Sanford annual profit falls 6.7% on mussel farms, US law suit

Managing director Eric Barratt

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Sanford, the country's second-biggest fishing company by sales, took a 6.7% profit hit after it took charges on restructuring its Coromandel mussel farm and legal fees for its unsuccessful defence of claims it dumped waste oil off American Samoa.

Net profit fell to $20.9 million, or 22.3 cents per share, in the 12 months ended September 30, from $22.3 million, or 23.8 cents, a year earlier, the Auckland-based company says in a statement.

That included a $2.6 million writedown on its North Island Mussel Processors investment and a provision of up to $5 million in legal fees and fines in the US Department of Justice prosecution. Sentencing is scheduled in January next year.

The result met Sanford's October guidance, when it downgraded its annual earnings expectations to between $20 million and $21 million, having previously signalled an improved second half.

Its Pacific tuna operation was hit by a lack of fishing time from two of its three vessels, one of which was detained over the US prosecution and the other needing an upgrade.

"Events of the past year neutralised our expectation of improved returns this year," managing director Eric Barratt says in his commentary. "We have outlined the impact of those events and believe we can continue to be positive about prospects in the coming year."

Shares fell 1.1% to $4.40 in trading today and have gained 8.8% this year. The stock is rated an average "hold" based on four analyst recommendations compiled by Reuters, with a median target price of $4.86.

Sanford's revenue slipped 0.9% to $460 million in the year, with smaller contributions from markets in Australia, Europe and North America, while sales into Asia picked up across the board. The company fattened its gross margin to 18% from 16% a year earlier.

Mr Barratt says both local and export markets were firmer for inshore fish species, though the strong currency "continues to be a challenge". Deepwater operations were the main contributor to earnings.

"The inshore and deepwater operations are expected to continue to provide strong contributions through ongoing focus in business improvement and increased catching efficiency."

The board declared a final dividend of 14 cents per share, taking the annual payment to 23 cents.


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5 Comments & Questions

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Despite the excuses, more of the same from this consistent under-performing stock. How can the directors justify their increased fees when they have just governed a 6.7% profit decrease? What do they get paid to do?

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Ask the shareholders. They vote for the increase!

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Best thing ever - pillage tuna stocks at will. When was the last time the average Kiwi saw a yellow fin tuna in the Bay of Plenty?

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Seems harsh to blame the directors for a fire and the actions of a casual employee, which knocked 25% off NPAT. I think this a well-run company which could do well next year.

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"It doesn't look good, it's not good, it's not good enough and it's got to get better,'' the managing director was quoted as stating at the last AGM. Now profits have slipped by a further 7%, so where's the accountability?

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