A fish pen fire, the mysterious disappearance of tonnes of salmon from a NSW processing plant and soaring freight costs are being blamed for a multi-million-dollar full-year loss for Australia’s second-largest salmon producer, Huon Aquaculture.
- Huon Aquaculture has reported a full-year loss of $128 million
- The main contributors were a drop in the international salmon price due to COVID-19 and soaring freight costs, but fires and theft also played a part
- The company is the target of a takeover bid from Brazilian food processing giant JBS, which values Huon at around $550 million
Huon told the Australian Securities Exchange it had been a “turbulent year” for the company, resulting in a full-year statutory loss of $128 million.
“While there was some respite in the last few months of the year from the challenges faced by Huon during much of FY2021, the overall pressures placed on the business from the market-related impacts from COVID-19 were significant,” the company statement said.
“The two main contributors were the 12 per cent fall in the average international salmon price … compared to the previous year and the significant increase in freight charges due to limited access to international flights.”
Huon said COVID-19 unfortunately coincided with a significant ramp-up in salmon production aimed mainly at overseas buyers.
International freight costs soared $34 million over the 2021 financial year — a rise of 49 per cent per kilo of fish — and the global salmon price dropped 12 per cent over the year.
Fish pen fire, breach and salmon rustlers
But the problems were not all related to the pandemic.
In November 2020, a fire in a fish pen in the D’Entrecasteaux Channel resulted in the loss of 50,000 full-grown fish.
A month later, a fish pen net was slashed during cleaning, allowing another 130,000 fish to swim away.
Around the same time, five people were charged over the alleged theft of 250 tonnes of salmon over six months from a Huon processing plant at Ingleburn, in Sydney’s south-west.
Police say the group was reporting salmon as waste, and then selling it on to a third party.
The combined cost of the fish pen accidents and theft has been put at $4 million in the company’s annual accounts.
JBS’s takeover bid
In February 2021, the strain on company founders Frances and Peter Bender was showing and Huon began a strategic review to canvas interest from potential buyers.
That resulted in the announcement of a scheme implementation deed, with Brazilian abattoir owner and meat processor JBS offering shareholders $3.85 a share.
The deal was backed by the Benders and Huon’s board, and constituted a 40 per cent premium over the value of the company’s shares at the time.
Just after the takeover bid was announced, West Australian mining magnate Andrew “Twiggy” Forrest increased his shareholding in Huon from about 8 per cent to 18.5 per cent, and let it be known he would be keeping an eye on the company’s environmental and animal welfare practices if the takeover went ahead.
When it was revealed that his investment company Tattarang had made its own offer for Huon, below the JBS bid, he went one further and called on Australia’s Foreign Investment Review Board to block the sale.
“JBS Group’s appalling track record on the treatment of animals is well and truly on the public record,” Mr Forrest said in a statement.
“Australians do not stand for animal cruelty and I stand with Australians. That is why the Australian government must intervene to stop the JBS Group taking over Huon.”
Mr Forrest said his company’s lower bid factored in what he called “environmental improvements”, including ceasing all farming in Macquarie Harbour on Tasmania’s west coast and moving to on-land salmon production.
JBS hit back with full-page ads in a Hobart newspaper defending its track record and reminding investors it already had a presence in Tasmania through its ownership of the Longford abattoir in the state’s north.
Huon hopeful of a better 2022
Huon said it was expecting conditions to improve in 2022.
“The outlook for revenue is more positive compared to this time last year,” it told the exchange.
“Retail demand in the domestic market has returned to its long-term average growth rate of 10 per cent and Huon will deliver its first full twelve months of sales under two new three-year contracts with Coles and Woolworths.”
JBS’s takeover bid will play out over the next few months.
A scheme booklet will be sent out to shareholders outlining the details and benefits of the deal in September and then they will vote at a shareholder meeting a month later.
Mr Forrest’s next move remains to be seen.