Lucky Star

Oceana dominates SA canned fish market, and makes high returns

SA’s fishing sector has long been in choppy waters. JSE-listed corporations with exposure to fishing can’t claim to have consistently netted great catches. AVI has, at best, endured mixed fortunes with frozen hake specialist I&J, while empowerment companies Sekunjalo and Brimstone have had solid, but unspectacular, performances from their respective holdings in Premier Fishing and Sea Harvest. It’s a different story for Oceana, however.

Has any food counter – including the big-brand counters – come close to matching the sustainable returns generated by fishing conglomerate Oceana over the past decade?

Oceana’s share price, which was trading below R17 on the JSE five years ago and is now close to R85, reflects how the market has gradually built an appetite for the company’s strength-in-diversity model, which has allowed for the landing of perennially profitable catches.

The catch basket includes pilchards (the best-selling Lucky Star canned pilchards brand), sardines, horse mackerel, hake, west coast lobster and squid, as well as French fries and cold storage services.

But the latest results, for the year to September, might suggest a slight slackening of some profit lines at Oceana, something that, ironically, can be linked to developments in the SA poultry sector.

Oceana is not inclined to give clear statements around future performance – and financial director Imraan Soomra joked that the only guidance investors assembled at the presentation would get was the fairly obvious deduction that it was “highly likely that revenue would break through the R5bn mark in the new financial year”. But CE Francois Kuttel diplomatically prepped investors for a tricky year ahead.

Of immediate concern was the pullback in the canned fish & fishmeal division which, over the past five years, has generated 55% of turnover and has traditionally been a profit mainstay. Kuttel said though Lucky Star had pushed market share to 67% (a level last seen in 2004) there were “headwinds” limiting Oceana’s ability to pass increased prices through to consumers.

Chicken prices are a key consideration. Oceana’s Lucky Star pilchard brand competes with chicken as a mainstay protein supplement in many Southern African households.

Remembering that Oceana’s cold storage depots in Johannesburg and Durban hold substantial packs of frozen chickens, it’s probably an authoritative admission by Kuttel that: “As far as we can see, there’s been no slowdown yet in chicken imports after tariff increases. “Maybe Brazil has slowed up a bit, but there’s still product coming in from Europe and other destinations.”With local poultry production not slowing down either, there’s not much scope for Oceana to price up its Lucky Star ranges……

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