Sanford annual profit falls 6.7% on mussel farm restructuring

Wednesday 28th November 2012

Sanford, the country's second-biggest fishing company by sales, fell 6.7 percent after it took charges on restructuring its Coromandel mussel farm and legal fees for its unsuccessful defence of claims it dumped waste oil off American Samoa.

Net profit fell to $20.9 million, or 22.3 cents per share, in the 12 months ended Sept. 30, from $22.3 million, or 23.8 cents, a year earlier, the Auckland-based company said in a statement. That included a $2.6 million writedown on its North Island Mussel Processors investment and a provision of up to $5 million in legal fees and fines in the US Department of Justice prosecution. Sentencing is scheduled in January next year.

The result met Sanford's October guidance, when the fishing company downgraded its annual earnings expectations to between $20 million and $21 million having previously signalled an improved second half. Its Pacific tuna operation was hit by a lack of fishing time from two of its three vessels, one of which was detained due to the US prosecution and the other needing an upgrade.

"Events of the past year neutralised our expectation of improved returns this year," managing director Eric Barratt said in his commentary. "We have outlined the impact of those events and believe that we can continue to be positive about prospects in the coming year."

The shares fell 1.1 percent to $4.40 in trading today, and have gained 8.8 percent this year. The stock is rated an average 'hold' based on four analyst recommendations compiled by Reuters, with a median target price of $4.86.

Sanford's revenue slipped 0.9 percent to $460 million in the year, with smaller contributions from markets in Australia, Europe and North America while sales into Asia picked up across the board. The company fattened its gross margin to 18 percent from 16 percent a year earlier.

Barratt said both local and export markets were firmer for inshore fish species, though the strong currency "continues to be a challenge." Deepwater operations were the main contributor to earnings.

"The inshore and deepwater operations are expected to continue to provide strong contributions through ongoing focus in business improvement and increased catching efficiency," he said.

The board declared a final dividend of 14 cents per share, taking the annual payment to 23 cents.

BusinessDesk.co.nz

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