Iwi big losers as Sealord exits Argentina

SNAGGED: Sealord has walked away from its Argentinian venture.
SNAGGED: Sealord has walked away from its Argentinian venture.

Maori co-owned deep-sea fishing company Sealord is walking away from its disastrous hoki venture in Argentina with an estimated $60 million loss.

But an internal notice to Sealord staff from chairman Matanuku Mahuika, obtained by Sunday Star-Times, says Sealord will return to profit and pay Maori a dividend again.

Sealord is now facing its angry Maori shareholders over heavy losses. It is owned by a holding company, Kura, which in turn is half-owned by 58 iwi, under a Treaty of Waitangi settlement, through Aotearoa Fishing.

Mahuika's confession is unlikely to make them any happier, exposing extraordinary failings as Sealord bet big on Argentina's already failing Yuken SA.

The company has never said how much it paid for Yuken but forecast in 2009 it would turn over $60m within five years.

But it has made only losses and was funded, in part, by cutting 350 jobs in the South Island and selling mussel farms. At the time, Sealord chief executive Graham Stuart said it was a case of losing some jobs to save many more.

Mahuika said Yuken would not be profitable and it was looking to sell it for a nominal amount.

"If even that can't be achieved, Sealord intends to walk away from the Yuken investment at the end of this month," he said.

Sealord started as a minor partner in Yuken in 2000. It became 100 per cent owner in 2009 when the Argentinian shareholder went broke.

"Yuken has never performed strongly from a financial point of view, but was able to trade profitably, albeit modestly so, in the years from 2005 through to 2009 but never generated a positive cashflow," he told staff.

Yuken's business operating losses totalled "$16m over the last three financial years".

At the same time Argentina's economy has suffered 30 per cent a year inflation and political and social instability.

He said Yuken's losses had been funded with Sealord's cash.

Sealord is usually opaque when it comes to releasing accounting details - it publishes no statement of cashflows, for example - and, in calculating the scale of the Yuken losses, the details are still unclear. Mahuika's statement and Aotearoa accounts put it in the range of $50m to $60m.

Sealord had tried to sell Yuken and, while 134 potential buyers had contacted it, only two maintained any interest after due diligence.

To limit losses, Sealord has tied up Yuken's vessels and ceased fishing operations.

But Argentina's hoki quota must be fished to be retained. Yuken had five hoki licences and four factory ships.

Mahuika noted that Sealord had already taken a $10m impairment on its books over Yuken.

"It was originally hoped that, with the sale of Yuken's assets, Sealord would be able to exit with a write-down of approximately $28m," Mahuika said.

"If, as looks likely, Sealord exits for a nominal amount, or simply walks away, the write-down will be in the order of $35 million."

He said this would be an accounting write-down, not a cash transaction and it would not have an impact on Sealord's banking arrangements.

Exiting Yuken would have a significant negative impact on the financial performance of Sealord this year and, in turn, a negative impact on dividend payments.

"We very much regret this outcome."

Sealord would return to profit and recommence paying dividends next year, Mahuika said. He said Sealord had paid its shareholders more than $144m in dividends, half to Maori.

"This will be the first year in that time that a dividend has not been paid," he said.

Tribes usually receive around $8m a year. Last year they got $2m and this year nothing.

Sealord is also half owned by Japan's Nippon Suisan Kaisha, usually known as Nissui.

Sunday Star Times