Oceana’s long-awaited financial results finally wash up

In October 2021, Oceana was made aware of concerns raised by a whistle-blower relating predominantly to the accounting treatment of a United States subsidiary, Daybrook Fisheries, along with its 25% interest in Westbank Fishing.

The board decided to undertake a comprehensive forensic investigation and review all matters raised. In February 2022, the auditors, PwC, raised a new concern regarding the dating of signatures on an internal document pertaining to an insurance claim in the amount of $4.2-million, which was then also independently investigated. As a result, the publication of the annual financial results has been delayed by roughly two to three months.

Chairman of the board, Mustaq Brey, says although an investigation did identify other instances of backdating, none of those affected the annual financial statements.

“We view the practice of backdating documents in a serious light and are implementing appropriate remedial interventions to address this, which includes disciplinary action and training. The forensic investigations concluded that none of the matters considered resulted in financial loss, nor was there any evidence of fraud or criminal conduct,” he says.

For the year to September 2021, Oceana saw revenue fall 8.1% to R7.6-billion as a result of lower canned fish, fishmeal and fish oil sales volumes, lower occupancy levels in the commercial cold storage segment, and a stronger exchange rate on export and US dollar translated revenue. This was offset by favourable pricing across most products.

Interim CEO, Neville Brink, says continued strong demand and consequential improved pricing for all the product lines underpinned Oceana’s performance, with particular reference to canned fish, horse mackerel, lobster, squid and cold storage.

However, supply to Oceana’s global fishmeal and fish oil customer base was negatively impacted by unfavourable weather conditions affecting both SA anchovy and US menhaden catch.

Higher fixed cost absorption from lower fresh fish landings affected gross margins, which reduced to 33.7% from 36.7% previously. Oceana’s underlying performance for the year was also negated by the following events:

• The Desert Diamond suffered main engine damage in October 2020, resulting in the vessel being non-operational for 49 days.


• Civil unrest in Kwazulu-Natal in July 2021 disrupted the Lucky Star canned fish operations with an inventory loss of R86-million, which hindered product availability for the rest of the year. The R20-million outstanding balance of the total R108-million insurance claim (including loss of profits) has not been accrued for, but has been disclosed as a contingent asset at year-end. A contingent asset is a potential economic benefit dependent on events largely out of a company’s control.


• Operations in the US were affected by Hurricane Ida in August 2021. Although damage was limited by flood protection measures, disruptions to road access and utilities resulted in plant closure for a week. Fishing conditions after the hurricane were challenging, contributing to further reduced landings through September. As the R63-million business interruption insurance claim was received in October 2021, it has not been accrued for, but has been disclosed as a contingent asset at year-end.


• Canned fish and cold storage operations were further challenged by global container shortages and port challenges.

As a result of the above challenges, and partially offset by a stronger rand and tight cost control, group operating profit before other operating items decreased by 14.3% to R1.2-billion, from R1.4-billion previously.

Headline earnings declined by 11.2% from R734-million to R652-million, with headline earnings per share declining by 12.5% from 628.4 cents per share to 550 cents per share.

Brink says the decline in overall cash balances to R934-million is largely the result of the R222-million net movement in borrowings, a R137-million outflow for working capital purposes, R133-million outflow for the unwinding of the Oceana Empowerment Trust and a R116-million reduction arising from the translation of the US cash balances at a lower exchange rate.

Shareholders will receive a final dividend of 248 cents per share, which with the interim dividend, brings the total dividend for the year to 358 cents per share, compared with 393 cents the previous year.

Brey noted that while the delay in publishing results was regrettable, but necessary given the circumstances, excellent progress had been made to get through a difficult and unprecedented period.

“Today marks the end of a painful chapter in our 104-year history. The work completed to publish results has positioned Oceana to now focus on driving performance and delivering value for all stakeholders,” he concluded. BM/DM

 

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