The US President Herbert Hoover was a keen fisherman and even gave a speech on the joy of fishing, or what he liked to call "the chance to wash one's soul with pure air".
Hoover, who was president at the outset of the Great Depression, also knew a thing or two about the business aspects of fisheries and wisely cautioned to an audience in 1951 that fish can make "a mockery of profits and egos."
More than 60 years later, the advice still stands and should be heeded by former Santos chief executive John Ellice-Flint as he works to turn around commercial fisheries business Clean Seas Tuna, of which he is the chairman.
Clean Seas Tuna has a major problem. They can propagate their fish, in this case yellowtail kingfish, but they just can't get the little buggers to grow properly and 35 per cent of the stock have died from gut enteritis. An update provided by the company yesterday advised the mortality rate had risen to 3 per cent a week of its kingfish juveniles.
Selling kingfish on the open market, where it can fetch $15.50 a kilogram and as much as $20 in Europe, provides the company's main income, its southern bluefin tuna operation being still on trial.
Chief executive Dr Craig Foster has a battle on his hands and the board has brought in experts to discover the cause of the gut problem, which causes diarrhoea. To date no other grower of kingfish that the company is aware of has encountered gut enteritis to the extent, variability and mortality rate it has, and Clean Seas Tuna might have the awful honour of having a world first at its South Australian ponds.
Harvesting of the 2011 stocks continues but the harvest size is less than hoped for by the company although, on the upside, the prices it is getting for the yellowtail are the best it has ever seen.
A review has now begun at Clean Seas Tuna that will include investigating other ways of containing the kingfish stock as they grow from birth to ready for a dinner plate.
For shareholders expecting to land a winner from Clean Seas Tuna it has been a painful ride. Shares in Clean Seas Tuna hit the market in 2005 with an issue price of 50? reaching a high of $2.10 in April that year. The stock has lost 36 per cent of its value this year to date and is now trading at just over 4.6? a share.
President Hoover believed fishing "soothes our troubles". Clean Seas Tuna investors might not agree.
HEALTH KICK
Veteran stock pickers Australian Foundation Investment Co - they have been around since the 1920s - raised $222.7 million via a convertible note issue in December, and just how they are spending that money on behalf of investors is starting to emerge.
It was revealed at a shareholder presentation in Tasmania that more than $140 million of the new funds had already been invested. New stocks added to its $4 billion-plus equities portfolio include Ansell, QR National and Sydney Airport, while AFIC has also ploughed money into a range of healthcare stocks such as CSL and Ramsay Healthcare, funeral company Invocare and mining waste management business Tox Free Solutions.
BACK BURNER
The planned listing of the Australian arm of mortgage insurer Genworth Financial has been shelved until early next near, after the insurer's profits were crunched by a jump in housing defaults.
Genworth's US parent was previously targeting the June quarter for the listing of a stake of up to a 40 per cent in the mortgage insurer.
Bullish estimates had put the value of a listing at as much $850 million, although many institutions questioned whether the market could support such a valuation.
The Australian business was likely to report a modest first quarter loss, Genworth said.
Rather than a systemic downturn in the nation's housing market, the company blamed banks and other lenders for accelerating some long-term mortgage delinquencies. A jump in natural catastrophes and downturn in some parts of the economy also caused a surge in mortgage losses.
Genworth ranks as Australia's largest mortgage insurer ahead of QBE Lenders Mortgage Insurance. Combined, the two hold a 75 per cent market share of the market.
Genworth says its liquidity and risk buffer plans were not dependent on the Australian initial public offer, with the holding company having approximately $US1.4 billion in cash and liquid securities. The delay is likely to represent a blow for Genworth's lead managers Goldman Sachs, Macquarie, UBS and CommSec.
AFTER BURN
Shareholders in UXC reacted with equanimity to the news late on Tuesday that it is exposed to a $22 million law suit relating to the Black Saturday bushfires of 2009, with its shares closing down just 0.5c at 57c yesterday, maintaining its gains following its recent stellar run on its reorganisation last year.
UXC sold its Field Solutions unit in 2011 for more than $60 million. This unit had previously provided inspection services to SP Ausnet, the operator of the high voltage grid in Victoria.
It says it has insurance cover in place that provides bushfire protection, but given the propensity for insurers to challenge large payouts, it is perhaps surprising UXC shareholders aren't on the back foot about the latest news - at least until there is some clarity on the prospects of the legal action succeeding.
Frequently Asked Questions about this Article…
What caused the high mortality in Clean Seas Tuna’s yellowtail kingfish and how serious is it?
Clean Seas Tuna reported widespread deaths among its yellowtail kingfish juveniles due to gut enteritis, a diarrhoea-causing condition. The company said about 35% of the stock had died and mortality was running at about 3% a week for juveniles. Management has brought in external experts because no other known kingfish grower has reported this level of variability and loss, making it a potentially serious and unusual operational problem.
How could the kingfish mortality affect Clean Seas Tuna’s revenue and harvest prospects?
Kingfish sales are Clean Seas Tuna’s main income source while southern bluefin tuna remains on trial. The company said 2011 harvests are continuing but harvest volumes are smaller than hoped because of the mortality. On the positive side, the prices the company is getting for yellowtail are among the best it has seen (about $15.50/kg locally and up to $20/kg in Europe), but lower volumes will weigh on near-term revenue until the production issue is resolved.
What steps is Clean Seas Tuna taking to fix the kingfish gut enteritis problem?
Clean Seas Tuna’s board and CEO Dr Craig Foster have engaged experts to investigate the cause of the gut enteritis. The company has also launched a broader review to explore alternative ways to contain and manage kingfish as they grow from hatch to harvest size. Investors should watch for updates on the investigation, changes in juvenile mortality rates, and any operational changes the review recommends.
How has Clean Seas Tuna’s share price performed recently and what does that mean for investors?
According to the report, Clean Seas listed in 2005 at an issue price of 50c and hit a $2.10 high that year. The stock has lost about 36% of its value year-to-date and was reported trading just over 4.6 (as reported in the article). For investors, that performance reflects operational setbacks—notably the kingfish mortality—and highlights the importance of monitoring the company’s remediation progress and harvest outcomes rather than relying on past peaks.
What did Australian Foundation Investment Co (AFIC) do with the funds from its recent capital raise?
AFIC raised $222.7 million via a convertible note issue in December and revealed it had already invested more than $140 million of that capital. New additions to its $4 billion-plus equities portfolio include Ansell, QR National and Sydney Airport. AFIC also put money into healthcare names such as CSL and Ramsay Healthcare, as well as Invocare and Tox Free Solutions.
Why was the planned listing of Genworth Financial’s Australian arm postponed and what should investors watch?
Genworth postponed the planned listing of its Australian arm until early next year after profits were hit by a jump in housing defaults. The US parent had been targeting the June quarter for a partial listing that some had valued at up to $850 million. Genworth said the Australian business may report a modest first-quarter loss and blamed accelerated mortgage delinquencies, natural catastrophes and some economic weakness. Investors should monitor the timing of any relisted IPO, the company’s quarterly results, and trends in housing defaults.
What is the UXC exposure to the Black Saturday bushfires lawsuit and how have shareholders reacted?
UXC is exposed to a $22 million lawsuit relating to the Black Saturday bushfires of 2009. Despite the news, the company’s shares fell only marginally (closing down 0.5c at 57c as reported), and shareholders appeared calm. UXC sold its Field Solutions unit in 2011 for more than $60 million and says it has insurance cover for bushfire liability, though insurers sometimes challenge large payouts—so the outcome remains a risk to watch.
What key updates should everyday investors monitor across these companies?
For Clean Seas Tuna: watch mortality rates for yellowtail kingfish, findings from the expert investigation, harvest volumes and realised prices per kilogram. For AFIC: updates on how new capital is being deployed and portfolio performance. For Genworth: timing of any relisted IPO, quarterly results and trends in mortgage defaults. For UXC: developments in the $22 million lawsuit and any insurance outcomes. Regular company announcements and quarterly reports are the best sources for these updates.
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