THE burgeoning farmed abalone sector – which relies heavily on export markets in the Far East – has struggled valiantly during the Covid-19 pandemic and it seems the seafood niche might emerge stronger than ever when healthier trading conditions resume.
Late last year Abagold, one of the biggest standalone abalone farming enterprises, reported an encouraging sales volume increase – but a drop of over 20% in selling prices.
Overall the Hermanus-based Abagold achieved sales of 444 tons of live equivalent abalone, an increase of 109 tons from the prior year. The total sales revenue on abalone ended at R160 million, which is a slight increase on last year. On a consolidated basis, Abagold managed a commendable gross profit of R104 million on a gross margin of 51% – better than the previous year’s R92 million gross profit and a 45% gross margin.
Abagold chairman Hennie van der Merwe said the improvement was largely due to an increased harvest and an improvement in size profile and sales mix. Most importantly, Abagold – hit hard by a red tide event in early 2019 – noted that the improved harvest meant that reliance on third-party purchases was reduced to 37 tons in the current year from 109 tons in the prior year (explaining the much improved margin).
Premier Fishing & Brands (PremFish) appeared to endure a tougher time at its Gansbaai-based Marine Growers abalone farming operations. In the year to end August revenue was static at R27 million but the operating loss was almost halved to -R1.8 million.
PremFish has, however, not eased off on its ambitious expansion plans for Marine Growers.
A recent communique to shareholders confirmed the last phase of the abalone farm expansions was being completed and that 79 new employees would be taken on-board at the end of July.
PremFish disclosed that the Marine Grower’s expansion had already increased the annual production output to around 229 tons at the end of August last year – most of which was marketed to customers in the Far East.
PremFish has invested more than R220 million in the existing farm, and – based on the current growth of spat (baby abalone), Marine Growers is expected to produce between 300 to 350 tons of abalone in the near future – meaning a valuable extension to PremFish’s existing import basket of south coast lobster and squid.
The Marine Growers abalone farm is also one of the first in the country to be solar powered, and PremFish have indicated plans are in place for further “greening” the farm.
Like Abagold, PremFish is determined that the farm – where production is already up over 90% since the start of its expansion in 2018 – will strategically grow its abalone to a larger size to meet market demand. This should enhance margins markedly in the abalone division.
The year ahead for Abagold also looks intriguing. The company admitted that the consistent production of the required volumes of high-quality spat – provided to its farms as efficiently and cost effectively as possible – remained an essential basis for the sustainability of the supply pipeline.
However Van der Merwe noted: “While the expansion of operations on other farms in the region led to a demand for spat sales, this demand for spat, unfortunately, has reduced significantly and the hatchery has already scaled back their production capabilities as well as the area that the hatchery occupies on the farm.”
Van der Merwe said the focus of the hatchery was now on meeting Abagold’s own demand with the focus on the production of larger spat at lower cost through innovation within the same time frames. “This division is the platform for the rest of the operation to achieve growth targets, competitive feed conversion rates and cost efficiencies in the overall plan.”
Abagold reported that its Sea View, Sulamanzi, Amaza and Bergsig production pipelines were now full – enabling the operation to have access to larger size product to harvest.
He said the yield (growth net of sales/starting volume) of 80% targeted for a maturing pipeline.
Encouragingly, for the farmed abalone sector (which also includes Sea Harvest and I&J), Abagold’s outlook for the year ahead is fairly optimistic.
Van der Merwe noted that the market conditions via the traditional channels and markets – especially Hong Kong – had been complicated since the first quarter of 2020 with demand depressed.
“The further complications of protest action in Hong Kong and the global impact of Covid-19 on demand, created an environment of uncertainty for our sales and marketing team.”
But Van der Merwe felt that the improved offerings from Abagold’s mature pipeline and the slow recovery of base demand in traditional markets – together with some momentum in new markets – had given the team the comfort that demand would recover in the first half of 2021. “This will allow the business to gain some momentum in the year ahead.”
