Alliance Select Foods sees return to profit in Q2
MANILA, Philippines— International seafood supplier Alliance Select Foods International Inc. expects to swing back to profitability in the second quarter and to outperform results in the last full year as favorable fish supply and global pricing may jack up business volumes by over 30 percent this 2013.
Alliance president Jonathan Dee told reporters after the company’s stockholders meeting last week that the second quarter was “one of the better quarters” that Alliance had ever seen and should be able to “offset the losses in the first quarter.”
The company incurred $586,444 in net less attributable to equity holders of parent in the first three months of 2013, higher than the $122,815 net loss in the same period last year due to lower than anticipated tuna fish deliveries and operating expenses increasing at a higher rate.
“The group had contracted to sell processed canned tuna but could not close its positions by procuring the raw materials in a timely manner. This industry wide phenomenon of paucity in fish deliveries meant that the group had to procure fish at spot prices from international fish suppliers, whose prices are generally higher,” Alliance said in its latest quarterly filing of financial results.
“Only towards the end of the (first) quarter that the delivery situation normalized and the group’s operations already turned the corner. Should fish deliveries continue to be normal, as expected, the group is projected to return to its historical profitability from the second quarter onwards, the company said.
Full year 2013 results are thus seen to be “better” than last year on the back of the projected rise in business volume, normalizing supply of fish and better pricing of seafood products globally. Net profit in 2012 amounted to $774,000, a reversal of the $952,000 loss in the previous year.
For the tuna business alone, which accounts for 74 percent of Alliance’s business mix, volume will likely grow by over 20 percent this year, according to Dee.
Meanwhile, the salmon business, which has been accounting for 26 percent of total business, has been “very good” and “quite encouraging,” said Dee.
Alliance has so far entered about 60 markets across the globe and has been working to foray into more, Dee said. “It’s good for us to spread our market,”he said.
The US has become the group’s fastest growing market for salmon as Europe has been for tuna, Dee said.
About $21 million has been budgeted for capital spending this year, of which $17 million has been so far disbursed.
For Alliance’s production plant in General Santos, Dee said some expansion plans have gone underway. “But it’s just minor tweaking of the facilities. Our focus is integration rather than expansion of capacity,” he said.
Alliance is also taking a break from the merger and acquisition scene for now in order to focus on integration and development of new businesses. The utilization rate of production lines is currently averaging at 70 percent, according to Dee.
“We’re building up our fish division,” he said.
Last year, Alliance acquired 80 percent of Akaroa Salmon NZ Ltd., a pioneer in salmon farming in New Zealand, in line with its bid to become a major salmon producer in the region. Prior to that, Alliance acquired in 2011 Massachusetts-based salmon processor Spence & Co. Ltd., marking its diversification into the branded food business.
For this year, Dee said the salmon farm business should grow its volume by 40 percent.
Meanwhile, Alliance’s plan to debut in the Singapore Exchange (SGX) through an offering of depository receipts has been delayed by taxation issues. Alliance is invoking a bilateral treaty between the Philippines and Singapore to ensure that trading on depository receipts will not be subject to double taxation.
The board of Alliance has given authority for the company to issue up to 400 million common shares as underlying shares for the depository receipts targeted to be listed and traded on SGX. “But it’s going to be less than that. It depends on what the price is,” Dee said, adding this would be determined at a date closer to the targeted listing.
Alliance is also considering fund-raising options through the sale of a combination of debt and equity, on top of the SGX listing exercise. For instance, he said Alliance would consider debuting on the local capital market through the offering of retail bonds.