Long-term shareholders in fishing group Oceana will have plenty to carp about these days. With the profit contribution from its US-based Daybrook fish oil and fishmeal operations markedly diminished, there will again be questions — and, quite frankly, the odd conspiracy theory — about the decision to shift abroad so boldly 10 years ago.
The numbers are hard to digest. Before Oceana made the R4.6bn acquisition of Daybrook and embarked on a R1.2bn rights issue, the group carried a market value of about R8bn on the JSE. At the time of writing, Oceana reflected a market value of R7bn; this will naturally fuel crude arguments about how much value Daybrook, which has been an inconsistent profit generator, has added to proceedings. Back in mid-2015, though, the Daybrook deal was received with some enthusiasm. The acquisition not only added a serious hard currency earnings element to Oceana, it also fed its catch product into sweet spots in aquaculture and pet food — and Daybrook was not subject to pesky total allowable catch allocations (as in South Africa).
Some shareholders might also have harboured hopes that Daybrook was just a first step in building out an international fishing business. Unfortunately, the business of catching and marketing the byproducts of the Gulf menhaden, or pogies, is a difficult one. The catching is seasonal (running from mid-April to end-October) and prone to disruption by extreme weather that often batters the coast of Louisiana. Then there is the supply issue. If Peru — which produces more than a third of the world’s fish oil and fishmeal — is pumping product into the market, pricing can be disappointingly soft for other producers.
So when Peru had much lower catch rates of about 200,000t in 2023, it drove prices higher in 2024 and into the early part of 2025, to the benefit of Daybrook and Oceana. Daybrook consequently produced profit on a large scale. But then Peru staged a recovery, with production this year set to reach 3Mt. The impact of Daybrook on Oceana’s recently released interim numbers has been profound. Oceana’s US operations reported a 15.6% drop in revenue to R1.46bn, and a more than halving of operating profit to R377m — with the margin crumbling from 48.9% to 25.5%.
Oceana’s US operations reported a 15.6% drop in revenue to R1.46bn, and a more than halving of operating profit to R377m
Oceana CEO Neville Brink suggested Daybrook’s performance was “reasonable” relative to the long-term average. I suspect a few Oceana shareholders might disagree and, typically in a poor year for Daybrook, again question the decision to angle for what is likely to remain a feast or famine business.
There are concerted efforts to drive volume at Daybrook with a new regime of weekend fishing, which could be a useful initiative if the fish oil and fishmeal markets improve in 2026. Longer term, too, growing aquaculture demand (mainly from Scandinavia) and a burgeoning US pet food market should provide a tangible demand underpin.
But there will be periods when profits sink. This year’s interim report contrasts the frustratingly uneven nature of Daybrook with Oceana’s redoubtable core — its Lucky Star canned fish business. Lucky Star remains one of the affordable household staples in South Africa, and it’s not surprising that efforts continue to can other food products to capitalise on a powerful brand and add new flavours (peri-peri is already proving popular). In the interim period, Lucky Star pushed up revenue 10.4% to R2.6bn and with margins fattened to 8.9% (7.3% in 2024), the operating profit was up a sumptuous 36% to R230m. Brink says demand for Lucky Star remains strong, and healthy inventory levels should put the product in a good position to drive second-half sales.
One shareholder bent my ear during the week about where the Oceana share price might be if Lucky Star’s stout showing was not weighed down by Daybrook. While such a scenario is easy to fantasise about, the reality is that Oceana is lumbered with Daybrook. If Oceana were inclined to refocus on its Southern African operations, I very much doubt that Daybrook could be sold for anything close to the 2015 purchase price. It seems grossly unfair to label one of the JSE’s most enduring food businesses a cyclical play. But Daybrook’s pervading performance profile makes it difficult to look at Oceana any other way. Tell you what, though … if Oceana drops anchor under R50, I’ll cast a net.
Sticking with seafood, the latest interim report from unlisted aquaculture business Abagold, which specialises in abalone farming, makes for riveting reading. Before the pandemic, abalone farming in South Africa looked like a particularly good spot to drop a line of capital. Demand from the Far East, particularly China, was strong and abalone farmers could command decent prices. Things have changed drastically. The opening paragraph of Abagold’s interim report is most telling, detailing a drop of almost 18% in selling prices. The company notes darkly: “Unfortunately, this price decrease was largely self-inflicted collectively by the South African abalone farms, which were all trying to retain market share, sell excess volume, and justify net asset valuations, while not recognising the inelasticity of the pricing and demand of the abalone product.”
With this in mind, I thought the interim results were more than satisfactory. Revenue was down 10% to R165m on a 10% decline in tons sold, with net profit swinging from a R16m loss to a R15m profit and cash flows coming in at R14m. Still, I can’t see Abagold wending its way to the JSE any time soon — or even being targeted by one of the large fishing groups (such as Sea Harvest, Premier Fishing or I&J) that have aquaculture interests.
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