Wednesday, 03 March 2010 00:00
Premier Fishing Floats In Sea Of Red
PREMIER FISHING, the smallest of the big four Cape Town fishing companies, found itself in a sea of red in the year to end September 2009. After sector leader Oceana Fishing released strong financial results in 2009, expectations were that Premfish could see a strong rebound in performance in the second half of its financial year.
Nothing doing, unfortunately. Results released by parent company Sekunjalo Investments showed Premfish – which specialises in lobster as well as hake, pelagic and squid – operating profits swinging from an encouraging R35 million in 2008 to a disappointing loss of R38 million in 2009.
The biggest difference in performance between Oceana and Premfish appears to be the lack of diversity at the latter. Premfish is heavily dependent on the export lobster segment, while Oceana has a wide spread of sizeable fishing businesses with sizeable local and export markets.
Oceana also has strong brands in Lucky Star and Glenryk, while Premfish only recently began exploring the possibilities of branding value added products.
Writing in Sekunjalo’s annual report recently appointed group CEO Khalid Abdulla says Premfish endured a challenging year with the implementation of the restructuring strategies as well as the impact of the global economic recession on export markets.
He points out that Premfish generated 60% of its revenues from international markets and a significant portion of that was generated from its South Coast Rock Lobster division.
It would seem that Premfish lobster sales were hit by a perfect storm.
The rand strengthened markedly against the dollar at a time when the after-effects from the global financial system meltdown was still hampering international demand for lobster (which is a ‘top end’ catch essentially aimed at a niche market).
A divisional review showed that Premfish’s South Coast Rock Lobster division suffered due to a 30% drop in selling prices.
Abdulla says the global slowdown – coupled with the limited shelf life of the product - led to the division liquidating stocks at substantially reduced prices and incurring operational losses.
He reckons the temporary drop in the export market pricing has already been partially rectified and expects that during the course of 2010 the levels will reach historic levels.
The West Coast Rock Lobster division performance is described as satisfactory. As most of the product is exported into the Far East the lobster was protected from the problems experienced in the European and American markets.
Abdulla says the West Coast Lobster selling prices maintained historic levels and the division delivered a positive performance.
While the lobster market does look set for an improvement in 2010 one wonders why Premfish has not done more in recent years to bulk up its other fishing interests – which include pelagic (pilchards and anchovies) and squid.
Abdulla does hint at some bulking up activity. He says Premfish continues to explore partnerships - both locally and abroad - to improve cost efficiencies and selling prices.
“We do expect further consolidation in the industry and are positioning ourselves as an attractive partner for the industry as a whole.”
The question in CBN’s mind is whether Premfish is being set up as a potential partner for a bigger fishing firm (Oceana obviously springs to mind) or whether the company wants to rope in smaller operators under its corporate fleet?
In the meantime it seems the upside is that Premfish’s recent restructuring efforts – aimed at stripping costs out of the business – has, according to Abdulla, made the business profitable at the current export levels.
Perhaps his statement that “any improvements to the export prices or weakening of the rand will create excellent profits” should not be discounted.