Sea Harvest is facing a puzzling disconnect between its operational fundamentals and a sharply declining market valuation, frustrating CEO Felix Ratheb, who maintains the maker of the flagship eponymous seafood brand is “a quality business”.
Debuting at 12.50 per share when it went public in 2017, the stock has fallen by half since then, leaving its market cap at R2.3bn, with its share price having dropped to R6.60 amid underlining deep-seated investor scepticism.
Speaking to Business Day, Ratheb expressed frustration at the disconnect, attributing the volatility to macroeconomic headwinds and industry volatility.
Even so, Sea Harvest remains a quality business, he said as he sketched out the company’s pitch to investors, which lies in its diversified portfolio across wild-caught hake, pelagics, aquaculture (abalone) and dairy, a model designed to cushion the company against volatility in any one segment.
He said the company generates more than 60% of its revenue in hard currency through exports, offering a natural hedge against rand weakness. It holds strong quota allocations in regulated sectors such as hake and pilchards, providing security of supply and pricing power.
“Over 60% of our revenue comes from international markets, including the EU, Australia, Japan and Southeast Asia. These are stable, developed economies with strong currencies,” he said.
Since listing, Sea Harvest has steadily paid dividends, though the amounts fluctuated. Its final dividend has ranged from a low of 5c per share in 2020 to a peak of 56c in 2022. The maiden dividend in 2018 stood at 31c, while the recent record was 40c per share in 2024.
Expansion
With the R1.3bn cash from the initial public offering seven years ago, Sea Harvest has pursued an aggressive expansion, buying nine businesses across seafood, aquaculture and dairy. The strategy failed to include earnings, with headline earning per share plunging 45% in 2024 weighed down by historically low hake catch rates, soft global seafood markets and rising finance costs.
Over the past seven years, the company acquired nine businesses to diversify and scale their operations. These acquisitions included Viking Fishing, which made them the world’s largest hake company, as well as investments in pelagics (West Point Fishing), aquaculture (abalone through Viking Aquaculture and Aqunion), and dairy (Ladismith and Mooivallei).
The group has averaged a 12% earnings before interest and taxes (ebit) margin, just below its 15% target, but recent investments in new trawlers and factory upgrades are expected to support future margin expansion.
Ratheb, an electrical engineer who has helmed Sea Harvest since 2013, said enhanced investor communication is now critical.
“We need to get our performance back to where it was ... and give shareholders the returns they expect, share price growth and attractive dividends,” he said.
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