SAN
16/12/2015 14:00
ADDRESS
NOT PRICE SENSITIVE
REL: 1400 HRS Sanford Limited
ADDRESS: SAN: Sanford Limited - Annual Meeting CEO's Address
16 December 2015
Sanford Limited 2015 Annual Meeting
Mr Volker Kuntzsch
Chief Executive Officer's Address
(Slide 1)
Good afternoon ladies and gentlemen,
Thank you for the opportunity to present to you the annual report for 2015.
The Chairman has provided a lot of detail and has already pointed out that
2015 was a busy year. I would like to share with you a little more insight
into some of the activities and outcomes of the year, while providing some
context for our strategic approach.
(Slide 2)
New Zealand plays a minor role in the global seafood business. Total
worldwide catches exceed 160 million tons of which NZ contributes less than
0.4%. This circumstance requires us to differentiate ourselves and sell our
rather limited resource at a premium instead of trying to outcompete others
by offering similar products. We don't have the economies of scale others
have and we are not blessed with 100's of millions of consumers on our
doorstep.
We do, however, have a number of advantages that we need to exploit: a wide
range of wonderful species, sustainably managed and above all, the
provenance. NZ has an excellent reputation around the globe.
(Slide 3)
Global fisheries production continues its upward trend, but it is clear that
the aquaculture industry is responsible for all the growth, while wild
catches are stagnant at around 90 million tons per annum. With respect to our
business, the bigger picture certainly requires a very different strategic
approach to fishing than to aquaculture to derive greater value from seafood.
Globally, not many seafood companies combine fishing and farming under one
roof, and the challenge is to determine an appropriately differentiated
approach.
(Slide 4)
The common dominator, however, is the customer. With the customer in mind,
the above facts have driven our actions over the last 18 months, primarily
with the aim of shifting the focus from commodity to added value. With
fishing quota and aquaculture volume delivering over 100,000 tons of seafood
this is not an easy feat. More importantly though, we had to understand what
"adding value" actually means. After interviewing our customers around the
world, listening to the expertise we have within Sanford and enhancing our
developing perspective with international experiences and trends in food -
and particularly in seafood consumption we have concluded that adding value
should focus on:
(Slide 5)
- Improving the quality of our products and service,
- Differentiating our products through innovation, and
- Building a well-respected brand.
This requires a significantly different mind-set as the focus shifts from
resource extraction to food manufacturing.
Most interestingly though, it became apparent that to create real value, our
focus needed to be on increasing the share of fresh fish as opposed to frozen
fish, especially with our inshore species, and offering these to discerning
customers around the world. After all, consumers are increasingly committed
to producing food from scratch again, using predominantly fresh, not frozen,
ingredients. While frozen fish is often frozen within hours of catch, thus
optimally capturing the inherent quality of the raw material, many consumers
still tend to view fresh fish as the premium quality and more convenient to
handle.
We have therefore embarked on restructuring our company to some extent to
accommodate these focus areas, while at the same time reducing effort in
areas that were strategically of lesser value or remained unprofitable after
several years of alternative approaches.
(Slide 6)
With the changes to our organisation we have added approximately $2m in
salary cost per annum, but the advantages of having professional supply chain
management and procurement in place are already evident through improved
inventory management and the introduction of structured supplier
relationships and cost savings.
We have exited the international purse seining activity of catching skipjack
tuna in the South Pacific Islands as this part of our business accumulated
ongoing losses. Furthermore, we were not able to align this activity with the
increasing exposure of our brand and our commitment to sustainability. We
also took an impairment on our Australian fishing quota as our expertise is
clearly in NZ waters and the absence of economies of scale and limited
opportunities for collaboration with other quota owners in Australian waters
created ongoing financial and managerial challenges. Our activities in
Australia will now focus primarily on marketing our product through Sanford
Australia in Melbourne.
Our business is subject to climatic and biological circumstances. These are,
at times, adverse with unfortunate consequences. Due to limited mussel
supplies, reduced spat catches and lower than expected yields we had to take
the step of closing our Christchurch processing facility in April, leading to
the redundancy of over 230 people. With the engagement of our site management
and employers in the region we managed to place the majority of our workforce
in new jobs and I thank our team for their dedicated support and commitment
to handling this process in an effective and caring manner.
All mussel processing in the South Island is now concentrated in Havelock in
the Marlborough Sounds. While our mussel business experienced a challenging
year in terms of supply and pricing, we were able to combat the shortfall to
some extent through the sale of mussels out of inventory.
Another important part of our aquaculture business, King salmon, performed
well and we are excited about the fact that an increasing share of this
species remains in NZ as fresh fish, whereas it was previously exported as a
frozen commodity.
Our fishing business overall had a good year with catches reflecting the
sustainable management of NZ's fish stocks. The diverse range of species we
are able to utilize efficiently underpins our endeavour to offer an excellent
portfolio of species to our customers.
(Slide 7)
This is then also the basis of the new image we have decided to create for
ourselves:
Against the background of our big blue backyard we combine the excellent
resources we harvest with the passion and care that we exhibit in working and
living in this wonderful environment to arrive at a very fresh and appealing
new logo and the tag line "Beautiful New Zealand Seafood".
(Slide 8)
We have decided on a more emotionally charged tagline in order to create a
greater understanding for who we are and what we stand for.
(Slide 9)
This is what our future focus is all about: the diversity of fresh and
appealing New Zealand seafood, ideally delivered as natural and pristine as
possible.
(Slide 10)
With the introduction of a new logo we have also become active in social
media and have recently introduced our new website. Please don't hesitate to
visit sanford.co.nz to experience our company in more detail. Naturally you
should also follow us on Facebook and Twitter. You may have noticed that we
involve ourselves in a variety of public relations related activities and are
starting to communicate more proactively about topics concerning industry,
sustainability, climate change and our community involvement - all with the
intention of improving transparency and creating a better reputation. This
will build our brand value over time.
In addition to creating a strong brand and greater value through the focus on
fresh, operational efficiency improvements, and added value items in our
frozen portfolio, I am happy to announce the addition of a Chief Customer
Officer to our Executive Team. The CCO will start in February with the
objective of bringing us closer to our customers and consumers. The focus on
fresh necessitates much stronger links with retail and other channels linking
us directly to the end users of our product. We have embarked on utilising
some innovative distribution channels and I look forward to sharing more
information on these at the next Annual Meeting. The CCO will also drive our
Innovation Team where we are currently focused on improved utilisation of
fish and shellfish by-products.
(Slide 11)
With respect to innovation I should also mention the progress being made with
Precision Seafood Harvesting, a Primary Growth Partnership project between 3
industry players and a government funded research institute (Plant and Food
Research). We will soon be into year 4 of 7 trialling this game changing
fishing method. This is an exciting project that strongly supports the
emphasis on sustainability and care for marine resources. We will distribute
the first commercial quantities harvested with this method under a dedicated
brand name in due course.
(Slide 12)
We trust that the variability of mussel spat supply will, in future, be
greatly reduced through the mussel hatchery, SPATnz, that we officially
opened in April this year. SPATnz is a PGP project between Cawthron, Sanford
and our mussel growers and enables the selective breeding of mussels to
ensure continuous supply of mussel seed and the ability to focus on families
with specific traits, e.g. meat quality. We are very encouraged by the
results we have seen so far, but we are certainly still in an experimental
phase. It has recently been announced that we have secured funding to conduct
research on the anti-inflammatory benefits of Greenshell mussels. This
research supports further value creation with this species and should ideally
culminate in the ability of health claims on the product.
(Slide 13)
As you are aware, our fleet of deep sea fishing vessels is complemented by 3
vessels operated by our Korean partners. These vessels support our endeavour
to fish our annual catch entitlement in an efficient, sustainable and ethical
manner and the standard applied to working and living conditions for all on
board aligns with NZ regulations. In addition to MPI observers accompanying
every fishing trip, we provide translation services to the crew and
facilitate interviews between crew and a confidante to create opportunities
for the crews to voice any concerns or issues they may have.
The relationship with our Korean partners, Dong Won and Juahm, has been
coming along for some decades now and we are pleased with the progress that
is being made in the preparation of their respective vessels for reflagging
to the NZ flag. We sincerely appreciate their tremendous effort in this
respect.
(Slide 14)
Tremendous effort is also put into ensuring the health and safety of all
employees, share fishers, contractors and visitors to our sites. The fishing
industry has a reputation of being one of the more challenging environments
when it comes to safety, but much progress has been made to make this
industry a much safer workplace. All our vessels are now certified by
Maritime New Zealand to the Marine Operator Safety System standard and
through a dedicated Compliance Manager and Health & Safety Coordinators at
every site we continue to create a culture of permanent awareness on the back
of our continuous improvement efforts. However, serious harm injuries have
increased during this reporting period and, while the total number is low, we
take these very serious. Third party audits and assessments and internal
investigations have classified all elements of risk and we have dealt with
these one by one to mitigate identified risks. The greater challenge that we
face and that needs to be overcome to improve the health and safety of our
employees is their own awareness of risk and acceptance of personal
responsibility. This requires a change in attitude and greater personal
involvement and all members of the Senior Management Team are now driving
this awareness across our company.
(Slide 15)
Moving back from the 'focus on safety' to the 'focus on fresh'. The 'focus on
fresh' will enable us to double the amount of fresh fish over time, but we
will still retain a large proportion as frozen product. Some species don't
lend themselves to being sold fresh in large quantities, e.g. Blue and Jack
mackerel, while the sheer volume of other species, e.g. hoki during the
spawning season requires freezing to eliminate waste. In this respect our
focus is on decreasing the share of frozen commodity product by creating
custom made products. The committed investment into the Granit, a factory
vessel currently operating in Norway, will not only enable a more efficient
processing operation at sea, but allow for greater value addition as well.
(Slide 16)
Our vision to become the best seafood company in the world drives us to
create a great business on the basis of passion, integrity and care. Although
we are still some way off our vision we have made great progress on this
ambitious journey and I heartily thank my team across all our sites for their
tireless input and the many long days during the year.
My appreciation also goes to Paul Norling and the Directors for their
guidance during this busy year. 2016 will be busy too, but we have built a
great foundation and the direction is now clear.
End CA:00275226 For:SAN Type:ADDRESS Time:2015-12-16 14:00:04
