KEY POINTS:
The New Zealand sharemarket has been hammered this year by global economic turmoil but one stock not caught in the net is fishing company Sanford.
Shares in Sanford closed at $5 yesterday - up 24 per cent for the year to date. That compares with a drop of
34 per cent for the benchmark NZX-50 index.
Sanford operates a fleet of fishing vessels and a number of processing plants. It sells to distributors and importers around the world. Sanford also owns the Auckland Fish Market.
Revenue for the year ending September 30 was up 18.7 per cent at $436.6 million and net profit more than doubled to $53.3 million.
Managing director Eric Barratt said prices in most markets for most species had risen quite a lot during the year. "It was just demand, the markets were strong, it was a continual expansion and drive further into the marketplace," Barratt said.
"I think being in a sustainable seafood industry I think we've shown through the bad times an ability to still pay our dividends."
The annual dividend for the financial year was up 1c to 23c a share.
And shareholders who saw a steady flow of dividends tended to support a stock, he said.
The result included a one-off capital gain of $26.2 million from the sale of an investment in Canadian company Fishery Products International and an asset impairment cost of $7.2 million, although trading profit (earnings before interest, tax, depreciation and amortisation) was still up 26.2 per cent at $65.9 million.
Seafood prices continued to rise during the second half of the year with strong demand particularly in Europe and increases in Australia, Africa and the Middle East.
"We continually have this health benefit of seafood that's continuing to make an impact on our business," Barratt said.
However, a buoyant market attitude had changed to a level of uncertainty, with customers under pressure to reduce inventories to minimise credit lines and exposure to any drop in market value.
"There's still that element of uncertainty there, there's still customers trying to establish just what their credit lines will be with banks and therefore what their ability to transact volume business with us will be, and that's across every customer and every country so in the meantime we're probably building up stocks a little bit," he said.
"We don't see that as a long-term thing but as I say it's just adjusting to this uncertainty and who knows how long it'll take to come back."
The feeling in the marketplace was that prices for fish products that did not have a shortage of supply could decline. "We're in a food product [sector], people eat food, we have products that go into high-end parts of the market, we have products that go into the more consumer-oriented parts of the market. Those parts of the economy apparently are tracking along still quite strong in most countries," Barratt said.
New Zealand was recognised for its sustainable supply of seafood, with catches stable and resources well managed, he said.
"You have a reasonable prospect that when you start the year you know exactly what you're going to catch and there's little variability to that.
"I think in the long-term future we're very confident, we're in a great industry, we've got a great product and we're part of a well-managed resource and that'll hold us in good stead for the future but right now the market's a little bit uncertain so there's just some short-term efforts required to overcome those obstacles."
The company said a more favourable exchange rate and fuel price environment would provide opportunities for higher returns from many species.
The average exchange rate against the US dollar for the year had been high at about US75c and Sanford had operated without hedging.
Each one-cent shift in the exchange rate was worth about $2 million to the bottom line, Barratt said.
A US50c to US53c exchange rate would be attractive and when it dropped to about US51c to US52c a few weeks ago the company started taking forward cover, although it had backed off after it began rising again.
"We've mainly just hedged within the current year but if it comes down we'd look at going probably two years out."
Sanford said a focus during the past two years had been to introduce or develop new processes and technologies.
"Once that exchange rate started climbing up we really had to look at where we were going and try and, I guess, reconfigure the business so that we are more competitive at those higher exchange rates and that's involved a lot of work on new technology and just a real concentration on catching and processing and marketing efficiency," Barratt said.
"They are things that take some time to develop. You have to stick to it and that's what we're doing and we've got other projects that we're working on as well."
* Fish facts
Sanford owns and operates a fleet of fishing vessels including deepwater and inshore. Some of the boats can freeze and process at sea.
Owns eight processing plants, including fish, mussels, oysters and crayfish, plus a mussel farm.
Revenue of $436.6 million.
Employs 1507 people.
