Argentinian snag for Sealord

17:00, Jul 06 2013
SNAGGED: Sealord has walked away from its Argentinian venture.

Maori dreams of hauling in fisheries riches are floundering in the frigid waters off South America's Cape Horn.

Sealord Group, 50 per cent owned by iwi as part of a Treaty of Waitangi settlement in 1992, is in trouble and has stopped paying the tribes dividends, accounts obtained by Sunday Star-Times reveal.

While hunting toothfish, hoki, whiting and warehou in Argentina's Tierra del Fuego, Sealord's Maori and Japanese shareholders in a venture called Yuken SA were burned by a soaring peso and rampant inflation.

Sealord's other half owner, Tokyo-based Nippon Suisan Kaisha, also known as Nissui, is trying to exit Sealord, fishing industry sources say. It has already taken over the most lucrative part of the Sealord business, its European marketing arm.

Sealord refused to discuss its plight last week. It is now completely closing down Yuken SA.

"We're not in a position to make any further comments," a Sealord spokeswoman said.


Headquartered in Nelson, Sealord employs 1100 people and makes sales of $530 million a year.

Sealord's troubles were revealed in the half-year accounts of Auckland-based Aotearoa Fisheries (AFL), which owns the Maori share of Sealord.

The accounts say Sealord is exiting Argentina and as a result AFL has been hit with an impairment charge of $7m.

AFL's shareholders are 56 iwi, including Ngapuhi, Ngati Porou, Ngati Kahungunu, Tuhoe, Tainui and Ngai Tahu, as well as Te Ohu Kai Moana Trustee Ltd which controls Sealord's quota rights.

Sealord's structure means its iwi half-owners have no direct way to force change in the company which unions have claimed employs few Maori in top positions. AFL dividends are the only way Maori gain directly from their ownership.

However, for the six months ended March 31 this year, AFL's profit was $7.2m, a 58 per cent fall from the $17.3m for the same period last year.

"From a group perspective this interim profit is very disappointing, and reflects Aotearoa Fisheries' 50 per cent share of Sealord Group's loss for the period," the accounts say.

"The deep-water fishing sector continues to face ongoing challenges, and the first six months have proven to be exceptionally so for Sealord Group," AFL's report says.

"While there are bright spots within Sealord Group, unfortunately heavy losses from Sealord's Argentinian operations have dragged down the performance of the group."

AFL chairman Whaimutu Dewes said the result was having a heavy impact. Management would visit iwi shareholders to explain what had happened.

"Our shareholders are unhappy at the very least . . . They hold us accountable in a very intimate and very direct way . . . It is an extraordinarily bad and disappointing result."

But he doubted whether the Treaty vision or Sealord itself was going to fail.

"One bad result does not make a winter."

Dewes said Sealord had been trying to extricate itself from South America and AFL, as a 50 per cent shareholder, could not have done much anyway. He said it had not been a snap decision to go into South America.

"There are some risks you have to take in business; this one was a venture into foreign-owned deep water and it could have paid off handsomely, and for a while it was."

The result, which will be included in AFL's full year financials, was a "huge bump" but Maori would stay true to the vision, Dewes said.

"The vision is still valid . . . Sealord is a critical part of the vision, and can and needs to deliver . . .

"If we don't try these things - the vision was far-reaching, deep-water, heavy harvesting capacity - and if you don't try it in these places you will never know."

"The second six months will continue to be particularly challenging for Sealord," AFL say.

"Until the investment in their Argentinian fishery is completely disposed of there is the chance of further losses from the eventual sale of assets and closing of the business."

Sealord has been in heavy seas for a while.

Two years ago it had to borrow $69.9m from Nissui to keep going.

Assets are being sold to cover cash flow, raising questions over whether the company will have to go to Maori shareholders for money.

Sealord does not comment on its financials, but the signs of the strain on its balance sheet had been apparent for some time.

Its accounts two years ago were tagged with a "fundamental uncertainty" comment by auditor Ernst & Young as it faced paying $172.9m to its bankers.

Its 12 month accounts to September 30 show a profit of $5.1m, against $18.3m the year before. Interest-bearing loans, including from Nissui, and borrowings to last September totalled $219m, against $138m a year earlier.

On its website Sealord still hails Yuken SA, saying its operations take place in Ushuaia, the southernmost city in the world.

Created in 2000, Yuken took its name from the language of the Alakaluf people, an ancient tribe from Tierra del Fuego; its meaning has become the company's work philosophy: "Let's walk together holding hands."

Sunday Star Times