CAPE fishing giant Oceana Group hauled a much bigger profit from its inshore fishing business to post an interim performance so powerful that a fairly hefty competition commission fine hardly provided any drag on bottom line.

In fact, had Oceana not been lumbered with the R35 million fine for transgressions in the ‘small pelagic’ sector, the group would have reported operating profits of almost R335 million – more than 50% higher than last year. The official operating profit of R265 million was a more than respectable 25% ahead of the last half year number – not exactly a shabby performance.

What stole the show in the interim period was the performance of Oceana’s inshore division, which – considering the prevailing brittle economic conditions, was nothing short of astounding. Despite an 11% hike in revenue to R1.3 billion in the six months to end March, the inshore division managed to more than double its profits to R109 million.

The inshore division – with the important pilchard quota - is Oceana’s largest business segment and management must be heartily commended for managing to ratchet up the margins from last year’s 4% to close to 9%.

Oceana CEO Francois Kuttel said pilchard landings and processing yields at the St Helena Bay cannery were good.

He said canned fish sales volumes on the domestic market increased meaningfully - partially due to a more robust supply chain with imported product continuing to supplement local supplies.

Oceana holds the valuable Lucky Star brand, which has enormous mass market appeal as an affordable protein staple.

With quantifying, Kuttel said profit from canned fish operations was well above that for the same period last year. Just how well the pilchard/canned fish segment performed during the interim period is, however, put in context by a markedly weaker performance by other inshore activities.

Oceana’s West Coast lobster saw lower catch rates and higher production costs per kilogram. But Kuttel said higher export prices and the effect of the weaker currency translated into improved selling prices in rand terms.

Ultimately, though, profits from lobster were lower for the six month period. Oceana’s squid catches were well below the first half of last year – in line with the industry (which as a whole has recently reported poor catch rates). The squid business made a small loss for the period.

There was better news on the anchovy and redeye herring front.

Kuttel said improved production efficiencies and lower costs per ton of manufactured product were achieved with landings of anchovy and redeye herring to the group’s fishmeal plants being significantly higher than in the previous season.

He said sales on the local market had increased although export volumes were lower due to weak international demand and prices.

Fishmeal made a loss in line with budget expectations, but the seasonal loss was materially lower than the previous interim period. The mid-water and deep-sea fishing segment managed a 24% increase in profits to R174 million, not quite able to capitalise on a 25% hike in turnover to R748 million. Presumably margins were squeezed by the higher fuel prices.

Kuttel pointed out that the initial allocation of Namibian horse mackerel quotas to existing rights holders of about 100 000 tons was materially lower than in the previous year in order to accommodate new rights holders (who received allocations totalling 100 000 tons).

He said catches were higher in Namibia for the six month period as a result of additional quota being made available in the final quarter of calendar 2011 when the company had four vessels at sea.

Kuttel stressed increases in fuel and other costs were contained on a per ton basis due to higher volumes caught. But he disclosed that significant additional costs were incurred in contracting the catching and marketing of quota allocated to new rights holders.

One major worry for Oceana heading into the second half is that the proposed acquisition of hake, horse mackerel and south coast lobster fishing rights as well as cold storage business from the Lusitania group still hangs in the balance.

The deal - which would give Oceana serious leverage in the hake and south coast lobster segments - remains subject to the approval of the Minister of Agriculture, Forestry and Fisheries as well as the Competition Commission.

The deal was expected to be effective in August 2012. But if there are hitches in clinching the Lusitania deal it might mean a major snag for the financially muscular Oceana’s ambitions to consolidate the local fishing sector.