New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Sanford (SAN) Q1 First Take – Revenue up, costs up</h2>
Sanford has delivered a broadly balanced update to the market which has highlighted 1Q22 sales volume growth of +11% but offset by growing cost pressures
Quarterly performance has seen a recovery in mussel pricing, greater Salmon volumes (driven by cleared excess inventory built up during the pandemic) and improved Wildcatch pricing (offsetting some volume decrease)
However the company has also noted additional operational cost pressures in the form of growing 1) supply chain challenges and 2) labour costs and headcount shortages
Additional details
<ul>
<li>SAN has also acknowledged some pressure from rising ocean temperatures which could be a risk to its aquaculture operations. The company believes it has some flexibility around operations but the Salmon division could be impacted should March to May see elevated temperatures</li>
<li>SAN is also exploring the sale of its crayfish quota with a decision to be reached before April (start of the quota year for that species)</li>
<li>The company is still expecting to communicate its strategic update to the market by June 2022 as previously stated</li>
</ul>
Our view
This is a reasonable result in the context of improving seafood demand and the signs are there that the worst may be over for the restaurant industry as things reopen globally post the recent Omicron wave. With stronger volumes driven by increased seafood demand and a degree of mussel pricing reported we expect to see upgrade to top line consensus numbers for FY22 (consensus total revenue currently +3% vs Forsyth Barr +5%) &nbsp;That said the growing supply-side issues around both freight and wages are likely to see consensus also increase SAN’s expected cost base going forward. We view potential sale of fishing quota as a sensible solution given the capital requirements of rejuvenating its fleet and on-shore processing plants and expect the market to take this positively.&nbsp;

Sanford (SAN) Q1 First Take – Revenue up, costs up
Sanford has delivered a broadly balanced update to the market which has highlighted 1Q22 sales volume growth of +11% but offset by growing cost pressures
Quarterly performance has seen a recovery in mussel pricing, greater Salmon volumes (driven by cleared excess inventory built up during the pandemic) and improved Wildcatch pricing (offsetting some volume decrease)
However the company has also noted additional operational cost pressures in the form of growing 1) supply chain challenges and 2) labour costs and headcount shortages
Additional details

SAN has also acknowledged some pressure from rising ocean temperatures which could be a risk to its aquaculture operations. The company believes it has some flexibility around operations but the Salmon division could be impacted should March to May see elevated temperatures
SAN is also exploring the sale of its crayfish quota with a decision to be reached before April (start of the quota year for that species)
The company is still expecting to communicate its strategic update to the market by June 2022 as previously stated

Our view
This is a reasonable result in the context of improving seafood demand and the signs are there that the worst may be over for the restaurant industry as things reopen globally post the recent Omicron wave. With stronger volumes driven by increased seafood demand and a degree of mussel pricing reported we expect to see upgrade to top line consensus numbers for FY22 (consensus total revenue currently +3% vs Forsyth Barr +5%) &nbsp;That said the growing supply-side issues around both freight and wages are likely to see consensus also increase SAN’s expected cost base going forward. We view potential sale of fishing quota as a sensible solution given the capital requirements of rejuvenating its fleet and on-shore processing plants and expect the market to take this positively.&nbsp;

Sanford (SAN): Q1 First Take – Revenue Up, Costs Up

Sanford Limited

Sanford (SAN): Q1 First Take – Revenue Up, Costs Up