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| Divisional Review – FISHING |
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| Objectives achieved 2006 |
Divisional performance for the year was
satisfactory,
reflecting industry-wide
challenges in quota allocations and
resource quality, and operating cost
increases, primarily fuel. |
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| Fishing |
| The Tiger group’s fishing interests comprise 74% of Sea Harvest (essentially a Hake Fishing business supplying local and export markets with fresh and frozen beneficiated products), and 44% of JSE-listed Oceana, a diversified fishing company based in South Africa and operating also in the United Kingdom, Namibia, Uruguay and Australia. |
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| Sea Harvest |
| One of the biggest challenges faced by Sea Harvest in 2006 was the long-term rights allocation for hake, issued for 15 years. Following the initial allocation, Sea Harvest lost 14% of its deep-sea hake quota. After appealing to the Minister to reconsider certain criteria, its allocation was increased by 2 400 tons, which represents a net 9% loss. A total allowable catch reduction of 10% is expected for 2007. |
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| Contribution to group |
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Cost pressures were primarily
due to poor catches and sharp increases in the
fuel price. Considerably lower catch rates compared
to the previous year required more vessel effort
to catch the quota, leading to higher costs.
Another factor affecting Sea Harvest’s performance
in 2006 was the size of the fish caught. Landings
of small fish increased significantly, putting
pressure on sales realisations. Smaller fish have
lower yields, require considerably more effort
to process and are sold primarily through commodity
channels. Therefore, they are less profitable
than larger fish.
These challenges, coupled with frequent stoppages
and illegal strikes due to downsizing and retrenchments,
resulted in a loss for the first six months of
the review period.
Against this background, the business has been
totally re-engineered to significantly reduce
costs, improve efficiencies and source markets
that provide greater profitability per kilogram
of fish landed.
As a result, the company reached breakeven by
July 2006 and returned to profit by year-end.
Although the business is still in the early phases
of returning to acceptable levels of profitability,
the outlook is positive. This should be viewed
against the worldwide shortage of white fish,
strong international pricing and the benefits
from a weaker rand.
The resource, albeit under pressure, is well managed
by government, and although further cuts in the
total allowable catch are anticipated, the business
is now well structured to accommodate such cuts. |
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| Business
renovation |
| The business
has been totally re-engineered
to significantly reduce costs,
improve efficiencies
and source markets that provide
greater profitability per kilogram
of fish landed. |
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| “Although Sea Harvest
is still in the early phases of returning to acceptable
levels of profitability, the outlook is positive.” |
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| Oceana |
In September 2006, Oceana’s
black ownership was increased to 33%. Long-term
commercial fishing rights of 8 to 15 years’
duration were allocated in April 2006, with a
subsequent period for applicants’ appeals.
The conclusion of this lengthy process clears
the way for rationalisation and consolidation
in the South African fishing industry and offers
opportunities for volume growth through the acquisition
of rights from those wishing to dispose of their
interests.
Operational performance in fishing activity was
generally satisfactory when measured by permitted
volumes landed from available fish resources,
and in terms of yields.
The Cold Storage division recorded another year
of good average occupancy rates and activity,
while the Blue Continent Products division delivered
an excellent performance.
Oceana’s range of products and services
continued to receive wide market support, with
the major brands being Lucky Star in South Africa,
Glenryck in the UK and Diamond for frozen-fish
sales in West Africa.
The Oceana Brands division manages canned fish
and fish meal operations, catching and processing
mainly pilchard and anchovy. Against lower total
allowable catch levels and the poor condition
of the pilchard resource, demand for Oceana’s
leading brands remained firm and performance for
the financial year was acceptable.
Conditions for lobster and squid resources remain
stable, with the abalone resource still severely
depleted by years of poaching. Demand and prices
for Oceana’s lobster products on export
markets were excellent.
Oceana will continue to support sustainable resource
management in maintaining the reputation and position
of South Africa ’s fishing industry. Following
ongoing rationalisation of its corporate structure
and operational activities, Oceana is well placed
to acquire additional quota volumes on economically
justifiable and realistic terms. |
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