ARTICLE ONE Oceana looking forward after dealing with problems at its executive level 14 June 2022 Corporate governance issues at fishing group Oceana had been limited to three executives at head office, with a stronger operational second half anticipated. This is according to the head of its audit committee, Zariane Bassa, and lead non-executive director Peter de Beyer, who were interviewed yesterday. The group recently saw its auditor, PwC, walk out due to a strained relationship. The group this month reported a difficult first half to March 31, with revenue falling 11 percent to R3.1bn, due mainly to lower stocks from Covid-19 supply chain disruption and civil unrest in KwaZulu-Natal, as well as Hurricane Ida in Louisiana, which affected fishmeal and fish oil production at the Daybrook operations in the United States. Headline earnings fell 51 percent to 126.4 cents per share. Bassa said the group has also in the past two years had to deal with corporate governance issues, following an ENS forensic investigation dealing with claims by a whistle blower, other issues related to three senior executives that were identified during 4 the investigation, and technical differences between accountants on one accounting issue, which had to be dealt with after the investigation, as well as the late publication of last year's annual results. Bassa said it was "okay" for auditors to sometimes disagree on technical issues, and the group had done all it could in asking relevant accounting authorities to deal with the matter. The executives, the chief executive, chief financial officer and company secretary have since left the group, with the former chief financial officer dismissed. De Beyer said there were few companies on the JSE that had been as thoroughly checked as Oceana during the investigation, and the group, in line with good corporate governance, had held governance roadshows and had made as much of the relevant documentation as possible publicly available. He said their interactions with shareholders had shown that shareholders had been frustrated by the group's inability to communicate with them during the investigation, but they had indicated they were pleased with subsequent disclosures, actions and fully reported irregularities once the investigation was completed. He said "not a penny" had been unaccounted for during the period. The issues had also not affected the operational management of each of the fish species that the group fishes. He said these teams and staff of about 5 000 had done well to keep the group fishing through Covid-19 as an essential service, and in dealing with a host of other problems since then, such as supply chain bottlenecks and violence in KwaZulu-Natal that had cost about R100 million in Lucky Star product stock. He said they traditionally report weaker first half results due to seasonal factors - for instance, Daybrook only starts its fishing season in April - and the group was looking forward to a better second half. He said the executive team had been stabilised following the appointments of chief executive Neville Brink to December 2024, and of interim chief financial officer Ralph Buddle, who is also interim company secretary. Processes were underway to appoint a permanent chief financial officer and a new firm of auditors. https://www.iol.co.za/business-report/companies/oceana-looking-forward-after-dealing-with-problems-at-its-executive-level-e6cc4055-7257-4dac ARTICLE TWO Oceana CEO expects food prices to keep rising Fishing group reports record sales of Lucky Star brand as consumers look for cheaper protein 05 JUNE 2023 KATHARINE CHILD AND NICO GOUS SA food prices will continue their upward trend says Oceana CEO Neville Brink. Brink was speaking at the presentation of the fish producer's interim results. The Lucky Star brand's 5 CEO emphasised how SA's biggest fish producer was trying to keep canned pilchard prices lower than cost inflation, to ensure poorer South Africans have access to protein. "I certainly don't think food inflation is going to stop over the next couple of months," Brink said. Food inflation had not yet peaked. SA food price inflation hit 14% in March this year, the highest since March 2009. Cash-strapped consumers are buying down or avoiding certain foodstuffs, according to SA's largest food producer Tiger Brands. While prices of international commodities such as vegetable oil, maize and wheat fell, Brink said the petrol price will rise due to rand weakness. The cost of power cuts has not yet been fully reflected in food prices. "What's driving a large portion of inflation in this country is load-shedding. And it's going to get worse going into winter. It's affecting every single manufacturing [facility]." He said there was 14% food inflation in Europe with it even higher in the UK. He expects food inflation to rise another five percentage points in SA before stabilising. Simon Crutchley, CEO of AVI, which makes Bakers biscuits and Five Roses tea, said earlier this year he did not think food prices were fully reflecting the cost of load-shedding. He predicted increases as the cost of companies producing their own energy was recovered. In the half year to end-March, the Lucky Star canned fish business. consisting mainly of pilchards, sold 20% more, reaching five-million cartons with revenue up 38.4%. But the operating profit margin in the canned fish division fell from 9% in the prior period to 5.3%, as Lucky Star did not try to recover all input costs. It knows that if prices rise too high consumers will not buy the products. The cost of cans, imported fish, transport and tomato paste, all rose faster than inflation. Lucky Star pilchards imports about 90% of the fish used. Brink said it was going to keep trying to grow volumes even as it made a lower profit per can. "We are as far as possible not going to increase the price. You will always have a moral obligation to try to keep the consumer fed. Food security in this country is a massive, massive problem." Canned fish is an affordable protein and does not need cooking or refrigeration, making it popular at spaza shops and during load-shedding. Oceana makes the bulk of its money from its US fishing operation Daybrook, that it bought in 2015, where it catches Menhaden fish that are turned into fish meal and fish oil. Fish meal is used in pet food, and the oil is used to feed farmed salmon, which is becoming more popular worldwide. This pushes up demand for omega 3 fish oil, which is in shot supply. About half off all salmon sold globally is now farmed, said Oceana CFO Zaf Mahomed. Fish oil prices rose 60% in the period and fish meal prices 11%. Daybrook achieved operating margins of almost 35%, its highest since Oceana bought it. This diversification of Oceana divisions and its ability to earn in dollars allows it to keep SA prices competitive, said Brink. 6 Smalltalk daily analyst Anthony Clark said Oceana produced a good set of results and predicted an even better second half as input costs for pilchards fall. Clark and the business expect sale in the US fish oil and feed business to rise as they usually do in the second half. Oceana more than doubled its interim dividend to 130c. Gross profit (revenue minus cost of sales) leapt 47% to R1.22bn. Net profit more than doubled to R384.65m and headline earnings per share for continuing operations, a common profit measure in SA that excludes certain items, soared by 123% to 313.5c. https://www.businesslive.co.za/bd/companies/industrials/2023-06-05-oceana-lifts-dividend-as-lucky-star-shines/

3.1 "Oceana produced a good set of results....." (Article 2) "The Oceana Group more than doubled headline earnings per share..."(Article 3) Discuss the reasons for the apparent turnaround in the business fortunes of Oceana. (15)