Daily ShareChat: Sanford Limited

By Jenny Ruth

Tuesday 20th October 2009

The rising New Zealand dollar means fishing company Sanford's earnings will probably decline in 2010 and 2011 as its existing currency hedges roll off, says David Oxley at Craigs Investment Partners.

"Against this backdrop, we struggle to identify a catalyst for near-term out-performance," Oxley says.

"The group is once again faced with fairly material headwinds in the shape of a rising New Zealand dollar. If the New Zealand dollar remains at current levels, particularly relative to the US dollar, then we expect earnings to decline in both 2010 and 2011."

He has downgraded his forecast of Sanford's net profit in the year ending September 2010 from $42.6 million to $32.6 million and his 2011 forecast from $41.7 million to $31.3 million.

Nevertheless, Oxley says Sanford's medium-term outlook is relatively bright. "World catch volumes in recent years have lagged demand growth, a function of historical over-fishing in many parts of the world and something that increased acquaculture volumes have been unable to fully offset," he says.

That has meant, at least until recently, relatively firm underlying pricing. "Furthermore, the New Zealand industry is relatively well positioned as a result of the reasonably secure supply of fish to which it has access, thanks to prudent management of the country's seafood resources."

BROKER CALL: Craigs Investment Partners rate Sanford as hold.

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