Growth in Sanford's aquaculture business was not enough to salvage reduced longline volumes as the country's biggest seafood and fishing company was effectively frozen out of the important Antarctic toothfish grounds.
With its deep-water San Aspiring ill-equipped to deal with unusually icy conditions in the Ross Sea, longline catch volumes of high value toothfish dropped 39 per cent or 240 greenweight tonnes, contributing to an overall drop in wild catch sales volumes of 8 per cent for the first half of the financial year.
The reduced catch, combined with softer pricing for toothfish and hoki under Covid-19 trading, was reflected in a $5 million hit to earnings before interest and tax for the six months to March 31.
Revenues were also scaled back 7 per cent to $245.5m due to the sale of the company's Tauranga-based tuna and mackerel fishing business last year, with net profits after tax dipping 17 per cent to $19m.
Adjusted earnings before interest and tax were down 16 per cent to $23.2m, from the comparable $32.6m last year, translating to ebit of 46 cents per kilogram, from 57 cents over the comparable 2019 period.
The board pared back its interim dividend to 5 cents, down on the 9 cents it paid last year. This will be paid on June 19 to shareholders registered on June 12.
Greenshell mussels success
Sanford shares had dropped by 6 per cent to $6.94 by lunchtime, eroding gains made earlier this month.
Chief financial officer Katherine Turner said while the challenges brought about by the coronavirus crisis had impacted operations during the latter part of the reporting period, the strategic move into value add aquaculture businesses were starting to bear fruit.
In particular, the greenshell mussel unit had done well, she said, showing a 13 per cent revenue increase.
"We were tracking really well in that business but Covid-19 has impacted orders while harvesting was also affected by social distancing rules."
Turner said the company has advanced its plans to build a new marine extract centre in Blenheim.
Sanford's King salmon business was also swimming upstream, with increased stock in water and overall biomass at its Stewart Island farm up by 19 per cent on the prior six months.
Overall sales volumes for salmon was up 2 per cent year on year, with revenue up 6 per cent, she said.
With the core foodservice market for the company's high-end Big Glory Bay brand salmon heavily impacted under Covid-19 rules, the company had pivoted into online and domestic sales, with the "unintended consequence" of ramping up brand awareness in that category.
She said while China markets were now getting back to pre-Covid levels, the impact of coronavirus had resulted in the delay of the company's e-commerce brand launch as part of New Zealand's flagship offering on Alibaba's Tmall platform.
Impacts of Covid-19
Turner said that, despite being classed as an essential business during the Covid-19 restrictions, the company did experience a short interruption to normal operations in March while it made changes to meet government-mandated safety requirements, and social distancing had slowed processing.
She said the company had not made any staff changes, but it had applied for about $500,000 in funding under government's wage subsidy to cover its Blenheim operation and its Auckland seafood school.
"The issues we face now are on the demand side. Consumer behaviour has changed and the foodservice industry is impacted through restrictions on people's movements and the absence of tourism.
"Retail and online sales, although currently only a small share of our total business, are showing strong growth and "we are aggressively pursuing further leads in these areas."
Turner told BusinessDesk that while the long term strategic priorities were unchanged, including a focus on moving away from commodity and into value-add businesses, the company had trimmed back its capital expenditure plans "as a natural consequence of Covid induced slowdowns" during the remainder of the financial year and into the next.
She expected capital expenditure to drop by between $20m to $30m from the expected $80m, with the marine extract centre, scampi vessel replacement, growth of online sales and packaging and expansion of the Big Glory Bay brand into the domestic market as key projects for the current year.