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

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.

(BusinessDesk)