted that normalized EBIT per green-weight kilogram improved across its aquaculture business, with salmon at the Stewart Island farm showing particularly good growth with a 19 percent increase in biomass. However, this wasn’t enough to counter the shortfall in the highly valuable toothfish catch and softer pricing, leading to an overall EBIT/kg decrease to NZD 0.46 (€0.26/$0.28) from NZD 0.57 (€0.32/$0.35) on the prior year.

CEO Volker Kuntzsch said that while the overall interim result was below expectations, there was clear strength in salmon and greenshell mussels, demonstrating the benefits of Sanford’s transition into a more diverse company.

He also noted that sales volumes for the group's salmon were up 2 percent and revenue up 6 percent.

"Our Big Glory Bay grown salmon are exceptional and have been highly sought after in some of the world’s finest restaurants," said Kuntzsch. "Unfortunately, foodservice channels have been severely impacted by COVID-19. Domestic retail sales have been holding up well and we are hopeful of continuing growth here.”

Long-term diversification holds firm

Kuntzsch pointed out that Sanford’s strategy to address the relatively volatile performance of the fishing business is a long-term one.

“Our aquaculture operations are relatively young but development there, through investments into operational excellence, market development, a focus on higher value sales channels and innovation, tend to bear fruit much faster than in fishing."

"Our mussel hatchery, SpatNZ, our mussel powder operation, Enzaq, and the activities leading to improved growth of our salmon are just a few of the highlights. The projects we have underway in our diverse fishing division, both inshore and in the deep-sea fleet are going well, but they are substantial undertakings requiring significant investment of capital, time and expertise and therefore require our patience as we tackle the move from commodity to added value, species by species.”

Coronavirus hurts demand for New Zealand giant

Regarding the impact of the coronavirus on Sanford, company CFO Katherine Turner said being an essential business was "a privilege," which did provide some protection against the impacts of the response to the virus. However, the company did suffer a short interruption to normal operations in March while it implemented company-wide changes to meet government safety requirements.

"The issues we face now are on the demand side," said Turner. "Consumer behavior has changed and the foodservice industry is impacted through restrictions on people’s movements and the absence of tourism. We are very conscious of the challenges faced by many of our customers. Retail and on-line sales, although only a small share of our total business, show strong growth and we are aggressively pursuing further leads in these areas.”

Kuntzsch acknowledged the volatile demand and an uncertain future and said he believes it is unlikely the company will be able to make up the first half earnings shortfall in the second half of the year.

Sanford has, therefore, limited its interim dividend payment to NZD 0.05 (€0.03/$0.03) per share, down from last year's NZD 0.09 (€0.05/$0.06), but Kuntzsch said the company has many reasons to be positive about the long term.

“We are a vertically integrated food producer with diverse products on offer through a wide range of channels and into a variety of markets. Our seafood is a sustainable, healthy and clean protein. The COVID-19 pandemic has seen our people step up to the challenge, demonstrating that they are a resilient, determined and caring group. We are very proud of what our people have already achieved, as we move into a future of challenge and change.”

Finance

'A future of challenge and change' awaits whitefish giant Sanford as earnings take a hit