Ann: ADDRESS: SAN: Sanford Limited Annual Meeting - Chairman's Address

• Release Date: 16/12/15 14:00
• Summary: ADDRESS: SAN: Sanford Limited Annual Meeting - Chairman's Address
• Price Sensitive: No
• Download Document  13.81KB

					SAN
16/12/2015 14:00
ADDRESS
NOT PRICE SENSITIVE
REL: 1400 HRS Sanford Limited

ADDRESS: SAN: Sanford Limited Annual Meeting - Chairman's Address

16 December 2015

Sanford Limited 2015 Annual Meeting
Mr Paul Norling
Chairman's Address

The Directors of Sanford are pleased to present to shareholders our report
for the year ended 30 September, 2015. A full account of the company's
progress and the Board's work over this past year is provided in the Annual
Report, but it is appropriate that I highlight today the Board's main
activities and considerations throughout this period.

This will be followed by a more in-depth review of operational matters by our
Chief Executive Officer, Volker Kuntzsch.

2015 - THE YEAR IN REVIEW

As stated in the Company's Annual Report, the past year has been a busy one
for the company's management team and your Board.  2015 has been our
inaugural year of strategy transition - one of journey commencement - from a
commodity seafood producer to one that is much more focussed on delivering
higher value seafood nutrition.

Some will recall our Chief Executive outlining our intended strategy in a
compelling manner at our Annual Meeting last year.  This redefining of
purpose and the resulting actions that were necessary to refocus the
business, were somewhat painful in terms of our bottom-line result but our
underlying operating profit, which adjusts for these actions, was relatively
pleasing as was the cash-flow improvement.

In summary our results were:
Net Profit after Tax declined by 38% to $13.8m from $22.4m in the 2014 year.
The better news however was the adjusted operating result where Earnings
before Interest and Tax - and before impairment and one-off restructuring
costs - improved by $10.4m (or 24.8%) to $52.4m for the year.

Revenue was down marginally but only by approximately 1% from the prior year
at $455.3m which was actually relatively solid considering some of the
corrective steps we took during the year and other challenges faced in the
aquaculture side of the business. Currency rates, however, assisted.

As noted previously our cash flow from operations was also a pleasing feature
as it improved by 69% from the previous year to $55m and enabled us to reduce
our borrowings by $27m
Our New Zealand 'wildcatch' fishing activities - incorporating both
'deepwater' and 'inshore' - were either in line or in advance of plan and our
salmon farming operation in Big Glory Bay on Stewart Island also performed
solidly. The greenshell mussel business, however, did encounter some
adversity during the year from spat supply issues and limited mussel growth
as well as weakness in our European markets.

While we still have a long way to go and the transition has only just begun,
we are satisfied with the results achieved thus far, given the challenges and
other matters that were or are being addressed within the company.

CORRECTIVE STEPS TAKEN DURING THE YEAR.

As I have already stated, the remedial steps taken during this past year were
somewhat painful but were realistic and necessary in the overall picture of
better positioning your company for the future, and our primary focus of
sustainably building earnings. The steps taken included:

- Making the decision to exit the Pacific Tuna fishing operation which had
become increasingly problematic as far as profitability is concerned, and
increasingly it also did not fit our 'sustainability' imperative from a
resource perspective. We had been hopeful that a robust sustainability plan
along with a sensible fishing environment would be possible and thus be able
to return the operation to an appropriate level of profitability. This did
not occur, with the Bangkok commodity tuna price continuing at seriously
uneconomic levels. The correct decision was therefore taken.

- Similar challenges faced us in Australia with our resource quota holding
there. Having endeavoured to have local Australian operations profitably fish
the quota, and then sending our own vessel across the Tasman without any real
improvement, we have taken the appropriate impairment decision on this asset
also.

- Because of greenshell mussel constraints, which arose mainly as a result of
spat scarcity and climatic factors, the decision was taken in April of this
year to close our Christchurch Processing Facility and consolidate the South
Island mussel processing on our automated plant located at Havelock in the
Marlborough Sounds.

The combined impairment charges for the three decisions taken were $13.3.m.
Other restructuring and redundancy costs of $3m were also incurred.

As noted in our Annual Report we sold one of the two remaining International
Purse Seine vessels (having already sold one in a prior period) in August
with the last remaining vessel currently on the market. The land and
buildings and plant constituting our Christchurch operation is also being
actively marketed.
In respect to our Australian quota package, we are currently working through
and assessing the most appropriate options.

NOTABLE ACHIEVMENTS DURING THE YEAR.

In addition to achieving the underlying operating result and cash flow
improvement, management's efforts were also focussed on advancing the
business in organisational and positioning terms for the future, to
facilitate the sustainable and continuous growth in profitability that we are
seeking. These achievements during this past year included:

- The rebranding of Sanford - our Chief Executive will cover this important
aspect in his presentation. I would just like to say though that the
implementation of our rebranding project was very well executed by Volker and
his management team.

- Continuing to build the 'people' structure within the company's
progressively changing face of what we do, to ensure we are equipped with
talented and professional people to deliver on what we say we will.

- Technology and research and development are areas of close focus also and
they will be even more so in the coming year.  During 2015 the Minister of
Primary Industry opened our new SPATnz facility in Nelson where we are
optimistic that the capability of this technology will enable us to better
manage both the risk factor of mussel spat availability as well as take
advantage of future market and product opportunities for greenshell mussels
that will benefit Sanford as well as our customers.

- The Precision Seafood Harvesting technology - the revolutionary new
'wildcatch' netting system - also continued its development in encouraging
fashion and all things being equal will progressively commence commercial
activity in 2016.

- We also made a decision late in the financial year to commit to acquiring a
deep sea trawling vessel from Norway.  While this vessel is not new, it has
been wonderfully maintained and we believe it will be a valuable addition to
our fleet and our focus on maximising the market value of our New Zealand
'wildcatch' resource. We won't, however, take delivery of it until August
next year and in a sense it is part of the refocusing of our fishing
activities away from the Tropical Pacific and Australia, back to New Zealand
as we strive  to become the 'best seafood company in the world'

CORPORATE GOVERNANCE

The fishing and seafood industry generally is a challenging and complex
business that has many aspects of risk attaching to it - some of which are
either unpredictable or uncontrollable or both.

As a Board we seek to have these risks managed as best as they can be by
management, with appropriate and continuing oversight from the Board.

Corporate Governance is always a work in progress as the Board also seeks to
improve this exceedingly important aspect wherever we can. To this end we
have just recently developed a wider and more comprehensive committee
structure within the Board which will come into effect from 1 January, 2016.
Details of this new structure were set out in the Annual Report and its
objective is to facilitate a more rigorous analysis of proposals and policies
prior to going to the Board for approval.  Equally importantly though and as
a direct consequence, it will also facilitate more time for the Board as an
entity to consider and discuss in greater depth, matters relating to strategy
and operational performance - this was also a prime objective! As you will
have noted, the scope of responsibilities of these committees has widened
considerably as well as having an additional Committee added.
An operational and governance aspect of particular focus is Health and Safety
as we operate in an industry that has more than its share of safety risks.
New legislation is also becoming operative in April 2016.

Management has been exceedingly busy this past year as we endeavour to ensure
that our workplaces for all employees, share-fishermen, contractors and
visitors are as safe as they can possibly be. The company has put a very
considerable amount of effort and financial resource into this highly
important area and we will continue to monitor performance closely as we seek
to improve safety and wellbeing behaviour right across the company.

To supplement our own in-company efforts the Board, in the latter part of the
year, also commissioned an external audit of our Health and Safety processes
and practices in the company, and this review will be used to guide the
further improvement of this key responsibility that the company has.

A final brief comment in this important area of Governance and it is on the
topic of Communication. You will be aware that in respect to our 2015 Annual
Report, this is the second year in which details not only of Sanford's
financial and operational performance but also our environmental, social and
economic performance, is presented in a comprehensive and integrated way.
While continuing improvements will be made, we are pleased with how this
major reporting and communication document is developing and we trust
shareholders are as well.

You also might have noticed from this year's Annual Report that Sanford won a
Gold Award in the overall General Division of the 2015 Australasian Reporting
Awards  and was also a Finalist for Integrated Reporting at the same awards.
Understandably we are proud of these achievements, particularly as the
assessment was on an Australasian wide basis. As an organisation we embrace
the Culture of Continuous Improvement so if you have any comments that would
be helpful in assisting us further improve our communication and reporting,
we would welcome them.

CONCLUSION

I spoke to you last year about the wonderful seafood resources that New
Zealand possesses which are excellently managed within our 4.4m square
kilometre Exclusive Economic Zone. As you are aware, Sanford has 23 % of the
allocated quota encompassing approximately 100 species.

From a resource perspective we are very well placed both as an industry and
particularly from a Sanford viewpoint, but from an international market
perspective the competition is tough!  Government subsidies are huge globally
and in 2013 a European Parliamentary study estimated that the worldwide
amount of Global Fishing subsidies totalled in excess of $50 billion NZ
dollars each year. Such substantial amounts can have a major distortional
affect in terms of industry economics, company profitability and - extremely
importantly - fish stock sustainability.

While we are in very good shape regarding fish stock sustainability in New
Zealand, in respect to the economics and flow-through profitability, we are
not!  It is for this latter reason we believe that there is potential for the
New Zealand fishing industry to investigate sensible areas of collaboration
in an effort to improve the efficiency and profitability of the industry here
- and Sanford is ready to participate positively in such discussions.

The major distortionary tilt created by this level of Government subsidies
worldwide, is another clear reason why we must also shift from being a
production driven commodity business. The future for Sanford is clearly to
become a consumer led and enhanced value niche seafood supplier if we are to
prosper in the very competitive international seafood marketplace.

The affect of the changes we are making and will continue to make are not
necessarily evident overnight and the journey will be a progressive one as
our management address the interlocking capabilities necessary to continue
down the path of change we have now commenced. Continuing and consistent
growth in both our underlying, as well as bottom line, profit performance
will however also be a prime objective in spite of the continuing cost of
implementing such change.
While Sanford is a seafood company, it is actually about people - as most
companies are! For Sanford, this is even more so given the complex and
challenging nature of our business - from catching and marine farming, to
processing  (much of it still with a high manual content) and to marketing,
in a highly competitive and subsidized world.  We therefore wish to
acknowledge the total Sanford 'team' from our fishermen through to our
marketing and sales force and all our highly important and well regarded
Sanford people in between, who handle and facilitate our seafood products
with such care and pride. And, of course, Volker and his management team -
the leadership group - who are guiding the good ship 'Sanford' as it goes
through this substantial change of course!

The Board thanks each and every one of you.

Finally I would like to say that under Volker's leadership and with his
passion for all things seafood as well as environmental and resource
sustainability, we are optimistic about the future. What we have embarked on
as a company, as well as the industry we are in, is - as I have already said
- not without risk and challenges, and it will require a constant focus and
inspirational connectivity with the market and our consumer customers. The
team at Sanford are embracing this challenge and I look forward to personally
reporting to you again in 12 months' time on our progress.

Thank you ladies and gentlemen.
End CA:00275227 For:SAN    Type:ADDRESS    Time:2015-12-16 14:00:11