Oceana Group Limited (OCE) Earnings Call Transcript & Summary

Thanks, Samuel, and welcome to everybody. Thanks for joining us this afternoon. Obviously, you've seen the trading update, and I'm not going to trying not to repeat the things in the trading update, but just to give you some color around the business. We're obviously 11 months into the year. We still got another month of fishing and that can and does change things, because fishing is not predictable as we'd like. So we've Daybrook is still fishing, our pelagic operations are still fishing and obviously, our Wild Caught, in the middle of the season, is the only fishery, that's not fishing at the moment. In fact, Squid is coming to an end. So in fact, all the fisheries are fishing at the moment. So maybe just to start with the group performance. So 11 months, we're really happy with the performance. Obviously, we had a very good first half. The second half this year was against a very good half last year. So the performance will be as less dynamic than it was in the first 6 months, which we alluded to when I presented the half year numbers. And the performance is really driven by two of the divisions. The Daybrook division, obviously, the oil price had a major effect on its performance. And then the Lucky Star performance. Across the Lucky Star different stables, they've had a good performance as well, both from a canned food side and from fishmeal and oil side. And then that was tempered by a disappointing performance by Wild Caught across, mainly in the Horse Mackerel side, which we didn't expect the magnitude of the poor performance when we presented our half year numbers. And I'll go through a little bit more detail about that. We expected fishing to improve and it certainly hasn't improved as much as we'd like. So I'm going to start with Daybrook, just to give you some color on where we are with Daybrook. We're in week 22 at the moment of 28 weeks. So we've got 6 weeks left officially. Sorry, somebody has got their camera on. It -- looks like it's off now. We're in 22 of 26 -- 28. So we've got 6 weeks left. As you might have heard last week, we had a hurricane event in the Gulf. Fortunately, that hurricane didn't hit our plant or our vessels. So there was no damage, no loss of life and no real disruption to assets, but it did disrupt us from a fishing point of view for a week. So, well, we didn't fish last week at all. The fortune thing is we -- the hurricane passed west of us, and we went back to sea on Saturday. And obviously, when a storm comes to you, you never know whether it moves the fish out or the fish remain. I can report that on Sunday, we landed 6 million fish and the vessels are fishing now. So we're back at sea, the positive thing that the fish haven't moved off and they seem to be in fair abundance. So we've got another -- including this week 5, 6 weeks to ago, and we need a good finish to the season, because that determines what kind of stock carryover we have, what stock we have for the future market and obviously is a strong recovery of costs. So the balance of September is still key for our results for this year. Catching on the whole in the U.S. has been disappointing in that, we haven't achieved the numbers we achieved last year. Interesting when -- and I visited the States 2 weeks ago with Zaf, and met with our partner in Westbank to talk to him about fishing and where we were. And positive thing is the biomass and the resource is still very strong. We had unusual wins, which meant that the fish didn't congregate as they normally would. So when we were setting on fish, we didn't get the kind of maximum catch per trawl as we normally could. It's not about there wasn't fish. The positive thing is there's a strong report of a very, very large numbers of juveniles in the catch at the moment, which is very positive for next year's catch. So we won't -- I don't believe we will have a similar season to last year, but it's still looking positive. As been reported by Anthony and others, the Peruvian catch -- the first season has been good. Back to normal. We're waiting for the second season. All indications are we back to normal, which obviously changes the dynamics from last year to this year in terms of supply and demand and prices will start to normalize. We still don't know where -- what a normal level is because we've continued to see strong demand from our salmon farmers who are continuing to grow their production and the requirement for oil. So we're still seeing strong demand. The other positive thing that which come out of this year is our oil yield, in particular in -- and Daybrook has been very, very good. Probably one of the best we've ever seen. We are currently averaging above 12%. Remember, the full year last year, we ended at just on 8% oil yield. So lower production in terms of volume fish caught, but probably similar levels of oil produced. And obviously, it depends on the last 6 weeks of catch. But as of the last production, we were still well above 12%. So we're hoping we'll end at an average of around 12% for oil yield, which is very positive. Just in terms of the factory. As I said, I was there a couple of weeks ago. I've never seen the factory and the staff in better condition. Management are very motivated. The factory is running. And when we were there the week, they had a $35 million week and that factory ran out on between 120 and 130 tons an hour, which has never run before. So on a consistent basis, it's running. So that factory is purring at the moment. Obviously, in a good position to take advantage of when fishing is optimized. So very, very comfortable where they are. And we will -- and the strategy and has been over the last 2 years is that we -- we don't liquidate stocks in the season we catch. We manage our stocks to keep our customers, and we've got very key customers, both in the pet food and the oil market that one 12-month supply. So we will hold stock and the plan is to hold stock for both the pet food and the oil manufacturers, the salmon manufacturers for the period where we're not fishing. So in other words, from October through to May next year. So there is -- so certainly, we are -- so a very good performance coming out of that business. We still got a few weeks to go. And factory and the investments we've put into that those factories -- that factory and vessels certainly have paid dividends this year. Let me move on to the Lucky Star side, and I'll start on the can side, Canned foods being a broader foods business. So strong volume in the second half. We're probably slightly behind last year, last year being a record volume offtake, but still very strong demand. We have put through, as I said in the first -- in the half year numbers, we put a price increase through in the early part in April. So the strategy remains and relative affordability strategy, giving consumers the versatility, the distribution and the innovation in that category. So we are driving, that can be, very strong. As you would have seen, it got voted the #1 iconic brand in the country. Lucky Star is an enormous pool, and we are capitalizing on that. Strong September month. We're in it at the moment, and the demand continues to be strong, hoping to end the year strongly with Lucky Star. We have bedded down our acquisition of the chicken livers business. That came on stream a couple of months ago. All the DD was completed, and we put management in there, and we integrated it into the Oceana stable. Obviously, we are concentrating on taking some costs out of that business, using the strength and the buying power that Oceana has. And we're streamlining the production to try and ramp it up there. So I think that business is in a good state at the moment and certainly poised for next year. And on the core meat, that businesses now, I think, is certainly integrated into our business. We're now moving -- we are selling core meat into the market, and we've now launched our latest luncheon role, which is an extension in the production of that factory. So good, good position to be in. Our stock level is very healthy at the moment. We are -- this is a prime buying season for us in terms of buying frozen material. We will -- we currently have similar stock levels, both a combination of frozen and canned finished goods relative to last year. We are buying strongly at the moment from the South Pacific and expect -- and we've got contracts out there. Some of them are in the process of being delivered. Some will be delivered in the early part of next year to ensure that we have sufficient stock to run through our close period. Remember, we always close the factories. This year, we closed them for a longer period for upgrades. Normally, we close them for about 1.5 months, where we do all the maintenance. But the key is for us to build enough stock levels now, so that when we come out of -- when we go into this closed period that we have sufficient stock for next year. I think we've seen -- we completed the cannery upgrades in the early part of this year. We've seen some of those benefits coming through in both yield and quality. So again, I think Lucky Star is in a good position, both from a factory point of view and a consumer demand and consumer acceptance to take this business forward for the next year. Given that we've now got two new businesses that really will have a full -- next year will be a full year of operations and should add to both volume and margin in the Lucky Star stable. On the Lucky Star fishmeal and oil business, as you know, we've embarked in the beginning this year on a major upgrade. As I said before, I think we've under-invested in that business for a while. And there was a catch-up that we needed to do. Fortunately, our balance sheet allowed us to spend a sizable amount of CapEx in that business. We closed the Laaiplek factory, the factory on the Berg River in Velddrif for almost the full season where we spent sizable CapEx in upgrading the boiler system and moving from flame drive production method to a gas drive production method. That really only came onstream right at the end of the season. So effectively, we landed all our fish just through our St Helena Bay plant. We did some upgrades there in terms of quality and in group efficiency, and that certainly came through. So both those factories are in a good position. We've now completed. We are -- we did Phase 1, we are going to bed down Phase 1 going into the new season, but those factories, obviously, were not -- we only operate one factory. They also had the benefit of the oil price coming through. Landings similar to last year. Not as good as in anchovy, but very positive on the red eye, the two species we catch there. The anchovy biomasses is slowly recovering. I think we reached the low last year, and there's certainly an upward movement. I think over the next 2 years, this year and next year, we'll be in a very good position to take advantage of improved catch rates in anchovy as that biomass bounce back. And I've said before, by anchovy is a short-life species that has major fluctuations in biomass, you see big spikes up and down. Where last year, we had a low, and we are expecting that over the next 2 years to bounce back quite strongly. And the key for me is always, I can't control fishing, I can't control weather. I can control our ability from a processing point of view to be available for the vessels when they can catch fish. And I think we're in a good position there. So -- we did have an unusual winter as people that are living in Cape Town will know that we've had an extremely wet -- extremely cold winter, unusually cold, one of the wettest in history. And in fact, in the pelagic side, we only had 8 days fishing for July and August, 4 days in July, 4 days in August, simply because of the state of the weather, which restricted our ability to fish. That is weather. So we'll certainly believe that -- and we spend the time fixing those factories. We also had pretty good oil yields. As you -- as I've said, we bring fish in for the can side from the South Pacific, a very oily Sardine or Pilchard, and we have a method now that we're using quite effectively to extract that additional oil from the can, prior to our ceiling and reporting the can. That helps our oil yield. The average oil yield that we're achieving without that is around 2%. With that, is closer to 4%. So it doubles the oil yield by producing or extracting oil from the can production. I think, that covers the Lucky Star fishmeal and oil. And then the business that disappointed us. We expected it to bounce back a little bit better in the second half, in particular, and let me just run through the businesses. The -- obviously, the Desert Diamond, our South African Horse Mackerel vessel. We had a major breakdown in December of this year. We expected that to be completed sometime midyear, and it took much longer than expected. We used the opportunity because of the delays in getting the spare parts manufactured for the repair of the vessel to do all of the normal dry dock standard maintenance and we did some upgrades in the vessel. So the vessel only went back to sea a couple of weeks ago, so it's still early days, but effectively didn't fish for the full year, which obviously came at a cost. We were hoping to get that vessel back earlier, and we'll have to see how it goes next year. Certainly, we don't have to pull the vessel up next year at all, but can fish for the full 12 months without any planned maintenance or SAMSA dry-dock regulation. So it's in a good state. We will have to see what the resource is and the state of the resource, but that has been untested at the moment. We know the Hake vessels are catching some horse mackerel. So there are certainly signs there, but we haven't really tested that fully with the Desert Diamond. On the Namibian side, catch rates have been certainly in the second half, quite sporadic, up and down. Currently, the catch rates are poor. And those two businesses are driven on catch rates. Our cost of production, the cost of sales is driven so hugely by the relative catch rates that, that business also although not in the same state as there is a Diamond, also had a poor year relative to the previous year. So very disappointing out of Namibia. Market remains healthy, market remains strong, pricing is still the demand for low-cost protein, affordable protein remains strong and certainly hoping that, that will improve as we go into the next year for both Desert Diamond and Namibia Horse Mackerel business. On the Hake side, an improved performance on last year, but I will say, off a low base last year. Obviously, we were very disappointed. It's certainly not at a level we would be comfortable with it. Hake needs, we've invested in those vessels, both from a reliability point of view and an upgrade in throughput and production capabilities. The one -- we have two vessels, the two bigger vessels, which are fishing. The one vessel that we are -- that we -- the smaller dual vessel that catches mack and hake is still in its -- in dry-dock, still getting some work done. It hasn't finished it's going out in the next couple of weeks. But -- let me say, it was an improved performance, but not a performance we'd be happy with. It could have been better. So certainly, that business has to turn around next year. We've given them the funds to make that -- to upgrade that fleet and make it more reliable. And then, it will be based on the state of the resource. In the last couple of weeks, we've seen a strong improvement in the catch rates both from a buy-catch point of view and from a hake point of view, they're fishing down south now in the Deep South, very good catch rates. Now it's the time of the year when we start moving east, when our prime catching starts in hake, when we start moving up the East Coast. And certainly that with the vessels now, all three vessels, the big vessels all available. That certainly will -- we're hoping in the first quarter that we'll see strong catch rates coming through that business. On the Squid side, we bedded down and finalized the purchase of the additional rights that we acquired and the four vessels that is in place now. Those vessels started fishing in April. Remember in the early part of the season, the Squid prime season normally is November, December, January. We had a very poor season at the start of the year and hence, the poor results coming out of Squid for the first half. The regulators decided to extend the season instead of closing at the end of March. They closed at the end of April. And Squid catchers came back very, very strongly. So it certainly paid dividends that we had additional vessels, both our own vessels and our new required vessels, and they had very good catches. In fact, they caught up the difference between what we missed out in the first -- in the December period, and we had good catches. So Squid,very pleased, and certainly, it is a species we believe in. It is a species, we will continue to invest in. And if there are opportunities to grow that -- the size of that business, we will continue to grow it. And then the last smaller parts of our business are two Lobster species. West Coast continues to be under threat from poaching. We expect further cut in the TAC. We've run that as a variable business. It's really just managing and staying involved in the fishery to assist DAF in their compliance and being the eyes and ears of out there to try and manage the poaching levels. On the South Coast, on the East Coast, the deepwater species is doing well. The strong resource recovering nicely and catches have been good. So no concern, and it will be certainly an area which we will continue to look at. There may be some opportunities in the South Coast. So maybe just to close, I think, I was trying to find a word to describe it. I think it's a solid performance. It's not a stellar performance, but a solid performance. So far, we we've got a few weeks left to close off. I think, we've invested heavily in the controllables across the board, in our factories, in our vessels and in our people. I think, the staff and the management and we spent ZAR 700 million on CapEx this year, which is the biggest we've spent in for a long time. So that's investing in the future. I've seen the excitement in our management and the management team as they've got the tools to actually take it to control those things that they can control. So it's been a busy year. They've delivered on the CapEx in time, a couple of hiccups on some of the vessels. But generally, they're delivered. So I think we're in reasonable shape for going into 2025. And the strategy remains, Lucky Star is grow the brand, extend the brand outside of the fish side. On the Daybrook, I think, that the strategy has put a factory in place that can take advantage of the fishing opportunities when it comes there. On the Lucky Star fishmeal and oil side, we spent sizable CapEx. We're still in Phase 1. So there's still some additional CapEx will be spent next year, but both factories are looking in good shape. And then on the Wild Caught side, we've invested in vessels, and it's now really to see whether this move from El Nino to La Nina, we'll see an improvement in catch rates across all the species. But certainly, they are in a good position. So it's now -- so that's where we are. So to me, I'm happy to take questions from here.

Excellent. Thanks for the opening remarks and overview. We can open up the floor for questions, and I'd like to give the two Anthonys, a chance to go first.

Which Anthony first?

Any one of the two, but I think there's other -- Anthony Geard, would you like to go first?

Yes. Thanks, Sameer. Good afternoon. Thanks so much for the update. Yes. So maybe just talking to the inventory level in fish oil in Daybrook, up 60-odd percent on last year. So I appreciate you got a month to go. Can you give us a sense of the extent to which prices are locked in for the new financial year and at what kind of level? And inventory, you're starting out inventory really, really strong. Clearly, maybe the volume aspect of the FY '24 results, for Daybrook is going to be a little bit depressed. But it sounds like you're going into FY '25 with a strong supply side of the equation.

Certainly, just on the stock levels, we should have a similar stock level on oil as we did last year probably, not on fishmeal. Obviously, we've had lower catches on fishmeal or lower catches on fish. So the translation into fishmeal will be lower. On our pricing, we've still got -- the market is coming down. We -- we haven't got a handle on exactly how far it will come down. The levels we've achieved this year of $5,000, $6,000 certainly are not going to be achieved next year. What that level is, whether it's $3000 or $3,500, difficult to tell at this moment. We have supplied our orders for now, cover our customers until about December. So it's next year's orders that we need to lock in. And they're reluctant to commit to prices until they know what the second season of the Peruvian catches. So they're also standing back and saying, let's see what the offtake is. On the fishmeal side, it does depend on China. China is slowly coming back -- the production is starting to ramp up. It's been very slow to get back to normal levels. So it will be depending on what their offtake is. There is a reasonable stock from the Peruvian catch and it will depend on how big their second season is.

Sorry, I see [ Alberto ] has got his hand up.

This is Sumil. Afternoon to everyone. Just a quick one from me. I know previously you guys obviously mentioned that the official price won't go back to where it was. But given what the prices of fish oil have done in the last couple of weeks, it's gone down over 20%. Do you see the fish oil price actually going back to pre-COVID levels? That's my first question. My second question is around insurance. You guys have had a week off. Are you guys -- I've spoken to Trevor, I think you guys are ensured to what level will you guys be ensured relative to the revenue you guys sort of made during that week. I don't know if that question makes sense. But yes, -- those are my two questions.

Let me answer the first one, and I'll get Trevor to comment on the second one. So that is a million-dollar question. My gut feel, given the continued growth in demand is that pricing will not go back to the pre-COVID levels. Our gut feel, it will be somewhere between the peak and those levels, whether it's halfway or 60% up or 6% being down, I don't know. But it's going to be -- our gut feel is somewhere between 3,000 and 4,000. That's the levels that we're predicting and certainly is being put into our models. And it's -- I think we've almost reset the base, and that base will be somewhere at that level, and then it will depend on normal supply and demand and dynamics as we go forward. Peruvian being the biggest supplier of both oil and meal.

And were you surprised to see it dropped as drastically as it did in that 1 week.

No. I mean, the market was all waiting for the first -- the opening season, what the commitment was from government regulators in terms of the TAC or the allowable catch. And then they obviously were waiting to see what the catches were and the catches were good. You've got -- as soon as they saw that, there's a market sentiment push the prices down. There weren't a lot of trades happening. So there's a lot of sentiment rather than trades. And remember, our customers are not spot buyers. Our customers are customers that need x amount of quantity per month on a regular basis. They know exactly what they -- they don't speculate. So we would tend to do 2 or 3 orders a year at a fixed price, and they are happy to take the ups and downs rather than they want a commitment. So they're not waiting for -- they're not traders.

Sorry. Trevor, just to interrupt this. So -- just coming back to Anthony's previous questions, can you indicate at what prices you contracted up until December on your oil and your meal?

Sumil, I think that's forward-looking information, which we don't want to share this quarter.

Yes. Okay. That's fine. Sorry. I'll let you go ahead.

Yes. Basically, on the insurance side, so our normal asset insurance policy covers us for business interruption, but only to the extent that there's damage to the property. This recent storm that went passed didn't -- there was no damage to our property. And so the business interruption that happened was weather-related, not damage related. So there's no cover in our normal asset policy for that. We have -- I think, we have mentioned before, we have taken out something called the parametric cover, which is almost a weather future. And that policy does cover you for weather events or distraction due to weather without damage to property, but it only kicks in at certain levels. I think, this hurricane that we went through now, I think, it only got 2 sort of Level 2 hurricane. And that weather or the parametric cover we've got, would only kick in sort of Level 3 and above. That so, we've got no cover for this event.

I think, the point is we are comfortable that we've got the right insurance for us. So it does -- if our factories get badly hit, we are covered. We've got some futures cover that does cover business. We can live with the weeks non-fishing. That's part of efficiency, wherever you are in the world, whether it's Cape Town or U.S.

And I think, the other one is we saved about $1.8 million last year when we renewed our insurance, because we're relying a little bit more on some of the other products like this parametric insurance.

Okay. Perfect. Lastly, Neville, you keep mentioning like the core meat business and the other derivatives from the Lucky Star brand. Excluding, taking filter out of it and adding all the other derivatives together, what percentage of that is it compared to the Pilchard Lucky Star brand? Because it's kind of always tough to tell if it's even going to move the dial on that.

So -- I mean, it's not going to be in this year's number. Certainly, we're just bedding those business. But certainly, the two businesses, we believe, will be a reasonable contribution to the overall Lucky Star. I mean, we're happy to give you a percentage, but certainly, it's margin-enhancing, first of all, rather than volume enhancing. So those are certainly more profitable businesses. They both have a uniqueness. Chicken liver is fairly unique. And I think, we will be the only can manufacturer of chicken livers, both supplying the Basic Education -- Department of Basic Education and pushing that product into retail. And then, the core meat obviously, that's us and one other supplier that competes in this market. And that market is -- in fact, when we were in it, and we, a couple of years ago, when we were contract packing, that market grew. When we bought the business and we had to relocate and set up the factory and we exited for a period of time where we were setting it up, the market contracted. So our involvement, we believe, will grow the market. And it's certainly been, particularly across border countries like Botswana, Namibia, Zimbabwe, very strong canned meat consumers. So we think there's a -- it will make a meaningful contribution to the overall Lucky Star business.

Excellent. Murray, please go ahead, you had hand up as well.

Guys, can you hear me? Apologies for any background noise. Guys, I was just listening to your kind of overall remarks on each business level. It didn't sound too negative. But I was quite surprised that the trading update didn't include kind of any earnings warning, that earnings would be higher than -- greater than 20% up, given that H1 earnings were up 80-plus percent. Can you just share what's -- I mean, H2 earnings would have to be down meaningfully in order not to get full year earnings above 20% growth. Maybe you can just share some of the factors that potentially leading to that?

So thanks, Murray. Thanks for the question. It's actually a good question. We put into our update, the fact that the earnings per share level, we've got $3.14 that's due because of the CCS disposal in the prior year. And we just want to highlight that for people that when they're doing the calculations that they should exclude that. At this stage, we don't have reasonable certainty, because we haven't closed the year, as Neville mentioned. September is a key month for us in terms of fishing and for results. We don't have any reasonable certainty on percentages in terms of JSE regulations at this stage. It doesn't mean that we won't put out a trading update -- trading statement later in October once we have certainty, but at this stage, we don't have reasonable certainty in terms of the numbers.

Murray, I mean, as I said earlier, Wild Caught did disappoint us. So Wild Caught was certainly a lot worse than we expected, driven by catch rate hake and maybe horse mackerel and the lack of performance out of the stocking vessel. If those businesses had been more normal, I think we certainly would have had a better. So it detracted from the overall performance, but the two other businesses certainly pulled through. And that -- that's one of the fortunate things of Oceana. We have the diversity across species, across gross markets, and currency. So we're not a one species business. And it allows us to weather this kind of storm.

And I think the other point is we had a really good H2 last year.

Yes, it was a really big one.

Understood. No, I just -- it looked like a sequential improvement in Wild Caught from H1 and Daybrook seems to hold up with oil prices and net oil yield. I was just surprised on -- but if you say you could score [indiscernible] towards end of September.

Daybrook certainly held up. Lucky Star head up, Wild Caught underperformed.

[ Metsy, ] please go ahead. I see you got your hand up.

I have questions on the chat. There's a mic issue there.

Can somebody read through the chat first, please?

Okay. I'll read it. I'm looking for the chat here. Oh, yes, her mic's off. What is your margin uplift in your own versus procured fish? I'm guessing that's probably on the Lucky Star business. And the second one is, can you elaborate why they will reduce poached trimmings, while they were increased local landings.

Let me answer the second question, and I'll get Trevor to give you some idea on the margin side. So the trimmings obviously, is the heads and tails that we cut off when we produce at our 2 canneries. As I said, we closed those canneries for a longer maintenance period in the early part of this year. Effectively, we closed them for 2.5 months, where we normally close for 1.5 months. So that's the effect of that. And the reason -- and the reason we could do that is we built up healthy stock levels of our canned products so that we could take us through that. We extended close period to do the maintenance and the upgrades we needed. But that's -- it's a simple fact. It was a planned longer closure, which meant we had less production through our two own canneries, which means we've produced less trimmings. The normal, the Pilchard is a function of TAC. I mean, obviously, there's a substantial margin difference between own core fish and purchase fish. So Trevor, if you want to expand a bit on that.

Yes. Clearly, catching our own fish off our doorstep is a lot cheaper. So that's always first prize. The imported product is all dollar-based. So we've obviously got the impact of the rand dollar exchange rate on that. And I think probably more so in the second half, we've also had the impact of higher freight rates coming through on containers. So I think the rough estimate is that the cost of our own -- catching our own fish is probably about 50% cheaper than importing, import, procuring fish at this stage. But obviously, it varies depending on things like exchange rate and freight rates.

Please go ahead, Dirk.

Neville, you just -- on the SA fish meal, fish oil business, you kind of casually said you doubled the oil yield based on this new technology with skimming off the cans. That's quite material. Is that in these numbers? Or is that coming through next year?

So Dirk, it existed last year as well. We weren't as good as extracting the oil. So you'll see that it's not a -- it's a double on our -- if you just catch only anchovy, there is normal oil yield of around 2%, but it's not a double on last year. Because we were doing it last year as well. So, it's just new technology. And it only exists running up from the Pacific fish. If we buy from Morocco, Mauritania, it's a far leaner fish, and we don't see anywhere as much oil, but the Pacific fish is a fatter fish with a lot more oil. So it's material in terms of when we get a product from that resource.

Okay. And have you been sourcing -- you said you've been sourcing more from that now, so that should help next year?

Correct. So our next 20,000, 30,000 tons, which should come in for the next 4 or 5 months will mainly be from that Pacific resource. Those contracts are in place. We've got -- we've had probably 1/3 of it delivered so far and that the next 2/3 will come out between now and February next year.

And obviously, you're going to account for a lower oil price as well.

Yes. I mean, obviously, it helps mitigate some of the drop in price.

Yes, for sure. And then just one other question, just a clarification question maybe on Daybrook. I mean, it sounds as it stands, you said volumes caught were down 26% of total fish. But oil yields are up 50%, 5-0, right? So 8% to 12%. Within your comment was that you expect fish oil volumes to be similar to last year? Can you just square that circle for me? I would have expected with much -- even though volumes are down, but yields are doubled, you'd have more -- you'd have more oil.

You're doing closing stock.

I think you made a comment about volumes. I wasn't sure if that related to closing stock or not.

I am more talking about closing stock. So the additional stock that we've produced kind of mitigates for the lack of production of fish. So we'll close this year similar to what we closed last year on oil. Again, as we've got a couple of weeks to go.

In terms of production...

Since the fishes are there, but that's the comment that I made, similar closing stock levels.

So then, your volumes sold this year higher than last year?

Yes.

Excellent. Chris, please go ahead.

Similar question to Dirk. Actually, just relating to Daybrook and the trading update disclosure on the fishmeal side, not fish oil, you guided to landings being down 26%, but inventory levels only down 16%. Can we read into that, that means your actual sale volumes over the period are lower unlike fish oil where it was higher.

Yes. Yes. That's correct.

And why -- and then just to understand why is it that, that -- yes, the sales volumes are weaker. Is that partly because of what you alluded to as the Peruvian restart and volumes coming from elsewhere? Or is it a conscious decision on your part?

Keeping our customers supplied for the period that we are out of the sea. So we could have liquidated more stocks now to non-regular customers. What we've -- the strategy is we will keep our long-term existing customers in supply. So we had to hold back some stock to keep them supplied until April of next year. There's no doubt we could have -- there is a spot market out there, which we could go and access. But then we're going to talk change our customers -- and that's not...

And then a second question, and it's -- I've only got two. But just on Lucky Star. The commentary was all around volume. There was no commentary around pricing and the sort of -- what the consumer market is like at the moment and whether you plan to take another price increase. And just to remind us, what is the average price increase this year versus last year?

The average prices this year, well, we took a 4% price increase in April of this year. So for the 12-month period, it's not -- it wasn't a substantial price increase. We have -- certainly the efficiencies that have come through our factory certainly are starting to play out in our margins, and I believe we'll see improved margins in Lucky Star related to last year. Pricing consumer still is under constrained. So we are reluctant just to push too much through to the consumer. We have got a price increase planned for next year. It will depend -- it will probably be in the early part of next year, and it will depend on what the alternate proteins we are selling at. We haven't committed to that. We put a budget in, but that doesn't mean it will materialize, it will depend on the state of the consumer. So the volume strategy remains there, but we do -- we are pushing to try and enhance margin across the board, not only on the can fish side, in the basket of products with Chicken livers and can meat and chicken to see margin enhancement that we can push through. It's a fine line between managing margin and managing volume given the state of the consumer.

And then, Chris, obviously, your strengthening rand helps us on our margin.

It will help us in the future.

In the future, yes.

Correct. I mean, this year has been tough.

Neville, why are we waiting for other questions. I can't see any. Just on your price increases, you mentioned 4% in April this year. In Lucky Star, was there any thing towards the end of last year that will annualize into this year's results?

There was, and Trevor trying to remember, there was a September price increase that would have come through.

Yes.

Yes. So it won't be -- there was some that came...

It was a funny year, because we had January, then we split it over January, April. I mean, there was a small one in September. So -- and then, we hadn't taken one for a while before there. Correct. So it's...

I mean, we could give -- we could certainly circulate a 2-year coming revenue growth.

Yes. I mean, year-on-year price movement is about 4%.

Okay. That's what I was trying to get.

That would take the April increase plus the increase, earlier increase into account.

So that's 4%. So what underpinned your margin expansion because the rand was net weaker this year on the imported products. Was it just because of the efficiencies on those plants?

And some additional fresh fish that we've certainly landed this year. So a combination of yields and improved contribution from own catch.

Excellent. I still don't see any hands up or any questions. That's because we are actually on time.

Murray's got a question.

Murray's got a question. Murray, please go ahead.

Just thinking out to kind of next year lapping the space? And just help me with my thinking. So Daybrook is expected probably to come down on lower oil prices and lower fish meal production and prices, although the oil yield will help somewhat. Lucky Star and Pilchard probably benefits from factory efficiencies and quality as well as fishmeal and oil Africa, just all the work you've done in those two factories. And then on the Wild Caught side, you're coming...

And a stronger rand.

Okay. Sure. And then on the Wild Caught side, you're coming off kind of exceptionally lower base with the Desert Diamond fishing for 12 months, next year it should be, unless there's no fish, should be a benefit and hake seems to be improving sequentially of H1, which was very weak. And then squid, you got four extra vessels and then lobster does, I guess, small in the mix, so it doesn't move the needle massively. Am I thinking on all of those pieces correctly?

Yes, I think you've covered, yes, correctly. I mean, obviously, what you haven't included is the two new businesses, which really didn't contribute this year. The chicken livers and the core meat. So those, hoping to make a meaningful contribution to the Lucky Star business. Right, Trevor?

And also on the Wild Caught fuel price also plays a big part. And I think we've seen recently fueled dollar prices coming to oil, the barrel prices has come back quite a bit.

And then, just between operating profit and net income. Obviously, the more South Africa earnings we have, the higher the tax rate goes up if the U.S. is a lower contribution. And then, from an interest point of view, we closed out that hedge in the U.S. Interest rates are expected to come down. And in South Africa, we've got more CapEx, which meant that our long-term debt increased. So depending on the mix of earnings between the U.S. and South Africa as well as higher debt levels, you're also going to get that impact on headline earnings per share.

Okay. Just a question on fuel. You mentioned post macro in Namibia using higher cost to get the terminology used. But maybe you can just explain that.

There was -- there's two types of fuel of those vessels use. It's heavy fuel oil and marine gas oil. We were using marine gas oil. Those vessels can use heavy fuel oil when you can get supply. We've managed to tie by a contract with a heavy fuel supply, which is substantially cheaper than marine gas oil. We're still trying to bed that down. But if it does materialize, it makes a sizable difference of those businesses. Those horse mackerel vessels, 1/3 of the cost is fuel. And when you catch nothing, then it becomes a big, big number. So -- but it is a big component in fishing and across the board.

And then sorry, just one last one was on just market dynamics and prices in macro, which you mentioned had softened, I think in the trading statement, but you haven't mentioned that in your comments now during the fall. And then the other one was squid, which you mentioned also softer prices, whereas the half you mentioned solid dynamics.

Both those markets are commodity markets. So they move very quickly with supply and demand dynamics. So in fact, if you right now, because of the poor catch rates, Horse Mackerel prices have gone through the roof. But that moves literally in a couple of weeks if we have certainly good catch, you'll see that come off. Generally, if you take a long-term trend on horse mackerel, prices continue to grow, because the need for affordable protein. Squid is a very -- generally plays in a more affluent market. All of our squid goes to Western Europe. When the catches were poor in the early part of the year, we saw prices run up to EUR 10, EUR 12 a kilo. As the April catches were very good, we saw that drop off to EUR 8. So it does move very, very quickly. I would rather have good production and slightly lower prices than no stock to sell at record prices. So certainly, it's -- from a squid point of view, it's a positive sign that the resources there. Western Europe market remains strong, they'll buy the product. It does fluctuate a bit.

Excellent. I don't see any other hands up or any questions in the chat. So I'd like to thank management for their time and for everybody for joining and giving us more insights in the trading updates and all the best for the last month of fishing.

Thanks very much. Yes. Thank you, Samuel. Thank you everyone for joining us.