JSE-listed seafood and aquaculture company Sea Harvest has posted a 23% increase in earnings before interest and taxes (Ebit) to R352-million for the six months ended June 30, on the back of strong demand and higher selling prices in all markets and channels.

The company has maintained its Ebit margin at 11%.

Headline earnings a share of 77c were 19% higher than in the prior comparable six months.

Loadshedding again contributed R22-million to the company’s direct operating costs. For context, loadshedding also contributed R20-million to additional costs in the last four months of 2022.

The prior year’s Fishing Rights Allocation process also resulted in lower available volumes, as did challenging weather conditions.

Despite lower hake catch volumes, revenue from the South African Fishing segment increased by 10% year-on-year to R1.5-billion, benefitting from strong demand in all markets and channels, higher selling prices and a weaker rand against the major trading currencies.

Revenue from the Aquaculture segment increased by 11% year-on-year to R62-million in the six months under review, with higher selling prices as a result of a recovering Asian market and the tailwinds of a weaker rand offset by lower available volumes – the company explains lower abalone volumes are a result of farms still being in the growth phase.

The Cape Harvest Foods segment was negatively impacted by supply constraints during the reporting period. Sea Harvest explains lower countrywide milk flow, loadshedding and a loadshedding-related fire at Ladismith – which caused a one-month disruption at the facility – curtailed available volumes.

Despite these challenges and a constrained local consumer, revenue in the segment increased by 9% to R1.05-billion, benefitting from higher selling prices across all categories.

The Australian segment delivered a 94% increase in revenue to R524-million in the half-year under review, owing to the inclusion of MG Kailis for a full period, as well as a weaker rand.

Sea Harvest warns that its group cost of sales increased by 20% in the period under review, owing to high inflation and the impact of loadshedding. Particularly, the fuel price, milk price and packaging prices all increased significantly during the period.

Total profit after taxation attributable to shareholders came to R213-million, which is 14% higher than the R187-million attributable profit reported in the prior comparable half-year period.

Sea Harvest did not declare an interim dividend for the six months under review.

The group generated cash from operations of R294-million, after investing R171-million in working capital.

Sea Harvest used R343-million in investing activities during the period, including R304-million of investments to property, plant and equipment. For example, Sea Harvest undertook refurbishments at the Mooivallei facility and invested in an additional factory freezer vessel.

The company has upheld its sustainability values, including making positive social and environmental impacts, despite the challenging business environment.

A new strategic partnership agreement concluded between the South African Fisheries Development Fund (which Sea Harvest initiated in partnership with Brimstone), the Fisheries Economic Development Research Advisory and Training Institute and the Cape Peninsula University of Technology is expected to boost the South African Oceans Economy and, in particular, the small-scale fisheries economy through initiatives that promote participation in the marine space of the most marginalised in society.

During the first six months of this year, the Sea Harvest Foundation focused on providing monthly fish donations to various organisations that support vulnerable persons and on projects that promote education, youth development and health and wellness.

The foundation’s bursary programme provided financial assistance to more than 30 tertiary students who are studying towards qualifications that align with Sea Harvest’s operational requirements

Meanwhile, Sea Harvest expects challenging fishing conditions owing to the erratic weather to continue impacting catch volumes in the South African Fishing segment. However, markets internationally and locally are firm, with the rand weaker against major trading currencies and the book well hedged against both the euro and the Australian dollar.

Management continues to focus on fixed cost containment to offset a higher fuel price and lower catch volumes.

With the continued increase in the abalone size mix, the continued recovery of far east markets, and the resumption of international flights during the third quarter, the Aquaculture segment is well poised to continue its recovery in the remainder of the current financial year.

Within the Cape Harvest Foods segment, Ladismith has mitigated the effects of loadshedding through additional generators. The business will continue to leverage the investment in additional capacity and the upgrade of facilities to increase performance.

The Ladismith business is weighted towards the second half of the year owing to the increased milk flow, however, consumers remain constrained and prices remain high.

BM Foods will continue to focus on recovering significant cost inflation while implementing a number of cost-saving initiatives and consolidating its Lanseria (Johannesburg) operations with its Cape Town operations to drive efficiencies.

With a bigger and more diversified wild-caught and traded product mix, the performance of the Australian segment is weighted towards the second half of the year.

Softer pricing is expected owing to an oversupply of prawns and a softer consumer market.

The group continues to investigate solutions to load shedding at its various operating sites in South Africa, including various renewable energy solutions.