Oceana Group’s operating profit came under pressure in the five months to February 22, as supply constraints and weaker global pricing weighed on performance, despite revenue holding steady.
In a voluntary trading update released on Monday, the group which owns Lucky Star said revenue for the period remained consistent with the prior five months, but operating profit was slightly lower, driven largely by weaker results in the fishmeal and fish oil businesses, which were affected by reduced fish landings and softer international prices.
Lower availability of key species in South Africa disrupted production, Oceana said. In the fishmeal and fish oil division, landings of red-eye herring declined, there was no anchovy total allowable catch, and cannery trimming volumes fell.
As a result, production volumes dropped by about 80%, leading to higher unit costs and a deeper operating loss compared with the prior period. Inventory levels in this segment also ended lower.
Global pricing pressures compounded these challenges. Oceana said fish oil prices were materially weaker, with average realised prices in the US business about 45% lower year on year. Though sales volumes in the US increased by 7.7%, the benefit was offset by lower prices and the impact of a stronger rand on translated earnings, it said.
Fishing activity in the region was also limited to one month due to the annual closed season, further constraining output.
“Global prices for fishmeal and fish oil showed an upward trend in the second quarter as the market awaits updates on Peru’s initial anchovy quota allocation,” said Oceana.
Supply constraints were also evident in the group’s Lucky Star foods division. Oceana said local canned fish production volumes declined due to limited global supply of frozen fish, pushing up processing costs per unit. Inventory levels ended well below the prior period as a result of reduced supply.
Despite these pressures, Lucky Star benefited from strong consumer demand for canned fish and favourable input cost dynamics, including lower freight costs and a stronger rand, which helped mitigate some of the margin impact from constrained supply.
In the wild-caught seafood segment, performance was mixed. The hake business posted slightly weaker results due to lower catch volumes and currency effects on export revenue, while the squid operation was affected by persistently low catch rates, leading to a sharp decline in volumes.
Oceana said horse mackerel operations at home and in Namibia showed improvement, supported by better catch rates, lower fuel costs and stronger demand, although currency movements and pricing pressures limited gains.
Across the group, lower fuel costs and hedging strategies provided some relief, but were insufficient to fully offset the impact of supply shortages and pricing declines in key segments.
The group will release its interim results in May.
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