Sanford comes up short

JOHN SELKIRK/Dominion Post

NEW FLEET: Sanford is eyeing up new inshore fishing boats and has bought a Chinese partnership to boost its processing capabilities.

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Softening fish prices and an exchange rate "defying gravity" have caused Sanford's pre-tax profit to more than halve in the second half of 2009.

The annual profit was posted as $39 million, down 26.4 per cent on last year, with marginally lower revenues described as "satisfactory".

The easier trading that managing director Eric Barratt had hoped for in June never came to pass, with the US-kiwi exchange rate strengthening and Sanford's share price dropping steadily in the second half.

Foreign exchange cover gave some respite from the high kiwi, with gains for the year of $8.4m, and some left over to continue into the next financial year. But Mr Barratt said it continued to "defy gravity" and, together with pricing volatility, would form the crux of the challenge facing Sanford next year.

Sanford's share price has taken a fall in the second half of the year, tumbling about $1 to $4.80 since June, just after the 2009 interim result was announced. The beginning of the share price fall was also coincidentally about the time the US-kiwi exchange rate passed 65c on the way up.

The dollar closed yesterday at just under US73c.

The results announcement noted a 14c final dividend, recorded at December 11, and paid on 16 December. Sanford's shares yesterday closed up 5c at $4.80.

Mr Barratt said fish prices dropped in many species during the year, except for orange roughy.

The most notable example was greenshell mussels, where exporters were dropping prices to keep market share.

Record prices at the start of the year had dropped from US$2.50 a pound to $1.50, a drop further exacerbated after the exchange rate had been factored in.

On the upside, Sanford managed an aquaculture revenue comprising 15 per cent of its total. Mussel production topped 20,000 tonnes for the first time, and Mr Barratt said new production capacity planned in Tauranga and Havelock North would add to that in the coming year, as would newly acquired mussel farms in Marlborough.

New mussel-opening machines developed and patented by Sanford were creating great efficiencies and also earning royalties.

"Yes, mussels are undervalued, it is very hard work. [But] we're well placed to deal with this issue."

Mr Barratt said mussel prices started to make sense in the US$1.60 to $1.85 range.

Asian markets had started to bounce back, especially in China and Korea, he said, creating other issues, such as sufficient recruitment for their partnership in Weihai Dong Won Food in China.

This year was still going to be affected by a hangover from the economic crisis and it was hard to recover prices once they fell.