Oceana Group: Diversification Offsets Fish Shortages, but Fuel Hedge Steals the Show

Flat profits belie a stronger balance sheet and a strategically positioned fuel hedge as El Niño looms.

OCE.JO · Earnings Call · 2026-05-25

Diversification Delivers Despite a Tough Six Months

Oceana Group's interim results show the power of its Lucky Star brand and the resilience of its diversified portfolio. “although we are flat on last year, it's a quite pleasing result. And why I say that is it points to the diversification of our business.” — Neville Brink, CEO · 2026-05-25 While revenue slipped 6% to ZAR 4.9 billion, operating profit dipped just 1.6% to ZAR 665 million, and headline EPS rose 7.7% to ZAR 3.498 per share, helped by a big drop in net interest expense.

Lucky Star: Constrained Supply, Strong Margins

Lucky Star Foods delivered operating profit up more than 40%, to ZAR 324 million, driven by favorable sales mix and lower procurement costs. Yet the brand is facing shortage of raw material. CEO Neville Brink noted that they are in allocation mode and that quarter 3 will be constrained, but the brand's 94% penetration in South Africa gives it pricing power. The company is actively seeking frozen stock from the Pacific and Morocco, and expects a Namibian pilchard quota soon.

Wild Caught Seafood and the Fuel Hedge

The Wild caught seafood segment swung from ZAR 74 million to ZAR 204 million, helped by record prices and a clever fuel hedge. CFO Zafar Mahomed explained that they hedged 70% of forecasted fuel consumption with a cap-and-collar on gas oil, yielding a ZAR 43 million gain, of which ZAR 33.4 million unrealized. “A 10% change in the oil price has an impact of approximately ZAR 10 million on our current operating costs.” — Zafar Mahomed, CFO · 2026-05-25 This hedge is particularly valuable as global oil price volatility rises.

Fishmeal: The Elephant in the Room

The fishmeal and oil business, both in South Africa and the U.S., is struggling. South Africa's industrial fishery saw a ZAR 139 million loss due to no fish, while Daybrook's profit fell 26.7% on weaker prices. But the CEO painted a bullish picture for the coming year: Peruvian catches are at a 9-year low, and El Niño is looming.

Right now, from a buyer and seller point of view, we're out there talking to buyers. No, most of the sellers are not going to commit right now. Buyers obviously would like us to commit. We know the pricing is going to go up. We just don't know to what level.
Neville Brink, CEO · 2026-05-25

This dynamic could significantly benefit Daybrook and South Africa if fish return.

Balance Sheet: From 2.2x to 1.1x Net Debt/EBITDA

The company dramatically deleveraged, cutting net debt from ZAR 3.5 billion to ZAR 1.7 billion. Working capital release and asset sales drove this. The U.S. balance sheet is now optimal, and the group will now focus on South African term debt. “The transition to a revolving credit facility in December 2025 has further enhanced the capital structure by eliminating negative carry and will now allow more dividends to flow through to the group.” — Zafar Mahomed, CFO · 2026-05-25 The interim dividend was maintained at ZAR 1.10.

Outlook: Volatility and Opportunity

The company is investing in a new dual-purpose vessel to replace the Desert Diamond, enhancing fleet flexibility. While anchovy and red eye landings are poor, the CEO believes the resource will bounce back. With global fishmeal supply tightening and demand from aquaculture growing at ~3% CAGR, the second half could see prices rally. The key risks remain fuel costs, supply constraints for Lucky Star, and the timing of resource recovery. Overall, Oceana is navigating a volatile sector with a strong balance sheet and strategic hedges, positioning itself for a potentially strong 2027.