JSE-listed seafood and aquaculture company Sea Harvest achieved a 29% year-on-year increase in revenue to R2.7-billion for the six months to June 30, as revenue grew across all segments.

Gross profit was largely unchanged at R676-million, but earnings before interest and taxes decreased by 10% to R286.9-million and profit after tax declined by 10% to R180-million.

"Sea Harvest had a challenging six months, driven by quota losses in the South African Fishing segment from the Fishing Rights Allocation Process (FRAP), significant input cost pressure and supply chain disruptions," the company said on August 29.

Although disappointing, the outcome of the FRAP provides a good foundation for certainty and stability for the South African Fishing segment for the next 15 years.

However, the segment has to contend with 10% lower hake volumes, a stronger rand, increased freight costs and a high fuel price. Fortunately, demand is strong, as inflation is high in the core markets in which the group operates, the company said.

Profit after tax attributable to shareholders of Sea Harvest for the period decreased by 14% to R187-million.

Owing to the challenges in the South African Fishing operation, significant cost inflation across the group, a stronger rand and acquisition-related costs, the group delivered operating profit of R277-million for the six months under review, 14% lower than the R323-million in the prior interim period, with the operating profit margin contracting to 10%, down from 15% during the 2021 interim period.

Headline earnings decreased by 10% to R182-million. Basic earnings a share decreased by 14% to 67c, down from 78c in the 2021 interim period, and basic headline earnings a share decreased by 10% to 65c  from 72c during the interim period to June 30, 2021.

In accordance with the group's dividend policy, no interim dividend was declared or proposed for the period, the company said.

Sea Harvest completed the acquisition of Western Australia seafood business MG Kailis' Western Australia-based fishing assets on May 23 for a purchase consideration of R765-million. This transaction is transformative and represents a significant step in the execution of the group's investment strategy of acquisitive growth in the international seafood space that focuses on businesses of scale in high-value seafood species.

"MG Kailis complements and diversifies the group’s existing business operations in Australia from a wild-caught fishing, trading, engineering and sales perspective."

Further, the South African Fishing segment had a challenging six months, impacted by a 10% decrease in available hake quota volumes, a significant increase in the price of fuel, and a stronger rand. Revenue increased 8% to R1.42-billion, up from R1.32-billion during the interim period to June 30, 2021, driven by firm export markets and strong pricing.

The strong focus on cost control was offset by increased selling and distribution expenses, largely as a result of the increases in export and local freight rates.

As a result, operating profit in the South African Fishing segment decreased by 25% to R236-million from R316-million during the 2021 interim period, with the operating profit margin contracting to 17%, down from 24% during the comparable interim period in 2021.

Meanwhile, revenue in the Aquaculture segment for the six months to June 30 increased by 55% to R56-million, benefiting from increased abalone sales volumes, firmer pricing and a weaker rand to the dollar.

The improved performance of the abalone division resulted in the Aquaculture segment reducing its operating loss by 51% to R18-million.

"The Aquaculture segment, which is now largely abalone focused, is reliant on the easing of the zero-Covid-19 policy and related lockdown measures in Far East markets and the normalisation of international flights. The segment is well poised to take advantage of the recovery in markets and, once the farms mature, benefit from the higher-margin dried market," Sea Harvest said.

The Cape Harvest Foods segment delivered a revenue increase of 85% to R956-million, from R516-million during the interim period to June 30, 2021, benefiting from the inclusion of Mooivallei, effective from August 1, 2021, and BM Foods, effective from September 1, which added R348-million in revenue.

Operating profit in the Cape Harvest Foods segment increased by 44% to R55-million for the period to June 30.

Within the Cape Harvest Foods segment, Ladismith Cheese is expected to continue to leverage the investment in additional capacity and Mooivallei to increase performance, with the business weighted towards the second half of the year owing to the increase in milk flow. BM Foods will continue to focus on recovering above-inflation cost pressures, the company said.

Additionally, revenue in the Australian segment increased by 17% to R270-million for the six months under review.

After absorbing R13-million in acquisition-related costs, the segment recorded an operating profit of R4-million. Adjusting for the acquisition-related costs would have resulted in the Australian operations delivering operating profit of R17-million for the period at an operating profit margin of 6%, up from 2%, or R5-million, achieved during the interim period to June 30, 2021.