Strong demand and good prices for fish provided a good start for 2005 in New Zealand in spite of a rising Kiwi dollar, spiraling oil costs, and some operators in the local industry fearing they could be forced out of business, reports Paul Prince.
Takeovers or proposed mergers affected the three biggest companies last year, with Chris Horton, chairman of the company that administers the fishing quota, Commercial Fisheries Services, saying future expansion may need to be in niche areas such as aquaculture.
"You can have some fisheries where it's just not economic at the moment to have more than one or two companies catching the fish," he said.
And at least one other analyst also noted that the industry was already relatively lean. "It's already quite a concentrated industry, so we're unlikely to see another Sanford or Simunovich [two of NZ's major fishing companies]," one operator said. But it's an economic reality that, to improve margins, you've got to have increased scale. "All in all, profitability is under pressure and that is driving rationalization," he added.
In September, listed company Sanford bought the high-profile family operation Simunovich Fisheries for $NZ137 million, and just before Christmas another major company, Talley's, bought out its 50 percent joint venture partner in fishing venture Amaltal for an undisclosed sum.
Early in 2004, the two biggest fishing companies, Sealord and Sanford, were discussing a merger which would have created a billion-dollar company that would have been in the top 20 on the stock exchange. But talks collapsed over issues the two companies said they could not resolve.
Rationalisation
Seafood Industry Council Chief executive Owen Symmans said any moves to consolidate the industry would be commercially driven. When other primary sector industries struck hard times, rationalisation followed, he said, but a lot of factors came into it.
"It'll be a matter of companies weighing up their commercial positions and looking at the opportunities," he maintained, adding that it was not just a matter of bigger companies taking over smaller ones.
Horton also said smaller operators may find themselves in a good position with lower overheads and more streamlined structures, while Symmans felt there could be changes right across the industry.
Horton, also a financial consultant for ABN Amro, said it was important that rules limiting the amount of quota that could be owned by one company and not affect the market dynamics. "I think that if there is a willing buyer there and a person wants to realise the value of their business, then aggregation rules should not get in the middle of it."
However, with no immediate relief on the horizon, bets are off as to whether 2005 is likely to throw up any further big ownership changes for the NZ industry.
Demand and prices up
Meanwhile, strong demand and good prices for fish made for a healthy start to the year for leading seafood company Sanford, with Chairman Douglas Goodfellow telling shareholders in Auckland in early February that sales in the first three months of the financial year to December 31 were eight per cent ahead of last year.
He also said demand for species such as orange roughy, toothfish and greenshell mussels is as strong as at any time in the past two years, while squid markets have also improved during the past year because of poor catches in the Atlantic. Demand for hoki in Europe remains strong, he said. Sanford's $15 million Auckland Fish Market, opened last June, was also providing volumes and sales in line with expectations, the chairman said, and returns from fish sales sold at auction were out-performing alternative markets.
