SAN
30/01/2013 14:00
ADDRESS
REL: 1400 HRS Sanford Limited
ADDRESS: SAN: Sanford Limited Annual Meeting - Managing Director Address
SANFORD LIMITED
SUSTAINABLE SEAFOOD
30 January 2013
Managing Director Eric Barratt's Speech
Sanford Annual Meeting
30 January 2013
Despite the challenges we have faced over the last 12 months we can have some
optimism going forward and I want to talk in detail about some of those
matters shortly.
Firstly I want to recap briefly on some of the issues that have significantly
impacted on the company over the past 12 months.
SAN NIKUNAU
The verdicts and sentence in the US court case on the San Nikunau indicated
that there had been a pattern and practices aboard this vessel of not
following required protocols regarding management of bilges and bilge waste
in accordance with at least US requirements if not NZ requirements. These
practices were acknowledged by a Filipino relief engineer who admitted to
having never followed required practices on this or any other US or foreign
flag tuna vessel that he ever worked on. The regular Chief Engineer claimed
he did follow required practices but the court found otherwise.
Sanford has been held vicariously liable for the actions of the Engineers and
other crew and we must accept responsibility for not detecting that these
practices were occurring. One aspect of our defence was that the vessel and
its records had been regularly inspected by NZ and US government officials
many times during the period of the offences and these issues were not
detected at the time. I could spend some time detailing the many arguments
and counter arguments raised in this case but it is time to move on and to
ensure that with our actions and responses we are never faced with this
situation again.
Sanford Limited moved aggressively to strengthen its environmental compliance
program across its fleet immediately the trial concluded.
We have created, implemented and are currently in the process of having
audited an enhanced Environmental Management System Manual for our Pacific
tuna fleet to achieve ISO 14001 certification for those vessels and fill
gaps identified in testimony at trial. Once the system has been implemented
and maintained we will be submitting this to the US courts to lift the
prohibition on entry to US ports. Regardless of the ban since the 1 October
2012 we have not been calling at Pago Pago ports because our Protection and
Indemnity Insurance Coverage no longer covers US port calls.
Amongst other things the upgraded EMS system substantially increases the
accountability and responsibility of crew and officers on board the vessels
as well as shore based managers to ensure that the systems are fully
implemented, regularly maintained and updated and audited both internally and
externally.
A new management position of Corporate Compliance Manager Marine and
Fisheries has been established and we are currently interviewing applicants
to fill that position. That position and person will create an extra layer of
accountability for compliance with regulatory, including MARPOL,
requirements.
We have engaged with Maritime New Zealand directly in an on-going dialogue to
clarify the issue of what constitutes a "machinery space" aboard fishing
vessels. This was a contentious issue in this case and the Judge's definition
given to the jury just prior to their retirement to consider the verdict
poses significant challenges to all large fishing vessels. At times in high
seas these vessels can take significant volumes of seawater onto trawl,
hauling or fishing decks and into processing areas where machinery operates.
The San Nikunau has recently completed a very substantial upgrade which will
not only extend its working life but which will increase its operational
reliability and has enabled new MARPOL surveys and International Oil
Pollution Prevention Certificates to be completed.
In addition we undertook and completed a company-wide review of the
capacities and capabilities of Oily Water Separators (OWS), the detail and
accuracy of Oil Record Book (ORB) keeping, and the MARPOL compliance
programs for our 12 vessels over 400 gross tons.
OCEAN BREEZE
The Ocean Breeze suffered substantial fire damage in the Lyttleton Dry Dock
as the vessel was having a shaft replaced under a previous insurance claim.
The fire was caused by welding activity and the contractor engaged has
accepted responsibility and is meeting the costs of the repairs and the
vessel is back fishing with its new International Oil Pollution Prevention
Certificate (IOPP).
As detailed in the annual report the real cost of these issues is in lost
fishing time and reduced profit opportunity. With both vessels now back in
operation and fishing we are expecting improved results from their activity
for the remainder of this year. Having completed upgrades on these vessels,
the San Nanumea is now undergoing a substantial upgrade which you can see on
the wharf to the west of this venue.
FOREIGN CHARTER VESSELS
Sanford has been instrumental in leading the implementation of new Government
requirements for foreign charter vessel crews and all crews are now paid in
New Zealand and into New Zealand bank accounts. There are challenging
requirements to which our staff have committed substantial effort. The
requirement for vessels to be reflagged to New Zealand within 4 years is a
project that we and our charter partners are working through carefully. Our
intention is to move at least one vessel through the process well in advance
of the requirements coming into effect to iron out any difficulties.
SUSTAINABLE DEVELOPMENT REPORTING
Before turning to look at the future prospects I want to reinforce to
shareholders the excellent Sustainable Development Report that you will have
received with your annual report or downloaded or read on the internet if you
did not chose to receive a printed copy. Further copies are available here if
you would like a printed copy. Sanford Sustainable Development Reports have
been awarded as some of the best and most comprehensive reports of any
company in New Zealand. They are not produced for the awards though. Our
Sustainability Manager Alice Penfold assembles these reports from a huge
database of information assembled by staff throughout Sanford's organisation.
Our honest and open reporting of our activities in the SDR annually is a
clear demonstration that the San Nikunau court case is not reflective of
Sanford's philosophy and commitment to operating legally, safely and
sustainability. The efforts of Alice and all those that support her deserve
support and recognition. Sanford Limited is fortunate to have earned the
right to have access to significant seafood resources and aquaculture space
throughout New Zealand. It is therefore our responsibility to ensure we
report accurately, transparently and honestly on our operations as we seek to
utilise these resources both sustainably and responsibly. Increasingly our
customers are demanding this level of accountability.
HEALTH BENEFITS WILL DRIVE SEAFOOD CONSUMPTION
Seafood consumption around the world continues to increase and that trend is
likely to continue as scientific literature continues to highlight the health
benefits of seafood.
Eating seafood boasts many health benefits including lowering the risk of
coronary heart disease, lowering blood pressure, and improving arthritis and
asthma symptoms. So what's in seafood that makes it so good?
New Zealand seafood is:
-High in Omega-3 and fatty acids.
-High in protein.
-Low in carbohydrates and saturated fats.
-Low in saturated fats.
-A good source of essential minerals and vitamins.
-Completely natural and easy to digest.
We have seen over the past year a real shift in the price levels of Pelagic
species - we cannot make the direct linkage to the fact these are species
high in Omega 3 and fatty acids but the indications are that those price
levels are likely to continue. Pelagic species that used to sell in the
US$600 to US$800 per tonne price level are now close to double that and
demand continues to be strong at these new levels. Skipjack tuna prices that
used to fluctuate in the US$500 to US$1,000 level now fluctuate in the
US$1,800 to US$2,300 level. Sanford is one of the strongest New Zealand
fishing companies in these species.
Other species that are seeing steady or improved pricing levels include hoki,
ling, silver warehou and barracouta while hake and squid have been softer
reflecting that the southern European countries of Spain, Portugal, Italy and
Greece are the main markets for these species.
GREENSHELL MUSSELS
As shareholders will be aware we are now focussed on only two aquaculture
species, Greenshell mussels and salmon, as we have exited our interests in
Pacific oysters. Our Greenshell mussel business in the South Island last year
performed extremely well while growth rates in Coromandel and financing
difficulties resulted in a restructuring of our ownership of the mussel plant
in Tauranga, now called North Island Mussels Limited. Since we achieved
ownership of the former Pacifica mussel business we have seen a significant
improvement in the stability of the mussel market. Previous wild fluctuations
in the export prices of mussels have stopped and the price has been steadily
improving. This has provided much needed stability to the industry and
greater confidence to independent growers of mussels in both regions.
While growing conditions in the Coromandel this year are much improved,
current growth in the Marlborough Sounds is below expectation and proving a
challenge to keep our processing plants in Havelock and Christchurch in full
production. We would not expect any increase in mussel volumes this year.
SPATnz
Our Primary Growth Partnership project with the Ministry of Primary
Industries for the breeding and production of mussel spat in a new hatchery
complex adjacent to the Cawthron facility in Nelson is now proceeding apace.
Consents for the construction of the hatchery complex are well advanced and
approval is expected in the near future. Preliminary earthworks on the site
started last week. This project will produce mussel spat that has been bred
for particular characteristics around growth rates, meat to shell ratios,
colour and flavour which will enable us to improve reliability of mussel
supply and reduce our risk where at present all of sourcing or catching spat
takes place in the wild and subject to weather and environmental variables.
PURE NZ GREENSHELL MUSSELS LIMITED SHANGHAI
While the proportion of our mussels going to this New Zealand cooperative
venture in China remains relatively low compared to our major markets in USA,
Korea and Australia this business continues to grow at a very satisfactory
rate from one year to the next. We are working with New Zealand Trade and
Enterprise on plans for a visit by the major Chinese customers of this
business to the New Zealand mussel farms and processing plants to further
educate them on the benefits of Pure New Zealand Greenshell Mussels.
SALMON FARMED ON STEWART ISLAND
We have successfully increased our focus on moving more of our salmon
production into fresh markets both in New Zealand and offshore. This has been
to offset the oversupply of frozen salmon mainly into Japan where prices have
weakened considerably over the past year. With adjustments to the breeding
cycle of some salmon we are now able to supply market acceptable sized fish
all year round which will assist servicing and retaining existing customers
and potentially attracting new ones. Since balance date we have reduced our
inventory of frozen salmon and recent customer visits should see our stocks
reduced to more than acceptable levels. We remain committed to the farming of
salmon in the long term and expect to be able to increase our farming volumes
on Stewart Island within existing consents once sustainability reviews are
completed.
PRECISION SEAFOOD HARVESTING
This innovative Primary Growth Partnership project with the Ministry of
Primary Industries and co investors Aotearoa Fisheries Limited and Sealord
Group Limited has started to gain some momentum. In the last three months
operational trials of the technology have been carried out on the Sanford
vessel San Hikurangi targeting snapper and trevally and on the Sealord vessel
Otakou targeting hoki. The San Hikurangi trial received enthusiastic support
from both shore management and the vessel skippers and crews. The
effectiveness of the fishing gear and the quality of the fish coming on board
the vessels was outstanding. When vessel crews comment that they have never
seen such colours on fish brought aboard then you know you have something
special. This is a seven year project but at this early stage it promises to
be an exciting development. Sanford and the other co-investors are pushing
for an earlier than planned chance to begin commercial trials of this
technology. Unfortunately as this technology is highly protected through
confidentiality clauses and we are not able to talk in any detail about the
way in which the technology works. We can say that the outcome of this
technology is likely to substantially change the way we catch, process and
market fish which will add significant value to both our inshore and
deepwater operations hence our desire to move quickly to commercial trials.
I have managed to get through this address without mentioning the exchange
rate but with a rate running around historical highs ranging from 83 to 85
cents there does not seem to be any prospect of a lower dollar assisting us
in lifting returns so we remain focussed on maximising selling prices,
increasing efficiencies and reducing costs and, as far as we can, reducing
the level of capital in the business.
The year ahead will continue to be challenging but we have made a positive
start. Revenue for the first three months of the year is up 10% over the
previous year assisted by increased sales of salmon on the New Zealand market
while catch and production levels are running 1% ahead of last year.
End CA:00232444 For:SAN Type:ADDRESS Time:2013-01-30 14:00:04
