Pacific Andes suffers 61% drop in first half earnings on non-renewal of deals

SINGAPORE - Frozen seafood supplier Pacific Andes International Holdings said its first half net profit fell by 61.4 per cent to HK$85.7 million (S$13.8 million), mainly due to an increase in finance costs and the termination of long term supply agreements.

Its fishery and fish supply division chalked up a 20.1 per cent increase in revenue to HK$2.54 billion in the first six months, driven by a 540 per cent surge in revenue from the enlarged Peruvian fishmeal operations.

This was partially offset by a 53 per cent decrease in revenue from the contract supply business due mainly to lower sales volume following the termination and non-renewal of the long term supply agreements.

Although the group participated in the spot market following the termination of the agreements, it did not trade on occasions when the spot prices of certain products were unfavourable.

The marketplace conditions for processing and distribution were difficult across the industry, it noted.

However, it added that its processing and distribution division was able to navigate the challenges through integration of production lines, improving efficiency, reducing costs and selectively increasing capacity and downstream capability.

Revenue generated from the division eased by 1.9 per cent to HK$2.3 billion.

However, the frozen fish supply chain management division recorded a 22.9 per cent slump in revenue to HK$2.12 billion, due to lower sales volume of products.

Gross profit increased by 12.9 per cent to HK$1.16 billion, primarily due to higher contribution from the enlarged Peruvian fishmeal operations.

For the immediate future, the group is focused on extracting value for shareholders through consolidation and increasing the efficiency and effectiveness of its expanded operations.

The Group will consider disposal of its non-core assets/operations to facilitate tighter focus on the priorities of the core business and reduce the its gearing and finance cost.

The Peruvian Government has set the total allowable catch for its 2014 first anchovy season at 2.53 million tonnes, a 23.4 per cent increase for the same fishing season last year.

The first fishing season started on April 23 and will run until the end of July 2014.

Experts on climate have raised the possibility of an El Nino effect impacting the South Pacific Ocean later in 2014.

Expert opinions vary as to the predicted likelihood or severity of El Nino if it occurs. If it were to develop, there would be an impact on the Peruvian anchovy catch in the Peruvian waters which would vary in line with the strength of the El Nino.

There are indications that the current catch in Peru is lower than anticipated, which may or may not indicate the early signs of El Nino. Pacific Andes said it will continue to monitor this situation and make any appropriate operational adjustments, if required.