Clean Seas Seafood is confident its business won’t be affected by a recession. Picture Getty
Time for a closer look at Clean Seas and these ASX stocks as global seafood demand rises
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- Seafood consumption continues to increase worldwide
- ASX-listed Clean Seas Seafood focuses on the breeding of yellowtail kingfish
- Stockhead reached out to Clean Seas’ CEO, Robert Gratton
The global average consumption of fish and other seafood per person reached a record high of 20.5kg per year in 2019.
According to the World Economic Forum, countries with the highest consumption include coastal nations such as Iceland or the Maldives, at more than 80kg per person.
Portugal, South Korea and Japan are also high on the list of fish lovers, while landlocked countries such as Afghanistan, Ethiopia and Tajikistan are at the other end of the scale with per capita fish consumption of less than 1kg per year.
Apart from rising demand, there are other reasons why investors may want to own seafood stocks, including the potential for diversification by adding exposure to a different sector.
Ethical and environmental considerations are also another reason to buy, especially those companies that prioritise sustainable and responsible practices which could align with personal values.
On the ASX, Clean Seas Seafood (ASX:CSS) is a leading seafood company that focuses on the sustainable full lifecycle breeding of the yellowtail kingfish (Seriola lalandi), renowned amongst leading chefs and restaurants around the world for its exceptional quality.
Clean Seas has now become the largest producer of this fish outside Japan, with a hatchery at Arno Bay and its fish farms located in Port Lincoln, Arno Bay and Fitzgerald Bay on the Eyre Peninsula of South Australia.
Clean Seas CEO, Robert Gratton, explained to Stockhead that the company has a commanding 98% market share of the kingfish supply in Australia, while serving 35% of the consumption in Europe.
“I think that comes down to our unique farming proposition, because we farm the yellowtail kingfish in its natural waters of Spencer Gulf,” Gratton said.
“This fish breeds naturally in the northern waters of the Gulf, and grows to maturity around the southern areas.”
Gratton said that farming this fish in its native waters results in the highest quality product.
“It gives rise to the best provenance in terms of sustainability, and enables us to supply the market 52 weeks a year with an exceptionally high quality product, which is very difficult to do,” he added.
Growing awareness of the yellowtail kingfish
Gratton explained that competitors in the past have tried to grow the fish in warmer water at cheaper costs, but they’ve mostly come and gone.
“The biology of the fish is inconsistent with that faster, cheaper grow out. And those who tried doing it usually get found out in terms of their lower quality.
“They also haven’t been able to match our cost of production either. So they’ve sort of failed on both levels,” he explained.
Gratton expects the market for yellowtail kingfish to grow rapidly, especially in Europe where growing awareness and acceptance of the fish is rising.
“In Europe, the yellowtail kingfish is a very small fraction of the farmed salmon market, and therefore per capita consumption is still quite low.
“So we’ve got boots on the ground in Europe, visiting chefs with the fish and saying, ‘Look chef, here’s the fish, and this is what you can do with it’,” Gratton said.
In Australia, our per capita consumption of the yellowtail kingfish fish is lower than it is in Japan where it is renowned as a sashimi dish and eaten raw.
Gratton explained the fish can also be grilled on the barbecue like a piece of salmon, or baked it in the oven like a swordfish steak.
“You can also cube it and put it in a curry, so it’s a really great product and we’re really still just scratching the surface in terms of the ultimate market potential.”
New feed barge investment to increase margins
In the last half, Clean Seas reported a $6m increase in revenue on the pcp to $22.4 million.
The company also reported operating EBITDA of $1.6 million compared to a loss of $9.9 million in the previous half, driven by operational cost reductions, and price increases.
“We’ve seen record salmon, beef and lamb prices. That obviously makes our fish price more competitive as well,” said Gratton.
A recent acquisition of an automated feed barge could be a game changer and boost margins further for Clean Seas.
The company has recently engaged Southern Ocean Solutions to construct the new $5.7m automated feed barge to be located on its 2,850 tonne capacity Arno Bay farm site, where it is expected to be fully operational by the end of June 2024 with the capacity to store 650 tonnes of feed.
Gratton says this barge is significant for the company, because the 650 tonnes of feed capacity will be plumbed into each of the individual cages that contains the fish.
“That will basically automatically pump the feed as required into those pens. Think of it as a giant pressurised sprinkler, pushing the feed out.”
The feed will be received directly on board via ocean transhipment from the feed mill, rather than by road, reducing the cost of freight and eliminating double handling.
This means that instead of missing feed days because of the weather or shortage of equipment, the company can make sure the fish are fed the right amount every day at the right time.
“And the beauty of this piece of equipment is that it’s operated remotely from our office in Port Lincoln using very effective software and high definition cameras.”
Recession proof?
For investors, the question has always been whether seafood is a daily staple that could withstand the pressures of rising inflation and a recession.
“It’s an interesting question because certainly, people still need to eat and seafood provides a great protein source, and it is a food that the world really enjoys and appreciates,” says Gratton.
He believes there is a very strong narrative that seafood might be recession proof, but he does acknowledge that at the end of the day, Clean Seas is farming a species that requires a price premium.
Having said that, Gratton believes sustainable aquaculture like Clean Seas gives investors and consumers a nice story for those interested in the environmental impacts of their investing and consumption decisions.
“It’s probably like free range eggs versus caged eggs, you know, it depends on what the consumer wants,” he said.
“But over the last six months, we’ve seen our fish continue to sell very well, and we’ve seen our prices hold up very strongly. That gives us some good confidence.”
Clean Seas Seafood share price today:
Other seafood stocks on the ASX
Murray Cod Australia (ASX:MCA)
Murray Cod controls the breeding, feeding, water conditions and biological inputs throughout the life cycle of Murray cod.
The company’s operations are located in Griffith, in the Riverina region of New South Wales, where the company also operates a hatchery, nursery and fish farming.
In the last half, MCA recorded EBITDA $482k, a 115% increase on the pcp, after a sales strategy aimed at building biomass.
New Zealand Coastal Seafoods (ASX:NZS)
NZS is a secondary producer of nutraceutical, seafood products and premium marine ingredients.
The NZ-based operations harness the country’s pristine waters and utilise raw ingredients sourced from sustainably managed fisheries.
NZCS’ Australian operations, Nine Ocean, is a premium seafood provider focused on sourcing seafood from the Torres Strait and the Coral Sea.
Rare Foods Australia (ASX:RFA)
Rare Foods has developed the world’s first commercial greenlip abalone sea ranching business in the pristine waters of Flinders Bay, Western Australia.
With the construction of proprietary, purpose-built artificial abalone reefs now complete, the company is supplying commercial quantities of its premium, ‘wild-harvested’, greenlip abalone to local and overseas customers.
Catalano conducts processing, retail selling, and import/export business, operating with an ocean-to-plate model within Western Australia.
The company has strong relationships across the seafood supply chain from third party fisheries through its own processing capabilities.
Recently, the company announced that The Pure Meat & Food Co has become a 19.9% shareholder in Catalano via a share subscription deal.
Other share prices today:
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.
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