Our opinion on the current state of Sea Harvest (SHG) is South Africa's most popular frozen fish brand with about 38% of the market. It was controlled by Brimstone, which had a 54,92% stake. Sea Harvest catches, processes, and freezes fish for local and export consumption.
They acquired the business of Viking, which began 40 years ago and now employs 1 600 people with a fleet of 30 vessels operating in Cape Town, Durban, Hout Bay, Mossel Bay, and Maputo. Viking catches, processes, and sells horse mackerel, hake, pilchards, anchovy, prawns, tuna, and rock lobster. As part of this deal, they have also acquired 50% of Viking's aquaculture business, which is one of the largest in South Africa. The cost was a total of R565m, of which R315m was paid in cash and the balance through the issue of 19,2m Sea Harvest shares.
Sea Harvest announced the acquisition of the Ladismith Cheese Company for R527m. This company produces cheese, butter, and related products and signals Sea Harvest's intention to diversify away from the fishing industry. The price paid seems quite high since it is based on Ladismith's R58m after-tax profit for the year to January 2018. On 8th March 2023, the company announced that it was increasing its stake in Viking Aquaculture to 82% for R210m.
In its results for the year to 31st December 2024, the company reported revenue up 16% and headline earnings per share (HEPS) down 45%. The company said, "The Sea Harvest Group experienced its most challenging year since listing in 2017, impacted by hake catch rates at historical lows, weak market conditions in abalone, continued soft global prawn pricing, and high interest rates. This was offset by strong demand and improved pricing in hake, a solid performance from the newly acquired Sea Harvest Pelagic business, and a firm result from Ladismith despite challenges from foot-and-mouth disease (FMD), resulting in the Group delivering EBIT of R609 million (2023: R577 million, up 6%) and HEPS of 55 cents (2023: 100 cents, which included a once-off gain on purchased loans of R93 million that contributed 34 cents to HEPS)."
The Sea Harvest share is fairly volatile, with reasonable volume traded. From its listing in March 2017, the share has moved mostly sideways and more recently downward since June 2022. Obviously, the Viking acquisition has changed the nature of this business substantially, but it remains subject to the weather (which affects the catch) and the regulatory environment (where quotas can be changed by the government). In our view, given the volatility, the share remains fairly fully priced.
On 15th May 2024, the company announced that the acquisition of 100% of Terrasan had received approval from the Competition Tribunal.
