In a business update to the Australian Securities Exchange last week, which spruiked the company’s rebounding sales volumes despite the lingering impacts of the coronavirus pandemic, Clean Seas also reported the increase in fish mortalities within its marine leases in Boston Bay, off Port Lincoln.
The additional fish deaths are expected to represent about 4.5 per cent of Clean Seas’ live fish biomass. This equates to about 200 tonnes of perished kingfish, or about 100,000 fish.
In the statement to the ASX, Clean Seas said it had “identified a range of contributing factors and taken multiple steps to mitigate the risk of further mortalities, including removing fish from the affected location, and has seen a subsequent decline in mortalities and an improvement in fish health as a result of these measures”.
Clean Seas CEO Rob Gratton told InDaily the contributing environmental factors included excess runoff into Boston Bay that impacted water quality and strong winds preventing sufficient water flow through the bay.
According to the Bureau of Meteorology, 91mm of rain was recorded at Port Lincoln Airport during October – more than triple the long-term average. September’s rainfall of 73.2mm was also well up on the monthly average for the area of 40.1mm.
Gratton said the increase in fish deaths was noticed in November and continued through December.
“There have been some funny weather patterns with strong south-easterly winds for a few months and a lack of flushing through there,” he said.
“The issues we were experiencing were isolated to that location: those environmental factors are dissipating and we’ve moved the fish and those that weren’t in that location weren’t impacted.
“We’re seeing better water flow through the bay now.
“Boston Bay will still be a very important part of our production process and it’s just one of those unusual seasonal impacts as a result of those environmental factors coming together so there is no issue for us in terms of farming there in the future.”
Clean Seas is the largest farmed kingfish producer outside of Japan, and the global leader in full cycle breeding and farming.
It raises fingerlings at its Arno Bay hatchery, about 120km north of Port Lincoln, and then moves the juvenile fish to sea pens in Boston Bay, Arno Bay and further out to sea off Port Lincoln.
The company also has significant lease holdings at Whyalla and Wallaroo, which are currently untapped.
Gratton said stock losses from time to time was a part of farming across all sectors.
“We’re farming so we’re very attuned to all of those factors and there were a number of environmental factors around weather and runoff and water quality that we obviously don’t have when we go outside the bay,” he said.
“But outside the bay has its own challenges as well. It’s typically heavier conditions, less sheltered so it’s more susceptible to the winds, which makes it harder for us to get out there and feed and clean cages so there’s always a balance depending on what’s going at each location.”
The company estimates the fish deaths will reduce the value of its biological assets by about $3 million this year.
However, the issue is expected to save about $1 million in cash from reduced feed and operating expenses and help re-balance Clean Seas’ live fish biomass, which is in surplus following a slump in sales in the middle of last year during coronavirus lockdowns.
Clean Seas has a processing plant in Adelaide and has traditionally sold the bulk of its yellowtail kingfish fresh to high-end restaurants around the world with Europe its most mature market.
The company reported a 43 per cent slump in sales in March and an even bigger drop in April as global coronavirus lockdowns were enforced.
By June, sales volumes improved to 77 per cent of 2019 figures and reached 95 per cent in July despite ongoing lockdowns in some key markets. This followed a shift in focus from the restaurant trade to retail and a major investment by Norwegian Atlantic Salmon processor Hofseth Group in April.
Clean Seas reported in September it had received an order from Hofseth North America for 150 tonnes of kingfish. It expected the orders to increase to about 250 tonnes by the end of December 2020 ahead of a wider rollout in 2021.
In last week’s business update, Clean Seas reported that despite ongoing disruption in the food service channel, it achieved sales of 1,413t in the first half of the 2021 financial year, up from 1,016t in the second half of FY20 and 1,406t in H1 FY20, prior to the coronavirus pandemic.
“It’s a glass half full situation with COVID, we missed those sales in the middle of last year, particularly in April and May when the flights weren’t flying and the restaurants were all shut,” Gratton said.
“Since then we’ve diversified the business and built new channels but those sales are effectively permanently lost so those fish are still in the water and are surplus. But it’s those same fish that give us an opportunity to launch into new channels.
“While we don’t want to lose fish and we are always striving for a lower cost of production and the level of mortalities is a factor in our cost of production, it’s not an issue for us in terms of servicing current or existing markets.
“We’re excited about these new channels and markets that are opening up and really, for a company that was selling into restaurants and exporting fresh fish to rebound so strongly and to ride out a crisis of the magnitude of COVID and to be back on the growth curve is quite positive.”
Clean Seas has a market capitalisation of $93.22 million. Its shares were trading at $0.83 on the ASX this morning.
Clean Seas Seafood was ranked No.67 in InDaily’s 2020 South Australian Business Index of the state’s top 100 companies.
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