Sanford dips on forex losses

By Phil Boeyen, ShareChat Business News Editor

Wednesday 18th April 2001

Foreign exchange losses have been a major driver behind fishing company Sanford (NZSE: SAN) posting a drop in interim profit.

For the six months ended February Sanford made a tax-paid profit of $12.1 million, down from $19.7 million last year. Sales fell to $166 million from $168 million.

The company took a $15.9 million hit on foreign exchange losses because most sales in US dollars had been hedged at currency rates of around US52 cents compared with the current rate of US42 cents.

"Lower than expected sales of orange roughy and hoki for the first six months resulted in a substantial percentage of currency conversions being at hedged rates that were well above the average daily rate for the six month period," Sanford says in a statement.

In the first six months last year there were only minimal differences between the two rates.

The company says another reason for the decline in profit was its market position in orange roughy.

It claims between October and February the US market over-reacted to the perception of a potential oversupply of the fish, pushing prices down.

"We were confident that the market price would recover and withheld product for four months, resulting in lower sales than expected, a build up in inventories and delayed benefits from the lower currency levels," the company says

Sanford says the market did recover in March, reaching a level of US$4 per pound, and regular sales and shipments are now being made.

Other factors adding to the profit downturn include lower catches and sales of hoki as Sanford accumulated stocks prior to the certification of the hoki fishery by the Marine Stewardship Council and lower skipjack tuna catches and prices.

" Consequently skipjack tuna revenue was over $4 million less than the previous year."

Despite the lower first half result Sanford is predicting a stronger second half based on existing conditions in the major economies, current exchange rates and the current improved market prospects for its main species of hoki, orange roughy and greenshell mussels.

The company is also reporting good progress on its Auckland Fish Market project, with final design and costing to be obtained to enable the finalisation of the feasibility study.

A fully imputed dividend of 8 cents per share, the same as last year, will be paid.

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