Two key developments have taken place that have led the seafood producer, Clean Seas Tuna (ASX: CSS) to be in headlines recently. A snippet has been provided herein below:
Legal Suit: Clean Seas Tuna (ASX: CSS), has initiated proceedings out of the Supreme Court of South Australia against the feed group Gibson’s Limited, trading as Skretting Australia, while claiming damages of between AUD 34.5 million and AUD 39.1m. The claims come at the back of CSS asserting that the feed supplied by Gibson’s had insufficient taurine otherwise required to be an essential dietary supplement for a number of fish species, and led to mortalities and poor growth in its stocks. This led to substantial trading losses for the company.
Clean Seas thus got an independent forensic accountant to assess the claim. Gibson’s is trying to defend the proceedings while denying the liability.
Partnership with Beston Global Food: The company sometime back also announced a new venture in partnership with Beston Global Food for the distribution of fresh and frozen kingfish in China, Hong Kong and South Korea. Beston will distribute an initial quantity of 176 tonnes (t) of frozen kingfish from Clean Seas; and both companies, which are listed on the ASX, expect further shipments of at least 340 t over the next 18 months. The initial contract is valid from June 2016 to December 2017. Clean Seas said that the development was exciting because it would establish the company in markets in China and South Korea, and that the two companies will be working together to develop the market focus by leveraging the outstanding quality of the product and the Beston networks and relationships in that region.
CSS also reported on the sales for financial year 2016 which touched 2012t which is a growth of 83% from the 1098t in the previous year and the sales for the fourth quarter were about 729t including 287t of frozen fish.
Sales Growth: The release of the full year sales update had a positive impact on the share price of Clean Seas. Investors were encouraged by the significant improvement update for the year on year results which was said to be ahead of the forecasts of 1700t. This is the second consecutive year of strong sales growth and in FY 2015, the company reported sales of 1098 t up 98% over the previous year. Growth is expected to continue at the same pace following the new deal with Beston. Meanwhile, the company earlier released cash flow for the third quarter of FY 2016 along with an operational update. Fish growth was above average expectations because of the above average seawater temperatures. Solid progress has been made on initiatives to sell surplus biomass using channels which will not disrupt existing sales channels. Operating cash flow was positive in the month of March 2016 and is expected to remain positive in the fourth quarter. Sales growth has been achieved, mainly in the Australian and European markets with farm gate returns consistent with expectations. The company has commenced a program to correct the structural imbalance that developed during FY 2015 and the first half of FY 2016 between sales and production levels in order to improve cash flows and profitability.
The freezing program has commenced and further freezing is scheduled. The above forecast sales growth of fresh products was driven by new customer acquisition program and favourable market conditions which further supported the correction of the structural imbalance. As at 31. March 2016, the company had cash of $ 1.4 million and an undrawn balance of $ 2.7 million in the working capital facility of $ 7 million. The stock price has already surged 27.27% in the last five days (as at July 05, 2016).
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