18th November 2021 By Bridget O'Connell | email@example.com | @foodtickernz
Sanford is developing a new strategy to rebuild profitability after facing a second year of Covid-19 related impacts that saw its earnings before interest and tax falling 39% to $23.3m in full year 2021.
New Zealand’s largest seafood company today posted a net profit after tax of $16.2m for the year to September 2021, down 16% on 2020, as margins were eroded by higher costs to supply its wildcatch fish, salmon and mussels.
Revenue ticked up 4% to $489.6m.
Sanford said Covid lockdowns that took out its main foodservice channel were the root of the problem, with the impact felt unevenly across its three business divisions as the pandemic evolved around the globe.
Mussels was the worst-performing division during the period as the timing of contracts and deliveries meant it was the last to be hit by Covid impacts and also the last to recover. This division provided around 20% of full year revenue in 2021, with sales up 4% but revenue down 16% as Sanford sought to clear inventory.
The largest segment of Sanford’s business, wildcatch, provided around 58% of full year revenue. It saw a 7% increase in sales volume in 2021 but this only translated to a 2% increase in revenue due to lower pricing.
A strong fourth quarter pushed annual salmon revenue up 32% on 2020, with sales volumes rising 41% compared with the prior year as Sanford cleared its lower margin frozen inventory.
Looking forward, chief executive of eight months Peter Reidie said the group had “clear strategic priorities for 2022, which will rebuild profitability and prepare us for future growth”.
He listed the priorities as rebuilding mussels profitability; grow developing opportunities in wildcatch; retain salmon profitability; and “prepare for future growth and establish cross-business fundamentals such as performance culture, risk management, executional excellence and more”.
Reidie would work with the executive team, including new chief financial officer Paul Alston who joined in October, to develop a new strategy for the period through to 2026. It would be presented to the market in the first half of calendar year 2022.
He noted that Sanford saw “continuing recovery in all divisions as the world reopens and demand returns,” but could not discount ongoing Covid-19 related risks, such as further supply chain disruption.
To this end, Reidie said that Sanford recently agreed a two-year arrangement with supply chain collaboration group Kotahi, which would take responsibility for all Sanford’s frozen export capacity.
“This makes us much more confident about access to shipping,” he said.
“We have managed what we could control in 2021. The overall result is disappointing however we feel positive about some aspects of the past year. We continued to deliver operationally through the pandemic, we managed net debt – $178.6m in 2021 versus $184.3m in 2020 – and we reduced inventory levels.”
Sanford’s board scrapped its dividend for 2021, although it would will bring it back “as soon as is feasible”.
Ngāi Tahu Investments is the largest shareholder in Sanford, after increasing its stake to 19.9% following a $38m buy-up in September.
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