New Zealand seafood company Sanford Limited (NZX:SAN) has reported total revenue of $468.8m for the financial year
ending September 30, 2020, a 14% decrease on 2019 ($545.1m). The business sees this decrease in sales as directly
attributable to the Covid-19 pandemic and its impact on food service globally.
However, the company says it has learned from the challenges and is adjusting to pandemic conditions, making the
business better prepared for the year ahead. It remains confident that its longer-term strategy is the right one.
Sanford’s Adjusted (underlying) Earnings Before Interest and Tax (Adjusted EBIT[1]) for the year to 30 September 2020 were $38.3m (versus $64.8m for the prior year), representing a 41% decrease.
Reported Net Profit After Tax (NPAT) was $22.4m, compared to $41.7m for the previous year, a 46% decrease.
Acting CEO Andre Gargiulo says Sanford, like many seafood companies globally, has been primarily reliant on food service
as a sales channel.
“We know that globally, the majority of seafood is consumed out of home. Our food service channels have been a key part
of our portfolio and they were hit hard by the lockdowns we saw around the globe. For example, we saw our sales into
North America fall by 30% compared to last year.
“We acknowledge this is a disappointing result, both for our investors and for our people, who have worked incredibly
hard through the extra challenges brought on by the pandemic. However, we are confident that our strategy to get closer
to our consumers and maximise the value of our products is the right one that will see us recover from the immediate
impact of Covid-19. For example, salmon volumes into North American markets have returned to near pre-Covid levels as we
are adding new retail customers. We have developed and are putting in place a plan to more flexibly respond to changing
environments, while protecting profits through an appropriate cost structure. Sometime this means we will have to make
hard choices.
“Another factor in 2020 was a poor toothfish catch in both halves of the fishing and financial year. In the first half
of the financial year 2020, we saw an impact from lower-than-usual toothfish catches in the Ross Sea (down 39%) due to
unusual ice cover. Toothfish is a high value product for Sanford and in the second half of 2020 we unfortunately then
saw toothfish demand reduced by the Covid-related food service slowdown, compounded by poor catches of Patagonian
toothfish in South Georgia in September.”
Sanford Limited is New Zealand’s largest and oldest seafood company, founded in 1904 and first listed on the New Zealand
stock exchange in 1924. Mr Gargiulo says it has seen off many challenges in that time.
“This is a proud New Zealand business that has continued to operate successfully for 100 plus years. That history gives
us perspective.”
CFO Katherine Turner says the numbers reflect the challenge of rapidly adapting a business which works on long time
horizons for supply, for example seeding mussels or putting salmon smolt in the water two years ahead of harvesting.
“Pleasingly, we harvested more fish and shellfish than last year, but because of Covid-19, more stock than usual has
gone to inventory.
“The pandemic’s impact on food service also meant that high value products were less in demand reducing our margins
further and increasing our cost base.”
Sanford also said goodbye to its CEO of seven years Volker Kuntzsch on September 18, 2020. However, Mr Kuntzsch has
continued to be available to the board and executive team in a consulting role. Board Chair Sir Robert McLeod says the
board is currently making good progress in the process to recruit a new CEO.
Due to uncertainty caused by the impact of Covid-19, the ongoing asset rejuvenation programme and wish to ensure prudent
cash availability, the Board has decided not to pay a final dividend in respect of the 2020 financial year.
Mr Gargiulo says despite the challenges, Sanford has had a strong year operationally in other areas and has started to
observe some early signs of recovery in its markets.
“Our teams on the water and in our processing plants have worked hard. We also experienced no material setbacks from
algal blooms on our mussel or salmon farms. We now have an opportunity to take advantage of strong inventories of our
premium products which have built-up over recent months. Half-shell mussels is our product that is most dependent on the
foodservice channel and so mussels is our biggest focus for new product formats and markets in 2021. By staying focused
on great performance and controlling costs across the organisation, we will be in the best possible position to deliver
improved results in 2021.”