China Fishery's Q2 profit down 75.5%

Singapore

AS forewarned, second-quarter earnings for industrial fishing firm China Fishery Group and parent Pacific Andes Resources Development were dragged down by reduced catch at a major Peruvian fishery.

China Fishery posted on Monday a 75.5 per cent slump in net profit from US$17.4 million a year ago to US$4.3 million for the quarter ended March 28, 2015, due to the Peruvian government's closure of the North Centre anchovy fishery for last year's November-January fishing season.

As a result of the closure and the temporarily warm waters in the April-July season, "there was virtually no production of fishmeal or fish oil" in the first-half period, the firm said.

Revenue for the quarter hence fell 57.4 per cent to US$76.7 million while first-half revenue fell 38.3 per cent to US$200.6 million. First-half net profit declined 46.9 per cent from a year ago to US$17.1 million.

The group focused on improving efficiency and reducing cost, which it says has helped its Peru operations become better placed to capitalise on the increased total allowable catch announced by the government for this year's April-July fishing season. The higher total allowable catch allowed the firm to catch half of the quota in the season's first month.

The global reduction in the supply of fishmeal and fish oil caused by the reduced anchovy fishing in Peru in 2014 has driven up fishmeal and fish oil prices, which remain at historical highs. Revenue from the Peruvian fishmeal operations, which contributed 50.7 per cent of total revenue, fell by 50 per cent for the first half year, but the lower sales volume was partly offset by the higher selling prices.

Operations in Namibia saw higher sales volume and selling prices, lifting the division's revenue for the quarter by 155 per cent to US$9.9 million.

The firm is "well ahead" of its target to reduce its net-debt-to-equity ratio, it said. As of March 28, 2015, the ratio was 73 per cent, down from 102 per cent a year ago, said group managing director Ng Joo Siang.

China Fishery's rights issue to finance the redemption of the Copeinca notes had been oversubscribed when it completed on April 30, and raised S$283 million before transaction costs were deducted. The funding will be used to redeem the notes in the third quarter, further reducing gearing and lowering annual interest expenses by US$23 million.

The firm expects "considerable progress" in the production of fishmeal and fish oil in the second half of the year. Barring unforeseen circumstances, it is confident FY2015 will be profitable. Earnings per share for the quarter fell to 0.21 US cents from 0.85 cents. No dividend was declared.

Similarly, second-quarter net profit for Pacific Andes Resources Development (PARD) fell 74 per cent to HK$45.7 million (S$7.9 million) from HK$174.1 million a year ago. Revenue for the frozen fish supplier sank 41.1 per cent to HK$1.32 billion from HK$2.23 billion, dragged down by lower contribution from its fishery and fish supply division, which made up 50 per cent of total revenue.

For the first half year, PARD recorded a 54.6 per cent fall in net profit to HK$126.1 million and a 32.9 per cent drop in revenue to HK$3.13 billion.

PARD said its net-debt-to-equity ratio was now below the levels in place before the Copeinca acquisition in 2013, standing at 53.6 per cent as of Mar 28, 2015. The completion of China Fishery's rights issue and Copeinca notes redemption will bring about a further fall in gearing levels.

Earnings per share fell to 0.59 Hong Kong cent from 3.57 Hong Kong cents. No dividend was declared.

China Fishery shares closed on Monday at S$0.198, up 0.8 Singapore cents, while PARD shares closed at S$0.065, up 0.2 cents.