“Further to the voluntary announcements dated 18 August 2017 and 3 October 2017, shareholders are advised that BVN has entered into negotiations to dispose of its 100 percent interest in Bidvest Namibia Fisheries Holdings (Proprietary) Limited excluding certain assets,” the company said in a cautionary statement released by the Namibia Stock Exchange.
Bidvest Namibia Chief Executive Officer, Sebby Kankondi, was mum on the development, citing listing regulations of the bourse, which bar company officials from commenting when their companies are trading under a cautionary.
The company’s fishing unit consists of Namsov Fishing Enterprises, Trachurus Fishing, United Fishing Enterprise, Twafika, Telelestai and Pesca Fresca. Namsov, the main fishing company, has been getting quotas since 1997.
IJG Securities Head of Research, Eric van Zyl, said the decision by the listed group was widely expected.
“The move will not come as much of a surprise to the market. Bidvest has been selling vessels and down-scaling the fishing operations due to the redistribution of quotas over the last two years. It is ironic that Bidvest, a Namibian listed company (in which many Namibian pensioners had an interest), lost quota allocations while foreign companies find it easy to obtain quotas,” he said.
Van Zyl said the disposal will have implications for Bidvest, as the company will find itself sitting on a war-chest of cash.
“They will need to deploy or return this money to shareholders. They have been cash heavy for a few periods now and it seems like they are not identifying opportunities to deploy this in the Namibian market.”
He said Bidfish; previously a high margin business had been negatively affected by low quota allocations, resulting in low earnings for the 2016 and 2017 financial years.
“Bidvest is facing challenges at present and it will be interesting to see how they restructure their operations to deal with these.”
Megameno Shetunyenga, an analyst at Simonis Storm Securities said the move was an indication of a turnaround strategy.
“Our stand has always been that management should focus on improving current business operations’ investment returns, if not to dispose of the non-performing divisions.”
He said the fishing division has been under pressure for the past three years, with profit contributions substantially declining, mainly on the back off uncertainty in quota allocations and the new foreign and public sector entrants in the local fishing market.
Challenges facing the fishing division include uncertainty in quota allocations and a tough operating environment both locally and internationally.
Shetunyenga said Bidvest has been operating at full capacity with purchased quotas, despite it being more expensive than in the past.
According to Bidvest annual reports, in 2011 revenues reached N$918 million, with a trading profit of N$544 million, with the fishing business contributing N$473 million to profit.
In 2012, revenue came in at N$2.7 billion, trading profit, N$646 million, with the fishing unit contributing N$563 million to profit.
In 2013, revenue was N$3.4 billion, with a trading profit of N$601 million, with the fishing unit contributing N$528 million.
In 2014, revenues closed the year at N$3.7 billion, profit N$501 million, with the fishing unit contributing N$406 million.
In 2015, revenue was N$3.5 billion, trading profit at N$415 million and the fishing unit contributed N$368 million.
In the results ended 30 June 2017, revenue was N$3,8 billion, but trading profit declined by 68 percent to N$92 million with the fishing division contributing N$39 million.
IJG Securities in an analysis published in August, noted that overcapacity had led the company to dispose of one of its three vessels during the last financial year, with another being held for sale.
Currently the company has a quota for only one of its fishing vessels, while additional quota was purchased at great expense.
According to Bidvest management, roughly N$88 million has been spent in the last financial year (2016) to purchase the additional quota, IJG said.
Additionally, the average price of fish has decreased by 7,5 percent in hard currency terms while exchange rate fluctuations had a 6,5 percent negative impact on revenue.
“To further complicate matters catch rates and sizes have deteriorated year on year, while competition in traditional markets such as the Democratic Republic of Congo has increased following import quotas in the Nigerian market,” IJG said.
IJG advised its clients to sell shares in Bidvest Namibia.