Daily ShareChat: Sanford

By Jenny Ruth

Tuesday 16th June 2009

The recent surge in the New Zealand dollar will have a dampening effect on fishing company Sanford's profitability and rising fuel prices are also a worry, says Morningstar.

Sanford has hedged 30% of its foreign exchange receipts, primarily in US dollars and the Japanese yen, over the next 12 months at favourable exchange rates.

"While it has not provided those rates, we estimate this to be under 55 US cents. A one cent movement in the New Zealand dollar versus either the US dollar or the yen impacts after-tax earnings by $NZ2 million," Morningstar says.

Because of these factors, it has downgraded its normalised 2009 full-year net profit estimate to $37.6 million from $40 million previously.

In late May, Sanford reported a 23% rise in normalised net profit to $20.6 million on a 5% sales increase to $228.5 million. The bottom line result of $26 million included $5.4 million of one-off gains, primarily foreign exchange gains.

"Favourable exchange rate and stable fuel prices positively impacted results. This was to some extent offset by weaker US dollar product prices and lower demand," Morningstar says.

"The company pays a reliable dividend despite earnings cyclicality and should suit income oriented investors."

BROKER CALL: Morningstar RATE Sanford (NZX: SAN ) as hold (upgraded from reduce).

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