Oceana is preparing to offload one of South Africa’s largest fishing vessels, the Desert Diamond, after years of losses and repeated underperformance in the country’s horse mackerel sector.
This change is expected to reduce operating costs and earnings volatility in the segment.
CEO Neville Brink confirmed in an interview with Business Day on Monday that the vessel, once a cornerstone of Oceana’s pelagic operations, is likely to be sold and replaced with a new, multi-species, dual-purpose vessel.
The group’s replacement strategy is designed to protect the business from the sharp, unpredictable swings that now define South Africa’s horse mackerel resource.
The problem, according to Brink, is that the Desert Diamond can catch only horse mackerel. When they are abundant, it is profitable. When they are not, the vessel becomes a major drag on earnings, he said. And in recent years, the resource has proved to be too volatile.
That unpredictability has left Oceana carrying a vessel with massive fixed costs, inconsistent catch volumes and a performance profile that no longer fits the group’s wider push for capital efficiency. According to Brink, the single-species constraint of the Desert Diamond is now commercially untenable.
“We are developing a new strategy right now. That vessel is likely to be sold and will be replaced by a multi-species, dual-purpose vessel.”
The decision comes after years in which Oceana’s South African horse mackerel division has struggled to generate consistent returns. In the most recent financial year, the segment again barely broke even despite strong operational performance elsewhere in the group.
Brink was clear that the issue is not demand. Horse mackerel remains a sought-after, affordable protein source in the region. The challenge is the shifting behaviour of the species itself, which no fishing business can control.
The group reported lower full-year profit as dollar fish oil prices halved from the record levels achieved in the previous year.
Profit after tax decreased 35% to R724m due to the weaker fishmeal and fish oil segments’ operating performance, an increased net interest expense and higher effective tax rate, it said on Monday.
Revenue was 0.7% lower at R10bn, with the positive impact of increased sales volumes across all segments and firm pricing for wild-caught seafood being offset by the decline in US dollar fish oil prices.
Headline earnings per share declined 38.4% to 564.8c and a final dividend of 175c per share was declared, taking the total dividend to 285c, a decrease of 42.4%.
The higher net interest expense of R288m was primarily due to increased borrowing in South Africa to fund the recent capital expenditure programme and working capital investment during the year.
Lucky Star will build on its strong brand and distribution network to continue to expand its market presence in South Africa and cross-border regions, it said.
In response to an anticipated poor Pacific sardine catch season, Lucky Star is sourcing product from other regions.
Due to a lower-than-expected anchovy quota in Peru’s second season, global fishmeal and fish oil prices are expected to improve in the near term.
Both the South Africa and US facilities have available production capacity and are therefore well positioned to take advantage of better catch rates and resource availability, it said.
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